Taxability of Sale of Real Property Under the Community Mortgage Program

November 26, 1992 BIR RULING NO. 332-92 21 (e), 24 284-92 332-92 Mr. Simeon F. Breton 529 J. Luna Street Pasay City S i r : This refers to your letter dated October 9, 1992 requesting confirmation of your opinion that the sale of your real property located at Tramo Street, Pasay City to Tramo Homeowners Association, Inc., a non-stock, non-profit community organization duly registered with House Insurance and Guaranty Corporation, in accordance with the Community Mortgage Program (CMP) initiated by the Home Insurance and Guaranty Corporation 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. 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 Tramo Homeowners Association, Inc., a parcel of land covered by TCT No. 31544 consisting of 1,448 square meters located at Tramo Street, Pasay City, undertaking to pay the amount of P3,620,000.00 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 P3,862,000.00; that the said transaction was certified by the National Home Mortgage Finance Corporation 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 that 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. Such being the case, the sale of your real property located at Tramo Street, Pasay City to the Tramo 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 to 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. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different and the transaction is not covered by the Community Mortgage Program (CMP) contemplated under R.A. 7279, then this ruling shall be considered null and void. aisadc Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner (Officer-In-Charge)