BIR Ruling [DA-511-05]

December 16, 2005 BIR RULING [DA-511-05] Section 185; DA-271-2004; 118-2004 Messrs. Catalino Sevilla, Jose C. Sevilla and Marina Sevilla Cenir J. Ruiz. Street, San Juan, Metro Manila Gentlemen : This refers to your undated letter requesting for a certificate of tax exemption on the Partition and Adjudication of your property located at San Juan located at 140 J. Ruiz Street, San Juan, Metro Manila covered by Transfer Certificate of Title No. 6400-R of the Registry of Deeds of San Juan with Tax Declarations Nos. 96-003-40060, 96-003-40061 and 96-003-40062. In reply, please be informed that Section 185 of the Revised Documentary Stamp Tax (DST) Regulations No. 26 provides that "conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable." Accordingly, the Agreement of Partition whereby Catalino Sevilla, Marina Sevilla, and Jose Sevilla, Jr. will allocate unto each other their shares in the area in consideration of their respective contributions is not subject to the documentary stamp tax, capital gains tax and value-added tax because the allocation is made without monetary consideration and is not in connection with a sale, pursuant to Sections 108 and 196 of the Tax Code of 1997. The partition is made merely to segregate the area among the parties, as the return of the capital which each contributed. However, the acknowledgment to said Agreement of Partition is subject to DST of P15.00 pursuant to Section 188 of the Tax Code of 1997. ECaHSI However, the subsequent sale of the respective share of the owner of the aforesaid property shall be subject to the capital gains tax and documentary stamp tax pursuant to Revenue Regulations No. 2-98, as amended, Sections 106(A) and 196 of the Tax Code of 1997. cSaCDT Finally, this will authorize the Revenue District Officer (RDO) of the Revenue District where the property is located to issue the corresponding Tax Clearance Certificate (TCL) with regard to the transfer of the titles to the lots to the above-named owners on their respective allocated shares pursuant to the Partition Agreement without need of presentation of proof of payment of the capital gains tax and documentary stamp tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service