Facts:
A lot was registered in the name of the Posadas spouses
(jointly titled in their names). Juan Posadas (husband) died in an aircraft
accident and an agreement was executed by Maria Elena Posadas (wife) that the
designated lots shall be exclusively registered in the name of one party only
in exchange for the exclusive co-ownership of other lots by the other co-owner.
Maria Elena, who was assigned the property, sold the lot to Noel Espina where title
to the property should be transferred in his name upon payment of the
appropriate taxes.
Issue:
Whether the transaction of Elena and Noel is exempt from
capital gains tax.
Held:
The agreement executed by Elena and the administratrix of
Juan Posadas in effect partitioned the properties transferring the co-ownership
by designating the said properties to each of the said owners. Also, the
transfer of title from the co-owners is not a barter, exchange or disposition
of realty that would warrant the imposition of capital gains tax.
The dissolution of the co-ownership is not subject to
capital gains tax however, that portion of the properties belonging to the
deceased owner (in this case Juan) shall be subject to estate tax.
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