Buenaflor-Alegre Law Office

May 20, 2008 BIR RULING [DA-306-08] 24 (D) (1); 196 DA-656-2006 Buenaflor-Alegre Law Office McArthur Hi-Way cor., St. Peter Street Crossing Bayabas, Toril, Davao City Attention: Atty. Mary Jesseline Irmina Buenaflor-Alegre Counsel Gentlemen : This refers to your letter dated April 11, 2008 requesting for exemption from the payment of capital gains tax and documentary stamp tax on the swapping of real properties to correct a mistake and without consideration. It appears Albert U. Porras married to Geralyn Lo Porras and Allan U. Porras married to Shiela Limbok Porras are the registered co-owners of Lot 15, Block 8, RGA Village, Dacudao, Davao City covered by Transfer Certificate of Title No. T-410238 issued by the Register of Deeds of Davao City consisting of Three Hundred Eight (308) sq. m., more or less; that Kerwin Ang Blas married to Ivy Jane C. Blas is the registered owner of Lot 17, Block 8, RGA Village, Dacudao, Davao City covered by Transfer Certificate of Title No. T-345076 issued by the Register of Deeds of Davao City consisting of Three Hundred Eight (308) sq.m., more or less; that the house of Kerwin A. Blas was erroneously constructed on the lot of Albert and Allan Porras believing that it was the lot which was registered under his name; that Albert and Allan Porras likewise established their residence on the property which they also thought was the one registered under their name as co-owners; that while the construction was going on, the construction engineer together with the surveyor discovered that there was a mistake in the occupation and the construction of their house has to be stopped; and that both parties agreed to fix the mistake in a peaceful way by undertaking an absolute deed of exchange of their respective lots, exclusive of the improvements, without monetary consideration because they believed that there was really an honest mistake. In reply, please be informed that since the exchange transaction is without monetary consideration, and considering further that the execution of the Deed of Exchange is merely for the purpose of correcting the mistake above-described, the exchange of realty by and between Albert and Allan U. Porras and Kerwin A. Blas is not subject to capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended, nor to the withholding tax imposed under Revenue Regulations No. 2-98, as amended. 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, as amended. 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, as amended. (BIR Ruling No. DA-656-2006 dated November 07, 2006) 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service