Mr. Ramil P. Bocado

January 22, 2010 BIR RULING [DA-(I-001) 009-10] Secs. 24 (D) (1); 196; DA-009-95 Mr. Ramil P. Bocado Attorney-In-Fact of Lucela Pilapil and Eleuteria Pilapil Catarman, Liloan, Cebu Sir : This refers to your undated letter, received by BIR Regional Office 13 on April 16, 2008 and by this Office on October 2, 2008 via 1st Indorsement dated September 11, 2008, requesting for tax exemption of the conveyance of the two-thirds (2/3) portion of Lot 2136 located at Catarman, Liloan, Cebu to its true and lawful owners by virtue of Court Order. Documents disclose the following facts: 1) Lot 2136 with area of eight thousand seven hundred eighty nine (8,789) sq. m. covered by OCT No. O-2799 was the exclusive property of Barbara Butad vda. de Pilapil; that this property was one of the properties included in the extra-judicial partition in a document known as "Deed of Confirmation of a Previous Oral Partition" notarized on February 14, 1985, executed by the following heirs: Catalino Pilapil, his wife, Barbara; their children Eleuteria, Emiliana, Lucela and Felix, granddaughter Alma who represented her deceased father, Gregorio (Catalino & Barbara's son); that in said partition, Lot 2136 was adjudicated to the heir of Gregorio, Lucela and Eleuteria at one-third (1/3) each; 2) An "Extra-Judicial Settlement of Estate and Partition" notarized on October 16, 2001 was executed by the heirs of Gregorio Pilapil and Lot 2136 was included in its entire area which resulted to the issuance of TCT No. TP-23923 in their names for Lot 2136-A with area of 5,846 sq.m.; EHTIcD 3) In order to assert their claim over 2/3 of Lot 2136, Eleuteria and Lucela filed Civil Case No. MAN-4967 against the heirs of Gregorio Pilapil to nullify TCT 23923 and the Extra-Judicial Settlement of Estate and Partition as well as for the reconveyance of the 1/3 share of Eleuteria and the 1/3 share of Lucela; 4) A Compromise Agreement was executed by the heirs of Gregorio Pilapil on May 17, 2005 and the Court issued an Order dated July 25, 2005 directing the heirs of Gregorio Pilapil to convey Lot 2136-A with an area of 5,846 sq.m. covered by TCT 23923; 5) A Certificate of Finality was issued on June 1, 2006 by the Regional Trial Court Branch 56 of Mandaue City and a Deed of Reconveyance dated June 3, 2008 was executed by the heirs of Gregorio Pilapil, namely: Alma Pilapil Caete, Jerry Pilapil, Carlito Pilapil, Ma. Lolita Pilapil, Gregorio Pilapil, Jr. and Vilma Pilapil Lauron; that in support of herein request, the following documents were submitted: 1. Copy of the Complaint and its pertinent annexes; 2. Original Deed of Reconveyance; 3. Extra Judicial Settlement of the Estate and Partition notarized Oct. 16, 2001; 4. Compromise Agreement with Joint Motion to Approve the Same and to Render Judgment based Thereon; 5. Certificate Authorizing Registration of the properties of Barbara Butad vda. de Pilapil; 6. Order (Compromise Agreement) dated July 25, 2005; 7. Certificate of Finality issued by RTC Branch 56, Mandaue City. In reply, please be informed that this Office had already occasion to rule on the matter, when it said in BIR Ruling No. 009-95 dated January 16, 1995, that aITECD ". . . the execution of a Deed of Reconveyance by the Spouses Rodrigo 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." Considering that the reconveyance of the title covering the proportionate shares of Lucela and Eleuteria Pilapil was made due to recognition of their ownership thereto pursuant to a Compromise Agreement and Order of the Court and that it was made without any monetary consideration, as it simply restores back the titles over the said properties to the latter, being the original owner thereof, the reconveyance of the said properties in favor of Lucela and Eleuteria Pilapil is exempt from the payment of capital gains tax and the corresponding documentary stamp tax respectively imposed under Sections 24 (D) (1) and 196 of the Tax Code of 1997. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained 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