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

July 8, 1998 BIR RULING NO. 111-98 24 (D) (2)-000-00-111-98 Mr. Conrado C. Ramos 95 General Luna Street Malabon, Metro Manila Sir : This refers to your letter requesting exemption from the payment of capital gains tax on the sale of your principal residence in favor of Veperey Realty Corporation on May 29, 1998 pursuant to Section 24(D)(2) of the Tax Code of 1997. dctai Documents submitted show that you and your children, namely: Karla D. Ramos, Paul D. Ramos and Aldine D. Ramos are the owners of a parcel of land including improvements thereon situated at 95 Gen. Luna St., Malabon, Metro Manila covered by Transfer Certificate of Title No. M-13999 issued by the Registry of Deeds of Malabon, Metro Manila; that the said real property is your principal residence together with your children as certified by Brgy. Captain Ricky R. Bernardo, of Brgy. San Agustin; that on May 26, 1998, you and your children sold your said principal residence in favor of Veperey Realty Corporation for and in consideration of P500,000.00; that the proceeds from the said sale will be fully utilized to buy and/or construct a new principal residence. 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 your principal residence, the proceeds of which shall be 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 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 to 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. From the foregoing, and since you and your children have manifested your intention to fully utilize the proceeds of the sale or disposition of your property to buy/acquire another lot and house as your new principal residence within the time 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 such sale in favor of Veperey Realty Corporation 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 the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, this ruling shall be considered null and void. LLphil Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue