Sale of Real Property to Foundation Exempt from Capital Gains Tax

October 21, 1993 BIR RULING NO. 419-93 SALE OF REAL PROPERTY TO FOUNDATION EXEMPT FROM CAPITAL GAINS TAX 21 (e) 000-00 419-93 Bukas Palad Foundation, Inc. 1862 Tramo St., cor. Buendia Ave. Pasay City Attention: Ms . Irene de los Angeles This refers to your letter dated 16 September 1993, in effect, requesting for a ruling that the sale by Gertrude Stewart House Plants and Landscaping, Inc. of their real properties located at Tramo St. corner Villa Barbara, Pasay City to the Bukas Palad Foundation, Inc. (BPFI), a non-stock, non-profit organization in accordance with the Socialized Housing Program is exempt from capital gains tax pursuant to Section 20(d)(2) of R.A. 7279 which was approved on March 24, 1992 and published in the March 28, 1992 issue of the Philippine Times Journal and Malaya , newspapers of general circulation. cdta It appears that BPFI acquired the property through the National Home Mortgage Finance Corporation (NHMFC) under its Social Housing Development Loan Program; that in the instant case, the property being sold to BPFI is covered by Transfer Certificate of Title Nos. 19208 and 10209; that the Housing and Urban Development Coordinating Council (HUDCC) issued a certification that BPFI has been granted a developmental loan for Socialized Urban Housing Project by the NHMFC. Field verification conducted in this case disclosed that the subject lot is vacant and has an aggregate area of nine hundred eighty one (981) square meters more or less; that the housing project proposed to be constructed thereon will consist of five (5) row houses of ten (10) units/houses each or a total of fifty (50) units to be occupied by poor families living as squatters along Tripa de Gallina or are renters of rooms within the depressed areas served by the BPFI; that the average monthly income of each beneficiary-family is P5,000.00; and, that BPFI is now raising fund to pay for the interest and other expenses not provided for by the loan from NHMFC. In reply, please be informed that pursuant to Section 20 of R.A. No. 7279, pertinent portion of which reads: "Sec. 20. Incentives for Private Sector Participating in Socialized Housing. To encourage greater private sector participation in socialized housing and further reduce the cost of housing units for the benefit of the underprivileged and homeless, the following incentives shall be extended to the private sector: xxx xxx xxx (d) Exemption from the payment of the following: xxx xxx xxx (1) Project-related income taxes; xxx xxx xxx the landowner who sells its property to the foundation to be used for socialized housing projects shall be exempt from the payment of corporate income tax and from the expanded withholding tax under Revenue Regulations No. 1-90. Upon the sale thereof, the gains realized by the owner shall be exempt from corporate income tax pursuant to the aforequoted provision of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. Such being the case, the gain presumed to be realized from the sale by Gertrude Stewart House Plants and Landscaping, Inc. of its property covered by Transfer Certificate of Title Nos. 19208 and 19209 of the Register of Deeds of Rizal, to the Bukas Palad Foundation, Inc. is exempt from the corporate income tax imposed under Section 24(e) of the Tax Code and the expanded withholding tax prescribed under Section 50(b) of the same Code, as implemented by Revenue Regulations No. 6-85 as amended by Revenue Regulations Nos. 1-90 and 16-90. Moreover, since the land being sold to the Foundation is included in the area for priority development as certified by the city Government of Pasay on September 24, 1993, the transfer to the Foundation shall be exempt from documentary stamp tax, registration fees and other fees for the issuance of the transfer certificate of title pursuant to Section 25, Article VI of R.A. 7279. Upon issuance of this letter of exemption, and registration of the document of sale, a lien upon the Certificate of Title of the lands to be issued in the name of the Foundation shall be caused to be annotated by the Register of Deeds having jurisdiction over the property, to the effect, that the said property shall be used for socialized housing project pursuant to R.A. No. 7279. Finally, as a project developer of socialized housing, Bukas Palad Foundation, Inc. shall also be exempt from project related income taxes on its subsequent sale of the socialized housing units to qualified beneficiaries as certified by the Local Government Unit were the property is located, provided that the consideration per unit does not exceed P150,000. aisadc LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue