BIR Ruling [DA-306-05]

July 5, 2005 BIR RULING [DA-306-05] 24 (D) (1); 196; 188; DA-194-2000 Mr. Luis L. Vargas No. 119 C.M. Recto Street, BF Homes Las Pias City S i r : This refers to your letter dated March 14, 2005, which was indorsed to this Office by way of 1st Indorsement dated April 11, 2005, by the Acting Regional Director, Revenue Region No. 9, San Pablo City requesting for exemption from capital gains tax and documentary stamp tax on the Deed of Exchange executed in order to correct the mistake relating to the ownership of subdivision lots. It is represented that Sps. Luis L. Vargas and Ma. Teresa P. Vargas (Seller) are the registered owners of a parcel of land together with the existing improvements thereon located at Block 5, Lot 9, No. 110 Manzanilla St.,San Jose Village II, Phase 5, Bian, Laguna covered by Transfer Certificate of Title No. T-172516 for the Registry of Deeds of Sta. Cruz, Laguna; that the property has an area of 110 square meters; that said property was sold to a certain Jose Carlos S. Castaeda (Buyer) through a Deed of Absolute Sale dated July 5, 2004; that based on an affidavit you executed dated March 14, 2005, you inadvertently sold TCT No. T-172516 instead of TCT No. 172515; that you came to realize the error only when you paid the real estate tax for the year 2005 and was informed by the Assessor's Office of Bian, Laguna that you were paying for the wrong property; that in order to express the true intention of the parties, a Deed of Exchange was executed March 7, 2005; that the parties agreed to replace TCT No. T-172516 with TCT No. T-172515, which bears the same size and location, and which is just adjacent; and that was intended to be sold was the parcel of land with TCT No. 172515 and not TCT No. 172516; and that was is being occupied by the buyer is the land situated in TCT No. 172515 but the ownership remains with the seller. 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 to correct the mistake resulting from the typographical error committed in the preparation of the sales documents, the same 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. cCSHET Furthermore, the said exchange of real properties is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgement to 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 068-98 dated March 2, 1998) This ruling is issued on the basis of the foregoing representations. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service