BIR Ruling [DA-042-99]

January 22, 1999 BIR RULING [DA-042-99] Atty. Romeo S. Subaldo Rm. 6, Midtown Arcade Rosario-Araneta Center Bacolod City Gentlemen : This refers to your letter dated November 6, 1997 relative to your letter dated September 10, 1997 requesting for a confirmation of your opinion that the Deed of Exchange to be executed by and between Romney S. Sentinar, et al., and Farah B. Jayme is exempt from the payment of capital gains tax and to the corresponding documentary stamp tax. It is represented that on October 14, 1980, Edgardo Sanicas and Emma S. Sentinar bought Lot No. 1060 from a certain Enrique Go as the location and terrain of the same was suited to their intended project; that they immediately took possession of Lot 1057 believing it to be Lot 1060; that subsequently in 1988, Edgardo Sanicas sold his share to Romney Sentinar; that in 1996 Farah B. Jayme bought Lot No. 1057 and immediately took possession of Lot No. 1060 believing it to be Lot No. 1057; that subsequently, Farah B. Jayme had the lot surveyed and she found out that what she occupied was Lot No. 1060 while Romney Sentinar et al. occupied Lot No. 1057 where he and Emma S. Sentinar had already introduced improvements thereon; and that on account of the said error, both parties decided to execute a Deed of Exchange. In reply, please be informed that since both parties had voluntarily agreed, and the proposed exchange transaction is without any monetary consideration and considering further that the execution of the deed of exchange is merely to rectify said error committed when Emma Sentinar took possession of Lot No. 1060 believing it was Lot No. 1057 and so with Farah B. Jayme when she took possession of Lot No. 1057 believing it to be Lot No. 1060, this Office is, therefore, of the opinion that they are not liable to pay capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 and to the creditable withholding tax imposed under Revenue Regulations No. 12-94 implementing Section 57(B) of the Tax Code of 1997. Furthermore, it is not likewise subject to the documentary stamp tax prescribed under Section 196 of the same Code. However, the notarial acknowledgment of the said deed is subject to the documentary stamp tax of P15.00 imposed under Section 188 of the Tax Code of 1997. (BIR Ruling No. 027-93 dated January 15, 1993 and BIR Ruling No. 008-95 dated January 16, 1995) This ruling is being issued on the basis of the foregoing facts as represented and the same shall be considered null and void if it turns out in an investigation that the facts are different from those as represented. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)