BIR Ruling [DA-375-99]

July 1, 1999 BIR RULING [DA-375-99] Sec. 24 (D) (2) DA-335-99 Mr. & Mrs. Rolando B. Goco 10 Woodpecker Street Green Meadows Subdivision Quezon City S i r : This refers to your letter dated June 15, 1999 requesting for exemption from the payment of capital gains tax the sale of your residential house and lot pursuant to Section 24(D)(2) of the Tax Code of 1997. It is represented that you are the registered and lawful owner of a parcel of land including improvements existing thereon situated #47 Sampaguita St., Valle Verde II, Pasig City covered by Transfer Certificate of Title No. 39219 issued by the Registry of Deeds of Pasig City; that you are a bonafide resident of said address as confirmed in a Barangay Clearance dated June 18, 1999 issued by Alejandro E. Santiago, Brgy. Captain of Barangay Ugong, Pasig City; that on June 14, 1999, you sold the same in favor of the Spouses James L. See and Nancy Chua See with residence and postal address at #1361 Caballero St., Dasmarias Village, Makati City for and in consideration of the amount of ten Million Pesos (P10,000,000.00); that it is stated in the Sworn Declaration of Intent you executed on June 10, 1999, that you are reporting the said sale in compliance with the requirement of Section 24(D)(2) of the Tax Code of 1997; that you intend to fully utilize the proceeds of the said sale in acquiring/constructing your said new principal residence within eighteen (18) months from the date of sale; and that your new forwarding address shall be at #10 Woodpecker St., Green Meadows Subd., Quezon City. 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 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/acquire 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 the Spouses James L. See and Nancy Chua See 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 you failed to comply with all the conditions requirements set forth under Section 24(D)(2) of the Tax Code of 1997. SCDaHc 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, and/or the conditional requirements set forth therein are not complied with, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)