BIR Ruling [DA-304-03]

September 16, 2003 BIR RULING [DA-304-03] 24 (D) (1) DA 486-99 Chato Eleazar Liboro & Santos 8th Floor, STRATA 2000 Emerald Avenue Ortigas Center Pasig City Attention: Atty. Wilfredo M. Chato Gentlemen : This refers to your letter dated December 17, 1999 requesting on behalf of the heirs of the late Absalona M. Chato and Leonardo B. Chato that the transfer of several real properties, subject of an agreement of Partial Partition executed among the heirs, is not subject to any tax: and for the issuance of the Certificate Authorizing Registration (CAR) so that title to the properties may now be issued in the name of the respective heirs. It is represented that the late Absalona M. Chato and Leonardo B. Chato died intestate on July 2, 1986 and October 16, 1992, respectively, leaving five (5) children namely: Leonardo, Jr., Wilfredo, Carlito, Marietta and Lourdesita; that the deceased spouses at the time of their death left several real properties and bank account at the Philippine Commercial and Industrial Bank, Mandaluyong Branch, as follows: TCT No./Tax Declaration Area (sq. m.) Location 467432 652 sq. m. 176 Leige St., San Juan, Manila T-91002 282 sq. m. Bacoor, Cavite T-93825 240 sq. m. Bacoor, Cavite 020-0778 400 sq. m. Amat St., Bgy. Washington, Surigao City 1625 5.00 ha. San Pedro, Alegria, Surigao del Norte 1626 .8070 ha. San Pedro, Alegria, Surigao del Norte 1627 400 sq. m. San Pedro, Alegria, Surigao del Norte 04-01-0039 240 sq. m. Bgy. Poblacion, Jabonga, Agusan del Norte 04-04-0028 7.92 ha. Bgy. Beltran, Jabonga, Agusan del Norte Cash in Bank P120,000.00 that on May 16, 1994, an Extrajudicial Settlement of the Estate of the deceased Absalona M. Chato and Leonardo B. Chato was executed among the heirs; that they have agreed to divide, partition and adjudicate among themselves the above-mentioned properties share and share alike without regard to any right, title or claim of advances made by them; that on October 28, 1999, an Agreement of Partial Partition was executed by the above-named heirs such that the three (3) parcels of land, now covered by TCT Nos. 6418-R issued by the Registry of Deeds for San Juan, T-512146 and T-512147 both issued by the Registry of Deeds for Cavite, which were inherited in common, share and share alike, as follows: DEICHc (1) TCT No. 6418-R shall belong to Wilfredo; (2) TCT No. T-512146 shall jointly belong to Marietta M. Chato and Lourdesita M. Chato; (3) TCT No. T-512147 shall belong to Carlito M. Chato; and (4) All other properties inherited in common by the parties from their deceased parents shall be the subject of a subsequent agreement of partition. In reply thereto, please be informed that Section 24(D) of the Tax Code of 1997 provides that a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of the said Code, whichever is higher; is hereby imposed upon 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: . . .'' Considering that a partition among co-heirs or co-owners is not so much a conveyance of title to, or transfer of, property from one person to another (Barcelona vs. Barcelona, 100 Phil. 251) as contemplated in Section 24(D) of the Tax Code of 1997 but a mere division of the property among the co-heirs or co-owners which rightfully belong to them and without consideration, this Office holds that the eventual partition of the above-mentioned properties as follows: (1) TCT No. 6418-R shall belong to Wilfredo; (2) TCT No. T-512146 shall jointly belong to Marietta and Lourdesita; (3) TCT No. T-512147 shall belong to Carlito. is not subject to capital gains tax imposed under Section 24(D) of the Tax Code of 1997 nor to the documentary stamp tax prescribed in Section 196 of the said Code. It is presumed that arrangements to equalize the share of each heirs are in place such that no heir gets a bigger share than the others. Moreover, the waiver by Leonardo M. Chato, Jr. of his share in the above-mentioned properties in favor of Wilfredo, Marietta and Lourdesita and Carlito is not subject to donor's tax as prescribed under Section 98 of the Tax Code of 1997, as there is no donation to speak of since the said properties never became the properties of Leonardo M. Chato, Jr. Besides, the renunciation was made merely to exclude himself from sharing on the said realties. 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. IaECcH Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group