BIR Ruling [DA-486-05]

November 29, 2005 BIR RULING [DA-486-05] Section 24 (D) (1); BIR Ruling Nos. 027-93 & DA-173-03 Mr. Manuel M. Mina Mr. Alexander M. Mina AFP Village, Silangan San Mateo, Rizal Gentlemen : This refers to your letter dated November 11, 2005 requesting a ruling exempting both of you from the payment of capital gains and documentary stamp taxes due on the exchange of your respective real properties in order to correct an error. You stated in your letter, the pertinent portion of which is as follows: "xxx xxx xxx The undersigned, Manuel M Mina, an absolute owner of a parcel of land covered by Transfer Certificate of Title No. 452738 situated at Blk. 21, Lot 2, Bo. Nangka, Municipality of San Mateo, Province of Rizal, which was purchased from the AFP Retirement and Separation Benefits System (AFP RSBS). That recently I constructed a house in my property (Blk. 21, Lot 2) and subsequently applied for a Housing Loan at Pag-Ibig. When Pag-Ibig investigated the property, it shows that it was not my property. So I went to AFP RSBS to verify the situation. In their subdivision plan, it shows that my property is Bl. 21, Lot 1 and Blk 21, Lot 2 is for my brother, Alexander M. Mina. The same undersigned, Alexander M. Mina, an absolute owner of a parcel of land covered by Transfer Certificate of Title No. 223893 situated at Blk 21, Lot 2, Bo. Nangka, Municipality of San Mateo, Province of Rizal. xxx xxx xxx" In reply, please be informed that considering that the exchange transaction in question is without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely to correct the mistake resulting from the typographical error committed in the preparation of the sales documents, this Office is of the opinion as it hereby holds that the aforementioned Deed of Exchange is not subject to the capital gains tax imposed under Section 24(D)(1) of the 1997 Tax Code. (BIR Ruling No. 027-93 dated January 15, 1993 and BIR Ruling No. DA-173-03 dated June 3, 2003.) Finally, the Deed of Exchange is likewise not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code. However, the Acknowledgment on the said Deed is subject to the documentary stamp tax imposed under Section 188 of the same Code. aDHScI 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 as null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service