BIR Ruling [DA-469-04]

September 3, 2004 BIR RULING [DA-469-04] 24 (D) (1), 196 DA-340-2004 Mr. Jose I. Hernandez, Jr. Unit 418, Fair Trade Commercial Center Rm. 23 Ortigas Ave. Extension, Cainta, Rizal Gentlemen : This refers to your letter dated March 17, 2004 requesting for exemption from the payment of capital gains and documentary stamp taxes relative to the swapping of real properties to rectify an error effected through a Deed of Exchange. Documents submitted shows that Majorical Realty and Development Corporation (MRDC) is engaged in the development and selling of fealties and is the registered owner of two (2) parcels of land covered by Transfer Certificates of Title (TCT) Nos. PT-105835 and PT-105836 located at Bo. Santolan, Pasig City; that pursuant to a Deed of Absolute Sale dated August 1, 2001, executed by the herein parties before Notary Public Gregorio Ariola, Jr. of Cainta, Rizal and entered in his notarial registry as Doc. No. 181; Page No. 37; Book No. CXXVI; Series of 2001, the parcel of land covered by TCT No. PT-105835 was sold by MRDC to Marcelina A. So; that the true intent of the herein parties in entering into the said agreement is for the sale of a parcel of land covered by TCT No. PT-105836, however, through inadvertence during the preparation of the aforesaid instrument, the parcel of land covered by TCT No. 105835 was made the object of the above-stated Deed instead of the parcel of land covered by TCT No. PT-105836; and that in order to rectify the said error, the parties deemed it proper to fully settle possession over the properties by executing a Deed of Exchange. In reply, please be informed that since the exchange transaction is without any monetary consideration, and considering further that the execution of the Deed of Exchange was merely for the purpose of correcting the mistake above-mentioned, the exchange of realties by and between the aforestated parties is not subject to the capital gains tax imposed under Sections 24(D)(1) or 27(D)(5) of the Tax Code of 1997, or creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, whichever is applicable. DHCSTa Furthermore, the swapping of real properties are not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said Deed of Exchange is subject to the documentary stamp tax of P 15.00, pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-340-2004 dated June 23, 2004) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service