BIR Ruling [UN-114-94]

April 4, 1994 BIR RULING [UN-114-94] Magtanong Acosta & Villanueva Law Offices EDSA corner Madison St. Mandaluyong, Metro Manila Attention: Atty . Raul B . Villanueva Gentlemen : This refers to your letter dated February 2, 1994 stating that pursuant to a judgment rendered by the Regional Trial Court, Branch 89 of Quezon City dated August 21, 1984 in Sp. Proc. Case No. Q-41486 approving the Compromise Agreement for the voluntary dissolution of the conjugal partnership of gains of the parties therein, two (2) parcels of land and all improvements existing thereon covered by Transfer Certificate of Titles No. 172092 (now RT-79798) and No. 196254 (now RT-29142) of the Registry of Deeds of Quezon City which were registered under the name of both spouses, your client, Remedios F. Keyser, and Juanito M. Keyser, are transferred to the former as her share in the conjugal partnership properties; and that the Register of Deeds needs clearance from this Office that your client's tax liability as a result of said transfer has been paid. Based on the foregoing, you now request for an opinion on whether or not there is a need for a certification to be issued by this Office allowing registration of the two (2) parcels of land solely in the name of your client, and if in the positive, whether or not your client is liable for the payment of capital gains tax before new titles over the parcels of land are issued solely in her name pursuant to the judgment on compromise issued by the above-mentioned Court. In reply, please be informed that 1. Pertinent provisions of Section 49 (a) (4) of the Tax Code, as amended by Executive Order No. 37 states as follows: "No registration of any document transferring real property shall be effected by the Register of Deeds unless the Commissioner of Internal Revenue or his duly authorized representative has certified that such transfer has been reported and the tax herein imposed, if any, has been paid." (BIR Ruling No. 014-90 dated February 8, 1990). 2. Under Article 143 of the Civil Code of the Philippines, all properties of the conjugal partnership of gains are owned in common by the husband and the wife. Such being the case, and since the properties involved in this case are conjugal partnership properties, the transfer thereof pursuant to the aforesaid judgment rendered by the Regional Trial Court, Branch 89 of Quezon City on August 21, 1984 approving the Compromise Agreement is not subject to the capital gains tax imposed under Section 21 (e) of the Tax Code, as amended. In other words, transfer of real property pursuant to Article 190 of the Civil Code of the Philippines is not among those contemplated under Section 21 (e) of the Tax Code, since the property is owned in common by the spouses. Moreover, the transfer pursuant to the Decision approving the Compromise Agreement is not likewise subject to documentary stamp tax since the monetary consideration from which the said tax is based is wanting. (BIR Ruling No. 427-88 dated August 31, 1988). cdi Very truly yours, ALICIA P. CLEMENO Officer-in-charge (Legal Service)