BIR Ruling [DA-403-98]

September 7, 1998 BIR RULING [DA-403-98] Baguio Colleges Foundation Gov. Pack Road Baguio City Attention: Ms . Nene S . Bowman Executive Trustee Gentlemen : This refers to your letter dated February 27, 1997 requesting that you be exempted from paying the capital gains tax and documentary stamp tax on your sale of a piece of land to Maligaya Corporation. LLpr It is represented that Baguio Colleges Foundation is a non-profit, non-stock educational foundation established in accordance with law on June 19, 1966 and has been granted Government Recognition by the Department of Education Culture and Sports (DECS) and the Commission on Higher Education (CHED) for various courses it offers ; that it is the successor-in-interest of the Baguio Colleges, Inc.; that a parcel of land with an area of 5,153 located at Holy Ghost Hill, Baguio City is registered in the name of Baguio Colleges, Inc. under OCT No. P-1285; that Baguio Colleges Foundation is intending to construct a new building at its present location along Harrison Road, Baguio City to accommodate the increasing of students; that to fund this project, it has sold the aforesaid land to Maligaya Development Corporation; and that the proceeds of the sale will be used purposely to defray the cost of the construction of the proposed building. In reply, please be informed that this Office is of the opinion that the sale of the subject parcel of land is exempt from the capital gains tax considering that the income derived therefrom did not result from the productive use of real properties but from a single transaction which is merely incidental to the purpose for which the Foundation is organized. Hence, the said income is not within the contemplation of the last paragraph of Section 30 of the Tax Code of 1997 [then Sec. 26 of the Tax Code, as amended]. (BIR Ruling No. 115-92 dated April 2, 1992) Under Section 196 of the Tax Code of 1997, a conveyance or deed whereby land is assigned or transferred to the purchaser is subject to the documentary stamp tax based on the consideration or fair market value of the property, whichever is higher. Moreover, the acknowledgment to the said deed of conveyance is subject to the documentary stamp tax of P15.00 on certification pursuant to Sec. 188 of the Tax Code of 1997. Such being the case, Baguio Colleges Foundation is liable to pay DST on its sale of land to Maligaya Development Corporation. 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, then this ruling shall be considered null and void. (BIR Ruling No. 115-92 dated April 2, 1992 and Opinion of Secretary of Justice, GC No. V-287 dated April 7, 1959) aisadc Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group