BIR Ruling No. 191-11

June 23, 2011 BIR RULING NO. 191-11 Sections 24 (D) and 196, NIRC of 1997, as amended Mr. Policarpio L. Espenesin 5 Telstar Street Village East Cainta, Rizal Sir : This refers to your letter dated June 9, 2009 requesting exemption from the payment of capital gains and documentary stamp taxes on the transfer of title of a real property to the trustor-owner. It is represented that you bought out of your exclusive funds a parcel of land located in San Vicente, Palawan covered by Transfer Certificate of Title No. E-11467 (now T-18523) issued by the Registry of Deeds for the Province of Palawan; that to facilitate the sale and in order to do away with the hassle of commuting to and from that place for minor details of the transaction and also in order to bargain for a lower price, you requested a relative living in that municipality to be your trustee and make it appear that they are the buyers of the property; that a Trust Agreement was executed by you and your trustee, Spouses Asterio Picardal and Nelia B. Picardal; that subsequently, the title was issued under the name of the trustee; that pursuant to the trust agreement, the trustee, in recognition of your exclusive ownership of the property shall cede, transfer and convey to you the subject property upon your demand without any consideration or condition whatsoever but only in recognition of the fact that you are the real owner of the property; and that in a supplemental letter dated August 31, 2009, you stated that the suspicion that these arrangements or scheme are simply to evade taxes are completely baseless. Based on the foregoing, you are requesting in effect for a confirmation of your opinion that a trust was created when you placed in the name of Spouses Asterio Picardal and Nelita B. Picardal the property you bought from Necito Naag in accordance with Article 1440 of the Civil Code of the Philippines and that the subsequent transfer of title of the subject property in your favor, the trustor-owner, is not subject to capital gains and documentary stamp taxes. In reply, please be informed that the alleged Trust Agreement was not duly executed and, thus, raises doubts as to its genuineness. It is worthy to note that the Trust Agreement was allegedly notarized on April 13, 2004, but the CTCs, notarial register, and PTR were all dated 2005. Also, the parties were identified based only on their CTCs, which is in violation of Sec. 12, Rule 11 of the 2004 Rules on Notarial Practice. In sum, this office sees no clear factual and legal basis in allowing exemption from the payment of capital gains and documentary stamp taxes on the transfer of title of a real property. Hence, your request is hereby DENIED for lack of legal and factual basis. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue