BIR Ruling [DA-535-99]

September 16, 1999 BIR RULING [DA-535-99] Mr. Resurreccion B. Roque 101-B Guatemala St., Pasig Green Park Village Manggahan, Pasig City S i r : This refers to your letter dated August 24, 1999 requesting exemption from the payment of capital gains tax on the sale of your principal residence in favor of Ms. Pilar Mori pursuant to Section 24(D)(2) of the Tax Code of 1997. llcd It is represented that Ms. Ivy L. Roque, married to Resurreccion B. Roque is the registered owner of a parcel of land together with the improvements thereon situated at No. 101-B Guatemala St., Pasig Green Park Village, Manggahan, Pasig City covered by TCT No. PT-109131 issued by the Registry of Deeds for the City of Pasig; that said property is your principal residence as certified to by Barangay Captain Cris S. Cruz; that on August 24, 1999, you executed a Deed of Absolute Sale in favor of Ms. Pilar Mori for and in consideration of P900,000.00; that the proceeds from the said sale will be fully utilized in acquiring/constructing a new principal residence; and that in support of your request, you submitted to this office the following documents: 1. Deed of Absolute Sale; 2. Transfer Certificate of Title; 3. Tax Declarations; 4. Sworn Declaration of Undertaking; and 5. Certification from the Punong Barangay where the property sold is located stating therein that you are a bona fide resident of the said Barangay. In reply, please be informed that pursuant to Section 24(D)(2) of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, 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 in 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. LibLex From the foregoing, and since you have manifested your intention to fully utilize the proceeds of the sale or disposition of your property to finance the acquisition/construction of a new house as your principal residence within eighteen (18) calendar months reckoned from August 24, 1999 as 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 Ms. Pilar Mori is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. However, the same is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 based on the gross selling price or fair market value/zonal value of the property whichever is higher. The concerned Register of Deeds is requested to annotate at the back of the subject certificate of title that the subject tax exemption shall be rendered null and void and that the entire proceeds of the said sale shall be subject to the capital gains tax and the corresponding penalties thereto, in case the seller failed to comply with all the conditions set forth under Section 24(D)(2) of the Tax Code of 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 and Enforcement Group)