Taxability of Sale of Real Property to a Non-Stock, Non-Profit Community Organization under the Community Mortgage Program

October 29, 1992 BIR RULING NO. 322-92 21 (e) 24 208-92 322-92 The Sisters Superior of the Holy Face of Jesus Sisters of Perpetual Adoration, Inc. 1111 R. Hidalgo, Quiapo Manila Attention: Sr . Maria Pierina Gentlemen : This refers to your letter dated 14 September 1992 requesting confirmation of your opinion that the sale of your real property located at 70-D Payatas, Diliman, Quezon City to the Rolling Hills Neighborhood Association, Inc., a non-stock, non-profit community organization duly registered with the Securities and Exchange Commission (SEC) and accredited as a legitimate association under Katibayan Blg. 001 of the Presidential Commission for the Urban Poor under Executive No. 82, in accordance with the Community Mortgage Program (CMP) of the National Home Mortgage Finance Corporation is exempt from the capital gains tax pursuant to Section 32 (b) of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. cdta 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 land owner, Sisters Superior of the Holy Face of Jesus Sisters of Perpetual Adoration, Inc., for in consideration of their willingness to sell in favor of the Rolling Hills Neighborhood Association, Inc., parcels of land covered by Reconstituted TCT Nos. T-60881; T-53891; T-53890; T-53889; T-53888; T-53887 formerly TCT Nos. 161829; T-40746; T-40745; T-40744; T-40743; T-40742, respectively, the Registry of Deeds of Quezon City consisting of 14,947 square meters located at 70-D Payatas, Diliman, Quezon City undertaking to pay the amount of P2,223,434.06 representing the proceeds of the loan of the Community Association as borrower-buyer; that the aforenamed landowner executed on 18 September 1992, a Deed of Absolute Sale of said property in favor of the Association for a consideration of 2,223,434.06; that the said transaction was certified by the Urban Poor Affairs Office under the Office of the City Mayor 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 both the capital gains and from the expanded withholding taxes 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. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sec. 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. cdti Very truly yours, JOSE U. ONG Commissioner of Internal Revenue