Gains Derived From the Sale of Subdivision Lots are Subject to the Ordinary Income Tax Rates

December 23, 1987 BIR RULING NO. 415-87 21 (e) 196-83 415-87 S i r : This refers to your letter dated January 17, 1987 requesting exemption from the capital gains tax under Section 34(h) of the Tax Code, as amended by Batas Pambansa Blg. 37. It is represented that you have developed your property into a subdivision; and that you have paid the required PTR before engaging in said business. In reply, I have the honor to inform you that subdivision lots are considered ordinary assets since they are properties held primarily for sale to customers in the ordinary course of trade or business under Section 34(a)(1) of the Tax Code, as amended. Such being the case, the gains derived by you from the sale of subdivision lots are ordinary gains not subject to the final capital gains tax under Section 21(e) of the Tax Code, as amended by Executive Order No. 37 but to the ordinary income tax rates prescribed by Section 21(a) of the Tax Code as amended likewise by Executive Order No. 37. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner