Ms. Angelina A. Barrera

November 24, 2009 BIR RULING [DA-(C-279) 698-09] 24 (D) (1); 39 (A); 106; 197-2007; DA-692-2006; DA-155-05; DA-653 & 654-2006; DA (C-40) 541-2003 Ms. Angelina A. Barrera Taft Avenue, Malate, Manila Madam : This refers to your letter dated November 11, 2009 requesting for confirmation of your opinion that the sale of your real properties to third party is subject only to capital gains and documentary stamps taxes. It is represented that you are the registered owner of two (2) residential parcels of land covered by Transfer Certificate of Titles Nos. 109433 and 109434 of the Registry of Deeds of Manila, located along Taft Avenue, Malate, Manila; that the said realties were the site of your family's residence since 1947; that you bought the said properties from your father in 1972 and continued to reside therein; that in 1984, you were forced to move out from your residence due to the construction of the Light Rail Transit (LRT); that in October of 2006, you again maintained the above property as your Manila residential address; that you sold the said property and has already paid the capital gains tax due thereon; and that you are requesting confirmation that your above real properties are considered as capital assets, hence, the sale thereof is subject only to the capital gains and documentary stamp taxes and not to the creditable withholding tax (CWT) and the 12% value-added tax (VAT). In reply, please be informed that Section 39 (A) (1) of the Tax Code of 1997, as amended, provides: " Capital Assets. The term "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would be properly included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property used in the trade or business, of a character which is subject to the allowance for depreciation provided in Subsection (F) of Section 34; or real property used in trade or business of the taxpayer." CaTcSA In the instant case, your aforementioned real properties are properly classified as capital assets because the same are constituted as your family's residence thereby said realties have never generated any income to be considered properties used in business. Accordingly, the sale of your afore-mentioned real properties is subject only to the capital gains tax imposed under Section 24 (D) (1) of the 1997 Tax Code, as amended, and to the documentary stamp tax imposed under Section 196 thereof. (BIR Ruling No. 660-99 dated November 29, 1999; BIR Ruling No. DA-397-2000 dated November 20, 2000 citing UN-276-95 dated July 26, 1995; BIR Ruling No. DA-219-2005 dated May 5, 2005 cited in BIR Ruling Nos. DA-653 & 654-2006, both dated November 7, 2006; Rev. Regs. No. 7-2003) Moreover, the sale of the above-mentioned real properties, treated as capital assets, is not subject to the 12% value-added tax (VAT) imposed under Section 106 of the 1997 Tax Code, as amended, in accordance with Sec. 4.109-1 (B) (p) of Revenue Regulations (RR) No. 16-2005, as amended by RR No. 4-2007, implementing Republic Act No. 9337. [BIR Ruling No. DA (C-40) 541-2009 dated September 15, 2009] 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service