BIR Ruling [DA-092-01]

May 6, 2001 BIR RULING [DA-092-01] 24 (D) (1); 196; 427-88 Gloria S . Lagana 3384 Policarpio Street Gen. T. de Leon Valenzuela City M a d a m : This refers to your letter dated March 30, 2001 stating that you executed an Agreement for Separation of Property with your husband, Jose Lagana, which was approved by the Regional Trial Court of Valenzuela City and became final and executory on October 1, 1999; that the said Trial Court ordered that (1) a parcel of land consisting of Three Hundred (300) square meters, situated in Iloilo City, covered by TCT No. T-84346, (2) a parcel of farm land consisting of Twenty Thousand Six Hundred Eighty Seven (20,687) square meters, situated in the Municipality of Janiuay, Province of Iloilo covered by TCT No. T-64866, and (3) a parcel of land consisting of Two Hundred (200) square meters, situated in Gen. T. de Leon, Valenzuela City, covered by TCT No. B-37120 shall belong to your husband; that the same Order further reads that (1) a parcel of land consisting of One Thousand Three Hundred Twenty Eight (1,328) square meters situated in Gen T. de Leon, Valenzuela City covered by TCT No. T-196195, and (2) a house and lot consisting of Two Hundred Fifty (250) square meters, situated in Valenzuela City, covered by TCT No. 139223 shall belong to you as plaintiff, however, you obliged yourself to give your husband (defendant) the amount of One Hundred Fifty Thousand Pesos (150,000.00) representing your husband's share in the property. Based on the foregoing representations, you now request for a ruling that the registration of the above-mentioned properties in the Registry of Deeds separately, with that of your husband, is not subject to tax. In reply, please be informed that under Article 116 in relation to Articles 126 and 135(6), all of the New Civil Code of the Philippines, all property acquired during the marriage, whether the acquisition appears to have been made, contracted, or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved. The conjugal partnership shall be terminated in case of judicial separation of property during the marriage, provided that at the time of the petition, the spouses have been separated in fact for at least one year and reconciliation is highly improbable. Such being the case, and since the properties involved in this case is conjugal partnership property, the registration of the aforementioned properties in your respective names pursuant to a Court Order dated October 1, 1999 approving the Compromise Agreement you executed with your husband is not subject to the 6% capital gains tax under Section 24(D)(1) of the Tax Code of 1997. The registration of the properties is equivalent to a conveyance but without any monetary consideration, in compliance with a Court Order and anchored upon the concept of conjugal partnership whereby the properties involved are owned in common by the spouses. Finally, the documentary stamp tax prescribed under Section 196 of the Tax Code of 1997 shall not be imposed since the monetary consideration in the conveyance of said property from which the tax should be based is wanting. However, the Agreement For Separation of Property conveying the properties in favor of the husband and wife separately in accordance with a Court Order is subject to the documentary stamp tax in the amount of P15.00 imposed on the notarial acknowledgment of the said Agreement pursuant to Section 188 of the same Code. (BIR Ruling No. 427-88 dated August 31, 1988) ADCIca 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group