Taxability of the Deed of Conveyance of Title to a Parcel of Land

June 2, 1988 BIR RULING NO. 227-88 21 (e) 000-00 227-88 M a d a m : This refers to your letter dated May 6, 1988 requesting a ruling as to whether or not a Deed of Conveyance of Title to a parcel of land, executed on April 7, 1988, by Mr. Artemio Garcia and his children is subject to capital gains tax. It is represented that on May 5, 1967, Mrs. Isabel Garcia who is now deceased and married to Artemio Garcia sold to you, for and in consideration of the sum of P1,200.00, a parcel of land, which is her a paraphernal property, situated in Bayabat, Amulung, Cagayan, now included as part of Ninuccauan, Amulung, Cagayan with an area of 1.30.00 hectares and assessed at P208.00 under Tax Declaration No. 7345-a, by virtue of a Deed of Sale she executed and which was also signed by her husband; that said parcel of land was unregistered and evidence of ownership thereof was Tax Declaration No. 7345-a; that upon execution of Deed of Sale, you took possession of the land as owner thereof; that you submitted the original deed of sale to the Office of the Provincial Assessor of Cagayan, and Tax Declaration No. 7345-a in the name of Mrs. Isabel Garcia was cancelled and Tax Declaration No. 623 was issued in your name to take effect beginning the year 1968; that subsequent tax declarations covering said parcel of land were issued in your name by the Office of the Provincial Assessor of Cagayan; that on November 14, 1987, you filed an application with the Bureau of Lands Office in Tuguegarao, Cagayan, for a free patent to said parcel of land; however, you were informed by the officials of the Bureau of Lands that a free patent covering the said parcel of land has already been issued in favor of Mr. Artemio Garcia; that to avoid court litigation, you and Mr. Artemio Garcia decided to settle the matter amicably by having Mr. Artemio Garcia execute a Deed of Conveyance of Title to the said parcel of land in your favor; and that the Register of Deeds informed you that before his Office could act on the said deed of conveyance by cancelling TCT No. P-65065 issued in the name of Mr. Artemio Garcia and issue a TCT in your favor, a tax clearance must first be obtained from this Office. In reply, please be informed that Section 8 of Revenue Regulations No. 8-79 implementing then Section 34(h) of the Tax Code, as amended by Batas Pambansa Blg. 37 provides that the imposition of a final schedular tax on capital gains realized by citizens and resident aliens from sales or other disposition of real property shall apply to transaction entered into on or after September 7, 1979. A Deed of Conveyance of real property acknowledged before a notary public on or after September 7, 1979 shall be deemed to be a sale or disposition of real property on or after September 7, 1979. Accordingly, and inasmuch as Mrs. Isabel Garcia sold her aforementioned property on May 5, 1967, she is not required to file the capital gains tax return and pay the final schedular capital gains tax prescribed by then Section 34(h) of the Tax Code, as amended by B.P. No. 37. However, proof must be submitted to the effect that Mrs. Isabel Garcia has included whatever gains she may have realized from the aforesaid sale of her property in her 1967 income tax return and the tax, therefore, has been paid. (BIR Ruling No. 343-87) Moreover, the Deed of Conveyance of Title to the aforesaid parcel of land executed on April 7, 1988 by Mr. Artemio Garcia and his children in your favor is not likewise subject to the 5% capital gains tax imposed under Section 21(e) of the Tax Code, as amended, since it was executed merely to divest Mr. Artemio Garcia and his children of any evidence of ownership over the aforementioned parcel of land, which had been previously sold to you on May 5, 1967. However, said Deed of Sale executed on May 5, 1967 is subject to documentary stamp tax at the rates then in force, i.e., P0.75 if the consideration, exceeds P200 but does not exceed P1,000 and P3.00 for each additional P1,000 or fractional part thereof in excess of P1,000 of such consideration, pursuant to then Section 233 of the Tax Code. Upon payment of the required documentary stamp tax on the said Deed of Sale executed on May 5, 1967, this Office will interpose no objection to the transfer of title in your favor. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner