Request for Issuance of a Certificate of Exemption from Capital Gains Tax
BIR Ruling No. 054-86 • Bureau of Internal Revenue (BIR) Issuances • Rulings (Numbered) • May 7, 1986
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May 7, 1986 BIR RULING NO. 054-86 21 (d) 184-85 054-86 S i r : This refers to your letter dated February 3, 1986, requesting in behalf of your client, Mrs. Ester Mijares for the issuance of a certificate of exemption from capital gains tax. It is represented that your client, Mrs. Ester Mijares is the holder of Land Investment Trust Certificates (LITC Nos. T00540-T00554, inclusive), with a total value of P750,000, issued by the Home Financing Corporation (HFC) as trustee, in connection with the LIT G. Araneta Townhouse Project; that the said LITCs matured last May 11 1985; and that the HFC will redeem the same at par value of P750,000.00 also. In reply thereto, please be informed that Section 21(d) of the Tax Code, as amended by P.D. No. 1994, provides as follows: "(d) On interest from bank deposit and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements . Interest from Philippine Currency Bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements whether received by citizens of the Philippines or by resident alien individuals, shall be subject to a 17.5% final tax and paid as provided in Sections 51 and 52 of this Code." Such being the case, interest income or other monetary benefit from trust investments are not subject to the capital gains tax, but to the final tax of 17.5% prescribed by Section 21(d) of the Tax Code, as amended by P.D. No. 1994. Accordingly, if as represented the aforementioned trust investment certificates will be redeemed by the HFC at the same par value of P750,000 no taxable gain will be realized by your client subject to the 17.5% final tax. However, if the trust investment certificates were acquired by your client at a discount, the difference between the discounted rate and the redemption amount is considered yield subject to the 17.5% final tax. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner
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