BIR Ruling No. 480-2017

BUREAU OF INTERNAL REVENUE REPUBLIC OH THE PHHLIPPINES DEPArI'MENT OF FInANGE Quezon City D

24 Fortune Avenue, Barangay Fortune PARITY PACKAGING CORPORATION Marik ina City [Sections27(D)(5):39(A)(D) BIR Ruling No.i87-2017 No. 7-2003 NIR( of 1997. as amended: RR 10-18-27 40-17

Gentlemen: Attention: Mr. Charles Q. Sia President

opinion that the parcels of land owned by Parity Packaging Corporation. formeriy: Parity Holdine Fities. Inc.. (PPCfor brevi overed by Transfer Certificates of Title (TCTS) No. 7-2003. Laguna are capitat assets. in accordance with the provisions ot Revenue Regulations (RR) Nos. This refers to your letter dated Aprit 5. 2016 requcsting for confirmation of your Jocated in Pasig City. and both located in Sta. Rosa.

Background:

Commission (SEC) with SEC Incorporation was approved on November 6. 1997. PPC. is a domestic corporation registered with the Registration No. and its Amended Articles of Securities and Exchange

on the servicc' as commercial printer. bookbinders. Jithographing business under specific contract or job orders from clientete. its manufacturing business. "In 20t1. it eventually stopped its printing operation. Currentiy PPC's revenue comes from dividends. at wholesale, all kinds ot printing. puhlishing. binding and engraving works and designs. books, papers. catalogues and stationery supplies, printing supplies, pads and stamps: and to carry on a generat business in monotyping. linotyping. electrotyping. color-typing. stencil press service. typesetting. composition. dies and advertising services: to engage in and carry stereotypers. electrotypcs. lithographers. and to undertake a general printing. engraving. PPC was organized primarily to manufacture. prepare. buy. sell and generally deat in PPC:'s printing activity started to decline in 2010 when one of its major clients ceased engravers.photographicprinters.

books'of accounts and are reflected in the audited financial statement as invesiment parcels of land which were never used in business and had remained idle since its acquisition. No improvement was ever introduced on these properties. Being so. these are treated in the properties of PPC. PPC. owns real properties located in Pasig City and Sta. Rosa. Laguna. These are

The details of the afore-mentioned properties are described. as follows:

PARITY PACKAGING CORPORATION 0-1-C17

TCTs Nos. ! Tax Deciaration No. : Area in sq. m. Location Date of Acquisition

175.839 66.536 162,408 I Sta. Rosa. Laguna Sta. Rosa. Laguna Pasig City Septemher 8. 2005 March 28. 1990 March 28. 1990

tax for the non-use and non-improvement of the property. amounting to In fact. on February 27, 20!7, PPC paid the City Treasurer's Oftfice of Pasig City under Ofticial Receipt (OR) No. representing idle land

property held by the taxpayer (whether or not connected with his trade or business). but docs not inciude stock in trade of the taxpayer or other property of a kind which would properiy be property held by the taxpayer primarily for sale to customers in the ordinary course of his Section 39(A)(1) of the National Iniernal Revenue Code of 1997. as amended. means included in the inventory of the taxpayer if on hand at the close of the taxable year. or trade or business. or property used in the trade or husiness. of a character which is subject to the allowance for depreciation provided in Subsection (F) of Section 34 of the National Internal Revenue Code of' 1997. as amended. or real property used in trade or business of thc taxpaycr. In reply, please be informed that the term -capital asset" as negatively defincd in

Moreover. RR No. 7-2003. particuiarly Section 3(e), provides that:

a capital asset or ordinury asset. "SFCTION 3. Guidelines in determining whether a particular real property is

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formerly forming part of the stock in trade of a tuxpaer engaged in the real estate business. or formerly being used in the trude or husiness of u taxpuver abandoned und became idle. shall continue to be treated as ordinary assets:. business shuall not result in its conversion into a cupital asset even if the same Real property initiully acquired by a taxpaver engaged in the real estate is subsequently abandoned or becomes idle. enguged or mot engaged in the real estate business. nhich were kater on e. Treatment of.abandoned und idle real properties. Real properties

into capital assets upon showing of proof that the sane have not been used for being used in husiness by a taxpayer engaged in business other than real more thun two (2+ veurs prior to the consummation of the tuxuble trumsuctions involving said properries. " (Fmphasis and underscoring supplied) estate business as defined in Section 2 (g) hereof are uutonmaticully counertet Provided however. that properties classified as ordinar assets for

taxpayers not engaged in the real estate business or referring to those persons other than real that the same have not been used in business for morc than two (2) years prior to the consummation of' the taxable transactions invoiving the said real properties. and though classitied as ordinary asscts, be automatically converted into capital assets. estate dealcrs. real estate deveiopers and/or real estate lessors shall. upon showing of proof In applying the above provision of RR No. 7-2003. real properties owned by

real estate business. being not a rcal estate dealer. developer or lessor and whose primary purpose is to carry on the business involving printing activities: and that the aforementioned are retlected in the audited financial statement as investment properties and had not been used in the ordinary course of trade or business. it is the considered opinion of this Office that the propcrties had already been idle and vacant since 20ll. treated in the books of accounts and In view of the foregoing. and considering that PPC is a taxpayer not engaged in the

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PARITY PACKAGING CORPORATION i 480-2017 10-18-2017

are now classified as capital assets of Parity Packaging Corporation. (BIR Ruling No. 187 2017 dated April 17. 2017) real properties described above. having complied with the conditions under RR No. 7-2003.

However. if upon investigation. it will be disclosed that the facts are different. then ihis ruling shall be considered null and void. This ruling is being issued.on the basis of the _foregoing _facts as represented.

Very truly yours.

TK-I-L.MAT Commissioner of Internal Revenue CAESAR R. DULAY 10050

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