BIR Ruling No. 431-2017

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMEN'T OF FINANCE

Quezon City

Mariano Z. Velarde et al. vs. Court of Appeals, ct al.. G.R. No. 108346: Corporation, et al. Philippine Home vs Cour Assurance ot Appeals, et al.. G.R. No. l 19446

FERNANDO T. CHUA BIR Ruling No. 178-2013 BIR Ruling No. 633-2012 17 431-P017

No. 74 Dunhill Street Fairvicw. Quczon City

Dear Mr. Chua.

This refers to your letter dated April 14, 2016, indorsed to this Office by the

for exemption from the payment of capital gains tax (CGI) and documentary stamp tax Legal Division of Revenue Region (RR) No. 7. Quezon City. regarding your request for Quezon City (DST) on the reconveyance of a parcel of land covered by Transfer Certificate of Title (TCT) No. (formerly. TCT No. ) of the Registry of Deeds

(Sps. Chua) were the registered owners of the iot covered by TCT No. It is represented that Spouses Fernando T. Chua and Maria Azineth S. Chua with

of Ahsolute Sale (DOAS) over thc subject property in favor of Maria Karla F. Kallos an area of 260 square meters: that on December 11. 2012. Sps. Chua executed a Deed (Ms. Kallos): that by virtue of said DOAS, a new TCT No. was issued to Ms. Kallos on May 29. 2013; that it was later discovered that the subject property is suffering from a hidden defect. that is, the property was found to be located along, and transected by the West Valley Fault, which precluded Ms. Kallos from constructing a residential structure on said property; that since the sole purpose of buying thc property was to construct a residential house on it. Sps. Chua and Ms. Kallos executed. on March

revoke, rescind and cancel the Deed of Absolute Sale dated December 11, 2012; and 24, 2015, an Amended Revocation/Rescission of Deed of Absolute Sale. agreeing to

that pursuant to the said Deed of Revocation/ Rescission of Deed of Absoiute Sale, Ms.

reimbursement of the expenses incurred by Ms. Kallos on account of the aborted sale. Kallos shall reconvey the subject property to Sps. Chua. while the latter shall return to the former the amount of as restitution of the purchase price as well as

Court of Appeals, et al., G.R. No. 108346 dated July 11. 2001, the Supreme Court held that "(t)o rescind is to declare a contract void at its inception and to put an end to it as In reply. please be informed that in the case of Mariano Z. Ielurdle et ul. r's.

though it never was. It is not merely to terminate it and release the parties from further obligations to each other. but to abrogate it from thc beginning and restore thc parties to their relative positions as if no contract has been made.'

Page 2 of 2 Recomvevance of Propertvi Spouses Chual Ms. Kallos 31-17 9-6-2017

taxable event for two reasons: a) the result of rescission is that it is as if there was no Based on the foregoing. the rescission of a contract would not give rise to a

sale, transfer or exchange, and hence, no income is realized; and b) the return of the object of the rescinded contract is not for monetary consideration and is merely an acknowledgement or confirmation of the title and ownership of the original owner of the property.

Revocation/Rescission of Deed of Absolute Sale. is not subject to CGT imposed under No Such being the case. the reconveyance by Ms. Kallos of the lot covered by TCT in favor of Sps. Chua, in accordance with the Amended

Section 27(D) of the 1997 Tax Code. as amended. Moreover: said reconveyance is not subject to DST pursuant to Section 185 of Revenue Regulations No. 26, otherwise known as the Revised Documentary Stamp Regulations, which provides that the conveyance of a real property without monetary consideration is not subject to the payment of DST. (BIR Ruling No. 633-2012 dated November 26, 2012; BIR Ruling No. 178-2013 dated May 17,2013)

However, if upon investigation, it will be disclosed that the facts are different. then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented.

Very truly yours.

Commissioner of Internal Revenue CAESAR R. DULAY

K- Resource Management Group Deputy Commissioner Officer-in-Charge Celia C. King ci 0