Tax Consequence of the Sale of Undeveloped, Unproductive and Idle Raw Lands

January 26, 1987 BIR RULING NO. 022-87 34-a-1 166-81 022-87 Gentlemen : This refers to your letter dated November 25, 1986 requesting confirmation of your opinion to the effect that the underdeveloped, idle and unproductive parcels of land sold by Zerimar Investment Co., Inc. (ZII) and Marisol Commercial, Inc. (MCI) are capital assets as defined under Section 34(a) of the Tax Code, as amended. It is represented that ZII under its articles of incorporation is authorized to engage in all transactions as an investment company while MCI is authorized also under its articles of incorporation primarily to buy, sell, deal in, exchange, import and export all kinds of merchandise, either in a raw, manufactured or partially manufactured condition such as but not limited to paper products, machineries and spare parts, textiles and to act as agents and brokers for others in the purchase, sale, exchange and import and export of merchandise and articles, that both ZII and MCI own undeveloped, idle raw lands; that said lands were sold by ZII and MCI; and that ZII and MCI will invest the proceeds of the sale in shares of stock of a BOI registered enterprise and avail of the capital gains tax exemption incentives granted to investors under Presidential Decree No. 1789 otherwise known as the Omnibus Investments Code. In reply thereto, I have the honor to inform you that since the aforementioned parcels of land sold by ZII and MCI are undeveloped, unproductive and idle raw lands, the same are capital assets within the contemplation of Section 34 of the Tax Code, as amended. The facts upon which this ruling are based shall be verified. If after verification, the facts are not as represented, this ruling will be revoked. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner