Computation for Both Capital Gains and Documentary Stamp Taxes Purposes in the Sale of Real Property for Government Housing Projects

November 22, 1991 BIR RULING NO. 253-91 21 (e) 196 232-90 253-91 M a d a m : This refers to your letter dated August 28, 1991, requesting in behalf of your client, Dr. Antonio Ordonez, for a ruling on the tax base to be used in computing his capital gains tax liability on his proposed sale of real property to the beneficiaries of the government housing program known as the Community Mortgage Program of the National Housing Authority (NHA). It is represented that your client owns a parcel of land located at Maypajo, Caloocan City, consisting of 6,666 square meters and covered by TCT No. 30153 and Tax Declaration No. B-003-00402; that said property has been occupied for over 20 years by some 126 families who have expressed interest in acquiring it through the government housing scheme known as the Community Mortgage Program; that under this Program, the families have organized themselves into an association known as the Ordonez Homeowners Association (OHA) and offered to purchase the property through a financing package extended by the National Home Mortgage Finance Corporation (NHMFC). In reply, please be informed that pursuant to Section 21 (e) of the Tax Code, the tax base for capital gains tax purpose arising from the sale by the individual of real property classified as capital asset is the fair market value or gross selling price whichever is higher; whereas under Section 196 of the same Code, the tax base shall be the actual consideration or true market value. But in the sale of real property for government housing projects the price is not on the zonal or prevailing market values but on the paying capacity of the target clientele. Target clientele as mandated under Executive Capacity No. 90 refer to those families with limited financial capacity who belong to the lowest 30-50% of the income bracket. Accordingly, in order to promote the government's housing program, in the computation for both capital gains and documentary stamp taxes purposes, the tax base shall be the actual consideration/selling price. (BIR Ruling No. 232-90) Very truly yours, (SGD.) JOSE U. ONG Commissioner