BIR Ruling [DA-657-99]

November 29, 1999 BIR RULING [DA-657-99] Ma. Christina Helena C. Gatmaitan-Samaniego Manhattan Villas, United States Street Betterliving Subdivision, Paraaque City M a d a m : This refers to your letter dated September 28, 1999 requesting in effect for a ruling exempting the sale of your principal residence from the payment of capital gains tax pursuant to Section 24(D)(2) of the Tax Code of 1997. Documents show that Ma. Christina Helena C. Gatmaitan-Samaniego, married to Eduardo L. Samaniego, is the registered owner of a townhouse unit located at Manhattan Villas, United States Street, Betterliving Subdivision, Paraaque City; that said property is covered by Transfer Certificate of Title No. 103045 issued by the Registry of Deeds for the City of Paraaque; and that you are a bonafide resident of the above-described property as certified by Barangay Chairman Jose T. Jurado; that on September 28, 1999, you executed a Deed of Absolute Sale in favor of Ms. Carmelita C. Canlas for and in consideration of Six Hundred Thousand Pesos (P600,000.00); that the proceeds of the aforementioned sale will be fully utilized in the acquisition of another real property that will serve as your new residence; and that in support of your request, you submitted to this Office the following documents: 1. Deed of Absolute Sale; 2. Transfer of Certificate Title; 3. Tax Declarations; 4. Sworn Declaration of Intent; and 5. Certification of Barangay Captain where the property sold is situated therein that you are a bonafide 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. 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 of a new real property that will serve as your principal residence within eighteen (18) calendar months reckoned from September 28, 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. Carmelita C. Canlas 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. However, this 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 requirements and all other conditions set forth under Revenue Regulations No. 13-99 dated July 26, 1999, implementing 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. cdlex Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)