BIR Ruling [DA-465-04]

August 30, 2004 BIR RULING [DA-465-04] Section 24 (D) (1) BIR Ruling No. DA-116-2001 Mr. Larry E. de Lemos 490 Santisima Trinidad St. Valley 6, San Antonio Paraaque, Metro Manila S i r : This refers to your letter dated May 13, 2004 requesting for a ruling exempting you from capital gains tax on the reconveyance of a real property by your older brother in favor of your Father. Documents show that your parents, Plutarco and Consuelo de Lemos and your brother, Danilo C. de Lemos agreed to build a duplex, one (1) door for your parents and the other door for your brother and that the title will be transferred in the name of your brother so that he could obtain a loan with Pag-Ibig Funds and such money shall be used to build the duplex; that Transfer Certificate of Title (TCT) No. 51878/T-237 covering a parcel of land situated in Barangay San Dionisio, Paraaque City, with an area of 271 sq. m., in the name of Spouses Plutarco and Consuelo de Lemos was transferred in the name of your brother under TCT No. 641140; that your brother was able to obtain a loan of P112,000.00 payable in 25 years with an interest pegged at 9% per annum with the property of your parents as collateral; that your brother executed an affidavit affirming their trust agreement and that he and his family have no interest in the said residential lot; that your brother lost his job and failed to pay his monthly amortization including penalties; that for fear of foreclosure, your parents continued the payment of the loan out of their savings and have already paid a total amount of P114,086.86 including the penalties; that your parents requested your brother to execute a Deed of Sale with Assumption of Mortgage to reconvey the property to them but he refused; that your father was forced to file a case in court docketed as Civil Case No. 98-062, for the Reconveyance of the subject land; that on June 30, 1999, the Regional Trial Court, Branch 260, Paraaque City issued an order directing Danilo C. de Lemos to re-convey the parcel of land through a Deed of Sale with Assumption of Mortgage and for Spouses Plutarco and Consuelo de Lemos to reimburse Danilo C. de Lemos the amounts he had already paid Pag-ibig Funds regarding the loan availed for the construction of the duplex, which resolution became final and executory as of August 16, 2000; that on March 30, 2003, Danilo de Lemos and Plutarco de Lemos (now a widower) executed a Deed of Sale with Assumption of Mortgage; that on August 24, 2003, the court ordered the Registry of Deeds to reconvey the parcel of land covered by TCT No. 64140 to Plutarco T. De Lemos; that your father is now seventy-eight (78) years old; that he is retired and depends on the pension he receives from Social Security System in the amount of P3,000.00; that your father continues to pay the monthly amortization in the amount of P1,100.00 from his monthly pension P3,000.00; and that he is financially incapacitated to pay the capital gains tax on the reconveyance of the subject property. In reply, please be informed that since the reconveyance of subject property is in pursuance to the Order of the Regional Trial Court dated June 30, 1999 and is without consideration, the transfer of the said property in favor of your father, Plutarco T. De Lemos is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 nor to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, as amended, implementing Section 57(B) of the Tax Code of 1997. Furthermore, the deed of reconveyance through a Deed of Sale with Assumption of Mortgage is not likewise subject to the documentary stamp tax (DST) imposed under Section 196 of the Tax Code of 1997 but to the DST imposed under Section 188 of the same Code. EADCHS 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group