Ortega, Del Castillo, Bacorro Odulio, Calma & Carbonnel

July 20, 2007 BIR RULING [DA-400-07] Sec. 24 (D) (2); DA 334-98 Ortega, Del Castillo, Bacorro Odulio, Calma & Carbonnel ALPAP 1 Bldg., 5th and 6th Floors, 140 L.P. Leviste Street, Salcedo Village Makati City Attention: Attys. Renato G. Calma & Monette Eloisa C. Fabros Gentlemen : This refers to your letter April 1, 2007 requesting in behalf of your client, Ma. Felisa Quimson-Lat for exemption from the payment of capital gains tax on the sale of her principal residence situated at Unit C 9th Floor, Legaspi Towers 300, Roxas Boulevard, Manila pursuant to Section 24 (D) (2) of the Tax Code of 1997, as amended. It is represented that Ma. Felisa Quimson-Lat is the registered owner of a condominium unit covered by Condominium Certificate of Title No. 6624; that Ma. Felisa Quimson-Lat and the members of her family have used the condominium unit as a family home and residence since its acquisition in 1987; that Ma. Felisa Quimson-Lat is currently working and staying in Canada; that on December 4, 2006, Ma. Felisa Quimson-Lat, together with her sister purchased a condominium unit at One Mckinley Place, Taguig City covered by CCT No. 5930 in the amount of Nine Million Six Hundred Fifty Thousand pesos (P9,650,000.00) each of them contributing Four Million Eight Hundred Twenty Five Thousand Pesos (P4,825,000.00); that Ma. Felisa Quimson-Lat sold to Big R Holdings Corporation her condominium unit in Legaspi Towers 300 for Three Million Pesos (P3,000,000.00) on July 16, 2007; that Ma. Felisa Quimson-Lat contributed the entire proceeds of the sale of her Legaspi Towers 300 condominium unit to the acquisition and purchase of the condominium unit at One Mckinley Place; that in compliance to the provisions of Revenue Regulations No. 13-99 as amended by Revenue Regulations No. 14-00, covering the exemption of certain individuals from the capital gains tax on the sale, exchange, disposition of a principal residence under certain conditions, Ma. Felisa Quimson-Lat submitted a sworn declaration of her intent to avail of the tax exemption was duly received by the Commissioner's Office on July 16, 2007, and deposited in cash, the amount of Four Hundred Ninety Two Thousand Ninety Six and 15/100 pesos (P492,096.15) interest bearing escrow account equivalent to the capital gains tax due; and that in support of your request, you submitted to this Office photocopies of the following documents: HIAESC 1. Deed of Absolute Sale in favor of Big R Holdings Corporation; 2. Deed of Sale showing the acquisition of the new principal residence; 3. Corresponding Transfer Certificates of Title; 4. Tax Declarations; 5. Letter of Intent received by the Office of the Commissioner; 6. Documents pertaining to the construction of the new principal residence. 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 Tax Code of 1997, as amended. IDSEAH From the foregoing, since your client has already fully utilized the proceeds of the sale or disposition of her property in the acquisition of the condominium unit as her new principal residence as required by law and has notified the Commissioner of the same within thirty (30) days from the sale or disposition of her property, the proceeds from the sale of her property in favor of Big R Holdings Corporation, 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). 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