BIR Ruling [DA-106-04]

March 9, 2004 BIR RULING [DA-106-04] Secs. 24 (D) (1); 196, 188 DA-431-2003 dtd. 11/28/03 Mr. Redentor Rey St. Dominic IV, Culiat Tandang Sora, Quezon City S i r : This refers to your letter dated February 16, 2004 requesting exemption from capital gains tax on the proposed exchange of two (2) parcels of land between Sps. Redentor & Nenita C. Rey and Sps. Jesus & Zanita S. Pangan. As borne by the documents attached to your letter-request, it could be ascertained that both spouses are the owners of two (2) adjacent lots described as Lot 3A and Lot 4A respectively; that you, together with your spouse has already built a residential house on the lot which for so many years you believed it was yours; that not until a representative of the Sps. Jesus & Zanita S. Pangan had informed you that you are occupying the lot belonging to said spouses that you know of the error you have committed; that realizing it was an honest mistake and considering that both lots contained the same land area, and contiguous as such, you had agreed with Sps. Jesus & Zanita S. Pangan to effect the necessary correction by way of exchange; that this exchange of the above lots does not involved money consideration. In reply, please be informed that since the exchange transaction was without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely to correct the mistake resulting from erroneous construction of structures on each lot, the same 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. 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 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-068 dated March 2, 1998 ). This ruling is being issued on the basis of the foregoing facts as represented. However, upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. IcCDAS Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service