BIR Ruling [DA-369-04]

July 1, 2004 BIR RULING [DA-369-04] 24 (D) (1); DA 145-00 Ms. Ester Cruz Martin 2053 CB Cruz Street Malasaga, Pasig City M a d a m : This refers to your letter dated June 4, 2004 requesting for a ruling as to whether the Deed of Exchange executed by Sonia M. Samonte and Rosene J. Walter relative to the swapping of their real properties in order to correct a mistake and without any monetary consideration is not subject to capital gains tax and documentary stamp tax. It is represented that Sonia M. Samonte is the registered owner in fee simple of a parcel of land located at Bo. Santolan, Pasig City covered by TCT No. PT-84118 issued by the Registry of Deeds for Pasig City and containing an area of 116.50 square meters; that on the other hand, Rosene J. Walter is the registered owner of a parcel of land also located at Bo. Santolan, Pasig City covered by TCT No. PT-84097 issued by the Registry of Deeds for Pasig City and containing an area of 116.50 square meters; that in 1991, Sonia M. Samonte sold one-half (1/2) portion of her property in good faith to Rosene J. Walter believing that the said one-half (1/2) portion of the said lot is the one they have agreed upon; that it is only now when Sonia M. Samonte intended to mortgage her property covered by TCT No. PT-84118, that the parties learned that the one-half (1/2) portion of the lot sold to Rosene J. Walter is not the lot occupied by her; that it appears from the location plan prepared by the Geodetic Engineer, as required by the mortgagee bank, the technical description of the property sold by Sonia M. Samonte is not Lot 19-B of the subdivision plan Psd-010584 appearing in TCT No. 84118 but pertains to Lot-A of said subdivision plan; and that to rectify the error committed, both Sonia M. Samonte and Rosene J. Walter have mutually agreed to exchange their respective properties by virtue of a Deed of Exchange in order to correct the mistake committed by sheer oversight and inadvertence by simply swapping their respective titles to the properties without any monetary consideration. In reply thereto, 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 realties by Sonia M. Samonte and Rosene J. Walter is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. Moreover, the said swapping 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 acknowledgment to the said Deed of Exchange is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the said Code. ( BIR Ruling No. DA145-00 dated March 10, 2000 ) 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. IcCDAS Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service