BIR Ruling [DA-425-A-98]

September 15, 1998 BIR RULING [DA-425-A-98] Ms. Rosalina Chan 130 10th Street, Unit U Quezon City M a d a m : This refers to your letter dated September 1, 1997 requesting for an exemption from the payment of capital gains tax on the reconveyance of a certain real property. LLcd Documents submitted disclosed that the real property covered by Certificate of Title No. 97887 of the Registry of Deeds of Manila was the subject matter of litigation between Rosalina Chan, Elizabeth Chi and George Ong as plaintiffs , and Jose Chan, Marianito Tan alias "Mario", spouse Evelyn T . Alarilla and the Register of Deeds of Manila, as defendants in Civil Case No. 86-34616 of Branch 52 of the Regional Trial of Court of Manila; that co-plaintiff, Elizabeth C. Ong, is the daughter of Rosalina Chan and Chi Bian Hok, also known as Tan Ching Kiat; that Rosalina Chan and Chi Bian Hok took into custody defendant Marianito Tan while he was still 3 years old, treating him as their own son; that defendant Jose Chan is the nephew of Rosalina Chan; that to further assure Marianito Tan's future, Rosalina Chan and Chi Bian Hok bought a lot from their friend Benjamin Ong Chiu and placed the title in Marianito's name; that on one instance, Rosalina Chan and Chi Bian Hok sent Marianito Tan to Dagupan City with their merchandise and car since their sales agent was unavailable, but Marianito Tan failed to turn over the proceeds of the sale and even left the car in Dagupan City; that because of such misconduct, Rosalina Chan and Chi Bian Hok thought of transferring the title over the subject property which is under the name of Marianito Tan to another; that Rosalina Chan contacted her nephew Jose Chan and entrusted to him the title to the land with the intention of reconveying it to Marianito Tan should he reform; that the title to the lot was eventually transferred to Jose Chan's name without any monetary consideration; that it was Chi Bian Hok who spent for the expenses relative to the transfer; that Marianito Tan never mended his ways and meanwhile Chi Bian Hok died; that her daughter, Elizabeth C. Ong married a Filipino citizen thereby acquiring her husband's nationality; that Rosalina Chan wanted Jose Chan to transfer the title under the name of her daughter, Elizabeth C. Ong but Jose Chan refused demanding P200,000.00 for the said transfer; that on April 30, 1990, the RTC Branch 52 of Manila ruled as follows: "WHEREFORE, judgment is rendered for the plaintiffs and against the defendants, as follows: "(a) Ordering defendant Jose Chan to reconvey the property covered by Transfer Certificate of Title No. 97887 of the Registry of Deeds of Manila in his name, consisting of 301.6 square meters, more or less situated at the District of Tondo, Manila, in favor of Elizabeth C. Ong, married to George Ong, Filipino, with residence in San Fernando, Pampanga, free from any and all encumbrances of whatsoever kind or nature; xxx xxx xxx" that on November 26, 1992, the Court of Appeals affirmed the said decision; that on May 26, 1993, the Third Division of the Supreme Court denied the Petition for Review on Certiorari filed by defendant Jose Chan; that on September 29, 1993, the First Division of the Supreme Court noted without action defendant Jose Chan's Motion for leave to file second motion for reconsideration and ordered that an entry of judgment be made in due course; that on May 23, 1995, plaintiff's counsel filed a motion for issuance of a writ of execution which was granted by the Court on September 1995; that on April 26, 1996, the Manila RTC Branch 52 ordered the conveyance of the subject property to Elizabeth C. Ong, which reads as follows: "WHEREFORE, it is hereby ordered that pursuant to the provisions of Section 10, Rule 39, of the Rules of Court: "(a) The Branch Sheriff of this Court is hereby authorized to execute the deed of conveyance contemplated in the judgment; and "(b) Upon the payment of the requisite fees, the Register of Deeds of Manila shall register the said conveyance, cancel Transfer Certificate of Title No. 97887 of his registry in the name of Jose Chan, and issue in lieu thereof another title in the name of Elizabeth C. Ong. "This order shall operate to divest Jose Chan of any title, right or interest over the land covered by said TCT No. 97887 and vests it on Elizabeth C. Ong, one of the judgment creditors." that on March 24, 1997, the Manila RTC Branch 52 executed a Deed of Conveyance in favor of the plaintiff, Elizabeth C. Ong, a portion which reads: "NOW, THEREFORE, pursuant to and by virtue of the Writ of Execution issued in the above-entitled case, and in accordance with Rule 39, Section 10 of the Rules of Court of the Philippines, and with the power and authority vested by law upon the undersigned, DO HEREBY TRANSFER and CONVEY by way of ABSOLUTE CONVEYANCE unto said herein-plaintiff, ELIZABETH C. ONG, married to GEORGE ONG of San Fernando, Pampanga, her heirs and assigns, that certain real property covered by TCT No. 97887, more particularly described as follows, to wit; xxx xxx xxx" In reply, please be informed that since the transfer and reconveyance of the property in question was pursuant to the Order of RTC Branch 52 of Manila and without any monetary consideration, the same is not subject to capital gains tax prescribed under Section 21(e) of the Tax Code, as amended. (BIR Ruling No. 042-97 dated April 8, 1997). Furthermore, the Deed of Conveyance executed by the Sheriff transferring and conveying in favor of Elizabeth C. Ong the subject property pursuant to and by virtue of the Writ of Execution issued by the Court, is not likewise, subject to the documentary stamp tax imposed in Sections 195 and 196 of the Tax Code of 1997 (also Section 195 and 196 of the Tax Code, as amended). However, the acknowledgment is subject to the documentary stamp on certification pursuant to Section 188 of the same Tax Code. (BIR Ruling No. 182-93 dated May 4, 1993) 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. cdt Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group