BIR Ruling [DA-007-01]

January 30, 2001 BIR RULING [DA-007-01] 24 (D) (1); 196 DA-145-2000 Messrs . Macario De Leon, Crispulo O . Bala and Ms . Constancia M . Peco 16 Lucas Street, Santolan Pasig City Attention: Mr . Benito O . Bala Attorney-in-Fact Gentlemen : This refers to your letter dated May 24, 2000 requesting for exemption from the payment of capital gains tax as well as documentary stamp tax on the swapping of real properties to rectify an error in the execution of two deeds of Absolute Sale through a Deed of Exchange made without consideration. Documents submitted and representations made disclosed that Macario de Leon and Eufrencia Vda. De Leon is the owner ("Owners" for brevity) of two parcels of land situated at Pasig City covered by Transfer Certificates of Title Nos. 382108 ("First lot"), identified as Lot 1-E and 382107 ("Second lot"), identified as Lot 1-D, entered in the Registry of Deeds for the Province of Rizal, Metro Manila District II both on November 9, 1972 with the same area of One Hundred Fifty Seven (157) square meters; that on December 14, 1976, the Owners executed a Deed of Absolute Sale of the First lot in favor of Crispulo O. Bala in the amount of Twelve Thousand Five Hundred Sixty Pesos (P12,560.00) and thereafter entered in the Registry of Deeds for Pasig, Rizal as TCT No. 3609 on February 9, 1977; that the Owners executed another Deed of Absolute Sale of the Second Lot in favor of Constancia M. Peco on September 23, 1982, and was entered in the Registry Of Deeds for Pasig. Rizal as TCT No. 37551 on March 24, 1983; that a Certification was issued by the Register of Deeds for Rizal on October 17, 2000, that the documents relative to the transfer of TCT No. 382107 in favor of the Owners covered and embraced by TCT No. 37551 is nowhere to be found as of such date; that an error was discovered when the Registry of Deeds for Pasig, Rizal issued the title of the First Lot to Constancia Peco which should have been issued to Crispulo Bala and that the latter was issued the title covering the Second Lot; and that because of the said error, Constancia Peco and Crispulo Bala executed a Deed of Exchange on May 9, 2000, to rectify the said mistake without any monetary consideration whatsoever. caSEAH In reply, please be informed that since the exchange transaction is without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely for the purpose of correcting the mistake above-mentioned, the exchange of realty by and between Constancia Peco and Crispulo Bala is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, nor to the Withholding Tax imposed under Revenue Regulations No. 2-98. Furthermore, the said swapping of real property is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment of the said deed is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-145-2000 dated March 10. 2000) 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. cEAaIS Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group