BIR Ruling [DA-068-98]

March 2, 1998 BIR RULING [DA-068-98] Ms. Teresita A. Mercado Culion, Palawan and Ms. Perla S. de las Alas 32-D Banahaw Street Cubao, Quezon City Mesdames : This refers to your letter dated July 1, 1997 requesting for a ruling on the tax consequence on the swapping of the real properties of the same areas that you respectively owned to correct the mistake resulting from the inadvertence of the real estate sales agent in identifying your respective lots during the time of the sale transaction. It appears that both of you respectively bought parcels of land in accordance with your particular requirements, which are adjoining to each other, and coursed through only one real estate sales agent, identified as Lot 45, Blk. 9 with an area of 63 square meters and Lot 47, Blk. 9 with an area of 63 square meters both situated at Tatalon, Quezon City; that subsequently, you were issued separate titles, namely: TCT Nos. 27394 and N-171839, respectively, both issued by the Register of Deeds for Quezon City; that Ms. Teresita A. Mercado constructed a residential house on that lot identified as hers by such agent; that later on, you have discovered that the parcels of land registered in your respective names were not the parcels of land that you really intended to buy; that in order to rectify this mistake, you executed a deed of exchange for the said properties of equal areas, thereby giving Ms. Teresita A. Mercado all the rights to the lot where she constructed a house, and likewise giving Ms. Perla S. de las Alas all the rights to the vacant lot; and that the said exchange transaction is without any monetary consideration. In reply, please be informed that considering that the exchange transaction in question is without any monetary consideration, and considering further that the execution of the deed of exchange is merely to correct a mistake resulting from the inadvertence of the real estate sales agent in identifying the lots which are for your respective ownership, this Office is of the opinion that such exchange transaction is not subject to capital gains tax imposed under Section 21(e) of the Tax Code, as amended [now Section 24(D)(1) of the Tax Code of 1997], nor to the creditable withholding tax imposed under Revenue Regulations No. 1-90, as amended. Further, it is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. However, the said deed shall be subject to the P15.00 documentary stamp tax imposed under Section 188 of the same Tax Code. (BIR Ruling No. 027-93 dated January 15, 1993) This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different from that as represented, then this ruling shall be considered null and void. LLjur Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)