BIR Ruling [DA-108-00]

February 21, 2000 BIR RULING [DA-108-00] Intestate Estate of Pablo S . Leuterio and Benito S. Leuterio 2731 Felix Huertas Street Sta. Cruz, Manila Attention: Mr . Roman P . Sayson Administrator Gentlemen : This refers to your letter dated November 12, 1999 requesting for a ruling as to whether or not the sale of agricultural lands under R.A. 6657, otherwise known as the "Comprehensive Agrarian Reform Law" is exempt from the payment of capital gains tax, documentary stamp tax and the estate tax. It appears that the heirs of the intestate estate of Pablo S. Leuterio and Benito S. Leuterio are the owners of the agricultural lands situated at San Luis, Pampanga; that Pablo S. Leuterio died on June 15, 1950 at San Luis Pampanga and Benito S. Leuterio dies on February 13, 1967, both intestate; that the state and inheritance taxes of both estates have not yet been paid; and that the said agricultural lands which are part of the gross estates of both decedents were subjected to the land reform program of the government. In reply, please be informed that pursuant to Section 66 of Republic Act No. 6657, reading "SEC. 66. Exemptions from Taxes and Fees of Land Transfers . Transactions under this Act involving transfer of ownership, whether from natural or juridical persons, shall be exempted from taxes arising from capital gains tax . These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof : Provided, That all arrearages in real property taxes, without penalty and interest, shall be deductible from the compensation to which the owner may be entitled." (Emphasis supplied) the sale of the aforementioned agricultural lands under R.A. 6657, otherwise known as the "Comprehensive Agrarian Reform Law" is exempt from capital gains tax as well as documentary stamp tax imposed under Section 196 of the Tax Code of 1997, because documentary stamp tax is substantially a tax on the transaction rather than on the document. (Op. No. 177, S. of 1939, Secretary of Justice) (BIR Ruling No. 109-90 dated May 29, 1990) However, the above-mentioned lands should be included in the estates of Pablo S. Leuterio and Benito S. Leuterio for the purpose of computing the estate and inheritance taxes imposed under the applicable tax laws at the time of the death of both decedents. This ruling is issued on the basis of the foregoing representations. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be declared null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)