Request for Exemption from Payment of Capital Gains Tax and Documentary Stamp Tax on Certain Dispositions of Realty

January 16, 1995 BIR RULING NO. 009-95 21 (e) 000-00 009-95 Atty. Marciano N. Villavert 18 Armstrong St., Doa Faustino Village Culiat, Tandang Sora Avenue Quezon City S i r : This refers to your letter dated September 30, 1994 stating that a parcel of land registered in the name of co-owners Aurora R. Magno and Manuel R. Magno situated at University District, Quezon City covered by TCT No. RT-60202 (48758) was sold by the said registered owners in favor of the Spouses Rodrigo Cawili and Marissa Cawili; that by virtue of the Deed of Sale executed for the purpose, the said Spouses Rodrigo Cawili and Marissa Cawili were able to transfer the said property in their name and a new title under TCT No. 66946 was issued in their favor; that unfortunately , Cawili and Marissa Cawili, as payment of the sale transaction bounced due to "Account Closed"; that several demand letters were sent by Aurora R. Magno to the Spouses Rodrigo Cawili and Marissa Cawili requesting the replacement of their bouncing checks either in cash or manager's check but to no avail; that as a consequence, the Spouses Aurora R. Magno and Luis Panaguiton, Jr. filed a complaint for Annulment of Deed of Sale with Reconveyance of Title and cancellation of mortgage lien annotated at the back of the title before the Regional Trial Court of Quezon City, Branch No. 106, under Civil Case No. D-9421472 entitled "Aurora M. Panaguiton, rep. by her husband Luis Panaguiton, Jr. versus Sps. Rodrigo Cawili and Marissa Cawili, and Lala Merchandoni; and that pending resolution of the abovementioned case, Spouses Rodrigo Cawili and Marissa Cawili executed a Deed of Reconveyance reconveying the property to the former owner's thereof. cdti Based on the foregoing representations, you are now requesting for a ruling exempting from the payment of capital gains tax and documentary stamp tax the sale of Aurora R. Magno and Manuel R. Magno of their realty in favor of the Spouses Rodrigo Cawili and Marissa Cawili and the reconveyance of the said realty from the Spouses Rodrigo Cawili and Marissa Cawili to Aurora R. Magno and Manuel R. Magno on the ground that both transfers are without any consideration; and the issuance of a tax credit in favor of Aurora R. Magno (now Aurora M. Panaguiton) on the capital gains tax and documentary stamp tax paid on the transfer of the realty covered by TCT No. RT-60202 (48758) in favor of the Spouses Rodrigo Cawili and Marissa A. Cawili. It is noted that Aurora R. Magno paid the capital gains tax and documentary stamp tax on the sale of their realty in favor of the Spouses Rodrigo Cawili and Marissa Cawili on September 16, 1992. In reply, please be informed that since the sale of the co-owners Aurora R. Magno and Manuel R. Magno of their real property in favor of the Spouses Rodrigo Cawili and Marissa Cawili did not materialize due to the failure of the Spouses Rodrigo Cawili and Marissa Cawili to pay the consideration of the said sale transaction, this Office is of the opinion as it hereby holds that the said sale transaction is not subject to the capital gains tax imposed under Section 21 (e) of the Tax Code, as amended, nor to the documentary stamp tax imposed under Section 196 of the same Code. Moreover, 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 said 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, nor 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. However, since Aurora R. Magno (now Aurora M. Panaguiton) paid the capital gains tax and documentary tax on the sale of their real property in favor of the Spouses Rodrigo Cawili and Marissa Cawili on September 16, 1992, your request for the tax crediting of such payment in favor of Aurora M. Panaguiton is hereby denied considering that more than two years have elapsed from September 16, 1992, the date of payment of the aforesaid taxes, to October 5, 1994, the date of filing of the claim for tax credit, hence, the right to claim tax credit on such payments has prescribed, pursuant to Section 204 (e) of the Tax code, as amended. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue