Dolmar Real Estate Development Corp.

November 19, 2008 BIR RULING [DA-(C-138) 446-08] 24 (D) (1) 188; DA-105-2000 Dolmar Real Estate Development Corp. Dolmar Bldg., 56 E. delos Santos Ave. Mandaluyong City Attention: Mr. Edward L. Tan Vice-President Gentlemen : This refers to your letter dated June 30, 2008 requesting in effect, for an exemption from taxes on the exchange of properties by and among Dolmar Real Estate Development Corp. (Dolmar for brevity) with Angela G. Lorenzo and Saturnino Lorenzo. Documents submitted show that Dolmar is a domestic corporation engaged into realty business and is the seller of two (2) parcels of land covered by Transfer Certificates of Title (TCT) Nos. T-222277 (M) and T-222276 (M) or "Subject Properties" situated at Brgy. San Vicente, Sta. Maria, Bulacan. The aforesaid lots were sold to Feliciano Lorenzo, married to Angela G. Lorenzo and Saturnino Lorenzo, married to Zenaida Lorenzo, respectively. However, the lots apportioned to the afore-named buyers were not suitable for the construction and improvement of a dwelling. For purposes of avoiding possible disputes, Angela G. Lorenzo and Saturnino Lorenzo have agreed to exchange the Subject Properties with those owned by Dolmar as evidenced by TCT Nos. T-487037 (M) and T-487038 (M) or "Replacement Properties" but without any monetary consideration, that will result in any way to an increase of wealth or income on either parties. In reply, please be informed that since there is no actual sale, exchange or voluntary disposition of real properties, but just a mere exchange without valuable consideration and considering that the conveyances were made merely for the purpose of replacing and substituting properties inappropriate for housing development, the herein exchange therefore, of properties is not subject to capital gains tax under Sections 27 (A) and 24 (D) (1) of the Tax Code of 1997, respectively. It is to be understood however, that any difference in the fair market value of the properties received by Dolmar is subject to tax pursuant to Sec. 24 (D) (1) of the same Tax Code, which states that 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 same Code, 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 assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trust. Likewise, any difference in the fair market value/gross selling price of the properties conveyed/transferred to said Angela G. Lorenzo and Saturnino Lorenzo as "Replacement Properties" shall be subject to income tax imposed under Sec. 27 of the same Tax Code. TcADCI Moreover, conveyances of realty to trustees or other persons without consideration is not taxable under Revenue Regulations No. 26 otherwise known as the Revised Documentary Stamp Tax Regulations. Thus, the Deeds of Exchange executed by the foregoing parties which was made without monetary consideration is not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code, as amended. However, the notarial acknowledgement to said deeds are subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Tax Code, as amended. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service