BIR Ruling [DA-644-99]

November 19, 1999 BIR RULING [DA-644-99] Mrs. Zaida Fe F. Usami #32 Sterling St., Jem 10 Subd. Tandang Sora, Quezon City M a d a m : This refers to your undated letter requesting exemption from the payment of capital gains tax on the sale of your principal residence pursuant to Section 24(D)(2) of the Tax Code of 1997. LexLib It is represented that you are the registered owner of a residential house and lot located at #32 Sterling St., Jem 10 Subd., Tandang Sora, Quezon City covered by Transfer Certificate of Title No. 121430 issued by the Registry of Deeds of Quezon City; that said house and lot served as your principal place of residence, which fact was confirmed in the certification issued on September 27, 1999 by the Brgy. Captain of Brgy. Tandang Sora, Quezon City with postal address at #32 Sterling St., Jem 10 Subd., Tandang Sora Quezon City; that on October 1, 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 support of your request, you submitted to this Office copies of the following documents: 1. Barangay Certification that you are a bonafide resident of #32 Sterling St., Jem 10 Subd., Tandang Sora, Quezon City; 2. Deed of Absolute Sale executed between you and Ms. Julieta B. Carlos; 3. Transfer Certificate of Title No. 121430; 4. Sworn Declaration of intent duly notarized; and 5. Other pertinent documents. 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 their principal residence by natural persons, the proceeds of which is fully utilized in acquiring or constructing a new principal residence within (18) calendar months from 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 gross selling price in order to determine the taxable portion for the purpose of computing the tax under Section 24(D)(2) of the Tax Code of 1997. 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 Ms. Julieta B. Carlos 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 imposed under Section 196 of the Tax Code of 1997 based on the gross selling price or fair market values of the property sold, whichever is higher. However, this tax exemption shall be rendered null and void and 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 the sworn declaration and post reporting requirements and all the other conditions set forth under Revenue Regulations No. 13-99 dated July 26, 199, implementing Section 24(D)(2) of the Tax Code of 1997. (BIR Ruling No. DA-604-99 dated October 11, 1999) This ruling is being issued on the basis on 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. cdlex Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)