The Law Firm of Ferrer & Frias

January 23, 2008 BIR RULING [DA-029-08] DA-435-2000 dtd. 12/18/00 The Law Firm of Ferrer & Frias Suite 315, Pasda Mansion 77 Panay Ave., Timog, Quezon City Attention: Atty. Joel B. Ferrer Counsel Gentlemen : This refers to your letter dated April 11, 2007, on behalf your client, JAIME L. AVILA, requesting exemption from the payment of donor's tax on the transfer of the title of their house and lot to him by virtue of a decision of the Court declaring his marriage with his wife null and void. It is represented that JAIME L. AVILA, filed a Petition for the Declaration of Nullity of his marriage with Evelyn G. Avila and was heard and decided by the Honorable Judge of the Regional Trial Court (RTC) Branch 194- Paraaque City, as marriage being void ab initio; that as such, your client, hereinafter referred to as FIRST PARTY, and his former wife, Evelyn G. Avila, hereinafter referred to as SECOND PARTY, executed a Memorandum of Agreement (MOA) for the dissolution of their property relations; that pertinent facts of the MOA, among other things are quoted as follows: "NOW, FOR and IN CONSIDERATION of the above premises, the parties agreed as follows: "1. The FIRST PARTY hereby waive his one half undivided right and share over the Condominium Unit covered by Condominium Certificate of Title No. 49762 of the Registry of Deeds for the City of Makati in favor of the SECOND PARTY; EaIDAT "2. The SECOND PARTY hereby waive her one half undivided right and share over the house and lot covered by Transfer Certificate of Title No. 95555 of the Registry of Deeds for the City of Paraaque; "3. It is hereby understood that the party in whose favor a right and share is waived will shoulder the expenses to effect the transfer thereof; "4. The SECOND PARTY hereby waive her right and interest over the share at Punta Fuego, Nasugbu, Batangas and over all the above listed motor vehicle; "5. The FIRST PARTY shall be solely responsible for the support of the children until they reach the age of twenty-one (21) years old. Thereafter, if the children still need support, the parties shall be jointly responsible in defraying the same. "6. . . ." that in an Order promulgated by the Court on August 9, 2006 at Paraaque City, finding the terms and conditions of the aforesaid MOA not contrary to law, morals, public policy and public order, the Court approved the same in toto and judgment was rendered in accordance therewith, the parties were enjoined to comply therewith faithfully. (Copy of the Court's approval of the MOA is attached for ready reference) In reply, please be informed that no donation had taken place when former spouses, as in this case, adjudicated to themselves separately the properties which belong to their community property/conjugal partnership as a consequence of the liquidation of the partnership. The parties merely segregated and adjudicated for their own individual and separate ownership the properties which, from the celebration of their marriage, rightfully belong to them equally (BIR Ruling No. 220-83 dated December 8, 1983). In the instant case, since the parties merely appropriated to themselves their respective shares in the community property, particularly, the wife waiving all her right and share to the husband over their house and lot, such appropriation of the properties covered by the MOA is not subject to donor's tax as there is no donative intent in this case. cDHAaT Moreover, the transfer of the title of the subject property to Jaime Avila is not also subject to capital gains tax, as such transfer is equivalent to a conveyance but without monetary consideration, made in accordance with the Court's Decision granting parties agreement for the distribution of communal property (BIR Ruling No. DA-092-01 dated May 6, 2001). Neither is the said transfer subject to documentary stamp tax since the monetary consideration in the conveyance of said condominium unit from which the tax shall be based is wanting. Accordingly, this BIR Ruling together with the MOA covering the liquidation of your client's communal property with his former wife shall be presented to the BIR Revenue District Officer concerned for the issuance of the Certificate Authorizing Registration (CAR) allowing the registration of the title of the property in the proper Register of Deeds. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service