Valerio and Ong

February 5, 2007 BIR RULING [DA-060-07] DA 526-05 Valerio and Ong 7/F Eastern Telecoms Plaza 316 Sen. Gil Puyat Avenue Salcedo Village Makati City Attention: Atty. Benedicto M. Valerio, Jr. Gentlemen : This refers to your letter dated December 6, 2006 stating that your clients, Anusacion Lopez Atienza, Gregorio Atienza, Macario Atienza, the Estate of Pedro Atienza, Elizabeth Bagacay, Cliff View, Inc., Divina Naje Clements, Zosima Maquilan and Gina R. Villanueva (Landowners), are the registered owners of parcels of land and/or have direct interest in parcels of land which are bounded by each other in Barangay Sinandigan, Puerto Galera, Oriental Mindoro; that Anusacion Lopez Atienza is the registered owner of a parcel of land covered by TCT No. T-119378 with an area of 2,208 square meters; that Gregorio Atienza is the registered owner of a parcel of land covered by TCT No. T-100307 with an area of 2,566 square meters; that Macario Atienza is the owner of a parcel of land covered by TCT No. T-105525 with an area of 1,722 square meters; that the Estate of Pedro Atienza is the owner of a parcel of land covered by TCT No. T-72895 with an area of 1,336 square meters; that Marites J. Dimalanta has a direct interest and is the registered owner of a parcel of land covered by TCT No. T-68228 with an area of 2,000 square meters; that Elizabeth Bagacay is the registered owner of adjoining parcels of land covered by TCT Nos. T-131214, T-131215, T-131213, T-77657, T-104942; that on the other hand, Cliff View, Inc. is the registered owner of adjoining parcels of land covered by TCT No. T-124129, T-124130, T-124131, T-124132, T-124133; that Divina Naje Clements is the owner of a parcel of land covered by TCT No. T-124128; that Zosima Maquilan is the owner of a parcel of land covered by TCT No. T-112242; that Gina R. Villanueva is the registered owner of a parcel of land covered by TCT No. T-100305; that due to error in designating the metes and bounds of the above-described properties, the structures that were built thereon by your clients were not erected geographically as they should be based on technical description appearing on their corresponding titles; that to avoid further confusion among your clients, they hired the services of a duly licensed Geodetic Engineer who prepared a consolidation subdivision plan of their respective lots showing the technical description of the properties geographically occupied by each of them; that based on the above-mentioned consolidated subdivision plan, your clients executed a Partition Agreement adjudicating among themselves the properties geographically occupied by each of them; and on November 8, 2006, the National Land Titles and Deeds Registration Administration approved the above-mentioned consolidation subdivision plan. aATCDI In your supplemental letter dated January 25, 2007, you stated that a survey was conducted by a licensed surveyor to determine the metes and bounds of the parcels of land geographically occupied by each of your clients and on which they had already introduced improvements; that based on the aforesaid survey, it was established that the technical description appearing in the certificate of title registered in the name of some of your clients covers and/or extends to areas that they are not geographically occupying and, conversely, a portion of the areas that they are occupying are covered by the technical description appearing in the titles registered in the name of another who are also your clients; that to correct the foregoing error, your clients hired the same surveyor to prepare a consolidation-subdivision plan wherein the parcels of land described in the respective title of your clients that extends beyond what they are geographically occupying, to: (a) Lot 1/Pcs-04-010440 [covered by TCT No. T-100305 in the name of Gina R. Villanueva]; (b) Lot 1-C-2-A, Psd-04-107780 [covered by TCT No. T-131215 in the name of Elizabeth Bagacay]; (c) Lot 1-C-1, Psd-04-077067 [covered by TCT No. 13124 in the name of Elizabeth Bagacay]; (d) Lot 1-2-D-1, Psd-04-5211-071350 [covered by TCT No. 77657 in the name of Elizabeth Bagacay]; (e) Lot 2-B, Psd-04-153340 [covered by TCT No. 104942 in the name of Elizabeth Bagacay]; (f) Lot 3-A, Psd-04-125340 [covered by TCT No. 181213 in the name of Elizabeth Bagacay]; (g) Lot 1, Pcs-04-010103; [covered by TCT No. 112242 in the name of Zosima Maquilan]; (h) Lot 1-D-2-B, Psd-04-045211-060967 [covered by TCT No. 68228 in the name of Marites Dimalanta]; (i) Lot 1-C-2-B-4, Psd-125527 [covered by TCT No. 105525 in the name of Macario Atienza]; (j) Lot 3/Pcs-04-01440 [covered by TCT No. 100307 in the name of Gregorio Atienza]; (k) Lot 2/Pcs-04-010440 [covered by TCT No. 119378 in the name of Anusacion Atienza]; and (l) Lot 1-D-2-A, Psd-045211-060967 [covered by TCT No. 72895 in the name of Pedro Atienza] were consolidated (identified as Pcs-34761) and subdivided into 12 lots, each corresponding to the metes and bounds of the lots separately occupied by your clients; that for this purpose, your clients, executed a Partition Agreement and requested the Land Registration Authority (LRA) to approve the consolidation subdivision plan that was prepared pursuant to the aforesaid agreement; that in order to implement the foregoing, the affected titles will be surrendered by your clients to the Register of Deeds; that in exchange, twelve (12) new titles will be issued respectively containing the technical description of the aforementioned twelve (12) lots, the same to be registered and released to your clients that occupies the corresponding lots; that there was no monetary consideration for the foregoing transaction; and that the same having been resorted to in order for the title of your clients to contain the technical description of the parcels of land that are respectively occupying. Based on the foregoing circumstances, you now request for exemption from the payment of capital gains tax and documentary stamp tax relative to the swapping of real properties to rectify an error, effected through a Partition Agreement and made without monetary consideration. In reply thereto, 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 Partition Agreement is merely to correct a mistake inadvertently committed in designating the metes and bounds of the above-described properties, this Office holds that the said swap transaction is not subject to the capital gains tax imposed under Section 24 (D) (1) or Section 27 (D) (5) 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, as amended. EcICSA Furthermore, the Partition Agreement is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended, but only to the P15.00 documentary stamp tax imposed under Section 188 of the said Code. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service