BIR Ruling [DA-090-00]

February 10, 2000 BIR RULING [DA-090-00] Atty . Delfin II . Decierdo La Paloma Mini-Mart Bldg. Katipunan-Narra Streets Tisa, Cebu City S i r : This refers to your letter dated August 10, 1999 and indorsed to this Office on September 2, 1999 requesting on behalf of your clients for a ruling that the reconveyance of properties without monetary consideration in their favor is exempt from capital gains tax and documentary stamp tax. It is represented that your client, Siegfredo Tabanag, Rey Tabanag, Minerva Tabanag, Helen T. Bacolod, Juliano Tabanag, Jr., Manolito Tabanag, Jeffrey Tabanag and Winnefer T. Dawson, all of Tisa, Cebu City are the plaintiffs in an action for annulment of title and reconveyance of ownership docketed under Civil Case No. CEB-237000, otherwise known as Siegfredo Tabanag, et al. vs. Purificacion Tabanag, et al.; that your client are brothers and sisters and are the children of the defendant, Purificacion Tabanag; that the court in its decision held that certain real properties were acquired by the plaintiffs using common funds while they were still single and ordered the Register of Deeds of Cebu City to issue new certificates of title in the names of the plaintiffs; that judgment was rendered final and executory; and that the parcels of land involved in the said case are as follows: (1) A parcel of land located at V. Rama Avenue, Cebu City, covered by TCT No. 75020; (2) A parcel of land located at Sitio Lutaw-Lutaw, Tisa, Cebu City, covered by TCT No. 88802; LibLex (3) A parcel of land located at Sitio Lutaw-Lutaw, Tisa, Cebu City, covered by TCT No. 89944 (now TCT No. 134391); (4) A parcel of land located at La Paloma Village, Tisa, Cebu City, covered by TCT No. 107273; (5) A parcel of land located at La Paloma Village, Tisa, Cebu City, covered by TCT No. 107259; (6) A parcel of land located at Tres de Abril Street, Labangon, Cebu City, covered by TCT No. 76494; and (7) A parcel of land located at Tres de Abril Street, Labangon, Cebu City, covered by TCT No. 87911; In reply, please be informed that under Section 24 (D)(1) of the Tax Code of 1997, capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including "pacto de retro" sales and other forms of conditional sales by individuals, including estates and trusts, shall be taxed at the rate of 6% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. Such being the case, and considering that the reconveyance pursuant to the court decision in favor of your clients is not a sale, exchange or other disposition of said properties but merely surrendering the properties to their rightful owners, the same is not subject to the capital gains tax prescribed under Section 24 (D)(1) of the Tax Code of 1997. Moreover, the reconveyance is not likewise subject to the documentary stamp tax imposed under Section 196 of the same Tax Code. (BIR Ruling No. DA-196-98 dated April 22, 1998) 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, this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)