Ms. Prudencia Curbi

February 6, 2009 BIR RULING [DA-(C-019) 065-09] Conveyance/Trust; DA-325-2004; DA-146-2000 Ms. Prudencia Curbi No. 23 Fortune Street Everlasting Payatas A Quezon City Madam : This refers to your letter dated January 9, 2008 stating that on April 18, 2007, you executed a Special Power of Attorney (SPA) in favor of your son, Richard C. Alcalde, and his common-law wife, Gigi C. Blando, granting them authority to purchase a real property using the funds belonging to you, and to sign and execute the Deed of Absolute Sale and other documents relative to the purchase thereof for and in your behalf; that on November 8, 2007, Richard and Gigi bought a real property from Spouses Gerardo and Amanda Perlas, situated in Villa Vienna Neapolitan Subdivision, Quezon City and covered by Transfer Certificate of Title No. 45150 of the Registry of Deeds of Quezon City, for and in consideration of the amount of P1,960,000.00; that the capital gains and documentary stamp taxes due on the said sale transaction were paid on November 22, 2007; that as a result, a Certificate Authorizing Registration (CAR) was issued by Revenue District Office (RDO) No. 28, Novaliches, Quezon City on the above sale of real property, indicated therewith as purchasers are your son, Richard C. Alcalde, and his common-law wife, Gigi C. Blando; that you just discovered the foregoing upon your return to the Philippines from Canada last March of 2008; that since you are the true purchaser of the above-mentioned property, and that Richard and Gigi were just acting as your attorneys-in-fact, for the purpose of purchasing the said realty by virtue of an SPA, you are requesting that the CAR will be amended to reflect your name as the buyer thereof so that once you register the transaction with the Registry of Deeds concerned, the title of the subject realty will be issued in your name; that for this purpose, on February 2, 2009, Richard C. Alcalde and Gigi C. Blando executed a Deed of Conveyance with Acknowledgement of Trust and Waiver of Rights, whereby they acknowledged the existence of a trust in your favor and admit that they acquired the above-mentioned property for and in your behalf. In reply, please be informed that under Section 24 (D) (1) of the Tax Code of 1997, as amended, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6 (E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts. In the instant case, however, there is no sale, exchange or disposition of real property involved, since you are the real owner of the subject realty, while your son, Richard C. Alcalde, and his common-law wife, Gigi C. Blando, acted merely as trustees. Their execution of the Deed of Conveyance with Acknowledgement of Trust and Waiver of Rights, which effectively recognizes the existence of a trust between you and them, without any monetary consideration, and with the purpose only of securing and registering the title of the subject property in your name, is not subject to the capital gains tax 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. (BIR Ruling No. 108-98 dated June 29, 1998 cited in DA-325-2004 dated June 16, 2004). Accordingly, the title over the subject real property may be registered in your name instead of the named buyers in the CAR, Richard C. Alcalde and Gigi C. Blando, who merely acted as your trustees, without payment of the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997. Moreover, the above Deed of Conveyance with Acknowledgement of Trust and Waiver of Rights is exempt from the donor's tax imposed under Section 98 of the same Code. The said deed merely transfers the ownership of the subject realty to the true buyer/owner. (BIR Ruling DA-146-2000 dated March 10, 2000) cAaDCE Further, under Section 191 of Revenue Regulations No. 26, otherwise known as the "Documentary Stamp Tax Regulations", conveyances to a trust without valuable consideration, or from a trustee to a cestui que trust without valuable consideration are not subject to tax. From the foregoing and since the conveyance of the above-mentioned real property by Richard C. Alcalde and Gigi C. Blando, the trustees, in your favor, as the trustor, the real owner thereof, is in connection and in recognition of a trust, the said transfer, therefore, is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgement to the said Deed of Conveyance is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the same Code. (BIR Ruling No. 027-93 dated January 15, 1993 and BIR Ruling No. 080-02 dated April 29, 2002 cited in BIR Ruling No. DA-325-2004 dated June 16, 2004). 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service