BIR Ruling [DA-363-00]

October 23, 2000 BIR RULING [DA-363-00] S24 (D) (2); 114-98 Spouses Bienvenido D. Sandoval and Juanita C. Sandoval No. 18 Cagna Street, Masambong San Francisco del Monte, Quezon City Gentlemen : This refers to your letter dated September 28, 2000 requesting for exemption from the payment of capital gains tax on the sale of your principal residence situated at No. 18 Cagna Street, Masambong, San Francisco del Monte, Quezon City pursuant to Section 24(D)(2) of the Tax Code of 1997. AHCETa It is represented and documents submitted disclosed that aforesaid residential property is part of a three-door apartment erected on a parcel of land you commonly owned with spouses Maximo and Eduviges Agito and spouses Nilo and Lilibeth Medrano; that you owned one-third (1/3) part/portion of said parcel of land which is covered by TCT No. 62465 issued by the Registry of Deeds for Quezon City, and the one-third portion of the improvement, which consist of your residential unit; that a certification was issued by the Office of the Barangay Captain of Barangay Masambong, Quezon City to the effect, that the property abovementioned is your principal residence; that you sold the said property to Rosario C. Sandoval for and in consideration of the amount of Php310,000.00; that the proceeds of said sale will be fully utilized to acquire a new principal residence within eighteen (18) months from the date of the sale; and that in support of your request, you submitted to this Office photocopies of the following documents: 1. Deed of Absolute Sale; 2. Transfer Certificate of Title; 3. Tax Declaration; 4. Certification of Barangay Captain; and 5. Sworn Declaration of Intent. 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 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 your intention to avail of the tax exemption thus mentioned, and in 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)(1) of the Tax Code of 1997, thereon. 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 and/or construct another 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 Rosario C. Sandoval, is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, but subject to the documentary stamp tax imposed under Section 196 of the same Code. (BIR Ruling No. DA-357-98 dated September 3, 1998). The entire proceeds of the said sale, however, shall be subject to the capital gains tax and the corresponding penalties thereto in case you failed to comply with all the conditions set forth under Section 3 of Revenue Regulations No. 13-99 dated July 26, 1999, implementing 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. (BIR Ruling No. 114-98 dated July 27, 1998) Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group