BIR Ruling No. 121-61

March 9, 1961 BIR RULING NO. 121-61 Eusebio & Costiniano Law Offices 575 Atlanta St., Port Area Manila Attention : Mr . Tagumpay S . Eusebio Gentlemen : This is with reference to your letter dated March 3, 1961, requesting a ruling from this Office as to the tax liabilities of Messrs. A. S. Tongco, C. Placido, and Bienvenido Galang & Associates, under the following facts: llcd "My client, Bienvenido Galang & Associates, duly licensed Real Estate Brokers, was authorized in writing by Messrs. Alejandro S. Tongco and Celso Placido, who are joint owners, pro-indiviso, of a certain parcel of land located in Angat, Bulacan, containing an area of about 1,106,585 sq. meters, more or less to sell the same for P0.10 per sq. meter or P110,685.00, Net. Any over price on the P0.10 per sq. meter will be the corresponding commission of Bienvenido Galang & Associates. Fortunately, the subject parcel of land was offered and sold to DSSO. "There has been an over price on P110,685.80." Based on the foregoing facts as presented, I have the honor to inform you as follows: (1) Messrs. Alejandro S. Tongco and Celso Placido, as joint owners, pro-indiviso , of the parcel of land sold to "DSSO", thru a real estate broker, are liable individually to the income tax in their share in the capital gain (if the property is a capital asset) derived from the sale. Only 50% of the capital gain derived from the sale is subject to income tax if the property has been held for more than twelve (12) months and 100% if the property has been held for not more than twelve months. (Sec. 34(a) & (b), Tax Code.) If the property was used in trade or business, such as agriculture, the full amount of the gain is subject to tax. This is for the reason that lands devoted to agriculture are considered ordinary assets. cdll Messrs. Tongco and Placido are, likewise, subject to the residence taxes prescribed by law. (2) Bienvenido Galang & Associates, as the real estate brokers involved in the transaction, are liable to the real estate broker's percentage tax of 6%, based on their gross compensation (commission) received from the owners of the land, pursuant to Section 195 of the same Code above-mentioned. Said compensation is likewise subject to the income and residence taxes prescribed by law. LibLex We assume that Bienvenido Galang & Associates, as licensed real estate brokers, had already paid their annual privileged (fixed) tax of P150.00, pursuant to Section 102 (A)(3)(s), in relation to Sections 178 and 180, of the same Code. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue