BIR Ruling [DA-606-99]

October 21, 1999 BIR RULING [DA-606-99] Ms . Salud R . Enriquez #157 Quezon Avenue Quezon City M a d a m : This refers to your letter dated September 7, 1999 stating that you are the registered owner of two (2) parcels of land situated in Quezon City then covered by Transfer Certificates of Title (TCT) Nos. RT-92356 and 29480; that the said properties were the subject of two (2) separate Deeds of Donation allegedly executed by you in favor of your grandchildren, namely: Erwin Anthony C. Paz, Maria Isabel Paz-Khi, Marie Christine C. Paz and Michael Anthony C. Paz; that upon the prescribed donor's tax, TCT Nos. 135303 and N-164436 were issued in lieu of TCT Nos. RT-92356 and 29480; that upon your discovery of the falsified Deeds of Donation, you caused the annotation of an Affidavit of Adverse Claim on the new TCTs; and that in order to restore the properties to its status quo ante and to avoid prosecution and emotionally drawn litigation because of the discovery of the fraud, the donees acceded to revert the titles of the properties in your favor by way of a Revocation of Donation with Reconveyance of Properties executed on August 14, 1999. LexLib Based on the foregoing, you now request for a ruling that the reconveyance by Erwin Anthony C. Paz, Maria Isabel Paz-Khi, Marie Christine C. Paz and Michael Anthony C. Paz of the aforementioned parcels of land in your favor be exempt from capital gains and documentary stamp taxes. In reply, please be informed that the Deeds of Donation you allegedly executed in favor of your grandchildren may be declared void ab initio as it arose from an unlawful transaction. It appears that the parties involved in the transaction have expressly acquiesced to the fact that the purported donation is fatally defective or void from the very beginning. Hence, there is no donation to speak of as far as you and the alleged donees are concerned. The Revocation of Donation with Reconveyance of Properties which was executed without consideration is now made a mode of transferring back the ownership of the subject properties in your name. Since the said document is without consideration and is not in connection with a sale made to you, no income was generated and a fortiori , no capital gains tax nor creditable withholding tax is payable and collectible. Moreover, Section 185 of the Revised Documentary Stamp Regulations (Regulations No. 26) provides that conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable. Furthermore, Title III, Chapter II of the Tax Code of 1997, does not impose any tax on revocation or donation. (BIR Ruling No. 039-90 dated March 29, 1990) In view thereof, this Office is of the opinion as it hereby holds that without prejudice to whatever legal action you may wish to bring against the perpetrators who incidentally are your grandchildren, the aforesaid Revocation of Donation with Reconveyance of Properties is not subject to the capital gains tax imposed under Section 24(D)(I) of the Tax Code of 1997 nor to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997. Neither is it subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said document is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the same Code. (BIR Ruling No. 550-93 dated December 29, 1993; DA419-96 dated November 12, 1996) llcd 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, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue