BIR Ruling [DA-127-01]

July 24, 2001 BIR RULING [DA-127-01] 24 (D) (1); 196 DA-145-2000 Raeses Cortez Briola & Associates Law Offices Ground Floor, Goldloop Twin Towers Amber Avenue, Ortigas Business Center Pasig City Attention: Atty . Julito M . Briola Gentlemen : This refers to your letter dated September 13, 2000 requesting for exemption from the payment of capital gains tax on the swapping of real properties to correct a mistake and without consideration. It is represented that Spouses Melanio P. Ponce and Judith M. Ponce are the absolute and registered owners in fee simple of a parcel of residential lot particularly lot 9, block 6, located at Lumang Bayan Executive Subdivision, Barangay Mayamot, Antipolo City, covered and evidenced by Transfer Certificate of Title (TCT) No. 307746 containing an area of One Hundred Seventy Three (173) square meters, more or less; that Spouses Jacintito E. Catipay and Analiza A. Catipay, are likewise the absolute and registered owners in fee simple of a parcel of residential land particularly lot 5, block 6 also located in the same subdivision, covered and evidenced by Transfer Certificate of Title No. 344029 containing an area of One Hundred Seventy Six (176) square meters, more or less; that both owners purchased their respective properties from the Lumang Bayan Realty Development Corporation; that because of sheer oversight and inadvertence, the Spouses Catipay started to build a house on the property of the Spouses Ponce; that the error was discovered by a private surveyor and was confirmed by the owner/developer of the subdivision; that the parties agreed to amicably rectify the mistake by simply swapping their properties without cost from either of them as evidenced by the deed of exchange of properties, hereto submitted as Annex "A"; that in support of your request, you submitted a copy of the Transfer Certificates of Title of the subject properties, latest tax declaration, official receipt of latest realty tax paid. 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 Spouses Ponce and Spouses Catipay 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.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group