BIR Ruling [DA-514-03]

December 16, 2003 BIR RULING [DA-514-03] 24 (D) (1), 196 DA-067-2001 Barin Law Office 1 Hilario St., Ligtasan Tarlac City Attention: Atty. Enrico G. Barin Gentlemen : This refers to your letter dated March 28, 2003 requesting on behalf of your clients, Serafin David et al, that they be exempted from the payment of the capital gains tax and documentary stamp tax relative to the reconveyance of the properties they have previously donated to the then Municipal Government of Tarlac (now City Government of Tarlac). It appears that Victor Pascual, Serafin David, Jose Perez and Greymar's Inc. represented by Mary E. Venturanza on June 1975 have donated three (3) parcels of land in favor of the Municipality of Tarlac, as evidenced by a Deed of Donation docketed as Document No. 469, Page No. 97, Book XXXIV, Series of 1975 of the Notarial Registry of Atty. Eusebio S. Lumibao; that said properties are all situated at Barangay Binauganan, Tarlac, Tarlac; that said donation was coupled by the following conditions: 1) the donee shall construct its public market on the property within two (2) years from the execution of the donation; 2) the aforesaid property shall be used exclusively for public market purposes; and 3) the donee shall construct a road leading to said place from the existing provincial road and the road surrounding the property at its own expense; that TCT No. 126011 was thereafter issued in the name of the Municipality of Tarlac, represented by Mayor Lino David; that pursuant to the conditions aforestated a public market, as well as the road leading to it was constructed on the above-mentioned properties within two (2) years from the date of donation, however, said public market was never operational since its construction; and that in view of the said partial compliance, the donors had written the donee, that the properties be formally reverted and reconveyed to them. In reply, please be informed that the transfer by the Municipal Government of Tarlac to the donors of the three (3) parcels of land by way of a Deed of Reversion and Reconveyance is not a sale, exchange or other disposition of said properties, hence the same is not subject to the creditable withholding tax under Revenue Regulations (RR) No. 2-98, as amended by RR No. 6-2001. The reconveyance is not likewise subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, considering that the previous donation was a donation with conditions which must be complied with and the non-compliance thereof would mean the reversion of the donated properties to the original owners as stipulated in the Deed of Donation. The Deed of Reversion and Reconveyance is also not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code, but only to the P15.00 documentary stamp tax under Section 188 of the same Tax Code. ECaScD 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, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group