Sale of Land under CMP Exempt from Capital Gains Tax

June 15, 1993 BIR RULING NO. 247-93 SALE OF LAND UNDER CMP EXEMPT FROM CAPITAL GAINS TAX 21 (e) 178-93 247-93 Urban Poor Affairs Office UPAO Building, City Hall Compound Quezon City, Metro Manila Attention: Mr . Zosimo I . Ampongan, Jr . Head This refers to your letter dated March 25, 1993 requesting in behalf of the landowner, Mrs. Carmen Casas Manabat, represented by Atty. Ramon Casano, for a ruling that the sale of her real property located at Laura Street, Old Balara, Quezon City, to the Magkakaisang Kapisanan Kapitbahayan sa Matandang Balara, Inc., a duly registered non-stock, non-profit community organization in accordance with the Community Mortgage Program (CMP), initiated by your Office, is exempt from capital gains tax pursuant to Section 32(b) of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. cdtech It appears that the Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC) which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; that through a Letter- Guaranty by said Government Financing Institution the landowner executes a Deed of Sale to the Association which stands as the borrower and debtor to the extent of the total amount paid by NHMFC to the landowner; that in the instant case, the property being sold to the Magkakaisang Kapisanan Kapitbahayan sa Matandang Balara, Inc. is covered by TCT No. 235105 (portion) issued by the Registry of Deeds of Quezon City; that the said transaction was certified by the National Home Mortgage Finance Corporation as an approved project under the Community Mortgage Program (CMP) of the government. Field verification conducted in this case disclosed that the registered members of the Magkakaisang Kapisanan Kapitbahayan sa Matandang Balara, Inc. are composed of the less privileged and homeless individuals, and are qualified beneficiaries of the Community Mortgage Program of the government; that they are the actual occupants on the said property subject of the sale, and that the NHMFC will undertake to pay the landowner in the account of the said community association, who will stand as the buyer-borrower, whose members in turn, will pay the association thru monthly amortization. In reply, please be informed that pursuant to Section 32 of R.A. No. 7279, pertinent portion of which reads: "Sec. 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges and incentives: xxx xxx xxx (b) Properties sold under the CMP shall exempted from the capital gains tax; and xxx xxx xxx the landowners who sell their property to the Tenant's Association, pursuant to the Community Mortgage Program, are exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90. Upon the sale thereof, the capital gains realized by the owner shall be exempt from capital gains tax, pursuant to the aforequoted provision of R.A. 7279. Such being the case, the sale of the real property by Mrs. Carmen Casas Manabat, represented by Atty. Ramon C. Casano, located at #46 Laura Street, Old Balara, Quezon City, to the Magkakaisang Kapisanan Kapitbahayan sa Matandang Balara, Inc. to the extent of eighty-two percent (82%) of the entire property (863 sq.m.) sold to them is exempt from the capital gains tax and the expanded withholding tax. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of R.A. 7279. Such being the case, the landowner is liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under Section 196 of the Tax Code, as amended, based on the actual consideration paid by the association to the landowner. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue