Suspension of the Payment of the Capital Gains Tax

April 15, 1981 BIR RULING NO. 074-81 034-h 000-00 074-81 K.V. Faylona & Associates 11th Floor Bldg., 1010 A. Mabini St. Ermita, Manila Attention: Atty . Donato T . Faylona Gentlemen : This refers to your letter dated August 28, 1980 requesting for the suspension of the payment of the capital gains tax imposed by Section 34(h) of the Tax Code as amended by Batas Pambansa Blg. 37, relative to the expropriated property of your clients, Mesdames Carmen A. Melencio, Ameurfina M. Herrera and Emiliana M. Fernando, covered by Transfer Certificate of Title No. 88980 of the Registry of Deeds of Manila. It is represented that, as stipulated in the Deed of Absolute Sale dated April 21, 1980, your clients will not receive payment for the expropriated property until the same is submitted to the Ministry of Public Highways under a new transfer certificate of title in the name of the government; and that the Register of Deeds will not allow transfer of the property in favor of the government, without a certificate of payment of the capital gains tax. In reply, please be informed that since the property of your clients was sold to the government, their tax liability on the gain derived from the sale shall be determined either under Section 21 of the Tax Code or under Section 34(h) of the same Code, at the option of your clients (Sec. 34(h), Tax Code, as amended by B.P. No. 37). In case your clients elect the former, this Office shall issue the certification authorizing the transfer of title to the purchaser. [Sec. 7(a)(5), Revenue Regulations No. 8-79]. On the other hand, in case your clients elect the latter, following the suggested arrangement of the Minister of Public Highways, 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, your clients 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 your clients and remit the same to this Bureau. In this connection, it may be noted this ruling applies only to sales of property in favor of the government wherein the contract of sale stipulates that the seller shall not be paid until title to the property is transferred to the government. Very truly yours, RUBEN B. ANCHETA Acting Commissioner