BIR Ruling [DA-106-02]

June 07, 2002 BIR RULING [DA-106-02] 24 (D) (1); 196 DA-127-2001 Bangko Sentral ng Pilipinas F.B. Harrison, Ermita Manila Attention: Mr. Victor G. Garlitos Officer-In-Charge Gentlemen : This refers to your letter dated June 28, 2001 requesting on behalf of your employees for exemption from the payment of capital gains tax and documentary stamp tax on the swapping of their real properties to rectify an error and without consideration. Based on your representations, as well as from the documents submitted, the facts are as follows. 1. Messrs. Constantino L. Castillo, Roberto C. Pineda, Hector V. Reyes and Edgar C. Pinpin (hereinafter referred to as "OWNERS"), all employees of Bangko Sentral ng Pilipinas, are the absolute and registered owners of parcels of land located at Barangay San Nicolas III, Molino, Bacoor, Cavite, covered and evidenced by Transfer Certificates of Title Nos. T-514558 with an area of 79 square meters, T-514556 (81 sq. m.), T-514557 (81 sq. m.), T-514559 (109 sq. m.), respectively, or a total area of 400 sq. m.. The subject lots were acquired by the OWNERS sometime in 1994 through the Housing Program of Bangko Sentral ng Pilipinas through its Provident Fund Office covering a 400 square meter lot, which was purchased from Rosita C. Mendoza as evidenced by Certificate of Title No. 429325. 2. The OWNERS then engaged the services of Modesto C. Allado, a professional surveyor, to ascertain the exact location of the lot and thereafter to subdivide the lot into four (4) lots. 3. The capital gains tax and documentary stamp tax arising from the Deed of Absolute Sale between Rosita C. Mendoza, as vendor, and the OWNERS, as vendees, which was executed on November 18, 1994 were already paid as evidenced by the issuance of Certificates Authorizing Registration Nos. 800317, 800318, 800319 and 800320 all dated November 29, 1994. 4. The OWNERS constructed their respective houses on the designated lots as recommended by the professional surveyor. However, a certain Mr. Charlie Fuentes later on claimed that he is the real owner of the lots where the said houses were constructed and after presentation of pertinent documents, it was confirmed that the OWNERS inadvertently committed the error of constructing their houses on the adjacent lot. 5. Mr. Charlie Fuentes was, however, compassionate and understanding toward the inadvertence and finally agree to just swap or exchange his lot with that of the OWNER'S respective lots through the execution of a Deed of Exchange. 6. In support of your request, your submitted a copy of the Transfer Certificates of Title of the subject properties, latest tax declaration, official receipt of latest realty tax paid, deed of sale from the previous owner to the OWNERS, deed of exchange between the OWNERS and Mr. Charlie Fuentes, Affidavits of the OWNERS, Affidavit of the private surveyor, and Certificates Authorizing Registration. 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 for the purpose of correcting the mistake above-described, the exchange of realty by and between the OWNERS and Mr. Charlie Fuentes is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, nor to the withholding tax imposed under Revenue Regulations No. 2-98. The said swapping of real property is likewise not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment of 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-145-2000 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service