Mr. Pedrito M. Aragon

June 20, 2007 BIR RULING [DA-335-07] 24 (D) (1); 188 DA-118-2000 Mr. Pedrito M. Aragon No. 41, Kobe Street BF Homes Paraaque City S i r : This refers to your letter dated May 29, 2007 stating that on April 24, 1967 your mother, Pilar M. Aragon, purchased a lot in Magallanes, Makati City; that the fund used to purchase the said property came from you and from your brother Danilo and sister Madonna; that sometime in 1990, you noticed that the title of the above property, Transfer Certificate of Title (TCT) No. 596928 issued by the Register of Deeds of Makati City, is under the name of your mother; that it was never your intention and that of the other siblings, that the above property will be registered under the name of your mother; that to correct the said inadvertence, your mother executed a Memorandum of Trust on July 6, 1990 wherein she acknowledged that she holds the above subject property and the improvements found thereon, in trust for the actual owners, her children, their corresponding shares indicated in the said instrument as follows: Pedrito M. Aragon 40% pro indiviso share Madonna M. Aragon 40% pro indiviso share Danilo M. Aragon 20% pro indiviso share that the said Memorandum of Trust was annotated in the title on July 19, 1990; that you and the other siblings want to partition the above property to put an end to the co-ownership thereof, hence, this 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 property and thereby transferring the ownership in your respective names, it goes without saying that the intended division of property among the siblings 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. ADaSET In view thereof, this Office is of the opinion as it hereby holds that the intended division of the subject property among the siblings is not subject to the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended, 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 same Tax Code. Neither is it subject to the documentary stamp tax imposed under Section 196 of the Tax Code. 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. cSCTEH 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, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue