Request for Exemption from Payment of Capital Gains Tax on Sale of Principal Residence

June 24, 1998 BIR RULING NO. 097-98 24 (D) (2)-000-00-097-98 Mr. Marcelo C. de Guzman No. 25 Pipit St., Villilia Village Novaliches, Quezon City S i r : This refers to your letter dated June 1, 1998 requesting for exemption from the payment of capital gains tax on the sale of your principal residence situated at Blk. 1, Lot 15, St. Michael Street, San Pedro Subdivision 7, San Bartolome, Novaliches, Quezon City covered by Transfer Certificate of Title No. RT-41751 in favor of Mr. Henry Lim pursuant to Section 24(D)(2) of the Tax Code of 1997. LexLib It is represented that you are the registered owner of a parcel of land including improvements thereon situated at Blk. 1, Lot 15, St. Michael St., San Pedro Subdivision 7, San Bartolome, Novaliches, Quezon City; that the said property is your principal residence; that you sold your principal residence on June 1, 1998 in favor of Henry Lim with postal address at Phase 4 #20 MY Homes, Marvex Drive, Balintawak, Quezon City for and in consideration of P850,000.00; that you are intending to use the proceeds of said sale to finance your acquisition of your intended new principal residence situated at Blk. 4, Lot 2B1, West Berkerly, California Village, San Bartolome, Novaliches, Quezon City; and that in support of your request, you submitted to this Office copies of the following documents: 1. Deed of Absolute Sale; 2. Transfer Certificate of Title No. RT-41751 (318744); 3. Corresponding tax declaration; 4. Sworn Declaration of Intent as to the utilization of the proceeds of said sale; 5. Certification of the Barangay Captain of the place where your sold property is located to the effect that the same is your principal residence prior to the sale thereof; and 6. Other pertinent documents. In reply, please be informed that pursuant to Section 24(D)(2) of the Tax Code of 1997, capital gains presumed to have been realized from the sale or disposition of their 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 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 her intention to avail of the tax exemption thus mentioned, and in 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)(2) of the Tax Code of 1997, thereon. LLphil From the foregoing, and since you have manifested your intention to fully utilize the proceeds of the sale or disposition of your property to buy another parcel of land including improvements thereon as your new principal residence within eighteen (18) calendar months reckoned from June 1, 1998 as required by law and have notified the Commissioner of the same within thirty (30) days from the sale or disposition of your property, the proceeds from the sale of your property in favor of Mr. Henry Lim is exempt from the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. The concerned Register of Deeds is, however, requested to annotate at the back of the subject certificate of title that the subject tax exemption shall be rendered null and void and that the entire proceeds of the said sale shall be subject to the capital gains tax and the corresponding penalties thereto in case the seller failed to comply with all the conditions set forth under Section 24(D)(2) of the Tax Code of 1997. This ruling is being issued on basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue