BIR Ruling [DA-378-06]

June 20, 2006 BIR RULING [DA-378-06] S24 (D) (2); DA-334-98; DA-088-02 Mr. Fernando Dizon Igdalig Street Quezon City S i r : This refers to your letter dated May 19, 2006 requesting for exemption from the payment of capital gains tax on the sale of your principal residence situated at Igdalig Street, Quezon City pursuant to Section 24(D)(2) of the Tax Code of 1997, as amended. It is represented that you intend to sell the above principal residence covered by Transfer Certificate of Title (TCT) No. RT-74156(354208) of the Registry of Deeds of Quezon City to Spouses Nexson and Juliet Yung by virtue of a Deed of Absolute Sale in the amount of P4,500,000.00; that the proceeds from the said sale shall be used to buy another principal residence; and that in support of your request, you submitted to this Office photocopies of the following documents: 1. Copy of the Deed of Absolute Sale; 2. Photocopy of the TCT; 3. Copies of the Tax Declarations; 4. Certification of the Barangay Captain; and 5. Copy of the Affidavit of Intention to avail of the exemption. In reply, please be informed that pursuant to Section 24(D)(2) of the Tax Code of 1997, as amended, 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 his 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)(1) of the same Tax Code. SAHIDc From the foregoing, and since you will utilize the proceeds of the sale or disposition of your property in the acquisition of the land and the construction of your new principal residence as required by law and will notify 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 Spouses Nexson and Juliet Yung, is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, as amended, but subject to the documentary stamp tax imposed under Section 196 of the same Code. ( BIR Ruling No. DA-334-98 dated July 21, 1998; DA-088-2002 dated May 7, 2002 ). 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 any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service