BIR Ruling [DA-328-00]

August 28, 2000 BIR RULING [DA-328-00] 24 (D); 196 DA-431-99; 258-91; DA-328-2000 Ms. Eduvigis A. Paderes 6 Milky Way Blue Ridge B Quezon City M a d a m : This refers to your letter dated March 20, 2000 requesting for a ruling on the tax consequence of the Extrajudicial Deed Of Partition And Dissolution Of Co-Ownership Of Real Properties entered into by and among the co-owners. ITEcAD It is represented that co-owners Spouses Ferdinand and Eduvigis Paderes, residents of No. 6 Milky Way, Blue Ridge B, Quezon City, as the First Party, Spouses Gonzalo and Manuela Roque, residents of No. 1 Rolling Lane, Batasan Hills, Quezon City, as the Second Party, Spouses Alberto and Theresa Deluria, residents of No. 5 Alabama Street, Quezon City, as the Third Party, and Spouses Jose and Purificacion Almeda, residents of 9029 Aranga Street, San Antonio Village, Makati City, herein represented by Ms. Eduvigis Almeda Paderes as their Attorney-in-Fact in this transaction, as the Fourth Party are the registered co-owners of the parcels of land described as follows: Property TCT/TD No. Location Area(sq. m.) Zonal Valuation Land RT-70799(237140) Real Village II, Bahay Toro/T. Sora, QC 431 P2,155,000.00 Land RT-70839(237127) Real Village II, Bahay Toro/T. Sora, QC 445 2,225,000.00 Land RT-70800(237125) Real Village II, Bahay Toro/T. Sora, QC 310 1,550,000.00 Land RT-71718(305460) Ramax, P. Tamo/T. Sora, QC 483 1,690,500.00 Total P7,620,500.00 ============ that on March 18, 2000, the Parties have agreed and covenanted unto themselves for the dissolution of the co-ownership over the subject properties, to distribute and assign the properties in equal share and share alike and pro-rata balancing schemes as follows: 1) The First Party shall receive the real property covered by TCT No. RT-70799(237140), but shall revert the amount of P249,875.00 to the co-ownership; 2) The Second Party shall receive the real property covered by TCT No. RT-70839(237127), but shall revert the amount of P319,875.00 to the co-ownership; 3) The Third Party shall receive the real property covered by TCT No. RT-70800(237125) and likewise receive the amount of P355,125.00 from the co-ownership; and 4) The Fourth Party shall receive the real property covered by TCT No. RT-71718(305460) and likewise receive the amount of P214,625.00 from the co-ownership; In reply, 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 there is no sale, exchange nor disposition of property in the above-mentioned transaction but merely a partition of the properties among the co-owners which rightfully belong to them and without any consideration, it is not subject to income tax and consequently to the capital gains tax imposed under Section 24(D) of the Tax Code of 1997. Moreover, the partition of the said properties among the co-owners is not subject to documentary stamp tax imposed under Section 196 of the Tax Code of 1997 since no taxable document was executed for the said transaction. (BIR Ruling No. DA-431-99 dated July 27, 1999, citing BIR Ruling No. 258-91 dated December 3, 1991) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner (Legal & Inspection Group)