BIR Ruling [DA-067-01]

April 20, 2001 BIR RULING [DA-067-01] Dir. Jaime B. Santiago Revenue Region No. 14 Government Center, Palo, Leyte S i r : This refers to your Memorandum dated January 7, 2000, together with the letter of Atty. Samuel C. Lagunzad, with address at 118 M.H. Del Pilar Street, Tacloban City, of the same date, requesting for a ruling on the taxability of the reconveyance of the excess portion of the donated properties by Basper Village through Guillermo Alapoop, in favor of one of the Donors, Ma. Lourdes Magno-Acebuche, as stipulated in the Deed of Donation. It is represented that on December 31, 1981, Mrs. Perpetua Vda. De Magno and daughter, Ma. Lourdes Magno-Acebuche, donated two (2) parcels of land in favor of Basper Village for park, playground and church site which parcels of land were covered by TCT No. 21687 of the Registry of Deeds for Tacloban City, situated at Tigbao, Tacloban City; that on April 16, 1984, TCT No. T-25970 was issued in favor of Basper Village, represented by Mr. Guillermo Alopoop, consolidating the two (2) parcels of land; that it was stipulated in the Deed of Donation that in case the parcels of land or any portion thereof would not be utilized or no longer directly and exclusively used for the purpose for which said lands were originally donated, for park, playground and church site, said parcels of land or portion thereof shall revert to Ma. Lourdes Magno-Acebuche; that it was later found out that out of Five Thousand Three Hundred Forty Seven (5,347) square meters donated to Basper Village, Two Thousand Twenty (2,020) square meters were not utilized; that on November 26, 1998, a Deed of Reconveyance was executed to return to the donors the unutilized portion of the donated properties consisting of 1,010 square meters; and that thereafter, Mrs. Perpetua Vda. de Magno, one of the donors, died. IcHAaS In reply, please be informed that the aforementioned transfer of the 2,020 sq.m. by way of a Deed of Reconveyance to the Donors is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, considering that the previous donation was a Donation with Conditions which must be complied with, non-compliance of which would signify the reversion of the donated properties to the original owners as stipulated in the Deed of Donation. Moreover, the aforesaid Deed of Reconveyance is not a sale, exchange or other disposition of said properties as contemplated under Section 24(D)(1) of the Tax Code of 1997; hence, the same is not subject to the capital gains tax prescribed therein. The Deed of Reconveyance is not likewise subject to the documentary stamp tax imposed under Section 196 of the same Tax Code but only to the P15.00 documentary stamp tax under Section 188 of the same Code. (BIR Ruling No. 372-92 dated December 28, 1992) However, the one-half portion consisting of 1,010 square meters which is being returned to the donors as stipulated in the Deed of Donation shall form part of the gross estate of Ms. Perpetua Vda. de Magno subject to estate tax imposed under Section 84 of the Tax Code of 1997. 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 from that as represented, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group