BIR Ruling [DA-173-03]

June 3, 2003 BIR RULING [DA-173-03] Sec. 24 (D) (1); BIR Ruling No. 27-93 Ms. Teresita Roy San Diego No. 38 11th Avenue, Cubao Quezon City M a d a m : This refers to your letter dated November 19, 2002 requesting in effect for a ruling exempting from the payment of the corresponding taxes due on the exchange transaction. It is represented that the Deed of Correction of the Deed of Absolute Sale was entered into to rectify an honest mistake in the consummated Deed of Absolute Sale dated August 29, 2001; that the vendees discovered that the Deed of Absolute Sale did not cover the lot they supposedly wanted to buy from the vendors which is Lot No. 25, Block No. 11 covered by TCT No. 61969 situated at No. 33 11th Ave., Murphy, Quezon City; that this property is just opposite the vendees' house situated at No. 33 11th Ave., Murphy, Quezon City; that the vendees have already taken possession and occupied Lot No. 25, Block No. 11 covered by TCT No. 61969 situated at No. 33 11th Ave., Murphy, Quezon City after the Deed of Absolute Sale have been executed by the parties; that one of the vendors and attorney-in-fact, Teresita Roy San Diego occupies and have continuously occupied before and after the sale Lot No. 22, Block No. 8 covered by TCT No. 61970 (cancelled and issued as TCT No. 230216) situated at No. 38 11th Ave., Murphy, Quezon City that this is the property that was mistakenly sold to the vendees by the vendors in the Deed of Absolute Sale dated August 29, 2001; that there was no intention on the part of the vendors to sell this property situated at No. 38 11th Ave., Murphy, Quezon City covered by TCT No. 61970 (cancelled and issued as TCT No. 230216) covering Lot No. 22, Block No. 8; that the vendees discovered that the Deed of Absolute Sale dated August 29, 2001 did not cover the lot they supposedly wanted to buy from the vendors and which the vendors are willing to sell to the vendees, as the lot stated in the sale was TCT No. 61970 (cancelled and issued as TCT No. 230216) which referred to Lot No. 25, Block No. 11 covered by TCT No. 61969 situated at No. 33 11th Ave., Murphy, Quezon City; that both properties covered by TCT Nos. 61969 and 61970 (cancelled and issued as TCT No. 230216) were previously owned by the vendors; that all taxes relative to the sale of said property have already been dutifully paid and the transfer of title completed; and that the Deed of Absolute Sale was registered at the Registry of Deeds of Quezon City and TCT No. 230216 was issued in the name of the vendees canceling TCT No. 61970. HAECID In reply, please be informed that considering that the exchange transaction in question is without any monetary consideration, and considering further that the execution of the Deed of Correction of the Deed of Absolute Sale is merely to correct the mistake resulting from the typographical error committed in the preparation of the sales documents, this Office is of the opinion as it hereby holds that the aforementioned Deed covering TCT No. 61969 and TCT No. 61970 between Teresita Roy San Diego (vendor) and Spouses Nicanor S. Baterina and Virgie C. Baterina (vendees) on September 23, 2002 is not subject to the capital gains tax imposed under Section 24(D)(1) of the 1997 Tax Code. ( BIR Ruling No. 27-93 dated January 15, 1993 ) Finally, the Deed of Correction of the Deed of Absolute Sale is likewise not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code. However, the Acknowledgment on the said Deed is subject to the documentary stamp tax imposed under Section 188 of the same Code. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service