BIR Ruling [DA-336-03]

October 7, 2003 BIR RULING [DA-336-03] 24 (D) (1); 196 DA-159-2002 Aurora E. Polintan No. 1455 H.S. Reyes Street Sta. Cruz, Manila M a d a m : This refers to your letter dated May 23, 2003 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. cDCEIA It is represented that Aurora E. Polintan and Corazon C. Cruz (the "Parties") are the absolute and registered owners of adjoining parcels of land together with the improvements thereon located in Sta. Cruz, Manila covered by TCT Nos. 238780, 238781 and 238782 issued by the Registry of Deeds for Manila; that the Parties have acquired the said properties from Patricia B. Navarro by virtue of a Deed of Absolute Sale executed on July 14, 1997 for the sum of Nine Hundred Thousand Pesos (P900,000.00); that the said property was then covered by TCT No. 134668 issued by the Registry of Deeds for Manila and containing an area of Ninety-Four (94) square meters; that after the sale, the Parties executed an Extra-Judicial Partition Agreement on May 28, 1998; that pursuant to said Agreement, the Parties agreed to terminate the existing co-ownership and have their respective shares determined by mutual agreement and adjudication; that the aforesaid property is thereby subdivided and described as Lots No. 5-F-1, 5-F-2 and 5-F-3 as per tracing cloth and blue print plan duly approved by the Land Registration Commission; that Lot No. 5-F-1 which is now covered by TCT No. 238780 registered in the name of Aurora E. Polintan and consists of 31.33 square meters, Lot No. 5-F-2 covered by TCT No. 238781 registered in the name of Corazon C. Cruz and consists of 31.33 square meters and Lot No. 5-F-3 covered by TCT No. 238782 registered in the name of Corazon C. Cruz and consists of 31.34 square meters; that the properties are adjoining each other and unfortunately an error was committed during the registration of the two (2) of the three (3) properties wherein the owners were transposed and inadvertently exchanged, meaning TCT No. 238782 should have been registered in the name of Aurora E. Polintan and TCT No. 238780 should have been registered in the name of Corazon C. Cruz; that to rectify the above error, both parties have mutually agreed to exchange their respective properties as above-described without monetary value of any kind, each free from all liens and encumbrances; and that in support of your request, you submitted the following: (1) Tax Clearance Certificate issued on July 29, 1999 in favor of Aurora E. Polintan; (2) Joint Affidavit executed by Aurora E. Polintan and Corazon C. Cruz; (3) Letter-Request; (4) Deed of Exchange between Aurora E. Polintan and Corazon C. Cruz; (5) Deed of Absolute Sale between Patricia B. Navarro as the Seller and Aurora E. Polintan and Corazon C. Cruz, as the Buyers; (6) Copies of TCT Nos. 134668 registered in the name of Patricia B. Navarro; (7) Copy of TCT No. 234685 registered in the name of Aurora E. Polintan and Corazon C. Cruz; (8) Extra-Judicial Partition Agreement between Aurora E. Polintan and Corazon C. Cruz; (9) Copy of TCT Nos. 238781 and 238782 registered in the name of Corazon C. Cruz; (10) Copy of TCT No. 238780 registered in the name of Aurora E. Polintan; (11) Deed of Absolute Sale between Aurora E. Polintan and Spouses Joselito V. Sagario and Rosalinda C. Sagario; (12) Copy of TCT No. 243806 registered in the name of Spouses Joselito V. Sagario and Rosalinda C. Sagario; (13) Copies of the Tax Declarations of the above-mentioned parcels of land and improvements; and (14) Copy of the Subdivision Plan of the adjoining parcels of land. 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 for the purpose of correcting the mistake above-described, the exchange of realty by and among Aurora E. Polintan and Corazon C. Cruz 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, 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. 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. (BIR Ruling No. DA-159-2002 dated September 12, 2002) 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.) MILAGROS V. REGALADO Assistant Commissioner Legal Service