Batino Law Offices

July 16, 2008 BIR RULING [DA-(I-004) 048-08] Batino Law Offices Fourth Floor Oakridge Plaza San Antonio Street Paseo de Magallanes Makati City Attention: Atty. Pio Lorenzo F. Batino Gentlemen : This refers to your letter dated February 12, 2008 stating that in September 1999, your clients, Michelle Maceda-Adevoso with her mother, Ma. Lourdes F. Maceda married to Manuel A. Maceda purchased a single residential unit at Chateau Verde Condominium located at Kaimito corner Atis Streets, Valle Verde 1 Pasig City comprising a total area of 210.51 square meters broken down as follows: Unit 215 with an area of 70.19 square meters under CCT No. PT-28111 and Unit 217 with an area of 140.32 square meters under CCT No. PT-28112; that the said properties were used by its owners as a single residence as certified to by the Chateau Verde Homeowners' Condominium Association; that in October 2006, Spouses Jay Paolo Adevoso and Michelle Maceda Adevoso sold the said property to William Tayag to purchase and re-establish a principal residence; that however, their application for Capital Gains Tax Exemption was denied by the Revenue District Office (RDO) No. 043, Pasig City, insofar as Unit 217 with an area of 140.32 square meters under CCT No. PT-28112 and up to the proportionate portion owned by Spouses Ma. Lourdes F. Maceda and Manuel A. Maceda more particularly described as Unit 215 with an area of 70.19 square meters covered by CCT No. PT-28111; that your clients concede to the payment of the capital gains tax due of the proportionate portion owned by Spouses Maceda in the amount of P159,000.00 on September 19, 2007 for both Unit 215 with an area of 70.19 square meters under CCT No. PT-28111 and Unit 217 with an area of 140.32 square meters under CCT No. PT-28112; that your Office filed a letter of appeal to the Revenue Region No. 7, RDO No. 43, which was endorsed to Revenue Region No. 7, Quezon City Legal Division; that this letter of appeal revolved around the issue whether or not the principal residence of Michelle Maceda-Adevoso constitutes one single residence; that it is your contention that the above-mentioned units were used by the first owners as one unit/residence; that it has one door located at Unit 215 and no door to the area denominated as Unit 217 which was not changed at anytime and continued from the time this single residence was transferred by the first owners to your clients up to the time the same was sold to the present owners; that your clients lived in said unit as their principal residence beginning January 2000 until it was sold in October 2006; that there is no unit denominated as Unit 217 in the Chateau Verde Condominium thus all utility bills, bank statements and other mail and correspondences of the occupants were directed to Unit 215 as their address; and that Chateau Verde Homeowners' Association Condominium certifies that said units were used as a single unit/residence prior to the purchase of your client up to the new and present owner. CHaDIT In reply, please be informed that pursuant to Section 24 (D) (2) of the Tax Code of 1997, as amended, 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 your 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) (1) of the Tax Code of 1997, thereon. CAIaHS Under the foregoing circumstances, since the sale of the above condominium units were certified by the Chateau Verde Homeowners' Association as a single unit/residence and considering further that all utility bills, bank statements and other correspondences were directed at Unit 215 as there is no unit denominated as Unit 217 at Chateau Verde, the sale of the above-mentioned condominium units shall constitute as one single residence and consequently falls within the contemplation of Section 24 (D) (2) of the Tax Code of 1997, as implemented by Revenue Regulations No. 13-99, as amended by Revenue Regulations No. 14-2000. SUCH BEING THE CASE, this Office holds that the sale of the above-mentioned condominium units by your clients to William Tayag and the proceeds of the said sale shall be fully utilized in the acquisition of the land and the construction of their new principal residence as required by law is exempt from the 6% capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended. AaIDCS 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 any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service