BIR Ruling No. 192-12

March 21, 2012 BIR RULING NO. 192-12 24 (D) (1); 188, NIRC; BIR Ruling No. 178-94; BIR Ruling No. 372-92; BIR Ruling No. DA-169-98 Ceballos Law Firm Unit 3-E Agcor Building, 335 Katipunan Ave.,Loyola Heights, Quezon City Attention: Atty. Poncevic M. Ceballos Gentlemen : This refers to your letter dated June 19, 2008 requesting, on behalf of your client, Lourdes M. Ceballos, exemption from capital gains tax and documentary stamp tax the reconveyance of a parcel of land as adjudged by the Regional Trial Court of Quezon City, Branch 227. Documents submitted disclose the following antecedent facts: 1. Lourdes M. Ceballos ("Ceballos" for brevity) is the owner of a real property covered by Transfer Certificate of Title (TCT) No. 84910 located in Project 8, Quezon City; said property was used to secure her loan with Insular Bank of Asia and America (IBAA) in 1977; 2. For failure of Ceballos to settle her obligation, IBAA caused the extra-judicial foreclosure of the mortgaged property and a Certificate of Sale was issued on September 1, 1980 which was annotated on the title; 3. Due to the fact that notice of sale of the mortgaged property was published on a newspaper which was not of general circulation, Ceballos filed on October 20, 1981 a civil case for declaration of nullity of the foreclosure sale, domestic letters of credit and damages docketed as Q-33667 and raffled to Branch 86 of the Court of First Instance (CFI) of Quezon City; 4. The CFI (now RTC) dismissed Civil Case No. Q-33667 but this was reversed by the Court of Appeals and later affirmed by the Supreme Court finding that the notice of sale of the mortgaged property was not published in a newspaper of general circulation thus competitive bidding in public auction was absent; 5. Pending the cases in the appellate courts, IBAA consolidated its ownership over the property and was able to secure a new title TCT No. 283859 in its name, thereby canceling Ceballo's title. IBAA was also able to obtain a writ of possession; CTDAaE 6. On October 15, 1984, IBAA and Josefina Siapno ("Siapno") executed a Deed of Promise to Sell the property covered by TCT No. 283859 which upon their full payment, a Deed of Absolute Sale was accordingly executed between Siapno and PCIB (then IBAA).A new TCT No. 46173 was issued to Siapno; 7. The instant civil case entitled "Lourdes M. Ceballos vs. Spouses Pedro Edmundo & Josefina Siapno" (No. Q-98-35884) was filed to recover Ceballos' title to the property alleging that despite the Supreme Court's decision of nullifying the extrajudicial foreclosure sale by IBAA, title remained with the Siapno. Ceballos prayed that judgment be rendered ordering the Register of Deeds of Quezon City to cancel TCT No. 46173 and a new one be issued to Ceballos; 8. On November 12, 2007, Regional Trial Court of Quezon City, Branch 227 rendered a decision in favor of Ceballos, to wit: "WHEREFORE, premises considered, judgment is hereby rendered declaring TCT No. 46173 in the name of defendant Josefina Siapno void; ordering the Register of Deeds of Quezon City to cancel the same and to issue a new title in the name of the Plaintiff Lourdes Ceballos ..." that the foregoing decision has become final and executory on January 11, 2008 and has been recorded in the Book of Entry of Judgments on April 4, 2008; that a Writ of Execution was issued by the RTC on April 4, 2008; and that in support of your request, you have attached the following documents: 1) Copy of the RTC QC Branch 227 Decision dated November 12, 2007 in Civil Case No. Q-98-35884; 2) Copy of the Entry of Judgment dated April 4, 2008; and 3) Writ of Execution dated April 4, 2008. In reply, please be informed that under Section 24 (D) (1) of the Tax Code of 1997, 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 6% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. Considering that the directive for the Registry of Deeds to issue new title in favor of Lourdes Ceballos is not a sale, exchange or other disposition of said properties but merely returning the properties to its rightful owner pursuant to a decision of the Regional Trial Court of Quezon City, thus the same is not subject to the capital gains tax prescribed under Section 24 (D) (1) of the Tax Code of 1997 (BIR Ruling No. 178-94 dated December 14, 1994) . Moreover, the Deed of Reconveyance, should there be one that is executed in accordance with the RTC Decision, is likewise not subject to the documentary stamp tax imposed under Section 196 of the same Tax Code. (BIR Ruling No. 372-92 dated December 28, 1992; BIR Ruling No. DA-169-98 dated April 22, 1998) However, the Acknowledgment on the Deed of Reconveyance, should there be one that is executed in accordance with the Decision, is subject to the P15.00 documentary stamp tax imposed under Section 188 of the Tax Code of 1997. SACHcD 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, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue