BIR Ruling [DA-106-96]

March 11, 1996 BIR RULING [DA-106-96] Mr. Renato A. Manzano No. 11 Tomas Street, Multinational Village Paraaque, Metro Manila S i r : This refers to your letter dated September 13, 1995 requesting a ruling as to whether the transfer or exchange by the Spouses Renato and Dorotea Manzano and Spouses Delfin and Eden Domingo of their parcels of land located in Bo. La Huerta Paraaque is exempt from capital gains tax. It appears that on August 22, 1995, you and the Spouses Delfin and Eden Domingo executed a Deed of Exchange whereby your property identified as Lot 2, Block 16 and covered by Transfer Certificate of Title No. 38464 issued by the Registry of Deeds of Paraaque with a market value of P154,880.00 will be exchanged for Lot 12-C, Block 9 covered by a Transfer Certificate of Title No. 98867 issued in the name of the Spouses Domingo by the Registry of Deeds of Paraaque with a market value of P144,000.00; that both parcels of land are identical to each other with an area of 176 sq. m. and 180 sq. m., respectively; and that there was no consideration involved in the exchange. In reply, please be informed that under Section 21(e) of the Tax Code, as amended, capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets , including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts, shall be taxed at the rate of 5% based on the gross selling price or fair market value prevailing at the time of sale, whichever is higher. Accordingly, you are subject to the capital gains tax at the rate of 5% based on the fair market value of your property while the Spouses Delfin and Eden Domingo are likewise subject to the 5% capital gains tax based on the fair market value of their property, pursuant to Section 21(e) of the Tax Code, as amended by Executive Order No. 37. (BIR Ruling No. 201-87 dated July 13, 1987) This supersedes all previously issued rulings inconsistent with BIR Ruling No. 201-87. cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)