Whether the Rectification of a Deed of Sale is Not Subject to Capital Gains Tax and Documentary Stamp Tax

March 29, 1995 BIR RULING NO. 062-95 21 (e) 000-00 062-95 Mr. Sixto M. Llaguno #8 Earth Street Barangay Tandang Sora Quezon City S i r : This refers to your letter dated December 26, 1994 stating that in May of 1991, Maria P. Tabios and Jessie James Tabios purchased with their combined resources a piece of property situated at Bo. Banlat, Quezon City, from Rosa L. Carbonell; that during the negotiation of the sale, Maria and Jessie James, who were abroad at that time were represented by the wife of Jessie James, Elizabeth d. Tabios; that when the sale was finally consummated, Elizabeth D. Tabios, who was merely following up the transaction, was made to appear as the vendee in the Absolute Deed of Sale and subsequently in the Transfer Certificate of Title of the property when it should have been Maria P. Tabios and Jessie James Tabios as co-owners who provided the purchase price equally between themselves; that Maria P. Tabios desires to rectify the mistake which apparently was made inadvertently, and Elizabeth has no objection in this regard; that Elizabeth executed an affidavit to this effect; that Elizabeth likewise executed a Special Power of Attorney in favor of Maria Tabios on June 16, 1994 to effect the correction of the records; that the Deed of Sale of 1991 had been duly rectified/amended on June 20, 1994 in coordination with the vendor of the property which the vendees now seek to register for the appropriate correction of the Certificate of Title to the property, and that the rectification of the Deed of Sale involves no monetary consideration, with practically the same parties belonging to the same family, covering the same piece of property, the taxes on which have been duly paid during the previous transaction. Based on the foregoing representations, you are now requesting in effect for a ruling that the rectification of the aforesaid Deed of Sale is not subject to capital gains tax and documentary stamp tax. In reply, please be informed that under Section 21(e) of the Tax Code, as amended, 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 taxed at the rate of 5% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. In the instant case, however, there is no actual sale, exchange or disposition of real property in the aforesaid rectification of the Deed of Sale considering that the true vendees of the aforesaid realty were now being correctly indicated as the vendees in the said sale transaction, aside from the fact that no monetary consideration is involved in the said rectification of the Deed of Sale. Moreover, the taxes due on the said sale transaction has already been duly paid during the previous transaction. Accordingly, this Office is of the opinion as it hereby holds that the said rectification of the Deed of Sale is not subject to the 5% capital gains tax imposed under Section 21(e) of the Tax Code, as amended, and to the documentary stamp tax prescribed under Section 196 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, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue