BIR Ruling [DA-054-04]

February 6, 2004 BIR RULING [DA-054-04] 24 (D) (1); DA 145-00 Mr. Isaraili Zamora Socorro, Oriental Mindoro S i r : This refers to your letter dated February 5, 2004 requesting for a ruling as to whether the Deed of Exchange executed by and between Spouses Annele and Joel Magsino (Spouses Magsino) and Spouses Antonio and Anacorta Inilongo (Spouses Inilongo) relative to the swapping of real properties in order to correct a mistake and without any monetary consideration is not subject to capital gains tax and documentary stamp tax. It is represented that Spouses Magsino are the absolute and registered owners of a parcel of land together with the improvements thereon located in Naujan, Oriental Mindoro covered by TCT No. T-10111112 issued by the Registry of Deeds for the Province of Oriental Mindoro and containing an area of 40,000 square meters; that on the other hand, Spouses Inilongo are the absolute and registered owners of a parcel of land together with the improvements thereon located at Naujan, Oriental Mindoro containing an area of 40,000 square meters; that the two (2) properties are adjoining each other and unfortunately an error was committed during the registration of the said properties; that Spouses Magsino and Spouses Inilongo erroneously built their houses on the lot believing that it was their respective lots; and that to rectify the error committed, both parties mutually agreed to exchange their respective properties by virtue of a Deed of Exchange in order to correct the mistake committed by sheer oversight and inadvertence by simply swapping their respective titles to the properties without any monetary consideration. In reply thereto, 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-described, the exchange of realties by Spouses Magsino and Spouses Inilongo is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. Moreover, the said swapping 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 of Exchange is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the said Code. (BIR Ruling No. DA145-00 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. ICDcEA Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service