BIR Ruling [DA-169-98]

April 22, 1998 BIR RULING [DA-169-98] Mr. Alberto G. Gonzales 78 Tolentino Street San Francisco del Monte Quezon City S i r : This refers to your letter dated December 24, 1997 requesting on behalf of Ms. Natalia G. Gonzales for a ruling that the Deed of Reconveyance of properties without monetary consideration in her favor is exempt from capital gains tax and documentary stamp tax. LLjur It is represented that on May 7, 1996, a Deed of Reconveyance was executed by Ms. Alademia Mallari of 980 Del Monte Avenue, Quezon City, in favor of Ms. Natalia G. Gonzales of 78-A Tolentino Street, San Francisco del Monte, Quezon City, covering the portion of the property described as Lot 3-A-1 with an area of forty-nine (49) square meters which is a portion of the property covered under TCT No. 357630 and eighty six (86) square meters as Lot 3-B covered by TCT No. 357631 of the Register of Deeds for Quezon City; and that the aforesaid Deed of Reconveyance without consideration was executed pursuant to a decision of the Regional Trial Court, National Capital Region, Branch 82, Quezon City, dated December 17, 1992 which was affirmed by the Court of Appeals on November 29, 1994 and an Entry of Judgment made by the Supreme Court on November 9, 1995 relative to a controversy over the ownership of the aforesaid properties. 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, the Deed of Reconveyance executed by Ms. Alademia Mallari in favor of Ms. Natalia G. Gonzales is not a sale, exchange or other disposition of said properties but merely surrendering the properties to its rightful owner, and the same is not subject to the capital gains tax prescribed under Section 24(D)(1) of the Tax Code of 1997. Moreover, the Deed of Reconveyance is not likewise subject to the documentary stamp tax imposed under Section 196 of the same Tax Code. (BIR Ruling No. 372-92 dated December 28, 1992) However, the Acknowledgment on the Deed of Reconveyance is subject to the P15.00 documentary stamp tax imposed under Section 188 of the Tax Code of 1997. This ruling is being issued on the basis of the foregoing facts as represented. However, it upon investigation, it will be disclosed that the facts are different from that as represented, then this ruling shall be considered null and void. aisadc Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)