Agreement to Rescind Sale Not Subject to Capital Gains Tax/Doc. Stamp Tax

March 1, 1993 BIR RULING NO. 079-93 AGREEMENT TO RESCIND SALE NOT SUBJECT TO CAPITAL GAINS TAX/DOC. STAMP TAX 24-000 97-91 079-93 Santiago Land Development Corporation 6th Floor, BPI Building, Ayala Avenue corner Paseo de Roxas Street Makati, Metro Manila Attention: Mr . Armand G . Unson Senior Assistant Manager and Mr . Ariel A . Reyes Assistant Vice President This refers to your letter dated November 19, 1992, in effect, requesting for a confirmation of your opinion that an Agreement to Rescind sale with Substitution which you executed to replace a damaged condominium unit is no longer subject to capital gains tax nor to the documentary stamp tax. cdta It is represented that on April 20, 1989 you have executed a Deed of Absolute Sale over a parcel of land together with one (1) unit of residential house identified as Unit 8, Block 13, Phase VII of your Ayala Alabang Housing Project located at Ayala Alabang Village, Muntinlupa, Metro Manila to Mr. Jose Victor Olaquera; that early this year said unit suffered structural damage and, as a reputable and responsible developer, you agreed to change the unit with another one of similar land and floor areas; that since the title of the property sold on April 20, 1989 has already been registered in favor of your buyer, you documented the agreement to change the unit by executing said Agreement to Rescind sale with Substitution; that since you have already paid the corresponding income and documentary stamp taxes on the said sale in 1989, you now request this Office for a tax exemption on the Agreement to Rescind sale with Substitution for the following reasons: "1. The structural damage suffered by the unit was due to unforeseen events and can, therefore, be considered as force majeure ; "2. The substitution of units will not entail any capital gain on both parties since units will be exchanged without any monetary consideration." In reply, please be informed that the Agreement to Rescind sale with Substitution is nothing more than a rescission of the original contract of conveyance and the substitution of the subject of the sale with another lot of the same kind and nature. Accordingly, since the subject of the previous deed of conveyance is of the same kind and value and that both capital gains and documentary stamp taxes have already been paid pursuant to Sections 24 and 196 of the Tax Code, neither taxes shall again be imposed on the conveyance by you of the substitute lot or unit; except for the P3.00 documentary stamp tax for the notary public's certification under Section 188 of the Tax Code. (Refer to BIR Ruling No. 97-91) JOSE U. ONG Commissioner of Internal Revenue