BIR Ruling [DA-592-99]

October 7, 1999 BIR RULING [DA-592-99] Mr . R izal V. Reyes, et al. No. 70 Kamuning Road Quezon City Gentlemen : This refers to your letter dated July 11, 1997 requesting for exemption from the payment of capital gains tax relative to the Deed of Sale with Assumption of Mortgage executed on December 10, 1957 by and between Spouses Hilarion and Leoniza Corpus (Spouses Corpus) and Messrs. Rizal and Gregorio Reyes and Ms. Candelaria Reyes (Rizal Reyes, et. al) so that title to the property can be registered in the name of the buyers. It is represented that Spouses Corpus are the absolute and registered owners of a parcel of land located at No. 70 (formerly No. 68) Kamuning Road, Quezon City covered by TCT No. RT-5341(31041) issued by the Registry of Deeds for Quezon City containing an area of 450 square meters; that on December 10, 1957, a Deed of Sale with Assumption of Mortgage was executed by Spouses Corpus in favor of Rizal Reyes et. al for and in consideration of P12,000.00 subject to the conditions that Rizal Reyes, et. al shall assume the mortgage outstanding against the property in favor of Government Service Insurance System (GSIS) in the amount of P5,000.00 and further agree to undertake the payment of the monthly amortization of said mortgage in the amount of P55.50 to the above-mentioned corporation, beginning December 1, 1957 until such time as the said mortgage is transferred to the Rehabilitation Finance Corporation or any other entity upon application of said vendees; that Rizal Reyes, et. al further agreed to assume the payment of the annual premium on the policy of fire insurance of P5,000.00 covering the aforesaid property during the effectivity of the mortgage in favor of the GSIS; that the mortgage having been fully paid under Official Receipt Nos. 310009 and 310779 in the total amount of P505.00 the release is authorized under Board Resolution No. 1444 adopted on July 27, 1959; and that due to some reasons or another, Rizal Reyes, et. al failed to register the same with the Register of Deeds for the issuance of another title in their favor. In reply, please be informed that all sales, exchanges or transfers of real properties (whether classified as ordinary or capital asset) by corporations, consummated on or after January 1, 1990, are subject to the creditable withholding tax. However, in the case of individuals, estates, trust funds or pension funds only sales, exchanges or transfers of real properties classified as ordinary assets, consummated on or after January 1, 1990, are subject to the creditable withholding tax. Sale by individuals of real properties classified as capital assets remain subject to the 5% (now 6%) capital gains tax. (RMC 7-90 dated January 16, 1990). As provided for in Revenue Memorandum Circular (RMC) No. 8-89 the date of notarization appearing on the Deed of Sale shall be considered prima facie the date of consummation of the contract of sale. However, in the case of sales evidenced by public instruments notarized on or before November 30, 1989, the same shall be deemed consummated on the date the Deed of Sale/Transfer is filed with or submitted to the proper revenue office, except in exceptional circumstances where the taxpayer can prove by documentary evidence other than the Deed of Sale/Transfer that the public instrument was truly executed and notarized on the date shown therein. It is the considered view of this Office that the Deed of Sale Assumption of Mortgage executed by and between Spouses Corpus and Rizal Reyes, et. al is an ancient document (more than 30 years old); hence, its authenticity is presumed. It qualifies as an exception to the rule that the date of presentation of the document with the BIR is the date of notarization. Accordingly, it is not subject to the final capital gains tax as presently prescribed under Section 24 (D) of the Tax Code of 1997, nor to the creditable withholding tax under Revenue Regulations No. 2-98. Such being the case, a Certificate Authorizing Registration (CAR) may now be issued to authorize the transfer of the subject property in favor of Rizal Reyes, et. al. (BIR Ruling No. 065-94 dated March 1, 1994). 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 (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)