BIR Ruling [DA-027-03]

January 30, 2003 BIR RULING [DA-027-03] Secs. 24 (D) (1); 196; 188 DA-194-2000 Atty. Alicia SM. De Guia Counsel for Ruffy T. Cuizon and Eduardo B. Canape No. 1 T. Angeles Street, San Mateo Rizal M a d a m : This refers to your letter dated November 27, 2002 requesting for exemption from capital gains tax and documentary stamp tax on the swapping of real properties between Ruffy T. Cuizon and Eduardo B. Canape. It is represented that Ruffy T. Cuizon is the registered and absolute owner of a parcel of land located at San Mateo, Rizal containing an area of 78 square meters, more or less covered by Transfer Certificate of Title No. 415690; that Eduardo B. Canape is the registered and absolute owner of a parcel of land located at San Mateo, Rizal containing an area of 78 square meters, more or less covered by Transfer Certificate of Title No. 382021; that relying on the information given by the developer as to the exact location of the property and in good faith and honest mistake, Ruffy T. Cuizon constructed a house on the lot owned by Eduardo B. Canape; that the lots are adjacent (same block, same street, same barangay, identical areas, shapes and values) to each other; that it was only after the house was constructed that Ruffy T. Cuizon found out that the lot was not his; and that after a series of conferences and negotiations, the parties agreed to swap and exchange the properties without any consideration through the execution of a Deed of Exchange. 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 to correct the mistake resulting from the erroneous construction of a house on the lot owned by Eduardo B. Canape, the same is not subject to the capital gains tax, imposed under Section 24 (D)(1) of the Tax Code of the 1997, nor to the withholding tax imposed under Revenue Regulations No. 2-98. CDScaT Furthermore, the said exchange of real properties is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to 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 068 dated March 2, 1998 ). This ruling is issued on the basis of the foregoing representations. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service