BIR Ruling [DA-648-04]

December 21, 2004 BIR RULING [DA-648-04] RMC 34-91; 43-91; DA-374-2003 Mrs. Elisea D. David 1828 Jose Abad Santos Tondo Manila M a d a m : This refers to your letter dated October 6, 2004 requesting for exemption from the payment of capital gains tax. It is represented that you are now 85 years old and a retired public school principal; that in 1964 a Deed of Sale has been executed between you and your eldest son Erlando D. David over a parcel of land measuring 39 square meters located at No. 1828 Jose Abad Santos, Tondo, Manila, for the purpose of securing a housing loan from the Social Security System (SSS); that said Deed of Sale has been executed for convenience and without monetary consideration; that you want to be fair among all your heirs and put everything prospectively to avoid confusion and problems in the future; that you have no intention of selling the same and it is best to remain communal to serve the needs of any of your heirs; that you did not request Erlando any financial assistance when you built the present and new structure in 1997; and that a Deed of Sale has been executed in 1975 to revert back the property to you, again, for convenience and without monetary consideration. In reply, please be informed that the rules on the kind of tax, rate of tax, zonal or fair market value obtaining at the date of notarization on April 29, 1975 shall be applied in accordance with the provisions of RMC 34-91, as clarified by RMC 43-91. Therefore, prior to the effectivity of BP Blg. 37, capital gains from the sale or transfer of real property classified as capital assets were then subject to the regular income tax rates. Moreover, a closer perusal of the said transaction would reveal that the subject property is the same property which you previously transferred to your son's favor for SSS Housing Loan Program which, as represented, is one of the requirements for the granting of the loan. In other words, the transfer of the Title to the property being sold should be complied with in order to qualify under the SSS Housing Loan Program. Therefore, considering that the transfer of the subject property is without consideration and was executed only as a requirement for the granting of the SSS loan, this Office is of the opinion that the reconveyance of the same in your favor is exempt from the payment of the capital gains tax imposed under Section 24(D) of the Tax Code of 1997 and documentary stamp tax prescribed under Section 196 of the same Code. However, the same is subject to the documentary stamp of P15.00 as imposed by Section 188 of the Tax Code of 1997 on acknowledgements. (BIR Ruling No. 042-97 dated April 8, 1997) cITCAa This ruling is being issued based on the foregoing representations. If upon investigation, however, it will be shown that the facts are different from the said representations, 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