Whether Reconveyance of Title is Exempt from Payment of Any Tax

July 11, 1995 BIR RULING NO. 104-95 50 (b) 000-00 104-95 Atty. Ricardo J.M. Rivera Rm. 604 ECCOI Building 497 E. Rodriguez Sr. Avenue Quezon City S i r : This refers to your letter dated September 5, 1994 stating that on March 14, 1989, your clients Ms. Generosa A. Latorre and Fr. Luis Esteban Latorre, both of 113 Buri St., Ayala Alabang, Metro Manila, donated to the Porfirio D. Latorre Memorial & Fr. Luis Esteban Latorre Foundation, Inc. (the Foundation) a parcel of land they co-owned located in Makati City covered by TCT No. 217379 (S-82523) issued by the Registry of Deeds of the Province of Rizal; that such donation was embodied in deeds of donation executed by the said parties and notarized by Atty. Juan M. Katigbak, Jr.; that thru the said deeds of donation, the ownership of the aforesaid property was transferred to the Foundation without paying any tax for such transfer as the Foundation is tax-exempt; and that recently, however, Ms. Latorre and Mr. Esteban latorre (who has left priesthood) came to need the said property they donated to the Foundation and since it was the agreement between the parties that the donation may be revoked should the donors, "during her/his lifetime, used up her/his remaining properties and money, and she/he needs money for her/his old age, hospitalization, and to maintain her/his standard of living she/he is used to, the DONEE will return or sell the properties and give the money to the DONOR'S", separate Deeds of Revocation of Donation and Reconveyance of Property both dated September 2, 1994 and notarized by you were executed by the parties. cdti It is noted that in the documents submitted the said donation was perfected on March 14, 1989 while the Agreements of the parties to the effect that should the donors now need the property they donated, the donee will return or sell the property and give the money to the donors, were executed on March 20, 1989; and that in the respective Deeds of Revocation of Donation and Reconveyance of Property executed by the parties on September 2, 1994, the reason for the revocation of the said donation of Mr. Luis Esteban Latorre is that at the time the donation was made the donor was a Roman Catholic priest, but now the donor needs the property he donated because he has left priesthood and is now married civilly to Evelyn Fernandez with whom he has a son by the name of Luis Gener Porfirio Latorre, who was born on January 23, 1992; while the reason for the revocation of the donation of Ms. Generosa Almeda is that she needs now the property she donated for her old age. Based on the foregoing representations and documents submitted, you are now requesting for a ruling that the said reconveyance of title in the names of your clients is exempt from the payment of any tax. In reply, please be informed that Article 757 of the Civil Code of the Philippines provides as follows: "Art. 757. Reversion may be validly established in favor of only the donor for any case and circumstances, but not in favor of other persons unless they are all living at the time of the donation. "Any reversion stipulated by the donor in favor of a third person in violation of what is provided in the preceding paragraph shall be void, but shall not nullify the donation. From the above quoted provisions of Art. 757 of the Civil Code of the Philippines it is clear that stipulation of reversion of donation in favor of the donor for any case and circumstances must be made at the time of the donation or at the perfection of the donation considering that such stipulation is a limitation on the donation. Hence, the execution of the said Agreement between the parties on March 20, 1989 subjecting the said donation to the said limitation after its perfection on March 14, 1989 did not convert the said donation to be subject to such to such a limitation. Accordingly, the reconveyance by the donee of the property donated by Ms. Generosa Almeda in her favor is subject to the 5% creditable withholding tax imposed under Revenue Regulations No. 1-90 implementing Section 50(b) of the Tax code, as amended and to the documentary stamp tax prescribed under Section 196 of the same code based on the zonal value of the said property. However, in the case of Mr. Luis Esteban Latorre, the reconveyance by the donee in his favor of the property he donated is not subject to the creditable withholding tax imposed under Revenue Regulations No. 1-90 and to the documentary stamp tax prescribed under Section 196 of the Tax Code, as amended, but is subject only to P10.00 documentary stamp tax imposed under Section 188 of the Tax Code, as amended, in view of Art. 760 of the Civil Code of the Philippines, which reads as follows: prll "Art. 760. Every donation inter vivos, made by a person having no children or descendants, legitimate or legitimated by subsequent marriage, or illegitimate, may be revoked or reduced as provided in the next article, by the happening of any of these events: "(1) If the donor, after the donation, should have legitimate or legitimated or illegitimate children, even though they be posthumous; "(2) If the child of the donor, whom the latter believed to be dead when he made the donation should turn out to be living; "(3) If the donor should subsequently adopt a minor child." Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue