Ms. Nenita Malaga-Manalo

December 7, 2007 BIR RULING [DA-631-07] 24 (D) (1); 196 DA-096-03 Ms. Nenita Malaga-Manalo Block 3, Lot 5 Hansuyin Village Bo. Talon, Las Pias City M a d a m : This refers to your letter dated October 27, 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. aSTAIH It appears that Adelina Malaga is the registered owner of Block 3 Lot 5 Hansuyin Village, Bo. Talon, Las Pias City, covered by Transfer Certificate of Title No. T-38458; that Milagros Delos Reyes likewise is the registered owner of Block 3 Lot 8 Hansuyin Village, Bo. Talon, Las Pias City, covered by Transfer Certificate of Title No. 81408; that Adelina Malaga erroneously built her house on the lot of Milagros Delos Reyes and the latter likewise erroneously built her house on the lot of the former; that since both the subject lots where each party both erroneously built their family homes have exactly the same area and value, a Deed of Exchange was executed between them without monetary consideration, dated July 31, 2007 purposely to correct the said error and 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 Adelina Malaga and Milagros Delos Reyes, 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. AaHcIT 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. AcISTE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service