BIR Ruling [DA-585-99]

October 7, 1999 BIR RULING [DA-585-99] Mr. Eduardo L. Reyes #1 Valle Verde I, E. Rodriguez, Jr. Avenue Pasig City S i r : This refers to your letter dated January 21, 1999 requesting 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. LibLex It is represented that you are the registered owner of 1 Unit of Chateau Verde Condominium situated at Kaimito St., Valle Verde I, E. Rodriguez Jr. Ave., Pasig City covered by Condominium Certificate of Title No. PT-16157 issued by the Registry of Deeds of Pasig City; that the said property is your principal residence, which fact was confirmed in the certification issued on August 30, 1999 by the Brgy. Captain of Brgy. Ugong, Pasig City certifying that you are a bonafide resident of Brgy. Ugong, Pasig City with postal address at Kaimito St. Valle Verde I, Barangay Ugong, Pasig City; that on January 21, 1999, you sold the said property in favor of Sterling Properties, Inc. for and in consideration of the amount of One Million One Hundred Eighty Six Thousand Four Hundred Pesos (P1,186,400.00); that in the Affidavit you executed on January 2, 1999, it was stated therein that you will use the entire proceeds of the said sale to acquire another real property to be used as your new principal residence within 18 months from said sale; and that in the same Affidavit, it was likewise stated that you will avail of the capital gains tax exemption provided for under Section 24(D)(2) of the Tax Code of 1997. In reply, please be informed that pursuant to Section 24(D)(2) of the Tax Code of 1997, 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 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)(2) 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 buy/acquire your 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 Sterling Properties, Inc. is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, provided, however, that the seller-owner shall be able to comply with the sworn declaration and post reporting requirements and all the other conditions provided for under Revenue Regulations No. 13-99 dated July 26, 1999. The said sale is subject to the documentary stamp tax impose under Sec. 196 of the Tax Code of 1997 based on the gross selling price or fair market value of the property sold, whichever is higher. (BIR Ruling No. 111-98 dated July 8, 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, and/or the conditional requirements imposed therein are not complied with, 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)