Cornista Law Office

June 1, 2010 BIR RULING [DA-(I-008) 085-10] Secs. 27 (D) (5), 188, 196; BIR Ruling Nos. 090-99; 027-93; 115-94; DA-195-2000; DA-301-03 Cornista Law Office 11th Floor, Ever Gotesco Corporate Center 1958 C.M. Recto Avenue, Manila Attention: Atty. Ildebrando L. Cornista Counsel for Lourdes G. de Guzman Gentlemen : This refers to your letter dated January 25, 2010 requesting for the issuance of a Certificate Authorizing Registration involving the properties acquired from Allied Banking Corporation by virtue of a Court Order. DTCSHA It is represented that spouses Felix and Lourdes de Guzman, and Steelman Builders Corporation are plaintiffs in a civil case for Nullification of the Foreclosure Proceedings against defendant Allied Banking Corporation, et al. before the Regional Trial Court of Malabon City Branch 170; that subject properties covered by Transfer Certificates of Title Nos. M-29088, M-29089, M-29088, M-29090, M-29091, M-29092, and M-29093 of the Registry of Deeds of Malabon City are registered in the name of Allied Banking Corporation; that a compromise agreement was agreed upon between the parties whereby the Trial Court rendered a decision on May 12, 2008; that the relevant portions of said compromise agreement are as follows: 1. For the full settlement of all its obligations with the Defendant, the Plaintiffs shall pay the amount of Six Million Nine Hundred Thousand (P6,900,000.00) Pesos payable as follows: xxx xxx xxx 2. For this purpose, the Plaintiffs shall deliver to the Defendant the corresponding postdated checks immediately upon execution of this Agreement. 3. Title to the subject properties covered by Transfer Certificates of Title Nos. M-29088, M-29089, M-29088, M-29090, M-29091, M-29092, and M-29093 of the Registry of Deeds of Malabon City are registered in the name of the herein Defendant shall revert to the Plaintiffs only upon full payment. Should Plaintiffs, however, fail to pay any amortization when due, all amounts already paid shall be forfeited in favor of the Defendant and the Defendant shall not be obligated to transfer to the Plaintiffs title to any of the subject properties. 4. Upon full payment, the Plaintiffs shall become entitled to the immediate issuance of a Writ of Execution directing the Register of Deeds of Malabon City to cancel Transfer Certificates of Title Nos. M-29088, M-29089, M-29088, M-29090, M-29091, M-29092, and M-29093 in the name of the Defendant and reinstate Transfer Certificates of Title Nos. M-924, M-925, R-99-8; R-13364 and R-7584 in the name of the plaintiff, or issue any new titles in the name of plaintiff free from all liens and encumbrances. that on February 20, 2008, Plaintiffs have fully settled the amount of P6,900,000.00 to the satisfaction of the Defendant; that on November 5, 2008, the Trial Court issued a Writ of Execution directing the Register of Deeds of Malabon City to cancel Transfer Certificates of Title Nos. M-29088, M-29089, M-29088, M-29090, M-29091, M-29092, and M-29093 in the name of the Defendant and reinstate Transfer Certificates of Title Nos. M-924, M-925, R-99-8; R-13364 and R-7584 in the name of the plaintiff, or issue any new titles in the name of plaintiff free from all liens and encumbrances; and that a Certificate of Finality of the Writ of Execution was issued by the Trial Court on February 4, 2010. HcSCED In reply, please be informed that this Office ruled in the case of a valid foreclosure sale but was revoked by operation of law (R.A. 7202), subject of BIR Ruling No. 090-99 dated July 7, 1999 , as follows: "Such being the case, the reconveyance of the foreclosed properties to the original owner pursuant to the mandate of RA 7202, is not subject to the capital gains tax imposed under then Section 21(e) of the Tax Code, as amended (now Sec. 27(D)(5) of the Tax Code of 1997) nor to the documentary stamp tax imposed under then Section 196 of the same Code (also Section 196 of the Tax Code of 1997) [BIR Ruling No. 9-95 dated January 1995]." Similarly, in BIR Ruling No. DA-301-2003 dated September 15, 2003 citing BIR Ruling No. DA-195-2000 dated March 30, 2000, involving the transfer of a parcel of land by way of legal redemption, the BIR opined: ". . . 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" In both rulings, this Office ruled that the deed of conveyance is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, because there is no monetary consideration in the subject transfer. However, the notarial acknowledgment to the deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling Nos. 027-93 dated January 15, 1993; 115-94 dated July 1, 1994) In view of the foregoing, this Office hereby rules that the reconveyance by Allied Bank Corporation in favor of the plaintiffs in the civil case, Sps. Felix and Lourdes de Guzman and Steelman Builders Corporation, to effect the court approved compromise agreement, giving them the right to redeem their properties 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