BIR Ruling [DA-035-04]

January 28, 2004 BIR RULING [DA-035-04] 24 (D) (1) DA-225-2002 Mr. Resty Manalo Homeowner's Association Zone 3, Cainta Green Park Village Cainta, Rizal S i r : This refers to your letter dated December 10, 2003 requesting in effect, for an opinion on whether the proposed Deed of Exchange executed by and between Speed Construction and Development Corporation ("SCDC") and Spouses Jaime and Carmelita Flores of two (2) adjacent lots, for the purpose of correcting an error made in the construction of a playground, is subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. It is represented that the parcel of land owned by SCDC with an area of 49 square meters and covered by PT-121394 of the Registry of Deeds of Pasig City, is an open space and playground allotted to the homeowners of Zone 3 Cainta Greenpark Village (CGPV),Cainta, Rizal; that on the other hand, Spouses Jaime and Carmelita Flores are the registered owners of a parcel of land covered by TCT No. 681075 of the Registry of Deeds of Rizal, with an area of 49 square meters and located adjacent to the above lot owned by SCDC; that the occupants-homeowners of Zone 3 erroneously constructed the basketball court and the electrical installations in the lot owned by the spouses; that to remedy said inadvertence, SCDC will swap its above-mentioned land to the above lot owned by the spouses; and that the foregoing swapping of lots shall be effected without any monetary consideration. In reply, please be informed that considering that the swapping of the above-mentioned properties is without any monetary consideration, and considering further that the purpose of executing a Deed of Exchange is merely to correct a mistake inadvertently committed in the construction of the playground and the electrical installations of your subdivision in the lot owned by Spouses Jaime and Carmelita Flores, this Office is of the opinion that the said swap transaction is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 nor to the creditable withholding tax imposed under Section 57 thereof, as implemented by Revenue Regulations No. 2-98. Accordingly, the Certificate Authorizing Registration (CAR) and/or Tax Clearance Certificate (TCC) may be issued by the Revenue District Officer concerned, authorizing the registration of the said lots in the respective names of Spouses Jaime and Carmelita Flores and SCDC. IaDSEA Further, the above Deed of Exchange is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 but only to the P15.00 documentary stamp tax imposed under Section 188 of the same Tax Code. (BIR Ruling No. DA-225-2002 dated November 27, 2002 citing DA-194-2000 dated March 30, 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. Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service