BIR Ruling [DA-552-98]

December 2, 1998 BIR RULING [DA-552-98] Ms. Violeta Quiia Predas 1838 Yakal Street Tondo, Manila M a d a m : This refers to your letter dated June 26, 1998 requesting for a ruling on the tax consequence of the sale by the Franciscan Filipino Vicariate of St. Gregory the Great, of a portion of its property in favor of Spouses Fortunato and Violeta Predas. aisadc It is represented that Franciscan Filipino Vicariate of St. Gregory the Great is a religious corporation duly registered with the Securities and Exchange Commission (SEC); that it is the owner of a parcel of land identified as Lot No. 7-B, Block No. 2 containing an area of One Hundred Two (102) square meters, located at San Francisco del Monte, Quezon City; that the said parcel of land is a portion of its property covered by Transfer Certificate of Title No. 29762 of the Register of Deeds for Quezon City; that on June 24, 1983, a Deed of Absolute Sale was executed by the religious corporation in favor of the Spouses Fortunato and Violeta Predas for and in consideration of P8,160.00; and that the proceeds of such sale was used by the religious corporation to finance the maintenance/repair of its churches and for other missionary expenses in the provinces. 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 religious purpose. 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 religious purpose' for which your corporation was created. And as the new site will not be acquired for speculation or as an investment to be eventually sold primarily for monetary gain, there is reason enough to say that 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 7, 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. LLpr Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group