BIR Ruling [DA-361-98]

August 10, 1998 BIR RULING [DA-361-98] Ms. Luisa P. Faller B10, L12, Citta Italia Bo. Tanzang Luma Imus, Cavite M a d a m : This refers to your letter dated May 7, 1998 requesting exemption from the payment of capital gains tax on the sale of your principal residence situated at Blk. 27, Lot 41, Wood Estate Village, Molino 2, Bacoor, Cavite covered by TCT No. T-559445 and Tax Declaration No. 81462 in favor of Bernardo D. Ranoco pursuant to Section 24(D)(2) of the Tax Code of 1997. cdta It is represented that you are the absolute and registered owner of a parcel of land including improvements consisting of a residential house situated at Lot 41, Blk. 27 Wood Estate Village, Molino 2, Bacoor, Cavite containing an area of 98.50 square meters and covered by Transfer Certificate of Title No. T-559445 issued by the Registry of Deeds of Trece Martires; that on April 15, 1998, you and Mr. Bernardo D. Ranoco made and executed a Deed of Absolute Sale wherein you sold your said realty in favor of Mr. Bernardo D. Ranoco with the marital consent of your husband, Marlon J. Faller for and in consideration of Six Hundred Ninety Nine Thousand One Sixteen Pesos and Eighty Centavos (P699,116.80) and as follows: Down Payment (cash) P200,000.00 Balance payable in one (1) year covered with 12 pcs. of post dated checks every 16th of the month 200,000.00 Assumed Balanced of HDMF Loan 299,116.80 P699,116.80 ========= that you sold your principal residence because you would like to buy a bigger one at Crown Asia Properties with a lot size of 131 square meters located at Blk. 10, Lot 12, Citta Italia, Bo. Tanzang, Imus, Cavite for the same purpose; that you expect to fully utilize the proceeds from such sale in buying the aforesaid realty at Crown Asia Properties; and that in support of your request, you submitted to this Office copies of the following documents: 1. Deed of Absolute Sale; 2. Transfer Certificate of Title No. T-559445; 3. Corresponding tax declaration; 4. Sworn Declaration of Intent as to the utilization of the proceeds of said sale; 5. Certification of Barangay Captain of the place where your property sold is located to the effect that the same is your principal residence prior to the sale thereof; In reply, please be informed that pursuant to Section 24(D)(2) of the Tax Code of 1997, capital gains presumed to have been realized from the sale or disposition of their principal residence by natural persons, the proceeds of which is fully utilized in acquiring or constructing a new principal residence within eighteen (18) calendar months from the date of sale or disposition shall be exempt from the capital gains tax imposed under Section 24(D)(1) of the same Code, provided, that the historical cost or adjusted cost basis of the real property sold or disposed shall be carried over to the new principal residence built or acquired; and that the Commissioner shall have been duly notified by the taxpayer within thirty (30) days from the date of sale or disposition through a prescribed return of her intention to avail of the tax exemption thus mentioned, and which can only be availed of once every Ten (10) years. The same Section further provides that if there is no full utilization of the proceeds of sale or disposition, the portion of the gain presumed to have been realized from the sale or disposition shall be subject to capital gains tax. For this purpose, the gross selling price or fair market value at the time of sale, whichever is higher, shall be multiplied by a fraction which the unutilized amount bears to the selling price in order to determine the taxable portion for the purpose of computing the tax prescribed under Section 24(D)(2) of the Tax Code of 1997. From the foregoing, and since you have manifested your intention to fully utilize the proceeds of the sale or disposition of your property to buy another property as your new principal residence within the time required by law and have notified the Commissioner of the same within thirty (30) days from the sale or disposition of your property, the proceeds from the sale of your property in favor of Mr. Bernardo D. Ranoco is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. (BIR Ruling No. 111-98 dated July 8, 1998) The Register of Deeds concerned is, however, requested to annotate at the back of the subject certificate of title that the subject tax exemption shall be rendered null and void and that the entire proceeds of the said sale shall be subject to the capital gains tax and the corresponding penalties thereto in case the seller failed, to comply with all the conditions set forth under Section 24(D)(2), of the Tax Code of 1997. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, this ruling shall be considered null and void. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)