Pador Law Office

November 12, 2009 BIR RULING [DA-(C-260) 665-09] DA010-08; DA371-08; DA099-05; DA352-06; DA028-00; DA-013-00 Pador Law Office Suite No. 304, Centro Mariano Building Osmea Street, Cagayan de Oro City Attention: Atty. Rexy R. Pador Gentlemen : This refers to your letter dated July 20, 2009 stating that Ferma Paares Pioquinto (Ms. Pioquinto), a resident of Villa Ernesto Subdivision, Gusa, Cagayan de Oro City, is the absolute and registered owner of a residential unit located at Phase II, Villa Ernesto Subdivision, Gusa, Cagayan de Oro City covered by TCT No. T-196554; that although the said property including the improvements thereon is registered in the name of Ms. Pioquinto, the latter declares that she possesses the same as trustee of Atty. Rexy R. Pador and Engineer Leny Lani O. Pablico (Spouses Pador), who are the true and beneficial owners thereof and who are in possession of the said property; that the said property was bought from Barbarra Landingin and Gerardo Landingin, Jr., using the common funds of Spouses Pador on July 14, 2008, considering that Ms. Pioquinto does not have other source of income than working as their household helper; that the registration of the said property in the name of Ms. Pioquinto was done in good faith, as trustee thereof, and with the intention to help and support the latter in her supposed application for United States Fiance' Visa which later turned out to be a failure and did not materialize; and that a Deed of Reconveyance was executed by Ms. Pioquinto, as Trustee, in favour of Spouses Pador, as beneficial owners thereof. Based on the foregoing representations, you now request that the reconveyance of the above-mentioned property by Ms. Pioquinto, as Trustee, in favour of Spouses Pador, as beneficial owners thereof, is exempt from capital gains tax and the corresponding documentary stamp tax. In reply thereto, please be informed that in BIR Ruling No. DA099-05 dated March 31, 2005 which is a reiteration of BIR Ruling No. 009-95 dated January 16, 1995 , the BIR ruled that ". . . the execution of a Deed of Reconveyance by the Spouses Cawili and Marissa Cawili reconveying the aforesaid real property in favor of Aurora R. Magno (now Aurora M. Panaguiton) and Manuel R. Magno being merely a formality of restoring title to the said property in the name of its true owners, hence, without any consideration, is not likewise subject to the capital gains tax imposed under Section 21(e) of the Tax Code, as amended, and 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 P10.00 pursuant to Section 188 of the Tax Code, as amended." HcaDIA Inasmuch as the transfer of the above-mentioned parcel of land together with the improvements thereon by Ms. Pioquinto to Spouses Pador is without monetary consideration but is merely to restore the title to the said property to the real owner, Spouses Pador, the Deed of Reconveyance executed by Ms. Pioquinto in Spouses Pador is not subject to capital gains tax or creditable withholding tax and the corresponding documentary stamp tax respectively imposed under Section 24 (D) (5) of the Tax Code of 1997 or Revenue Regulations No. 2-98, as the case may be, and Section 196 of the said Code. WHEREFORE, in view of the foregoing , this Office is of the opinion as it hereby holds that Deed of Reconveyance by Ms. Pioquinto in favor of Spouses Pador is not subject to capital gains tax and the corresponding documentary stamp tax. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service