Congregation of the Blessed Sacrament, Inc.

February 5, 2007 BIR RULING [DA-059-07] 101 (A) (3); DA-472-06 Congregation of the Blessed Sacrament, Inc. 20 Sunnyside Drive, Quezon City Attention: Atty. Romeo L. Luna Counsel Gentlemen : This refers to your letter dated November 29, 2006 requesting clarification on the exemption granted to the Congregation of the Blessed Sacrament, Inc. from the payment of donor's tax on the transfer in its favor of a parcel of land covered by Transfer Certificate of Title No. 103100 of the Registry of Deeds of the City of Manila, with buildings and improvements thereon, and those located at 574-576 T. Mapua Street and 1012-16 Tamabacan Street, Sta. Cruz, Manila, covered by Tax Declaration No. B-29-934, donated by the sole heir of the late Gregorio, Remedios and Salome, all surnamed Villacorta, brother and sisters of the donor, Josefina Villacorta, under BIR Ruling No. DA-472-2006 dated August 4, 2006 and in accordance with the provision of Section 101 (A) (3) of the Tax Code of 1997, as amended. IDScTE In connection therewith, you are asking confirmation that the exemption from taxes granted in the above ruling covers all the properties donated by Josefina Villacorta in favor of the Congregation of the Blessed Sacrament, Inc., despite the fact that in the said donation the usufruct or the right to use the subject properties remains with the donee during her lifetime. In reply, please be informed that Articles 731 and 750 of the Civil Code of the Philippines provide viz.: "ART. 731. When a person donates something, subject to the resolutory condition of the donor's survival, there is a donation inter vivos ." "ART. 750. The donation may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor. . . . " The imposition of a resolutory condition of the donor's survival, like in the case at hand, does not change the nature of the act as a donation inter vivos . It is still an act of liberality during the lifetime of the donor. The nature of this kind of donation is not affected by the fact that it was subject to a condition, since it was imposed as a resolutory condition, and in this case, it necessarily implies that the right came into existence first as well as its effect. The property passed to the ownership of the donee from the acceptance of the donation and this could not be revoked except upon the non-fulfillment of the condition imposed or for other causes prescribed by the law, but not by the mere will of the donor. ( Zapanta vs. Posadas, Jr. , 52 Phil. 557) ATESCc From the foregoing, and since in donations inter vivos , as in the case at hand, the act is immediately operative and final ( see Alejandro vs. Geraldez, 78 SCRA 245; Ping vs. Peaflorida, 15 SCRA 276, 16 SCRA 136; Castro vs. Court of Appeals, 27 SCRA 1076 ) notwithstanding the presence of resolutory conditions therein, thereby passing to the donee, at the time of the donation, the ownership over the property donated, this Office therefore confirms your opinion that the exemption from taxes granted in BIR Ruling No. DA-472-2006 dated August 4, 2006 covers all the properties donated by Josefina Villacorta in favor of the Congregation of the Blessed Sacrament, Inc., despite the fact that in the said donation the usufruct or the right to use the subject properties remains with the donee during her lifetime. On the other hand, upon fulfillment of the resolutory condition imposed in the above subject donation or at the time of death of the usufructuary, the merger of usufruct in the owner of the naked title (the Congregation of the Blessed Sacrament, Inc.) shall not be subject to tax. (Sec. 87, 1997 Tax Code, as amended) Finally, since the exemption from the payment of the donor's tax pursuant to Section 101 (A) (3) of the Tax Code of 1997, as amended, granted in favor of the Congregation of the Blessed Sacrament, Inc. is subject to the condition that not more than 30% of the said gift shall be used by the said donee for administration purposes, it is hereby required that the donee shall cause the Register of Deeds to annotate this condition at the back of the Transfer Certificate of Title involved because failure to comply with the said condition shall be a ground for the revocation of the donation pursuant to Article 764 of the New Civil Code. (BIR Ruling Nos. DA-044-02 dated March 12, 2002 and DA-622-99 dated November 3, 1999) ISTECA This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service