BIR Ruling No. 633-12

November 26, 2012 BIR RULING NO. 633-12 Section 24 (D) (1) NIRC; BIR Ruling No. 427-2011 Atty. Iderlina P. Pagunuran 38 Ranger St., Moonwalk Village 1747 Las Pias City Ma'am : This refers to your letter dated February 28, 2012 requesting, on behalf of your clients, Leoncio Gumabay, Felix Melad and Luis Melad, for exemption from the payment of capital gains tax (CGT) and documentary stamp tax (DST) on the reconveyance of a parcel of land in favor of your clients by virtue of a Decision rendered by Regional Trial Court of Tuguegarao, Branch 5, Cagayan in Civil Case No. 4524 entitled " Crispina G. Flores vs. Leoncio Gumabay, et al. ," which decision was subsequently affirmed by the Court of Appeals and the Supreme Court. EcTCAD The facts as culled from the records are as follows: The Civil Case No. 4524 involves a dispute over a parcel of land identified as PSU-185825, with an area of 237,652 square meters covered by Original Certificate of Title (OCT) No. P-63941 under the name of Crispina Flores and located at Quibal, Peablanca, Cagayan. The case was instituted by Crispina Flores who claimed to be the owner of the above-described property allegedly on the basis of an extra-judicial settlement executed by the heirs of a certain Amado Molina in favor of her husband, Claro Flores. On the other hand, defendant, Leoncio Gumabay, and intervenors, Luis Melad and Felix Melad, opposed the claim of Crispina Flores on the ground that they have always been in the possession of the subject property in the concept of owners since 1920. They also averred that the OCT under the name of Crispina Flores was procured by the latter through actual fraud. The Regional Trial Court rendered its Decision dated February 24, 1997 finding that Leoncio Gumabay, Felix Melad and Luis Melad are the real owners of the property in dispute. The pertinent dispositive portion of the said decision reads as follows: "WHEREFORE, in view of the foregoing, the Court finds for the defendant and intervenors and hereby renders judgment: 1. Dismissing the complaint for lack of merit; HScCEa 2. Declaring the defendant and intervenors (to the extent of seven and one-half hectares) as the owners of the land in litigation; 3. Ordering the plaintiff to reconvey title to said land to the defendant and intervenors and to deliver to them the owner's duplicate of Original Certificate of Title No. P-63941 within thirty (30) days from finality of judgment. . . ." On May 26, 2004, the Court of Appeals (CA), Fourth Division, promulgated its Decision in CA-G.R. No. 57596 finding for the defendants-appellants, Leoncio Gumabay, Felix Melad and Luis Melad and affirmed the decision of the Regional Trial Court. The CA further clarified in the aforesaid Decision that the Regional Trial Court adjudged the total area of 23.7652 hectares in favor of defendant and intervenors, and that the area of 7 1/2 hectares in parenthesis appearing in the dispositive portion of the lower court's decision merely refers to the area belonging to the intervenors. Thus, out of the total area of 23.7652 hectares, 7 1/2 hectares thereof belong to Felix Melad and Luis Melad, the intervenors, while the remaining 16.2652 hectares belong to the defendant, Leoncio Gumabay. On December 12, 2005, the Supreme Court, Second Division, rendered a Resolution in G.R. No. 170279 which dismissed the Petition for Certiorari filed by plaintiff, Crispina Flores. The said resolution became final and executory on January 26, 2006. Accordingly, Cesar M. Agustin, Sheriff IV of the Regional Trial Court of Tuguegarao, executed a Deed of Reconveyance dated July 14, 2006 over the subject property in favor of Leoncio Gumabay, Felix Melad and Luis Melad. DAaEIc In reply, please be informed that since the reconveyance of the subject real property was in accordance with the Decision of the Regional Trial Court and without any monetary consideration, the transfer of the 237,652 square meters of parcel of land in favor of Leoncio Gumabay (16.2652 hectares), Felix Melad and Luis Melad (7 1/2 hectares) is not subject to the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended. Likewise, the Deed of Reconveyance is not subject to the documentary stamp tax (DST) imposed under Section 196 of the Tax Code of 1997 but to the DST imposed under Sec. 188 of the same Code. ( BIR Ruling No. 427-2011 dated November 4, 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