BIR Ruling [DA-108-05]

April 4, 2005 BIR RULING [DA-108-05] 24 (D) (1); 196; DA-145-2000; DA-336-2003 Adelaida A. Villamin Lot 88, Cluster 9 BN 1, Cogeo Antipolo City M a d a m : This refers to your letter dated March 10, 2005 requesting on behalf of Ponciano Q. Jamandra and Ligaya M. Flores , for exemption from the payment of capital gains tax as well as documentary stamp tax on their swapping of real properties to correct a mistake and without any consideration. It is represented that in 1995, Ponciano Q. Jamandra bought a Townhouse Unit Lot 7 and thereafter occupied the same up to the present while Ligaya M. Flores bought Townhouse Unit Lot 4 and occupied the same since 1996; that however, when the corresponding Transfer Certificates of Title (TCT) was finally released to them, it was found out that the property described in TCT No. 125282 issued by the Quezon City Register of Deeds and registered in the name of Ponciano Q. Jamandra, is the townhouse unit being occupied by Ligaya M. Flores, and the property described in TCT No. N-148337 registered in the name of Ligaya M. Flores, is the townhouse unit being occupied by Ponciano Q. Jamandra; and that to rectify the mistake through the fault not of their own making, a Deed of Exchange was executed by and between Ponciano Q. Jamandra and Ligaya M. Flores without any consideration involved. 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 or Swapping Agreement is merely to correct the mistake above-described, the exchange of realty by and between Ponciano Q. Jamandra and Ligaya M. Flores, 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. cHaDIA Furthermore, the said swapping of real property 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 same Tax Code. (BIR Ruling No. 027-93; BIR Ruling Nos. DA-145-2000 and DA-336-2003) 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group