Request for Exemption from Payment of Capital Gains Tax on Behalf of Ifugao Settlers of Isabela

August 28, 1985 BIR RULING NO. 152-85 34-h 44-84 152-85 Gentlemen : This refers to your letter dated February 14, 1985 on behalf of the Ifugao settlers of Wigan, Cordon, Isabela, requesting exemption from the payment of the capital gains tax. It is represented that the aforementioned Ifugaos, all members of the tribal community of the Wigan Settlers Association, Inc., were displaced by the construction of the Magat River Multi-purpose Dam Project; that their lands were expropriated by the National Irrigation Administration (NIA) for the said project; and that the value of their real property and improvement were retained by the NIA as payment of their farm lots, residential lots and houses in the resettlement areas. In reply, please be informed that since the aforementioned properties were expropriated by the government through the National Irrigation Administration, the tax liability of the owners on the gain derived from sale shall be determined under Section 21 or under Section 34(h) of the Tax Code, at their option (Section 34(h), Tax Code as amended by B.P. Blg. 37). In case they elect the former, this Office shall issue the certification authorizing the transfer of title to the government (Sec. 7(a)(5), Revenue Regulations No. 8-79). On the other hand, in case they elect the latter this Office hereby allows the registration of the deed of sale with the Register of Deeds and consequently, the transfer of the property in favor of the government. Thereafter, upon submission of a new certificate of title in the name of the government at which time payment of the expropriated property can be effected, they shall file the corresponding capital gains tax return within thirty (30) days from said submission of the certificate of title. The National Irrigation Administration shall within the same period, withhold the capital gains tax due from them and remit the same to this Bureau. In this connection, it may be noted that this ruling applies only to sales of property in favor of the government wherein the contract stipulates that the seller shall not be paid until title to the property is transferred to the government. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner