Angeles Capareda Aliño, et al.

April 29, 2010 BIR RULING [DA-(C-010) 057-10] Sec. 27 (D) (5); BIR Ruling No. 009-95; BIR Ruling DA-306-07 Angeles Capareda Alio, et al. c/o Apolonia Delima Linao, Talisay City Cebu City Madam : This refers to your undated letter requesting exemption from the payment of income tax, capital gains tax and documentary stamp tax on the reconveyance by the Traders Royal Bank of real property in favor of Angeles Capareda Alio, et al., in accordance with the court decision promulgated on September 8, 2005. The facts of the case are as follows: Apolonia Delima is the registered owner of Lot No. 3946 covered by Transfer Certificate of Title No. T-4922; Apolonia was married to Silvestre Capareda. In 1983, Apolonia was in need of money because she was already then sickly. To help finance the medication of Apolonia, Felix Capareda, son of the former secured a loan in the amount of P3,000.00 from Mr. Federico Berdida. In connection with said loan Berdida and Felix Capareda executed a receipt, to wit: "RECEIPT TO WHOM IT MAY CONCERN: This is to certify that I, Mr. Felix Capareda received from Mr. Fred Berdida the amount of THREE THOUSAND PESOS (P3,000.00), being guaranteed by our owners Certificate of Title #53355 Lot No. 3946 to be redeemed one year after date without interest. IcHDCS This certifies further that after paying the amount of Three Thousand Pesos (P3,000.00) on the specified date, abovementioned, Mr. Fred Berdida will return the title to Mr. Felix Capareda or to any of his authorized representative. xxx xxx xxx." Lot No. 3946 covered by TCT No. T-4922 was used as collateral for the loan and the owner's copy thereof was given to Fred Berdida. Felix Capareda made several attempts to redeem the property by offering to pay off the indebtedness from Fred Berdida. However, due to the numerous excuses given by Fred Berdida, the attempts to redeem the subject property proved futile. Thereafter, Felix Capareda discovered that TCT No. 4922 under the name of Apolonia Delima was cancelled and various TCT's were subsequently issued in its stead. The latest of which, is TCT No. 60186 in the name of Traders Royal Bank. Thus, on November 20, 1989, a Complaint for Recovery of Ownership and Reconveyance of Title of Real Property, Annulment and/or Cancellation or Declaration of Nullity of all Fake Documents, with Damages and Attorney's fees was filed by Capareda's et al. Finally, on September 08, 2005, the Court of Appeals, Cebu City, rendered its decision in favor of the Capareda's against Traders Royal Bank directing the latter to reconvey to the former the lot described in the complaint and the Register of Deeds of Cebu Province is likewise directed to issue a new certificate of title in favor the same. In reply, please be informed that in BIR Ruling No. DA-306-07 dated May 17, 2007 citing BIR Rulings DA-301-2003 dated September 15, 2003, BIR Ruling DA-195-2000 dated March 30, 2000 involving transfer of a parcel of land by way of legal redemption, the BIR ruled as follows: ". . . please be informed that since the transfer of the subject property is in consonance with the decision of the Court of Appeals and is without consideration, the transfer of the said property in your favor is not subject to the capital gains tax imposed under Section 24(D)(1) 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." xxx xxx xxx Moreover, the execution of a Deed of Reconveyance being merely a formality of restoring title to the said property in the name of its said true owners, hence, without consideration, is not likewise subject to the capital gains tax imposed under Section 21 (e) of the Tax Code, as amended, nor to the documentary stamp tax imposed under Section 196 of the same Code. However, the notarial acknowledgment to the said Deed of Reconveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code, as amended. [BIR Ruling 009-95 dated January 16, 1995]. DSETac In view of the foregoing, this Office hereby rules that the Deed of Reconveyance executed by the Branch Clerk of Court, Regional Trial Court, Branch 13, Cebu City in favor of Caparedas to effect the court decision, giving the Caparedas the right to restore and transfer title of their property in their name, is not subject to the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, nor to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the Tax Code of 1997, as amended. Likewise, the said Deed is not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code, as amended. However, the notarial acknowledgment to the Deed of Reconveyance is subject to the documentary stamp tax of P15.00 imposed under Section 188 of the same Code. 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.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service