BIR Ruling [DA-538-06]

September 7, 2006 BIR RULING [DA-538-06] 24 (D) (1); 27 (D) (5); DA-469-2004 Benito Tan Uy, Jr . 462 Jupiter Street, Del Rey Ville III Sta. Queteria, Caloocan City S i r : This refers to your letter dated May 19, 2006 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. It appears that a parcel of land was adjudicated to you as inheritance from your deceased father Benito Tan Uy, Sr.; that a parcel of land adjacent to your property was likewise adjudicated to your sister, Maria Cristina Uy Mateo, as her share of the estate; that when you received the Transfer Certificate of Title of the property evidencing your respective share in the estate, you found out that there was inadvertence during the preparation of the instrument adjudicating the properties to you and to your sister; and that a Deed of Exchange was executed between you and your sister dated February 17, 2006, without monetary consideration in order to rectify the said error and fully settle the possession of your share of properties. 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 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. Furthermore, the swapping of real properties is 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 P15.00 pursuant to Section 188 of the Tax Code of 1997. cSITDa 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service