Taxability of the Sale of Real Property in Accordance With the HUDCC Community Mortgage Program

October 23, 1992 BIR RULING NO. 299-92 21 (e), 24 208-92 299-92 Mrs. Visitacion S. Plaza Rosales Compound Rosales Avenue, Butuan City M a d a m : This refers to your letter dated September 9, 1992 requesting confirmation of your opinion that the sale of your real property located at Purok 1, Bgy. 24, Imadejas, Butuan City to Sta. Cruz Homeowners Association, Inc., 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 Housing and Urban Development Coordinating Council 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. cdpr 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 your favor, for and in consideration of your willingness to sell in favor of the Sta. Cruz Homeowners Association, Inc., parcel of land covered by TCT No. RT-16409 consisting of 7,003 square meters located at Purok 1, Bgy. 24, Imadejas, Butuan City, undertaking to pay the amount of P1,925,825.00 representing the proceeds of the loan of the Community Association as borrower-buyer; that you executed a Deed of Absolute Sale of the said property in favor of the Association for a consideration of P1,925,825.00; that the said transaction was certified by the Housing and Urban Development Coordinating Council as an approved project under the Community Mortgage Program (CMP) of the government. In reply, please be informed that pursuant to Section 32(b) 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: xxx xxx xxx (b) Properties sold under the CMP shall be exempted from the capital gains tax. 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 owners shall be exempt from capital gains tax pursuant to the aforequoted provisions of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. Such being the case, the sale of your real property located at Purok 1, Bgy. 24, Imadejas, Butuan City to the Sta. Cruz Homeowners Association, Inc. is exempt from the payment of 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 Section 32 of R.A. 7279. Such being the case, you are liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under Section 196 of the Tax Code, as amended, based on the actual consideration paid by the association to you. prcd Very truly yours, JOSE U. ONG Commissioner of Internal Revenue