BIR Ruling [DA-429-06]

July 18, 2006 BIR RULING [DA-429-06] Sec. 24 (D) (1); DA-173-03 Mr. Felix S. Lim Rm. 807, 8/F, United Group Building Juan Luna St., Binondo, Manila S i r : This refers to the undated letter you executed together with Abbie Marian L. Tan, Oliver C. Yulo and Ines T. Tablante, requesting that the two separate exchanges of real properties both made to correct errors in the titling of said properties be exempt from the payment of the capital gains and documentary stamp taxes. It is represented that you are the registered owner of a parcel of land situated in Valencia, Quezon City, covered by TCT No. N-256047 of the Registry of Deeds of Quezon City; that Abbie Marian L. Tan, Oliver Co Yulo and Ines T. Tablante, et al., on the other hand, are the registered owners of three lots adjacent to your property, covered by TCT Nos. N-256045, N-260435 and N-256048, separately and respectively registered in their names, all of the Registry of Deeds of Quezon City; that the technical description of the land registered in your name, covered by TCT No. N-256047, described the lot occupied by Abbie Marian L. Tan, to which she had built improvements; that, likewise, the technical description of the land registered in the name of Abbie Marian L. Tan, covered by TCT No. 256045, described the lot you occupied to which you already built improvements; that, on the other hand, the technical description of the land registered in the name of Oliver Co Yulo, covered by TCT No. 260435, described the lot occupied by Ines T. Tablante, et al., to which Ines T. Tablante and company had built improvements; that likewise, the technical description of the land registered in the name of Ines T. Tablante, et al., covered by TCT No. 256048, described the lot occupied by Oliver Co Yulo, to which Oliver Co Yulo had also built improvements; that the above inadvertence in the titling of the subject properties, of which all parties had purchased from one and the same developer, was discovered only when one of the purchasers of the lots adjacent to the above properties and owned by said developer noticed the discrepancies in the titles when he was about to mortgage his property to a bank; that to correct the said inadvertence in the titling of the subject properties, you, together with the other owners, mutually agreed to exchange titles over the properties for it will be physically impossible to transfer the improvements you have respectively made in the lots. In support of your request you submitted photocopies of the following documents, viz: 1. Two (2) separate Deeds of Exchange of Real Properties; 2. Corresponding TCTs; and 3. Corresponding Tax Declarations; In reply, please be informed that since the above exchange transactions are without monetary consideration, and considering further that the execution of the two (2) separate deeds of exchange are merely to correct a mistake, this Office is of the opinion as it hereby holds that the aforementioned exchanges of realties between Felix S. Lim and Abbie Marian L. Tan, on one hand, and Oliver Co Yulo and Ines T. Tablante, et al., on the other, are not subject to the capital gains tax, imposed under Section 24(D)(1) of the Tax Code of 1997, as amended, and the documentary stamp tax prescribed under Section 196 of the same Code. However, the acknowledgments to the said deeds of exchange are subject to the documentary stamp tax of P15.00 on certification pursuant to Section 188 of the Tax Code of 1997. 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. (BIR Ruling No. DA-173-03 dated June 3, 2003 citing BIR Ruling No. 469-93 dated December 1, 1993) Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service