Profit Realized in the Sale of Inherited a Piece of Real Property (land and building)

June 30, 1959 BIR RULING NO. 322-59 Mr. Modesto M. Abenojar R-211 Maritima Bldg. Dasmarias, Manila S i r : This has reference to your query below: "I have a client who has inherited a piece of real property (land and building) wherein he received rental income annually. This land and building was later on sold whereby the recipient realized a gain from the sale of said inherited property. A typical example of the foregoing case is given hereunder: cdt Selling price P500,000.00 Fair Market value 400,000.00 Gain on sale of land & building P100,000.00 ========= "The above-mentioned property was inherited by my client and was held for more than 12 months. Question: 1. Is the gain from the sale of the property (land and building) whereby the recipient receives annual income a capital gain ? 2. What amount will be declared as a taxable income of the said taxpayer? Will it be 100% (P100,000.00) or 50% only P50,000.00)?" In reply thereto, I have the honor to inform you that the said real property is an ordinary asset, it being used in business, pursuant to section 34 of the National Internal Revenue Code. Accordingly, the profit realized in the sale thereof is taxable in full. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue