Mrs. Nelly D. Leofando

August 22, 2007 BIR RULING [DA-464-07] 24 (D) (1); 196 DA-096-03 Mrs. Nelly D. Leofando #42 Road 3, Proj. 6 Quezon City M a d a m : This refers to your letter dated August 14, 2007 requesting exemption from the payment of capital gains and documentary stamp taxes on the swapping of real properties to correct a mistake and without monetary consideration. It appears that Spouses Danilo and Nelly Leofando are owners of two (2) adjacent lots with the same land area of 133.75 square meters, located in Alley 2, Project 6, Quezon City, with identical improvements found thereon; that one of the properties was sold to Victoria Coronel Churcher, married to John Churcher, and is now covered by Transfer Certificate of Title (TCT) No. N-304219 issued by the Registry of Deeds of Quezon City; that the other property, registered in the name of Spouses Leofando, is covered by TCT No. N-284606; that the property sold to Victoria Coronel Churcher was bought by the latter through a financing scheme provided by the PS Bank; that a mistake was made by the liaison officer of PS Bank tasked in the processing of the transfer of title of the above realty to Victoria Coronel Churcher in the submission of the documents in its Loans Department, resulting in the titling of the wrong property in favor of Mrs. Churcher; and that upon discovery of said mistake, a Deed of Exchange was made and executed on August 15, 2007 by and between Spouses Danilo and Nelly Leofando and Victoria Coronel Churcher, married to John Churcher, represented by Raquel Andino, purposely to correct the said inadvertence. In reply, please be informed that since the exchange transaction is without 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 realty by and between Spouses Danilo & Nelly Leofando and Victoria Coronel Churcher, married to John Churcher, is not subject to capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended, nor to the withholding tax imposed under Revenue Regulations No. 2-98, as amended. DIAcTE Furthermore, the said swapping of real property is not likewise 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, as amended. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service