Tax Liability on the Gain Derived from the Sale of Property Expropriated by the Government

February 27, 1984 BIR RULING NO. 044-84 34-h-74-81-044-84 S i r : This refers to your letter dated February 1, 1984 requesting authority to register the Deed of Sale with the Register of Deeds of Quezon City and to transfer the title to the property in favor of the government even if the capital gains tax due thereon has not yet been paid. It is represented that you are the registered owner of the residential land located at G. Araneta Avenue Extension, Santol, Quezon City, consisting of 312 square meters more or less, covered by TCT No. 218120 of the Register of Deeds of Quezon City; that said property has been expropriated by the government through the Ministry of Public Highways; and that you have not been paid yet of the value of said lot until title thereto has been transferred from your name to the government. In reply, please be informed that since your property was expropriated by the government, through the Ministry of Public Highways, your tax liability on the gain derived from the sale shall be determined under Section 21 or under Section 34(h) of the Tax Code, at your option (Section 34(h), Tax Code, as amended by BP 37). In case you elect the former, this Office shall issue the certification authorizing the transfer of title to the purchaser (Sect. 7(a)(5), Revenue Regulations No. 8-79). On the other hand, in case you elect the latter this Office hereby allows the registration of the deed of sale with the Register of Deeds and consequently, the transfer of the property in favor of the government. Thereafter, upon submission of a new certificate of title in the name of the government at which time payment of the expropriated property can be effected, you shall file the corresponding capital gains tax return within thirty (30) days from said submission of the certificate of title. The Ministry of Public Highways shall within the same period, withhold the capital gains tax due from you and remit the same to this Bureau. In connection, it may be noted that this ruling applies only to sales of property in favor of the government wherein the contract stipulates that the seller shall not be paid until title to the property is transferred to the government. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner