Salva Salva and Salva

April 12, 2007 BIR RULING [DA-219-07] 24 (D) (1), 196; DA-090-2000 Salva Salva and Salva 15th Floor Washington Tower Asiaworld Complex, Marina Bay Pacific Avenue, Paraaque City Attention: Atty. Eliseo Magno C. Salva Gentlemen : This refers to your letter dated March 21, 2007 requesting on behalf of the Intestate Estate of Beatriz S. Silverio, represented by its designated Regular Administrator, Ricardo S. Silverio, Jr., exemption from the payment of capital gains tax and documentary stamp tax on the reconveyance of the following real properties located at: 1) 82 Cambridge Circle, North Forbes, Makati City; 2) 17 Taurus Street, Bel-Air IV, Makati City; and 3) 8 Intsia Street, Forbes Park, Makati City covered by TCT Nos. (147129) 137156, (436750) 137155 and (36986) 337033, respectively issued by the Registry of Deeds for Makati City to the Estate of Beatriz S. Silverio, based on the following facts. On July 27, 1993, the Regional Trial Court (RTC), National Capital Judicial Region, Makati City, Branch 143, rendered a Decision regarding the afore-stated properties, the dispositive portion of which provides: "WHEREFORE, summary judgment is hereby rendered in favor of plaintiff intervenor EDGARDO S. SILVERIO, in his capacity as Special Administrator of the Intestate Estate of the late Beatriz S. Silverio, declaring defendants in intervention Maria Rowena Z. Silverio de los Reyes, Maria Roxanne Z. Silverio, and Ricardo Z. Silverio III as trustees of the properties covered by Transfer Certificate of Title Nos. (147129) 137156, (436570) 137155, (36986) 337033 of the Registry of Deeds of Makati, Metro Manila, for the benefit of the conjugal partnership of defendant in intervention Ricardo C. Silverio, Sr. and the late Beatriz S. Silverio and ordering said defendants in intervention Maria Rowena Z. Silverio de los Reyes, Maria Roxanne Z. Silverio Arenas and Ricardo Z. Silverio III TO EXECUTE and DELIVER to plaintiff in intervention Edgardo S. Silverio, as Special Administrator of the Intestate Estate deceased Beatriz S. Silverio, the corresponding deeds reconveying the properties in question covered by the aforecited Transfer Certificates of Title Nos. (147129) 137156, (436570) 137155 and (36986) 337033 of the Registry of Deeds for Makati, Metro Manila to RICARDO S. SILVERIO, SR. and the INTESTATE ESTATE OF THE LATE BEATRIZ S. SILVERIO, together with the corresponding certificates of title within five (5) days from finality of this decision. HICATc xxx xxx xxx Without pronouncement as to costs in all instances. SO ORDERED." and considering that the cited Decision thereafter became final and executory, the Honorable Court issued a Writ of Execution on May 7, 1996, which was implemented by Sheriff IV Ray N. Bantug of RTC, Branch 143, Makati City, who issued a Sheriff's Partial Report dated May 17, 1996 stating in part that: "On May 11, 1996, Mrs. Carmen Z. Silverio delivered to the undersigned Transfer Certificates of Titles Nos. (147129) 137156, (436570) 137155 and (36986) 337033 of the Registry of Deeds of Makati, Metro Manila, in accordance with the direction of the Writ of Execution issued in the above-entitled case. However, the corresponding deed of reconveyance was not executed and delivered by defendants-in-intervention, Ma. Rowena Z. Silverio de los Reyes, Ma. Roxanne Z. Silverio Arenas, and Ricardo C. Silverio in view of the absence of Ma. Rowena Z. Silverio de los Reyes and Ricardo Z. Silverio III, who are both outside the Philippines. The original copy of the Writ of Execution is now respectfully returned to the Honorable Court, with the information that the judgment of the Honorable Court in the above-entitled case had been PARTIALLY SATISFIED with the delivery of the Certificates of Titles." Subsequently, Clerk of Court VII and Ex-Officio Sheriff Ignacio Escasinas executed a Deed of Conveyance transferring said properties to Ricardo S. Silverio and the Intestate Estate of the late Beatriz S. Silverio, his heirs and assigns, which was executed pursuant to the Court's Order dated April 29, 1997, the dispositive portion of which states: "The Court further orders the Register of Deeds of Makati City to register said Deed of Reconveyance executed by the Clerk of Court, and to cancel the above-numbered Transfer Certificates of Title, and issue in lieu thereof new certificates of title in the name of Ricardo C. Silverio, Sr. and the Intestate Estate of the late Beatriz S. Silverio, and deliver the new certificates of title to plaintiff-in-intervention Edgardo S. Silverio." Based on the foregoing you now request for exemption from the payment of capital gains tax and documentary stamp tax, since the conveyance pursuant to the said Decision of the RTC of Makati City on July 27, 1993 is not a sale, exchange or other disposition of said properties, but merely surrenders the properties to their rightful owners, the Intestate Estate of Beatriz S. Silverio, and therefore not subject to capital gains tax prescribed under Sec. 24 (D)(1) of the Tax Code of 1997 and documentary stamp tax imposed under Sec. 196 of the same Tax Code. 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, and considering that the reconveyance pursuant to the court decision in favor of your client is not a sale, exchange or other disposition of said properties but merely surrendering the properties to their rightful owners, the same is not subject to the capital gains tax prescribed under Section 24 (D) (1) of the Tax Code of 1997. Moreover, the reconveyance which is made without valuable or monetary consideration is not likewise subject to the documentary stamp tax imposed under Section 196 of the same Tax Code, as amended. (BIR Ruling No. DA-090-2000 dated February 10, 2000) CAcEaS This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service