BIR Ruling [DA-431-03]

November 28, 2003 BIR RULING [DA-431-03] Sec. 24 (D) (1); 196, 188 DA-027-2003 dtd. 1/30/03 Mr. Alberto Pineda-Capati c/o 64 Esteban Abada St. Loyola Heights, Quezon City S i r : This refers to your letter in behalf of your clients received by this Office on September 3, 2003, requesting for exemption from capital gains tax and documentary stamp tax on the swapping of real properties between Sps. Guillermo & Luna P. Capati and Sps. Luis & Ma. Carreon Aguilar-Capati. It could be ascertained from the docket of the case that Guillermo Capati and Luis Capati are brothers; that together with their respective spouses, they bought two (2) adjacent lots consisting of 152 square meters each covered by Transfer Certificate of Title (TCT) #PT-84634 and #PT-84635, both of the Register of Deeds of Pasig; that both parties have, in good faith, inadvertently took as their own the other parties' lot; that they both constructed structures on these respective lots; that in the spirit of good filial and neighborhood, and for mutual benefit, both parties have agreed to exchange ownership of lots in a Deed of Exchange executed on July 20, 2003 at Pampanga and that this Deed of Exchange was made and executed without any monetary consideration. In reply, please be informed that since the exchange transaction was without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely to correct the mistake resulting from erroneous construction of structures on each lot, the same is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, nor to the withholding tax imposed under Revenue Regulations No. 2-98. Furthermore, the said exchange 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 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-068 dated March 2, 1998) . SDAcaT 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, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service