Gains Derived by Estate from the Sale of Subdivision Lots Not Subject to Capital Gains Tax

November 15, 1985 BIR RULING NO. 206-85 34-h 127-83 206-85 Gentlemen : This refers to your letter dated October 4, 1985 requesting a ruling on behalf of your clients, the heirs of the late Charles Newton Hodges, as to whether the gains derived from the sale of subdivision lots are subject to the capital gains tax under Section 34(h) of the Tax Code as amended by Batas Pambansa Blg. 37. It is represented that the properties of the estate of the late Charles Newton Hodges consist of subdivision lots which are being held by the estate primarily for sale to customers in the ordinary course of its business. In reply, I have the honor to inform you that the gains derived by the estate from the sale of subdivision lots are considered ordinary gains, the same being profits derived from the sale of property held primarily for sale to customers in the ordinary course of trade or business under Section 34(a)(1) of the Tax Code of 1977, as amended. Such being the case, said gains are not subject to the capital gains tax under Section 34(h) of the Tax Code, as amended by Batas Pambansa Blg. 37, as implemented by Revenue Regulations No. 8-79, but to the ordinary income tax rates prescribed by Section 21(b) of the Tax Code, as amended by Batas Pambansa Blg. 135. cdta Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner