BIR Ruling [DA-222-02]

November 25, 2002 BIR RULING [DA-222-02] 27 (D) (5) DA-215-96 Soto Maalat & Jadoc Law Offices G/F JTL Building B. S. Aquino Drive cor. 17th Street Bacolod City Attention: Atty. Alfredo A. Soto Gentlemen : This refers to your letter dated April 4, 2000 which was referred to this Office by Revenue District Office No. 77, Bacolod City stating that: Sometime in August 1990, CLAPAROLS DEVELOPMENT CORPORATION sold to GERMAN D. JAREO Lot 17-B with a total area of 585 square meters situated at Barangay Matab-ang, Talisay, Negros Occidental and covered by TCT No. T-87932 in the name of CLAPAROLS DEVELOPMENT CORPORATION, for which GERMAN D. JAREO was issued TCT No. T-154143 in his name; and that capital gains and documentary taxes due on this transaction were paid on August 30, 1990. On August 11, 1990, EULALIA CLAPAROLS ROSSELLO sold to GERMAN D. JAREO Lot 17-A with a total area of 292 square meters, situated at Barangay Matab-ang, Talisay, Negros Occidental and covered by TCT No. T-87931 in the name of EULALIA CLAPAROLS ROSSELLO, for which GERMAN D. JAREO was issued TCT No. T-154041 in his name; and that the capital gains tax due in this transaction in the amount of P1,460.00 was paid on August 14, 1990 per Official Receipt No. 453987, and the documentary stamp tax on the document in the amount of P300.00 was also paid on the same date per Official Receipt No. 204396. DEacIT On March 3, 1992, GERMAN D. JAREO sold to ERLINDA K. COO Lot 17-B with a total area of 585 square meters, situated at Barangay Matab-ang, Talisay, Negros Occidental, and covered by TCT No. T-154143, and Lot 17-A with a total area of 292 square meters, situated at Barangay Matab-ang, Talisay, Negros Occidental, and covered by TCT No. T-154041, both TCTs being in the name of GERMAN D. JAREO, for which LINDA K. COO was issued TCT No. 160113 and TCT No. 160112, respectively; and that the capital gains tax due on this transaction in the amount of P13,155.00 was paid on March 3, 1992 per Official Receipt No. 24613810, and the documentary stamp tax due on the document in the amount of P2,640.00 was also paid on the same date. Prior to the execution of the Deeds of Sale, the vendors, CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO have agreed to sell to GERMAN D. JAREO, and the latter has agreed to buy from the former Lot 15, Block 3 with a total area of 877 square meters, situated in Barangay Matab-ang, Talisay, Negros Occidental and covered by TCT No. T-51604, but through inadvertence and honest mistake, CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO delivered to GERMAN D. JAREO Lot 17-B and Lot 17-A for which GERMAN D. JAREO was issued in his name TCT No. T-154143 and TCT No. T-154041, respectively. After the execution by CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO of the Deeds of Sale in favor of GERMAN D. JAREO, the latter believing that what was being delivered to him by CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO was Lot 15, Block 3, GERMAN D. JAREO took possession of said lot and even started to improve the same by putting filling materials in said lot; and that as previously stated, Lot 15, Block 3 was the lot originally agreed upon by CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO to be sold to GERMAN D. JAREO and which the latter agreed to buy from them, and this lot has a total area of 877 square meters and is adjacent to Lot 17-B and Lot 17-A, both of which had an aggregate area of also 877 meters. The mistake committed by CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO in delivering to GERMAN D. JAREO, Lot 17-B and Lot 17-A instead of Lot 15, Block 3 was aggravated when on March 3, 1992, GERMAN D. JAREO sold to LINDA K. COO the former two (2) lots for which the latter was respectively issued TCT No. T-160113 and TCT No. T-160112. To correct the above-described mistakes, CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO and LINDA K. COO executed a Deed of Exchange; and that as contemplated in the said Deed of Exchange, the exchange of properties between CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO and. LINDA K. COO shall be as follows: Lot No. 17-A, TCT No. T-160112 in the name of ERLINDA K. COO From To ERLINDA K. COO EULALIA C. ROSSELLO Lot No. 17-B, TCT No. T-160113 in the name of ERLINDA K. COO From To ERLINDA K. COO CLAPAROLS DEVELOPMENT CORPORATION Lot No. 15, Block 3, TCT No. T-51604 in the name of CLAPAROLS DEVELOPMENT CORPORATION From To CLAPAROLS DEVELOPMENT ERLINDA K. COO CORPORATION and EULALIA. C. ROSSELLO The exchange of properties between CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO and LINDA K. COO has no monetary consideration. Based on the foregoing representations, you now request exemption from the payment of the capital gains tax and documentary stamp tax on the said exchange of realties between CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO and LINDA K. COO. In reply, please be informed that since the execution of the Deed of Exchange between CLAPAROLS DEVELOPMENT CORPORATION and EULALIA CLAPAROLS ROSSELLO and LINDA K. COO is without any monetary consideration, and considering further that the execution of the said deed is merely to correct a mistake, this Office is of the opinion as it hereby holds that the aforementioned exchange of realties between the parties involved is not subject to the corporate income tax imposed under Section 27(A) nor to the capital gains tax imposed under Section 24(D)(1), both of the Tax Code of 1997. Furthermore, it 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 Code. cIDHSC 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, and/or any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service