BIR Ruling No. 484-12

July 30, 2012 BIR RULING NO. 484-12 Sections 24 (D) (1), 188 & 196 of the Tax Code of 1997, as amended; BIR Ruling No. 360-11 Dr. Alejandro A. Caia 61 Karuhatan Road Karuhatan, Valenzuela City Sir : This refers to your undated letter requesting for exemption from the payment of capital gains tax and documentary stamp tax on the disposition of real properties through a compromise agreement. It is represented that on June 2, 2011, the Regional Trial Court of Morong, Rizal, Branch 78 rendered its decision in Civil Case No. 06-1795-M entitled Drs. Alejanro A. Caia and Rizalina T. Caia, et al. vs. Heirs of the late Melencio A. Caia, et al. approving, in toto, the Compromise Agreement entered into by and between the Drs. Alejandro A. Caia and Rizalina T. Caia, et al. and Heirs of the late Melencio A. Caia, et al.;that paragraph 1 of said Compromise Agreement provides that: 1. That to buy peace and harmony as family members, the parties agreed to partition the subject properties, as follows: a. To the plaintiff spouses Drs. ALEJANDRO and RIZALINA CAIA: TCT No. Lot No. Area M-105457 2520-A 121 sq. m. M-105459 2520-C 252 sq. m. M-105460 2520-D 131 sq. m. M-105461 2520-E 430 sq. m. M-105463 2520-G 425 sq. m. Total 1,386 sq. m. ========= b. To the defendant Spouses EDUARDO and RITA SAN JOSE: TCT No. Lot No. Area M-105458 2520-B 146 sq. m. c. To the defendants CHRISTOPHER MELECIO, JR.,REYNALDO, EDUARDO and JOSEPH, all surnamed CAIA: TCT No. Lot No. Area M-105462 2520-F 1,117 sq. m. Together with all the improvements existing thereon. In reply, we regret to inform you that your request for tax exemption cannot be granted for lack of legal basis. aTcHIC 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 properties is in pursuance of a court order, the transfer of the said properties in favor of the Plaintiffs 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue