Basis of Capital Gains Tax on Sales of Private Property in favor of the Government for road right-of-way purposes

May 27, 1993 REVENUE MEMORANDUM CIRCULAR NO. 29-93 SUBJECT : Basis of Capital Gains Tax on Sales of Private Property in Favor of the Government for Road Right-of-Way Purposes TO : All Revenue Officials and Employees and Others Concerned For the information and guidance of all revenue officials and employees, quoted hereunder is the letter of Commissioner Jose U. Ong to Honorable Florello R. Estuar, Secretary of Public Works and Highways dated February 20, 1990: aisa dc "This has reference to your letter dated February 13, 1990, requesting for exemption from the application of the zonal valuation established by the BIR with respect to sales of private property in favor of the government for road right-of-way purposes. casia "Considering that the government is the buyer of the real property and since the tendency to undervalue the purchase price in contracts between two private parties is not present in this case, your request that the consideration appearing in the Deed of Sale, even though lower than the zonal valuation, be used as a basis for the computation of the 5% capital gains tax, is hereby approved as an exception to the policy of this Bureau, in relation to Section 21(e) of the Tax Code. "In this connection, it may be mentioned that the individual's income tax liability, if any, or gains from sales or other dispositions of real property to the government or any of its political subdivision or agencies or to government-owned or controlled corporations shall be determined either (a) under Section 21(a), applying the graduated income tax rates on taxable business and other income, or (b) under Section 21(e), imposing the 5% capital gains (final) tax rate on gross selling price." cdt All revenue officials and employees are enjoined to give this circular as wide a publicity as possible. (Sgd.) Liwayway Vinzons-Chato Commissioner of Internal Revenue