BIR Ruling [DA-693-99]

December 16, 1999 BIR RULING [DA-693-99] Sec. 24 (D) (1) DA-240-99 DA-693-99 Mr . Bonifacio U. Lucatin 7752 Doa Ninay Street Santos Compound Sucat, Paraaque City S i r : This refers to your undated letter stating that upon verification on the ground that it was found out that the vacant lot, one half () portion of which was bought by the Spouses Bonifacio U. Lucatin and Ma. Thelma C. Lucatin identified as Lot 25-A was erroneously retained by the Spouses Remegio Del Rosario and Elvira R. Del Rosario, while the other half of the lot where said Spouses Remegio and Elvira del Rosario Bodega Store stands identified as Lot 25-B was the one erroneously sold to the Spouses Bonifacio and Ma. Thelma Lucatin; that said error committed came about in the preparation of the subdivision plan dividing the said property due to the intended sale of the vacant lot, [one half () portion], identified as Lot 25-A; hence, the separate title was issued pertaining to Lot 25-A covered by TCT No. 135372 was registered in the name of Spouses Remegio Del Rosario and Elvira R. Del Rosario, while Lot 25-B covered by TCT No. 135371 where the Bodega store is situated was registered in the name of the Spouses Bonifacio U. Lucatin and Ma. Thelma C. Lucatin; and that said fact was confirmed in a Certification dated October 18, 1999 issued by the Barangay Captain of Barangay San Isidro, Paraaque City; and that in order to rectify the error, the parties agreed to exchange their respective Title, thus, Transfer Certificate of Title No. 135372 for Lot 25-A was transferred and conveyed by the Spouses Del Rosario in favor of the Spouses Lucatin, while Transfer Certificate of Title No. 135371 for Lot 25-B was transferred and conveyed by the Spouses Lucatin in favor of the Spouses Del Rosario. LibLex Based on the foregoing representations and documents submitted, you are now requesting exemption from the payment of capital gains tax on the exchange of properties by the Spouses Remegio Del Rosario and Elvira Del Rosario and the Spouses Bonifacio Lucatin and Ma. Thelma Lucatin. In reply, please be informed that under Section 24(D)(1) of the Tax Code of 1997, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of the Tax Code of 1997, whichever is higher, is imposed upon capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines, classified as capital asset, including pacto de retro sales and other forms of conditional sales, by individuals including estates and trusts. From the foregoing provisions of Section 24(D)(1) of the Tax Code of 1997, it would seem to appear that the Deed of Exchange executed by and between the Spouses Remegio Del Rosario and Elvira Del Rosario and the Spouses Bonifacio Lucatin and Ma. Thelma Lucatin is subject thereto. However, a close perusal of the same would reveal that the execution thereof was merely to rectify the error committed in the designation of the lots described in the subdivision plan of the property wherein TCT No. 135372 for Lot 25-A retained by the Spouses Remegio Del Rosario and Elvira Del Rosario pertains to the portion of the lot bought by the Spouses Bonifacio U. Lucatin and Ma. Thelma Lucatin while TCT No. 135371 for Lot 25-B where the Bodega Store is situated was issued in favor of Spouses Bonifacio and Ma. Thelma Lucatin which pertain on the other hand to that portion that is supposed to be retained by the Spouses Remegio and Elvira Del Rosario. Hence, this Office is of the opinion as it hereby holds that the execution of said Deed of Exchange is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 (BIR Ruling No. DA-240-99 dated April 15, 199) Moreover, the Deed of Exchange executed by the parties to effect such exchange is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 pursuant to Section 185 of Revenue Regulations No. 26, otherwise known as the Revised Documentary Stamp Tax Regulations. However, the acknowledgment on said Deed is subject to the documentary stamp tax of P15.00 prescribed under Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-240-99 dated April 15, 1999) LexLib This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group