BIR Ruling [DA-553-98]

December 3, 1998 BIR RULING [DA-553-98] R.S. Bernaldo & Associates Unit 1810 Cityland Condominium 10 Tower 1 6815 Ayala Avenue cor. H.V. dela Costa Extn. 1200 Makati City Attention: Atty . Rosario S . Bernaldo Managing Partner Gentlemen : This refers to your letter dated September 30, 1998 requesting for a ruling that, for income tax purposes, the herein mentioned property is a capital asset. casia It is represented that Mr. Jose Yao Campos (Mr. Campos for short) is the owner of a parcel of land located at 190 V. Mapa St., Sampaloc, Manila under Transfer Certificate of Title No. 38948 and Tax Declaration No. 96-60059 with an area of 2,486.3 square meters, more or less; that the said property has been classified as a commercial lot with an existing fair market value of P7,164,990.00; that it was initially acquired by Mr. Campos for residential purposes on April 6, 1955; that it was temporarily used by the United Laboratories, Inc. as its office until 1958 and by the Westmont Pharmaceutical, Inc. up to 1962; that thereafter and up to the present, the place has not been occupied nor has been used for any business activity; and that you are of the opinion that although the property is being classified as "for commercial use" under its declaration, it cannot also be considered as an "ordinary asset" defined under Section 39(A)(1) of the Tax Code of 1997 since the taxpayer does not hold the property under any of the situations mentioned thereof. In reply, please be informed that pursuant to Sec. 39(A)(1) of the Tax Code of 1997, the term ' capital assets ' means property held by the taxpayer (whether or not connected with his trade or business), but does not include the following, viz: "(1) stock in trade of the taxpayer; "(2) other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the closed of the taxable year; "(3) property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business. presumed to have been realized therefrom as prescribed under Sec. 24(D)(5) of the Tax Code of 1997 in relation to Sec. 57 of the same Tax Code. (BIR Ruling No. 190-93 dated May 5, 1993; BIR Ruling UN-312-95 dated August 23, 1995) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it shall 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