BIR Ruling [DA-481-99]

August 23, 1999 BIR RULING [DA-481-99] Mr. Ang Chan Eng No. 4 Celery Drive, Valle Verde V E. Rodriguez, Jr. Avenue Ugong, Pasig City S i r : This refers to your letter dated July 27, 1999 requesting for exemption from the payment of capital gains tax the sale of your principal residence pursuant to Section 24(D)(2) of the Tax Code of 1997. It is represented that you are the registered owner of a residential house and lot situated at No. 4, Celery Drive, Valle Verde V, E. Rodriguez, Jr. Ave., Ugong, Pasig City covered by Transfer Certificate of Title (TCT) No. PT-74047 issued by the Registry of Deeds of Pasig City; that the said property is your principal residence as confirmed in a Certification dated July 26, 1999 issued by the Barangay Captain of Barangay Ugong, Pasig City; that on July 27, 1999, you sold your said principal residence in favor of Ang Daniel Teng for and in consideration of the sum of Seven Million Pesos (P7,000,000.00); that you intend to use the proceeds of the sale in acquiring your new principal within a period of eighteen (18) months; that in an Affidavit of even date, you are, in effect, informing the Commissioner of the Bureau of Internal Revenue of your intention to avail of the capital gains tax exemption under Section 24(D)(2) of the Tax Code of 1997; and that in support of your request, you submitted to this Office copies of the following documents: 1. Deed of Sale of your principal residence; 2. Affidavit declaring your intention to use the proceeds of the sale of your principal residence in acquiring your new principal residence; 3. TCT No. PT-74047; 4. Corresponding Tax Declaration; and 5. Barangay Certification. In reply, please be informed that pursuant to Section 24(D)(1) and (2) of the Tax Code of 1997, capital gains presumed to have been realized from the sale or disposition of their principal residence by natural persons, the proceed 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 in which can only be availed of the 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 determined 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 utilized 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 Mr. Ang Daniel Teng is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. (BIR Ruling No. DA-357-98 dated September 3, 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, 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)