BIR Ruling [UN-353-95]

October 2, 1995 BIR RULING [UN-353-95] Mr. Valeriano D. Aquino 210 Vinalon St., Cupang Muntinlupa City S i r : This refers to your letter dated June 23, 1995 pertaining to the expropriation of a portion of the property of your deceased parent Damaso Aquino consisting of 588 square meters located at Bo. Cupang, Muntinlupa City, covered by Transfer Certificate of Title No. (17078) S-22119 of the Registry of Deeds of Makati; that said portion of land was expropriated in favor of the Republic of the Philippines and the Department of Public Works and Highways by the Regional Trial Court of Pasay, Branch VII, in its Order of Condemnation in Civil Case No. 58-R entitled Republic of the Philippines vs. Marta Santos, et. al., dated September 6, 1958, for public use as part of the West Service Road of the South Luzon Expressway, then known as Alabang-Buendia Road; that the total consideration paid was a measly sum of P217.60; that since the expropriated portion has not yet been deducted from the total area contained in its title, you as heir of the late Damaso Aquino, are still paying up to the present time the realty taxes corresponding to the condemned area; and that you now intend to segregate that portion of the expropriated property from the area covered by Transfer Certificate of Title (TCT No. 17078), and transfer the ownership thereof in favor of the Government, pursuant to a Deed of Assignment executed by you and your co-heirs. Based on the foregoing, you now request that the amount paid for by the Government, through the Department of Public Works and Highways, as consideration for the expropriation of your property be exempted from the capital gains tax and corresponding documentary stamp tax. In reply, please be informed that public instruments transferring real properties presented to the appropriate revenue official beyond three (3) months from the date of notarization shall be considered as ante-dated and the tax liabilities of the parties shall be determined in accordance with the rules and regulations obtaining at the time such documents are presented to the BIR pursuant to Revenue Memorandum Circular No. 34-91. Applying the foregoing provision, Section 21(e) of the Tax Code, as amended, provides that 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 trust, 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, provided, that the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government owned or controlled corporations shall be determined either under Section 21 (a) or (e) of the same Code, at the option of the taxpayer. While under Section 196 of the Tax Code, as amended, there shall be collected a documentary stamp tax on all conveyance, deeds, instruments, or writing, other than grants, patents, or original certificates of adjudication issued by the Government, whereby lands, tenements or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to the purchasers, or to any other persons designated by such purchaser or purchasers. Accordingly, you are subject to the capital gains tax and the corresponding documentary stamp tax based on the consideration of P217.60, as adjudged by the Court in its Order in Civil Case No. 58-R. (BIR Ruling No. 022-91 dated February 14, 1991) aisadc Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant Legal Service