Request for Exemption from the Payment of Taxes Arising from the Segregation of Properties

July 16, 1992 BIR RULING NO. 207-92 21 (e) 000-00 207-92 Mr. Roberto O. Caraig & Ms. Emma C. Mateo No. 3 Pudaca Street, Galas, Quezon City S i r/M a d a m : This refers to your letter dated May 21, 1992 stating that you are co-owners of a parcel of land situated at No. 36 Luzon Avenue, Galas, Quezon City, covered by TCT No. RT 2929 (160601); that on May 13, 1992, you jointly entered into an agreement of Segregation of Real Estate wherein the said parcel of land will be subdivided between the two of you in proportion of what was originally paid by both of you as co-owners thereof, thus the subdivision will not be of equal proportion due to the fact that Mr. Roberto O. Caraig paid more than Ms. Emma C. Mateo during the amortization period; that there is no monetary consideration involved in the segregation, and that in securing separate title for your respective properties, the Quezon City Register of Deeds required you to submit a certification from this Office that you are exempt from taxes arising from the segregation of ownership. cdll Based on the foregoing representations and on copies of documents in support thereof, you now in effect request a ruling that you are exempt from the payment of taxes arising from the segregation of your respective properties. In reply, please be informed that under Section 21(e) of the Tax Code, as amended, 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 5% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. Considering that the said segregation is without any monetary consideration upon which the income tax prescribed under said section is anchored, this Office is of the opinion as it hereby holds that the segregation of the realty you previously subdivided in proportion to the amount of amortization you each paid for the same is not subject to income tax and consequently to the capital gains tax prescribed under Section 21(e) of the Tax Code, as amended. Moreover, the deed (Segregation of Real Estate) you executed on May 13, 1992 for such purpose is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code, considering that there is no purchaser or person designated by such purchaser in this case that would place the said deed within the purview of the said Section 196 of the Tax Code as there is no monetary consideration involved in the said segregation of your said realty. However, it is subject to the P3.00 documentary stamp tax imposed under Section 188 of the same Code. aisadc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue