BIR Ruling [DA-145-00]

March 10, 2000 BIR RULING [DA-145-00] 24 (D) (1); 196 027-93; UN293-95 DA-145-2000 Messrs. Alexander A. Legasto & Jaime Lee 56 Gilmore Avenue New Manila, Quezon City Gentlemen : This refers to your letter dated December 03, 1999 requesting for exemption from the payment of capital gains tax as well as documentary stamp tax on the swapping of real properties to correct a mistake and without consideration. It is represented that both of you bought Townhouse units including the lots thereof, situated at No. 56 Gilmore Avenue, New Manila, Quezon City, from CAL Corporation, of which No. 56-B should be for Alexander A. Legasto and No. 56-E for Jaime Lee; that it turned out, however, that No. 56-B was titled to Jaime Lee and 56-E was titled in favor of Alexander A. Legasto; that to rectify the mistake through the fault not of their own making, a Deed of Exchange was executed by and between Alexander A. Legasto and Jaime Lee surrendering Townhouse No. 56-B in favor of Alexander A. Legasto and Townhouse 56-E in favor of Jaime Lee, 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 Messrs. Alexander A. Legasto and Jaime Lee 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 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 Tax Code of 1997. (BIR Ruling No. 027-93 dated January 15, 1993; and BIR Ruling No. UN 186-94 dated June 27, 1994) This ruling is issued on the basis of the foregoing representations. 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)