BIR Ruling [DA-157-04]

April 2, 2004 BIR RULING [DA-157-04] 24 (D) (1); 188 DA-118-2000 Mr. Elpidio E. Reymundo, Jr. 2821-C Molave Street, Manuguit Subdivision Tondo II, Manila S i r : This refers to your letter dated January 30, 2004 stating, in effect, that you and your brother, Julius Caesar E. Reymundo, are the only heirs of your late mother, Jacobvina Encarnacion-Reymundo; that your mother left the following realties: 1. A parcel of land situated in Quezon City containing an area of 805 sq. meters and covered by TCT No. 121281 of the Registry of Deeds of Quezon City; 2. A parcel of land situated in Manila containing an area of 163.80 sq. meters and covered by TCT No. 10818 of the Registry of Deeds of Manila; 3. A parcel of land situated in Manila containing an area of 112 sq. meters and covered by TCT No. 14235 of the Registry of Deeds of Manila; 4. A parcel of land situated in Davao City containing an area of 24,141 sq. meters and covered by TCT No. 19159 of the Registry of Deeds of Davao City; that the estate and inheritance taxes due on the transmission of the above realties to you and to your brother were already paid on December 12, 1969; that titles to the above properties, except the realty covered by TCT No. 121281, were already transferred to your names as co-owners pro-indiviso thereof; that the new titles are as follows: 1. A parcel of land situated in Manila containing an area of 163.80 sq. meters and covered by TCT No. 110416 of the Registry of Deeds of Manila; 2. A parcel of land situated in Manila containing an area of 112 sq. meters and covered by TCT No. 110417 of the Registry of Deeds of Manila; 3. A parcel of land situated in Davao City containing an area of 24,141 sq. meters and covered by TCT No. T-145827 of the Registry of Deeds of Davao City; that your brother, Julius Caesar E. Reymundo, died on September 28, 1975; that he is survived by his wife, Regina De Lara Reymundo, and his children, namely: Gretchen Reymundo-Fuentes, Maria Reymundo-Mandanas, Julius Reymundo II and Julius Reymundo III; that as the heirs of the late Julius Caesar E. Reymundo, they assumed all his rights over the above-mentioned realties; that the one-half (1/2) share of the late Julius Caesar E. Reymundo over the above realties is divided equally among his heirs through the execution of an Extra-judicial Settlement of Estate dated March 16, 1993; that the estate tax due thereon was paid on August 15, 2002; that the corresponding Certificate Authorizing Registration (CAR) pertaining to the one-half (1/2) share was issued on October 7, 2003: that you and the above-mentioned heirs of the late Julius Caesar E. Reymundo desire to terminate the co-ownership of the properties covered by TCT Nos. 121281, 110416 and 110417 in order to forestall any problem in the future; that to implement the foregoing, you and the said heirs of Julius Caesar E. Reymundo executed a Partition and Memorandum of Agreement dated July 3, 2002. Based on the foregoing, you now in effect request for a ruling that the aforementioned termination of co-ownership/division of properties be exempt from capital gains and documentary stamp taxes. In reply, please be informed that since as aforestated, the division of properties is a mode of terminating the co-ownership of the subject properties and thereby transferring the ownership in your respective names, it goes without saying that the intended division of properties between you and the heirs of the late Julius Caesar E. Reymundo is executed without any consideration. Suffice it to say that since it is not in connection with a sale, no income was generated and a fortiori , no capital gains tax nor creditable withholding tax is payable and collectible. Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26)provides that conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable. In view thereof, this Office is of the opinion as it hereby holds that the intended division of properties between you and the heirs of the late Julius Caesar E. Reymundo is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 nor to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001, implementing Section 57(B) of the Tax Code of 1997. Neither is it subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said document is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the same Code. 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 null and void. TCcSDE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group