BIR Ruling [DA-454-99]

August 10, 1999 BIR RULING [DA-454-99] Ms. Loreto Camacho-Velasco 39 D. Muoz Avenue Carmel V, Tandang Sora Quezon City M a d a m : This refers to your letter dated August 2, 1999 stating that Mr. Inocencio Movido is the registered owner of a parcel of land located at Paliparan, Dasmarias, Cavite covered by TCT No. T-362996 of the Registry of Deeds of Cavite; that on the other hand, Emilio, Soledad, Zosimo, Juana, Alegria, Benedicto and Antonio, all surnamed Camacho (Camacho Family) are the registered owners of a parcel of land located at Paliparan, Dasmarias, Cavite covered by TCT No. T-815859 of the Registry of Deeds of Cavite; that the afore-mentioned parcels of land were formerly part of the Imus Friar Estate and were conveyed by the government to the respective predecessors in interests of the above-mentioned parties without technical descriptions of the lots; that as per ocular inspection of the Land Management Bureau of the Department of Environment and Natural Resources, there was an overlapping of the lots covered by TCT No. T-362296 and T-815859; that upon actual measurement, the overlapping area is measured to be 6,717 square meters; that based on the report of the Land Management Bureau, two (2) different survey plans were used by the parties or their predecessors in interest when the technical descriptions were annotated on their respective titles; that as a result of the utilization of two (2) survey plans, more particularly FLs-2006 and amendment survey SWO-16734 and SWO-16409, two (2) errors resulted, to wit: (a) an overlapping area of 6,717 square meters and (b) a gap with an area of 8,053 square meters and known as sub-lot C of the Verification Plan and which is adjacent and supposed to be part of the lot covered by TCT No. T-362996; that in order to forestall/prevent any controversy between the parties, they have agreed to exchange the portion overlapped or encroached by the title of Inocencio Movido in TCT No. T-362996 on the portion of the property of the Camacho Family covered by TCT No. T-815859 with the resulting gap of 8,053 square meters by way of Deed of Assignment; that Inocencio Movido also executed a Deed of Exchange of Real Property whereby the latter exchanged and bartered his 8,053 square meter lot to that of the 6,717 square meter lot included in Inocencio Movido's and the Camacho's title and which had already been sold by Inocencio Movido; and that in an Order dated July 6, 1998 entitled "IN RE: Petition for Correction of Technical Description of Lot 2, PCS-045206-006937 in TCT No. T-362996 and Approval of Deed of Exchange of Properties Executed by the Parties" issued by the Honorable Judge Cesar A. Mangrobang of the Regional Trial Court, Branch 22, Imus, Cavite, it was ruled as follows: "WHEREFORE, in view of the foregoing, judgment is hereby rendered approving the Deed of Assignment and the Deed of Exchange of Real Property executed by the petitioners. "The Register of Deeds of Cavite is hereby ordered to correct, upon payment of the required fees, the technical descriptions of TCT No. T-362996 in the name of petitioner Inocencio Movido so as to include therein the lot with an area of 8,053 square meters, the technical descriptions of which are hereto attached as Annex "A" and made an integral part of this decision. "However, considering the approval of the Deed of Exchange and the Deed of Assignment executed by the parties, the Register of Deeds of Cavite is hereby ordered to effect the agreement of the parties by separating/partitioning the said lot with an area of 8,053 and a separate title thereof issued in the name of petitioners Camacho and the transfer of the lot covered by TCT No. 815859 with an area of 6,717 in the name of petitioner Movido. "SO ORDERED. "Imus, Cavite, July 6, 1988." Based on the foregoing representations, you now request for a ruling that the Deed of Assignment and Deed of Exchange executed by and between Mr. Inocencio Movido and Camacho Family for the purpose of correcting an error, as in this case, is not subject to capital gains tax and documentary stamp tax. In reply, please be informed that under Section 24(D)(1) of the Tax Code of 1997, capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales by individuals, including estates and trusts, shall be taxed at the rate of 6% based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of the said Code, whichever is higher. LexLib However, since in the instant case there is no actual sale, exchange or disposition of real property for a valuable consideration, but a mere exchanging of the lots in question without consideration and only for purposes of rectifying a mistake, this Office is of the opinion as it hereby holds that the Deed of Assignment and Deed of Exchange entered into by and between Mr. Inocencio Movido and Camacho Family are not subject to the capital gains tax imposed under the above-cited section of the Tax Code. Moreover, the said Deed of Assignment and Deed of Exchange are not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, since the same was executed without any valuable consideration, which under Section 185 of Regulations No. 26, otherwise known as the "Revised Documentary Stamp Tax Regulations" conveyance without valuable consideration is not taxable. However, the acknowledgment on said Deed is subject to a documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. UN115-97 dated March 19, 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)