Sale of Property under CMP Exempt from Capital Gains Tax

December 27, 1993 BIR RULING NO. 526-93 SALE OF PROPERTY UNDER CMP EXEMPT FROM CAPITAL GAINS TAX 21 (e) 413-93 526-93 Gorricho Estate Homeowners Association, Inc. Singkamas Street Makati, Metro Manila Attention: Mrs . Magdalena H . Jorge President This refers to your letter dated November 9, 1993, requesting in behalf of the landowner, Philippine Development Alternative Foundation, Inc., for a ruling that the sale of its real property located at Singkamas St., Makati Metro Manila, in your favor, a non-stock, non-profit community organization in accordance with the Community Mortgage Program (CMP) initiated by the Foundation for the Development of Urban Poor, Inc. 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 through a Letter-Guaranty by said Government Financing Institution the landowner executed a Deed of Sale to the extent of the total amount paid by NHMFC to the landowner; that in the instant case, the property being sold to the Gorricho Estate Homeowners Association, Inc. is covered by TCT No. 177874 issued by the Register of Deeds of Makati; 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 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; and xxx xxx xxx the landowners who sell their property to the Tenants 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 owner shall be exempt from capital gains tax pursuant to the aforequoted provision of R.A. 7279. Such being the case, the sale of its real property at Singkamas Street, Makati, Metro Manila, to the Gorricho Estate Homeowners Association, Inc. is exempt from the 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, the landowner is liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under Sec. 196 of Tax Code, as amended, based on the actual consideration paid by the association to the landowner. prll LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue