Computation of Capital Gains Tax on Real Property Paid by Installment

December 14, 1981 BIR RULING NO. 269-81 34 000-00 269-81 Mr. & Mrs. Cecilio V. Milo 761 East St., Mandaluyong Metro Manila Sir/Madam : This refers to your letter dated April 9, 1981 stating that on February 7, 1962 you acquired ownership over a parcel of land in Barrio Sta. Cruz, Antipolo, Rizal consisting of 94,680 square meters; that on October 20, 1969, you entered into a contract to sell with Solid Homes, Inc., (Solid for short) whereby you would sell the property for a total amount of P1,750,000.00, under the following terms and conditions: (a) down payment of P225,000.00 upon execution of the contract and (b) the balance of P1,525,000.00 payable in ten (10) annual equal installments plus 12% per annum interest; that to enable Solid to proceed with the improvement, development and subdivision of the land, it was agreed that the corresponding transfer of title covering this property shall be made available to Solid that it was agreed further that the separate and individual titles to every single lot of the subdivision shall remain in your name and ownership until such time as Solid shall have complied faithfully with all the terms and conditions set forth in the contract and shall have finally paid the full contract price of P1,750,000.00 subject to the condition that partial release of individual title can be made whenever subdivided lots sold by Solid to its buyers are fully paid even before final liquidation of the liabilities of Solid with you; that you declared the portions of the gains derived from your receipts of down payment and annual installments in the respective income tax returns for the taxable years 1970 through 1978; and that even after the effectivity of Batas Pambansa Blg. 37, you also declared for income tax purposes your gains from your receipts corresponding to 1979 and 1980. In reply, please be informed that assuming your representations above are true, you are not liable to pay capital gains at the rate and in the manner prescribed by Sections 3, 5(b) and 6(b) of Revenue Regulations No. 8-79 implementing Batas Pambansa Blg. 37, on the portion of gains allocable on the down payment and the annual installment paid to you by Solid for the years 1970 to 1978. Since the installment payment for 1979 was made in January, 1979, or before Batas Pambansa Blg. 37 took effect the portion of your allocable thereto is likewise not covered by Revenue Regulations No. 8-79 implementing Section 34 of the Tax Code, as amended by Batas Pambansa Blg. 37. However, inasmuch as the last installment payment had to be made in 1980 and since the absolute deed of sale to evidence the conveyance had necessarily to be acknowledged before a notary public after September 7, 1979, your gain corresponding to the last installment payment by Solid is subject to the final capital gains tax prescribed in Section 34(h) of the Tax Code, as amended by Batas Pambansa Blg. 37 as implemented by Revenue Regulations No. 8-79. Accordingly, inasmuch as the tax on the gains pertaining to the annual payments for 1980 was not paid within thirty (30) days following your receipts thereof but was paid only when you filed your income tax return for that taxable year, there is still due from you the penalties incident to your failure to pay the tax due on time. This is without prejudice to the collection of whatever deficiency income tax that might be found still due from you or to the refund to you of any tax overpayment, if the tax is recomputed at the rates of 10%-20% in accordance with the said Revenue Regulations No. 8-79. cdt Very truly yours, RUBEN B. ANCHETA Acting Commissioner