BIR Ruling [DA-037-01]

March 14, 2001 BIR RULING [DA-037-01] 24 (D) (1) DA-068-98 3-02-98 Mr . Oscar B . Mendoza Sta. Barbara, Baliuag Bulacan S i r : This refers to your undated letter requesting for exemption from the payment of the capital gains tax relative to the two (2) Deeds of Exchange executed for the purpose of correcting a mistake inadvertently made by the surveyor in assigning the lot numbers in the subdivision of a parcel of land in accordance with a partition agreement. It is represented that your mother-in-law, Petronila Talactac, is one of the several heirs who inherited a 1,305 square meters parcel of land located at Sta. Barbara, Baliuag, Bulacan, covered by TCT No. T-202889 of the Registry of Deeds of the Province of Bulacan; that the said parcel of land or Lot No. 1599 was subdivided and partitioned by and among the heirs in eight (8) equal parts, each receiving a 141 square meter lot; that your wife inherited the share of her mother, over which you and your wife then, immediately constructed a residential house; that said lot is adjacent to Calle Rizal and is the first lot at the entrance of the alley which serves as an access road to the inner lots; that you bought the lot adjoining to your above property from your wife's aunt; that other heirs also sold their shares to different parties; that you registered the said two (2) lots and were issued titles thereto bearing the descriptions lot B and C of the subdivision plan of Lot No. 1599, (the whole stretch of the alley being designated as Lot A under the said plan); that recently, when you intend to mortgage your property you found out that the titles issued to you, designated as lot B and C, pertain to the lots situated at the end of the alley; that it turned out that when Lot No. 1599 was subdivided, in accordance with the partition agreement of the heirs of Petronila Talactac, the surveyor had erroneously assigned the numbers of the lots; that instead of designating the lots starting from the entrance of the alley as Lot B up to the lot at the end of the alley as Lot I, the surveyor started designating the lot at the end of the alley as Lot B up to the lot at the entrance as Lot I; that all the while the heirs of Petronila Talactac and the succeeding owners of the individual lots thought that the designation of the lots started at the entrance of the alley as Lot B up to the lot at the end as Lot I; that as a result, when the individual owners of the lots have their lots registered, they received the wrong title of the lot they have been occupying. Based on the foregoing, you are requesting for a ruling that you will be exempt from the payment of the capital gains tax and the documentary stamp tax on the following exchange transactions executed for the purpose of correcting the error of the surveyor in designating the lot numbers in the subdivision plan: 1. On the exchange executed by and between you and your wife, Conchita Angeles, and Teresita A. De Guzman and Clara A. Vda. De Guzman, swapping Lot No. 1599-B, covered by TCT No. RT-39404 (T-276228) with Lot 1599-I, covered by TCT No. T-291376, the lot over which your house is constructed. The said exchange is without any monetary consideration. 2. On the exchange executed by and between you and your wife. Conchita Angeles, and Marcela Talactac, swapping Lot 1599-C covered by TCT No. RT-39405 (T-276229) with Lot 1599-H, covered by TCT No. T-276234, without monetary consideration. In reply, please be informed that considering that the exchange transactions are without any monetary consideration and considering further that the execution of the Deeds of Exchange was merely to correct a mistake inadvertently committed by the surveyor in assigning or designating the lot numbers in the subdivision plan, this Office is of the opinion that such exchange transactions are 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 (B) of the Tax Code of 1997. 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 properties. Further, the two (2) Deeds of Exchange are not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 but the same shall be subject only to the P15.00 documentary stamp tax imposed under Section 188 of the same Tax Code. [BIR Ruling No. DA-068-98 dated March 2, 1998 citing BIR Ruling No. 027-93 dated January 15, 1993]. 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.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group