“Principal Residence”
is the family home of the individual taxpayer. It refers to the dwelling house,
including the land on which it is situated, wherein an individual including his
family resides as a permanent dwelling, or whenever absent, wherein the said
individual intends to return (RR 14-2000). It should be certified by the
Barangay Chairman over the place, or the Building Administrator is the
residence is a condominium or the individual taxpayer’s address as indicated in
his latest tax return.
RULES:
·
General Rule: Subject to 6% capital gain tax
based on the selling price or zonal value, whichever is higher
·
Exception: If the proceeds are fully utilized in
acquiring or constructing a new principal residence within 18 months from the
date of disposition subject to the following
conditions:
a. The
proceeds is fully utilized in acquiring or constructing a new principal within
18 calendar months from the date of disposition.
b. The
historical cost or adjusted basis of the real property sold or disposed shall
be carried over to the new principal residence built or acquired.
c. The
Commissions shall have been duly notified by the taxpayer within 30 days from
the date of sale or disposition through a prescribed return of his intention to
avail of the tax exemption.
d. The
tax exemption can only be availed of once every 10 years.
e. If
there is no full utilization of the proceeds of sale or disposition, the
portion of the gain presumed to have been realized from the sale or disposition
shall be subject to capital gains tax.
*The taxable portion is computed as
follows:
Taxable amount = Utilized Portion / Gross selling
price x Gross selling price or zonal value at the time of sale, whichever is
higher.
f.
The tax on the unutilized portion shall be paid
within 30 days after the expiration of the 18-month period.
COST BASIS OF THE NEW PRINCIPAL RESIDENCE
- Sales
proceeds fully utilized - The cost of the new principal residence is the same as the cost of the old residence sold,
irrespective of the actual amount of the sales proceeds.
- Sales
proceeds partially utilized – If the sales proceeds were just partly
utilized, the basis of the new principal residence would be:
Basis =
Utilized portion / Gross S. P. x Basis of the old R. res.
- Acquisition
costs exceed the entire sales proceeds – The basis of the new principal
residence would comprise the following:
a.
Cost or basis of the old principal residence
sold, plus
b.
Additional cost in acquiring the new
principal residence.
