Clarification of Provisions on Real Property Valuation for Purposes of Capital Gains Tax on Real Property Transactions

December 17, 1986 BIR RULING NO. 273-86 21 (e) 000-00 273-86 M a d a m : This refers to your letter dated September 27, 1986 requesting clarification of some of the provisions of Revenue Memorandum Order No. 3-86A dated June 10, 1986, particularly on real property valuation for purposes of the capital gains tax on real property transactions. cdt In reply, please be informed as follows: 1. Under said Revenue Audit Memorandum Order No. 3-86A dated June 10, 1986 pending the establishment of the final zonal values, the market value of real property (land and/or improvement) appearing in the latest declaration of real property filed in the Provincial/City Assessor's Office shall be the basis of the increase by 10% or 50% as the case may be. The "latest declaration of real property filed in the City Assessor's Office" means that declaration covering the period nearest to the date of the transaction subject to capital gains tax. 2. Under said Revenue Audit Memorandum Order No. 3-86A, where real property is located in exclusive villages or subdivisions in Makati (East and West) and in other Revenue Districts within Revenue Region No. 4-B, Quezon City, the market value appearing in the latest declaration of real property filed with the Assessor's office shall be increased by 50% Accordingly, the rate of increase applicable to properties in BF Homes, Paraaque which is under Revenue District No. 34 of Revenue Region No. 4-B, Quezon City, is 50%. However, said Revenue Audit Memorandum Order also states that where the revenue officer concerned feels that the 10% or 50% increase is not valid or where the taxpayer does not agree to the 50% increase over the market value appearing in the assessor's declaration, the certificate authorizing registration to be issued by the Revenue District Officer to the taxpayer shall be plainly marked "TENTATIVE ONLY. Upon establishment of the zonal value applicable to the property in question, the assessment shall be revised accordingly." In other words, if the taxpayer objects to the 50% increase, the 10% increase shall be utilized as basis for real property valuation for purposes of the capital gains tax. After payment of the tax, the Revenue District Officer shall issue the said tentative certificate. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue