BIR Ruling [DA-225-02]

November 27, 2002 BIR RULING [DA-225-02] 24 (D) (1) DA-194-2000 Atty. Oscar G. Abrina 36 Rio de Janeiro Ext., Southgate BF Homes, Las Pias, Metro Manila S i r : This refers to your letters dated March 20, 2001 and May 15, 2001 requesting in effect, for an opinion on whether an Affidavit executed by and between owners of two (2) adjacent lots for the purpose of correcting an error made in the adjudication of said lots to them from the estate of their father, is subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. It is represented and documents submitted show that you and your sister, Nora Abrina, own separately two (2) adjacent lots located at Tigatto, Davao City and covered by TCT Nos. T-31223 and T-31224 of the Registry of Deeds of Davao City; that these two lots, which have the same area and value, were your inheritance from your late father, Candido Abrina, who died intestate on August 7, 1957; that at the time of partition and adjudication of the above parcels of land, you and your sister had intended and agreed that Lot No. 6, covered by TCT No. T-31223 will be assigned and adjudicated to her while Lot No. 7, covered by TCT No. T-31224 will be assigned and adjudicated to you; that your afore-stated intention and agreement was inadvertently not followed in the documentation because when the Deed of Extra-Judicial Partition was finally executed, the lot that was intended to be assigned to your sister and the lot intended for you, were mistakenly interchanged; that upon finding said error, the two of you executed an affidavit swapping the two lots in order to remedy the said inadvertence and at the same time to enforce therein your real intention; and that the said swap transaction was executed without any monetary consideration. In reply, please be informed that considering that the swapping of the above-mentioned properties does not purport to be a sale transaction, it being without any monetary consideration, and considering further that the execution of an affidavit was merely to correct a mistake inadvertently committed in the documentation of the inheritance you have received, this Office is of the opinion that the said swap transaction is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 nor to the creditable withholding tax imposed under Section 57 thereof, as implemented by Revenue Regulations No. 2-98. Accordingly, the Certificate Authorizing Registration (CAR) and/or Tax Clearance Certificate (TCC) may be issued by the Revenue District Officer concerned, authorizing the registration of the two (2) lots in your respective names. IDaEHS Further, the said Affidavit swapping the above-mentioned properties is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 but only to the P15.00 documentary stamp imposed under Section 188 of the same Tax Code. ( BIR Ruling No. DA-194-2000 dated March 30, 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, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service