Saguisag & Associates

May 17, 2010 BIR RULING [DA-(I-004) 065-10] Section 24 (D) (1), 188 & 196; BIR Ruling No. 339-88 & DA-368-08 Saguisag & Associates 4045 Bigasan St. Palanan, Makati City Attention: Atty. E.D. Salonga, Jr. Gentlemen : This refers to your letters dated September 24, 2009 and December 8, 2009 requesting for exemption from the payment of capital gains tax and other related internal revenue taxes and fees on the reinstatement of title over a real property in favor of your client, Zenaida G. Crisostomo. DaAETS Documents show that the Regional Trial Court Branch 106, Quezon City, rendered a decision in the case of Zenaida G. Crisostomo vs. Bernardo Hernandez, Majech Trading Corp., the Registry of Deeds of Quezon City, and the Land Registration Authority , Civil Case No. Q-92-13706 (for declaration of nullity of deeds, cancellation/annulment of titles with damages) dated November 5, 2008, finding that a piece of real property owned by Zenaida G. Crisostomo, had been fraudulently transferred in favor of other persons and ordering the Register of Deeds of Quezon City that her title thereto, Transfer Certificate of Title No. 59398, be reinstated in her name. In reply, please be informed that under Section 24 (D) (1) of the Tax Code, 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 shall be subject to 6% based on the gross selling price or current fair market value as determined in accordance with Section 6 (E) of the Tax Code, whichever is higher (BIR Ruling No. 339-88 dated July 19, 1988). Since the reinstatement of the above-mentioned property is in pursuance with the court Order dated November 5, 2008 and without consideration, the transfer of the said property in favor of your client, Zenaida G. Crisostomo, is not subject to the capital gains tax imposed in Section 24 (D) (1) of the Tax Code nor to the creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the said Code. Furthermore, the reinstatement of the said property is, likewise, not subject to the documentary stamp tax (DST) imposed in Section 196 of the Tax Code but only to the DST imposed under Section 188 of the same Code (BIR Ruling No. DA-368-08 dated June 13, 2008). In other words, there was no sale, exchange or other disposition of real property classified as capital asset in this case (BIR Ruling No. 339-88 dated July 19, 1988). 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 as null and void. TcHCDI Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Group