BIR Ruling [DA-370-06]

June 15, 2006 BIR RULING [DA-370-06] DA 096-03 Mr. Eduardo C. Reyes 240 Malapantao Street Barangka Itaas Mandaluyong City S i r : This refers to your letter dated May 16, 2006 requesting for exemption from the payment of capital gains tax and documentary stamp tax relative to the exchange of properties due to mistake and without consideration. It is represented that Eduardo C. Reyes married to Purificacion Bernabe Reyes is the owner of a parcel of land together with the improvements thereon located in Mandaluyong City covered by TCT No. 156 duly issued by the Registry of Deeds for Mandaluyong City containing an area of 68 square meters; that on the other hand, Ernesto C. Reyes married to Elizabeth Aquilar Reyes is the owner of a parcel of land located in Mandaluyong City covered by TCT No. 157 duly issued by the Registry of Deeds for Mandaluyong City containing an area of 67 square meters; that the above-mentioned properties are adjoining each other having been acquired by virtue of inheritance, that an error was committed during the registration of the two (2) properties wherein the owners were transposed and inadvertently exchanged; and that to rectify the above error, both parties have mutually agreed to exchange their respective properties without monetary consideration by virtue of a Deed of Exchange. 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 Eduardo C. Reyes and Ernesto C. Reyes is not subject to the capital gains tax imposed under Section 24(D)(1) or the Tax Code of 1997, nor to the withholding tax imposed under Revenue Regulations No. 2-98, as amended. Furthermore, the said exchange of the said properties is likewise not 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. ( 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, and then this ruling shall be considered null and void. IcHTCS Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service