BIR Ruling [DA-363-99]

June 23, 1999 BIR RULING [DA-363-99] Hobart Realty & Development Corporation Rm. 512 5th Floor, President Tower #81 Timog Avenue, Diliman Quezon City Attention: Mr . Juan T . Garcia President Gentlemen : This refers to your letter dated May 8, 1999 requesting in effect for exemption from the payment of whatever taxes due on the exchange of property between Hobart Realty & Development Corporation and Erna Convenido. It appears from the documents submitted that Erna Convenido, a resident of 37 San Francisco, Calihay, San Pablo City purchased from Hobart Realty & Development Corporation, a corporation duly organized and existing under the laws of the Philippines with office address at 955 Quezon Avenue, Quezon City, a townhouse located at Lot 15, New Manila Executive Townhouse, 11th Street, Barangay Damayan Lagi, New Manila, Quezon City covered by Transfer Certificate of Title No. 80294 of the Registry of Deeds for Quezon City with an area of 104.6 square meters; that through inadvertence, Lot 13, New Manila Executive Townhouse, 11th Street, Barangay Damayan Lagi, New Manila Quezon City covered by TCT No. 80292 with an area 155 square meters was transferred by Hobart Realty and Development Corporation to Erna Convenido due to some confusion arising from the numbering of the lots; that as a result, TCT No. 100630 was issued by the Registry of Deeds for Quezon City in favor of Erna Convenido; and that in order to correct the error, the parties executed a Deed of Exchange and agreed on the following: "1. CONVENIDO, hereby returns by way of absolute transfer to HOBART Lot 13 New Manila Executive Townhouse, 11th Street Barangay Damayan Lagi, New Manila, Quezon City evidenced by TCT No. 100630 issued by the Registry of Deeds for Quezon City and with an area of One Hundred Fifty Five (155) square meters, CONVENIDO hereby absolutely ceding, transferring, disposing and conveying full ownership and title unto HOBART said parcel of land and all the improvements thereon inclusive of the townhouse located thereon. "2. In exchange, HOBART hereby cedes, transfers, disposes and conveys unto CONVENIDO full ownership and title over the townhouse and parcel of land and all its improvements located at Lot 15, New Manila Executive Townhouse, 11th Street Barangay Damayan Lagi, New Manila, Quezon City under TCT No. 80294 issued by the Registry of Deeds for Quezon City and with an area of 104.6 square meters in compliance with the attached Deed of Sale." In reply, please be informed that since the exchange transaction in question is without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely to correct a mistake, this Office is of the opinion as it hereby holds that the aforementioned exchange of realties between Hobart Realty & Development Corporation and Erna Convenido 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 Revenue Regulations No. 1-90 as amended by Revenue Regulations No. 12-94, as amended by Revenue Regulation No. 2-98. Furthermore, it is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. 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 same Code. (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, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)