Tax Imposed on the Excess Selling Price of the Property Sold by Union Church of Manila

June 3, 1958 BIR RULING NO. 302-58 The Chairman Board of Trustees Union Church of Manila P. O. Box 1990 Manila S i r : Reference is made to your letter dated April 28, 1958, stating that the Union Church of Manila is a non-profit and religious organization operated exclusively for religious and charitable purposes, no part of the net income of which inures to the benefit of a private stockholder or individual. The aforesaid organization intends to sell is three (3) parcels of land together with the buildings erected thereon, located at the corner of A. Mabini and Padre Faura Streets, Manila, and use the proceeds from such a sale in the acquisition of another parcel of land and the construction thereon of a new church building. You now request opinion of this Office as to whether the excess of the selling price over the original cost of the aforesaid property, is subject to income tax. cdt Section 27 of the National Internal Revenue Code provides in part as follows: "Sec. 27. Exemption from Tax on Corporations . The following organizations shall not be taxed under this title in respect to income received by them as such. "xxx xxx xxx "(e) Corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, cultural, or educational purposes, or for the rehabilitation of veterans no part of the net income of which inures to the benefit of any private stockholder or individual: Provided, however, that the income or whatever kind and character from any of its properties, real or personal, or from any activity conducted for profit, regardless of the disposition made of such income, shall be liable to the tax imposed under this Code." Under the aforequoted general exemption provision of Section 27(e) of the Tax Code, this Office has ruled that the income derived by a corporation or association organized and operated exclusively for religious purposes from strictly religious activities essential to, or necessarily connected with, its religious purposes is exempt from income tax provided that no part of its net income inures to the benefit of a private stockholder or individual. However, the income of whatever kind and character from any of its properties, real or personal, is subject to income tax irrespective of the destination of such income, pursuant to the proviso contained in the aforesaid section of the Tax Code. The income or religious, charitable, scientific and educational corporations which is considered as income from properties, real or personal, generally consists of income from corporate dividends, rentals received from their properties, interests received from capital loaned to other persons, income from agricultural lands owned by such corporations, profits from the sales of property, real or personal, and other similar income. (Sec. 30, Income Tax Regulations) In view of the foregoing, this Office is of the opinion that the excess of the selling price over the original cost of the abovementioned property is subject to income tax, even if such income is to be used by the Union Church of Manila in the purchased of a new church site and the construction thereon of a new church building. LLpr Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue