BIR Ruling [DA-349-03]

October 9, 2003 BIR RULING [DA-349-03] 24 (D); 196; DA-127-2002 dtd 7/25/02 Ms. Charina M. Vitug 38 Mercedes Street Bel-Air Village, Makati City M a d a m : This refers to your letter dated August 25, 2003, requesting information as to the tax consequence arising out from the termination of your co-ownership with your brother in a deed of partition executed in August 2003. It is represented that you and your brother are co-owners of two separate properties, one located in Quezon City and the other in Antipolo City; that the Quezon City property is located within the Scout area near Roces Avenue while the Antipolo property is located within the Valley Golf Subdivision; that you have decided to terminate your co-ownership and assigned each of the properties as per Deed of Partition dated August, 2003; that you have attached herewith the Transfer Certificate of Titles, Tax Declarations and BIR zonal valuation of the properties. In reply, please be informed that under Section 24 (D) (1) of the Tax Code of 1997, a final tax of six percent (6%) based on the gross selling price or the current fair market value as determined in accordance with Section 6 (E) of the Tax Code of 1997, whichever is higher, is 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 asset including pacto de retro sales and other forms of conditional sales by individuals, including estates and trust. Considering that there is no sale, exchange or disposition of property in the above-mentioned transaction but merely a partition of the properties among the co-owners which properties rightfully belong to them and without any consideration, the same 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 between the co-owners is not subject to documentary stamp tax imposed under Section 196 of the Tax Code of 1997, but only to the documentary stamp tax of P15.00 prescribed under Section 188 of the same Tax Code. (BIR Ruling No. DA-328-2000 dated August 28, 2000; BIR Ruling No. DA-127-2002 dated July 25, 2002) TAcSaC 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.) MILAGROS V. REGALADO Assistant Commissioner Legal Service