Documentary Stamp Tax Due on Deed of Conveyance of Real Estate

January 17, 1969 BIR RULING NO. 001-69 Orcar Corporation 327 Quezon Boulevard Ext. Quezon City Attention : Mr . Vicente F . Faustino Treasurer Gentlemen : This refers to your letter dated January 8, 1969 stating, in part, as follows: "Will you please advise how much documentary stamps should be affixed on the Deed of Conveyance in the following case: LexLib "On January 31, 1968, A, B, C, D and E transferred by Deed of Conveyance certain real property owned by them in common to X corporation which they had just formed, in consideration of the issuance to them of shares of stock of said corporation with a total value of P590,100.00. At the time of the transfer, there was an existing mortgage on the said property for a loan from a bank in the amount of P192,500.00. The payment of this obligation was assumed by X corporation in the said deed, mortgage remains." In reply, I have the honor to inform you that, in accordance with Section 233 of the Tax Code, the documentary stamp tax due on a deed of conveyance of real estate is based on the consideration or value received or contracted for to be paid for the realty, after making proper allowance for encumbrances thereon. Such encumbrances refer to those which rest on the property before the sale and are not removed by the sale. In the light of the foregoing, while the total consideration of the conveyance consists of P590,100.00 shares of stock received plus the mortgage loan of P192,500.00 assumed by the corporation, the documentary stamp tax shall be based only on P590,100.00, the mortgage loan of P192,500.00 not having been removed by the conveyance. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue