BIR Ruling [DA-268-97]

August 11, 1997 BIR RULING [DA-268-97] Mr. Urbano P. Besas No. 88 K-Street Kamuning, Quezon City S i r : This refers to your letter dated May 30, 1997 requesting for a ruling on the tax consequence of an exchange of real property for purposes of rectifying the error committed by the seller regarding the sale of a certain parcel of land. It is represented that on June 27, 1991 Spouses Urbano P. Besas and Corazon P. Besas entered into a Contract of Sale with Miss Esther Sorino, attorney-in-fact of Mrs. Honorora A. Seguritan; that it is the intention and agreement of the parties that the sale shall involve the property covered by Transfer Certificate of Title No. 11488 (29578); that due to honest mistake and inadvertence, Miss Esther Sorino gave to the Spouses Urbano P. Besas and Corazon P. Besas the owner's duplicate copy of Transfer Certificate Title No. 32143 for which reason, the property covered by said title was the one fully described in the Deed of Absolute Sale; that when the said document was presented with the Registry of Deeds of Quezon City, Transfer Certificate of Title No. 32143 was cancelled and accordingly, Transfer Certificate Title No. 99539 was issued in the name of the Spouses Urbano P. Besas and Corazon P. Besas; that the real property subject of their Deed of Sale is supposed to be a parcel of land covered by TCT No. 11488 and not the one covered by TCT No. 32143; and that in order to correct the foregoing mistake and to realize the true intention of the parties, the supposed seller, Mrs. Honorora A. Seguritan, and the Spouses Urbano P. Besas and Corazon P. Besas, as buyers, executed a Deed of Exchange on May 22, 1997; and that it is their contention that the subject Deed of Exchange of real property is not subject to the capital gains tax and to the documentary stamp tax considering that no monetary consideration whatsoever is involved in the exchange and that the principal purpose of the same is merely to correct an inadvertent mistake that has been committed by the seller's attorney-in-fact. aHIDAE Based on the foregoing representation and documents submitted, you now request exemption from the payment of the corresponding taxes due on said exchange transaction. In reply, please be informed that since the abovementioned transaction is without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely to correct a mistake that has been inadvertently committed by the seller's attorney-in-fact, it is the opinion of this Office that the aforementioned exchange of real properties between you and Miss Esther Sorino, as attorney-in-fact of Mrs. Honorora A. Seguritan, is not subject to the capital gains tax imposed under Section 21 (c) of the Tax Code, as amended. DEIHAa Furthermore, it is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. 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, as amended by Republic Act No. 7660. (BIR Ruling No. 027-93 dated January 15, 1993) 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.) SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service)