BIR Ruling No. 173-13

May 14, 2013 BIR RULING NO. 173-13 Sections 24 (D) (1), 188 & 196 of the Tax Code of 1997, as amended; BIR Ruling No. 360-11 Gilbert S. Dimaano Sakuting St.,Lanzona Subdivision Matina, Davao City Sir : This refers to your letter dated October 21, 2011 duly indorsed by Revenue Region No. 19 Davao City, requesting for exemption from the payment of capital gains tax on the transfer of real property through a court-approved compromise agreement. It is represented that on April 10, 2006, the Regional Trial Court of Davao City, Branch 8 rendered its decision in Civil Case No. 27,571-999 entitled Luzonio S. Dimaano and Clara S. Dimaano vs. Spouses Gilbert S. Dimaano and Ruth Rina C. Dimaano ,approving in toto ,the Compromise Agreement entered into by and between the parties; and that paragraph 9 of said Compromise Agreement provides that: "9. The share of Luzonio S. Dimaano at the DIMSON Bungalows located at Tinikling Street, Lanzona Subdivisions, Matina, Davao City is hereby surrendered in favor of Sps. Gilbert and Ruth Rina Dimaano." and that the parties executed an Agreement dated October 14, 2011, whereby Luzonio S. Dimaano relinquished his share in DIMSON Bungalows located at Tinikling Street, Lanzona Subdivisions, Matina, Davao City in favor of Sps. Gilbert and Ruth Rina Dimaano. aDICET Hence, this request. In reply, we regret to inform you that your request for tax exemption cannot be granted for lack of legal basis. Section 24 (D) of the Tax Code of 1997, as amended, provides, viz. : "Section 24 (D) Capital Gains from Sale of Real Property. (1) In General. The provisions of Section 39 (B) notwithstanding, a final tax of 6% based on the gross selling price or current market value as determined in accordance with Section 6 (E) of this Code, whichever is higher, is hereby imposed upon the capital gains presumed to have been realized from the sale, exchange and other dispositions 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: ..." Although the conveyance of the real property is pursuant to a court order, the transfer of the said property in favor of the Spouses Gilbert S. Dimaano and Ruth Rina C. Dimaano is covered by the clause "other dispositions of real property" under Section 24 (D) of the Tax Code of 1997, as amended, and therefore subject to the capital gains tax imposed therein. The conveyance being a disposition of real property under Section 24 (D) of the Tax Code, as amended, is likewise subject to the documentary stamp taxes imposed in Section 188 and Section 196 of the Tax Code, as amended. (BIR Ruling No. 360-11 dated September 30, 2011) 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. ESDcIA Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue