BIR Ruling [DA-517-99]

September 6, 1999 BIR RULING [DA-517-99] Dr. Jose P. Rizal Memorial Foundation, Inc. Bagong Bayan, Dasmarias, Cavite Attention: Liborio L . Mangubat , M . D . President & Chairman Gentlemen : This refers to your letter dated February 16, 1999 requesting for a confirmation that Dr. Jose P. Rizal Memorial Foundation, Inc. is exempt from income tax on the proceeds of the sale of a parcel of land. It is represented that Dr. Jose P. Rizal Memorial Foundation, Inc. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission under SEC Registration No. 35807 dated July 18, 1968; that on October 27, 1976 following the provisions of the Laurel Langley Agreement, Pfizer Inc., an American Pharmaceutical Co. opted to donate to the Foundation three (3) parcels of land; that two (2) of the lots were sold in 1979 and all the proceeds of the sale were used by the Foundation; that since the Foundation needs a lot of money to finance the projects particularly the expansion and renovation of the 100 bed charity hospital at Bagong Bayan, Dasmarias, Cavite, the Foundation decided to sell the remaining property covered by TCT No. 8-43882 issued by the Registry of Deeds of the Municipality of Muntinlupa; that on the sale of the first two lots, no capital gains tax was paid by the Foundation since the same is a charitable Foundation; and that the Foundation expects the same privilege on the sale of the third lot. In reply, please be informed that this Office is of the opinion that the sale of the said parcel of land is exempt from the capital gains tax considering that the income derived therefrom will not result from the productive use of real properties but from a single transaction which is merely incidental to the charitable and social welfare purposes of the Foundation. Hence, the said income is not within the contemplation of the last paragraph of Section 30 of the Tax Code of 1997. The aforesaid opinion has been sustained and adopted by the Court of Tax Appeals in CTA Case No. 1468 dated October 14, 1968 (Congregacion de la Mission de San Vicente de Paul). Accordingly, the profit or income resulting from the sale transaction would be merely incidental to the charitable and social welfare purposes for which the Foundation was created. The income to be derived from the sale of said property is not within the contemplation of the proviso of Section 30 and will therefore, not render such profit taxable as income. (Opinion of Secretary of Justice, GC No. V-287 dated April 27, 1959 and BIR Ruling No. DA-381-97 dated November 13, 1997) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)