BIR Ruling [DA-065-01]

April 19, 2001 BIR RULING [DA-065-01] 24 (D) (1); 196; 188 DA-194-2000 Mr . Edgardo Y . Reyes No. B-86 Soliven Avenue Greenheights, Concepcion Marikina City S i r : This refers to your letter to the Office of the Regional Director, Revenue Region No. 7 which was forwarded to this Office by way of First Indorsement dated February 26, 2001, requesting in behalf of Ms. Jennifer A. Lua, a resident of No. 82D, 12 th Street, New Manila, Quezon City for exemption from capital gains tax and documentary stamp tax on the swapping of real properties between Jennifer A. Lua and Augusto V. Pangan. It is presented that Jennifer A. Lua is the owner of two parcels of land, at two hundred forty (240) square meters each, more or less, covered by Transfer Certificate of Title No. 303223 and 303225, located at Barangay Nangka, Marikina City; that, in addition to being the Attorney in Fact of Jennifer A. Lua, you are also her industrial partner and contractor, in the construction of low cost housing units in the said properties; that, in good faith and due to honest mistake, you erroneously constructed housing units, upon two (2) adjacent (same block, same street, same barangay, identical areas, shapes and values) lots of the late Augusto V. Pangan, covered by Transfer Certificate of Title Nos. 146743 and 146744; that Civil Case No. 976496 was filed against Jennifer A. Lua by the Estate of the late Augusto V. Pangan; that after a long heartbreaking talk and negotiations, an agreement between the parties concerned was reached; that the parties agreed to swap and exchange their properties without any consideration, through the execution of a Deed of Exchange. In reply, 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 to correct the mistake resulting from the erroneous construction of housing units on the lots owned by the Estate of the late Augusto V. Pangan, the same is not subject to the capital gains tax, imposed under Section 24(D)(1) of the Tax Code of 1997, not to the withholding tax imposed under Revenue Regulations No. 2-98. Furthermore, the said exchange 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 is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA 068-98 dated March 2, 1998) This ruling is issued on the basis of the foregoing representations. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. EDSHcT Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group