BIR Ruling [DA-420-03]

November 20, 2003 BIR RULING [DA-420-03] 24 (D) (1); DA 145-00 Spouses Alberto & Helen Melchor 11 Rhombus Street Novaliches, Quezon City Gentlemen : This refers to your letter dated September 22, 2003 requesting for a ruling as to whether the Deed of Exchange executed by Spouses Alberto & Helen Melchor (Spouses Melchor) and Francisco Dumindin relative to the swapping of 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 Spouses Melchor are the owners in fee simple of a parcel of land together with the improvements thereon located at J. Abad Santos, Sta. Lucia, San Bartolome, Quezon City covered by TCT No. 64034 issued by the Registry of Deeds for Quezon City and containing an area of 150 square meters; that on the other hand, Francisco Dumindin is the absolute and registered owner of a parcel of land together with the improvements thereon covered by TCT No. 118946 issued by the Registry of Deeds for Quezon City; that the two (2) properties are adjoining each other and unfortunately an error was committed during the registration of the two (2) properties wherein the properties were transposed and inadvertently exchanged; that to rectify the error, the aforesaid parties have mutually agreed to exchange their respective properties without monetary value by virtue of a Deed of Exchange executed on September 29, 2003. 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 Spouses Melchor and Francisco Dumindin is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. HCISED 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. DA 145-00 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. EIcSDC Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service