Taxability of the Sale of Real Property Under the NHA Community Mortgage Program

October 5, 1992 BIR RULING NO. 276-92 219 (e) 24 208-92 276-92 Ms. Rosie D. Garcia President, Sandigan ng Mahihirap sa Balara (SAMABA) No. 44 Dupax, Bgy. Balara Diliman, Quezon City M a d a m : This refers to your letter dated September 15, 1992, in effect, requesting confirmation of your opinion that the sale of real property by Victorino, Miguel, Esmeralda, Vicente, Ma. Magdalena, Ignacia & Vicente Bustamante, all surnamed Arambulo represented by their Attorney-in-fact Dra. Concepcion Arambulo Joya, located at Dupax Old Balara, Quezon City to your association, Sandigan ng Mahihirap sa Balara (SAMABA) a non-stock, non-profit community organization duly registered with the Securities and Exchange Commission (SEC), in accordance with the Community Mortgage Program (CMP) initiated by the National Housing Authority is exempt from capital gains tax pursuant to Section 32 (a) (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 a Letter of Guaranty was issued by NHMFC in favor of the landowners represented by Dra. Concepcion Arambulo Joya, for and in consideration of the willingness of the letter to sell in favor of the Sandigan ng Mahihirap sa Balara, a Community Association, a parcel of land covered by TCT No. 19208 consisting of 2,400 square meters or less, located at Dupax, Old Balara, Quezon City, undertaking to pay the amount of P1,200,000.00 representing the proceeds of the loan of the Community Association as borrower-buyer; that the aforenamed landowners, represented by their Attorney-in-fact, Dra. Concepcion Arambulo Joya executed on July 15, 1992, a Deed of Absolute Sale of their said property in favor of the Association for a consideration of P1,200,000.00; that the said transaction was certified by the National Housing Authority as an approved project under the Community Mortgage Program (CMP) of the government. In reply, please be informed that pursuant to Section 323 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 or incentives: (a) Government-owned or controlled corporations and local government units, may dispose of their idle lands suitable for socialized housing under the CMP through negotiated sale at prices based on acquisition cost plus financial carrying costs; xxx xxx xxx (b) Properties sold under the CMP shall be 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 not only from capital gains tax but also on project-related income tax on ordinary gain, and from the expanded withholding tax under Revenue Regulations No. 1-90. Upon the sale thereof, the capital gains realized by the owners shall be exempt from capital gains tax pursuant to the aforequoted provision of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of R.A. 7279. Such being the case, the document conveying the property to you under CMP shall be subject to the documentary stamp tax imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid by your association to the landowner. cdt Very truly yours, JOSE U. ONG Commissioner of Internal Revenue