BIR Ruling [DA-505-98]

November 18, 1998 BIR RULING [DA-505-98] Ms. Nemencia D. Narvaez Building 2, Unit 5 Suzette Nicolas St., BF Resort Village Las Pias, Metro Manila M a d a m : This refers to your letter dated September 3, 1996 requesting for exemption from the payment of capital gains tax and documentary stamp tax relative to the swapping of your townhouse unit with the townhouse unit belonging to a certain Nena U. Paner in order to rectify the mistake committed by the National Home Mortgage Finance Corporation (NHMFC) of interchanging the subject townhouse units in their records. cdLL Documents submitted to this Office disclosed that you are residing at the above-mentioned condominium unit, specifically Unit 2, Building 5, Suzette Nicolas St., BF Resort Village, Las Pias, as certified by Bgy. Chairman of Barangay Talon Dos; that the aforesaid unit was the same unit subject of the Deed of Absolute Sale between the National Home Mortgage Finance Corporation (NHMFC) and Nena U. Paner; that as per record with the Home Development Mutual Fund, the same unit was registered in your name; that it was actually registered in Ms. Paner's name per Condominium Certificate of Title No. 1241; that, while the aforementioned documents disclosed the ownership of Nena U. Paner of the aforesaid unit, reality proved otherwise; that Nena U. Paner is living and actually occupying Unit 6, Building 5 of the Village; that this unit, viz, Unit 6, Building 5 was the same unit accepted by you on August 2, 1983 from the Land Investment Trust and which is also covered by a real estate mortgaged with Maunlad Savings and Loan Association; that the same was covered by Condominium Certificate of Title No. 1635 and Tax Declaration No. D-014-04687, both recorded in your name; that this interchange was brought to the attention of the NHMFC in 1985 to rectify the inadvertent processing and registration made by them; that on March 27, 1996, a Joint Deed of Exchange was entered between you and Nena U. Paner, whereby you both agreed for records purposes to interchange or change the units originally acquired to the units actually occupied by each of you; and that both of you posed no objection whatsoever with regard to the said exchange. In reply, please be informed that pursuant to then Section 21(c) of the Tax Code, as amended [now Section Sec. 24(D) 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 5% (now 6%) based on the gross selling price or fair market value prevailing at the time of the sale, whichever is higher. Such being the case, parties to the exchange of real properties located in the Philippines classified as capital assets are subject to the 5% (now 6%) capital gains tax based on the gross selling price or the fair market value/zonal value prevailing at the time of sale/exchange, whichever is higher (BIR Ruling NO. 201-87). Considering, however, that, in the instant case, the corresponding income taxes had already been paid when the aforesaid condominium units (Unit 5, Building 2 and Unit 6, Building 5) were transferred and registered in your and Nena U. Paner's names coupled with the fact that through inadvertence in the preparation of the documents (i.e., Deed of Sale and Certificate of House Acceptance), the said properties were interchanged, such that Unit 5, Building 2 covered by CCT No. 1241 which you applied for and actually occupied thereafter was registered in the name of Nena U. Paner; and Unit 6, Building 5 covered by CCT No. 1635, which was applied for and occupied thereafter by Nena U. Paner, was registered in your name, this Office is of the opinion that you and Nena U. Paner are no longer liable to pay the capital gains tax imposed under then Section 21(e) of the Tax Code, as amended, and the documentary stamp tax prescribed under Section 196 of the same Code, on the exchange executed by you and Nena U. Paner of the aforesaid condominium units to rectify the errors inadvertently committed by the Vendor-corporation in the preparation of the documents conveying the same in your and Nena U. Paner's favor. (BIR Ruling No. 008-95 dated January 16, 1995) 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)