Sale of Property under CMP

July 5, 1993 BIR RULING NO. 285-93 SALE OF PROPERTY UNDER CMP 21 (e) 201-93 285-93 Hon. Catalino V. Figueroa Congressman 2nd District, Samar This refers to your letter dated February 23, 1993 requesting in behalf of the landowners, Mrs. Pura Santos Lazo, Paterno Santos, Jose Santos and Lydia Santos Umali, for a ruling that the sale of their real property located at Bgy. Pilar Village, Almanza, Las Pias, Metro Manila, to the Gloria Residents Association, Inc., a duly registered non-stock, non-profit community organization in accordance with the Community Mortgage Program (CMP) initiated by the National Housing Authority 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 Gloria Residents Association, Inc. is covered by TCT No. S-42249 issued by the Registry of Deeds of Las Pias; that the said transaction was certified by the National Home Mortgage Finance Corporation as an approved project under the Community Mortgage Finance Program (CMP) of the government. Field verification conducted in this case disclosed that registered members of the Gloria Residents Association, Inc. 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 covering only 27,181 sq. meters of the entire property (28,000 sq. m.) sold to them as evidenced by the Master List of Beneficiaries and Loan Apportionment and the Subdivision Plan; 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 wider implementation, participants in the CMP shall be granted with the following privileges or incentives: 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 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. Pura Santos Lazo, Paterno Santos, Jose Santos and Lydia Santos Umali located at Bgy. Pilar Village, Almanza, Las Pias to the Gloria Residents Association, Inc. to the extent of 27,181 sq. meters only of the entire property (28,000 sq. meters) 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 landowners are liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid by the association to the landowners. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue