Capital Gains — Foreign Source Income of Non-Resident Citizen

December 18, 1979 BIR RULING NO. 130-79 Capital gains foreign source income of non-resident citizen This refers to your letter of the 7th instant stating the following facts: "My husband, Rodolfo V. Ocampo (former Finance Attache assigned in San Francisco, California, U.S.A.) arrived from the United States on June 30, 1979 after more than 8 years of continuous stay in the United States (April, 1971-June 30, 1979). I, however, followed later and arrived in the Philippines on August 19, 1979 after more than 8 years of continuous stay in the United States (April, 1971-August 19, 1979). "On July 6th, 1979, we sold our house in San Francisco, California for $103,000.00 which we purchased in 1971 for $28,500.00. We spent a substantial amount of funds to improve the house as it needed new roofing, gutters paint, and a room added in the basement area. Also, we incurred expenses for "Closing costs" in the purchase and sale of the house, as shown below: cd Gross Selling price $103,000.00 Less: Cost/Other bases $28,500.00 Closing cost during purchase 750 Improvements 15,000.00 Selling expenses closing cost 3,377.30 6% broker's commission 6,180.00 53,807.30 Capital Gain $49,192.70 50% thereof (held for more than 12 months) $24,596.35 Less: Exemption 4,000.00 Net taxable amount $20,596.35 TAX DUE THEREON $357.89 "During my stay in the United States, I have had the opportunity to work as a savings and loan new accounts counsellor and I had been filing my dollar income separately on a B.I.R. Form No. 1701-C through the advice of our BIR attache in San Francisco. "On my husband's wages and rental income derived from the Philippines, separate returns had been filed annually under B.I.R. Form 17.01." Based on your representations, you request information as to whether you could file and report in B.I.R. Form 17.01-C, the capital gains derived from your sale of a house abroad. In reply thereto, I have the honor to inform you as follows: Pertinent portion of Section 20(e) of the Tax Code of 1977 as amended reads thus "(e)(1) . . . "(2) . . . "(3) A citizen who has been previously considered as non-resident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a non-resident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines . (Emphasis ours) xxx xxx xxx" Under the aforequoted provision of law, a citizen who had been a resident abroad but arrived in the Philippines at any time during the year to reside permanently in the Philippines, will be considered as a nonresident citizen with respect to his foreign source income while he was abroad during the portion of the taxable year. (Revenue Memorandum Circular No. 80-78 dated August 15, 1978) In view thereof, and considering that unlike your husband, you had been previously considered as a nonresident citizen, this Office is of the opinion as it hereby holds that being one of your foreign source income as of August 19, 1979, the date of your arrival in the Philippines, you may report in B.I.R. Form No. 17.01-C, the capital gains realized from the sale of your house in San Francisco, California and pay the corresponding income tax thereon as computed in accordance with the rates prescribed by Section 21(a) and (b) of the Tax Code of 1977 as amended. aisa dc