BIR Ruling [DA-204-05]

April 21, 2005 BIR RULING [DA-204-05] 24 (D) (1); 196; DA-159-2002 Mario H. Eleda Anonas St., GSIS Metro Homes Pureza, Sta. Mesa, Manila Arnaldo R. Rase Cabuco St., Bahayang Pag-asa Subd. Molino, Bacoor, Cavite Gentlemen : This refers to your letter dated January 18, 2004 requesting for exemption from the payment of capital gains tax and documentary stamp tax on the swapping of real properties without consideration to correct a mistake. It is represented that on March 11, 2003, you bought an adjacent residential lots containing the same area from Capricorn International Products Corporation. However, the descriptions of the corresponding lot you bought is different from what was stated in the respective deeds of sale. The property covered under Transfer Certificate of Title (TCT) No. T-669782 should have been stated in the deed of sale executed in favor of Mario H. Eleda and the property covered by TCT No. T-669783 should have been stated in the deed of sale for Arnaldo R. Rase. Unfortunately, the error was realized only when the transfer was already completed and after you visited and relocated the said lots. Thus, to correct the error and to acquire the property in consonance with your true intention, you executed a deed of exchange of real property. 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, your exchange of realty 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. IAEcCa 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 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-159-2002 dated September 12, 2002) 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