BIR Ruling No. 128-82

April 22, 1982 BIR RULING NO. 128-82 034-h 1-81 128-82 A.T. Dimatulac & Associates 2972 R. Magsaysay Boulevard Sta. Mesa, Metro Manila Attention: Mr . Alberto T . Dimatulac Gentlemen : This refers to your letter dated March 27, 1981 stating that in 1971, your clients, the spouses Keng Suy Wat and Chan Sio Tin, purchased a piece of land from Tahanan Village Development Corporation for P22,000.00 under the following terms: a down payment of P5,258.40 and the balance of P16,741.60 payable in 120 equal monthly installments of P301.83 including interest; that in December, 1980, the right over the lot was sold for P94,000.00 to Mr. & Mrs. Octavio and Lourdes Aberion; that at the time of the sale to Mr. & Mrs. Aberion, your clients had made payments totalling P37,856.04, inclusive of interests in the amount of P14,949.00; and that the interests were not deducted from the taxable gross income of your clients in the years they were paid. cdt Based on the foregoing facts you posed the following questions: "(1) Is the above sale of Spouses Keng Suy Wat and Chan Sio Tin to Spouses Octavio and Lourdes Aberion covered by the capital gains tax law? "(2) If yes, is the interest portion of the amortizations includible in the cost of the property for purposes of determining the amount of capital gain?" In reply, please be informed as follows: (1) The sale by your clients of their right over the abovesaid parcel of real property, which right is a real property under Article 415(10) of the Civil Code reading: "Article 415. The following are immovable property: xxx xxx xxx (10) Contracts for public works, and servitudes and other real rights over immovable property." is covered by the capital gains tax law found in Section 34 (h) of the Tax Code, as amended by Batas Pambansa Blg. 37. (2) Since the amounts of interest paid by your clients were not claimed by them as deductions from their gross income in the year paid, those portions of the amortizations which correspond to interests shall form part of the acquisition cost of your client for purposes of computing their capital gains. Very truly yours, RUBEN B. ANCHETA Acting Commissioner