BIR Ruling [DA-148-03]

May 6, 2003 BIR RULING [DA-148-03] 27 (D) (5); 496 NCC; DA-499-98 Gilmore Business Center, Inc. 8 Gilmore Avenue cor. 1st St. New Manila, Quezon City Attention: Mr. Mariano Yupitun President Gentlemen : This refers to your letter dated November 15, 2002 stating that an agreement was executed to subdivide a parcel of land registered under the names of Gilmore Business Center, Inc. and 8 Gilmore Place, Inc.; that said property is covered by Transfer Certificate of Title (TCT) No. N-235339 and is located at 8 Gilmore Avenue cor. 1st St., New Manila, Quezon City with an area of 1,986 sq.m.; that a Partition Agreement dated October 25, 2002 was thereafter executed by both parties particularly defining the technical description and areas of the parcel of land to be specifically allotted among said co-owners; and that you are now requesting for a Certificate of Tax Exemption relative to the aforestated transaction. In reply, please be informed that under Article 496 of the Civil Code, partition as a mode of terminating co-ownership may be made by agreement between the parties or by judicial proceedings. Partition shall be governed by the Rules of Court insofar as they are consistent with the Civil Code. Considering that the transfer of title from the co-ownership to the respective co-owners is not a barter exchange or other disposition of realty, the same is not subject to the capital gains tax imposed under Section 27(D)(5) of the Tax Code of 1997. Furthermore, the Partition Agreement executed for purposes of terminating the co-ownership over the said realty is not likewise subject to the documentary stamp tax imposed under Section 196, also of the same Tax Code, because the allocation is made without monetary consideration and not in connection with a sale. Such being the case, the agreement dissolving the co-ownership and dividing the properties by and among Gilmore Business Center, Inc. and 8 Gilmore Place, Inc. is not subject to the capital gains tax imposed under Section 27(D)(5) and to the documentary stamp tax imposed under Section 196, both of the Tax Code of 1997. ( BIR Ruling No. DA-499-98 dated November 18, 1998 ) This ruling serves as your authority for the issuance of the corresponding Tax Clearance Certificate. EAaHTI Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group