Mr. Elmer P. Battung

April 20, 2010 BIR RULING [DA-(I-003) 052-10] Sec. 24 (D); 196; BIR Ruling No. 027-93; UN-293-95; UN-418-95; DA-268-97; DA-027-03 Mr. Elmer P. Battung Ms. Maribel P. Battung Andrada 11B Mapagkumbaba St., Sikatuna Village, Quezon City Sir/Madam : This refers to your letter dated September 25, 2009 requesting exemption of taxes arising from the exchange of real properties between you and Nenita Jusay Casareno. Documents submitted disclose that your father, the late Florencio Battung has purchased half of Lot 15 located at No. 11 Mapagkumbaba St., Sikatuna Village, Quezon City; that TCT No. 175092 covering 210 sq.m. was previously registered in the name of Florencio Battung, married to Juliana Battung and eventually transferred as TCT NO. 61813 to your names as registered owners thereof; that the other half of the lot, also consisting of 210 sq.m., located in the same address was purchased by Adolfo Casareno ("Casareno" for brevity) from one Alfredo Lopez; that Casareno was issued TCT No. 175091 as its registered owner; that at the time of purchase by Casareno, Florencio Battung's residence has already been constructed on the adjoining lot; that it was subsequently discovered that your residence and that of Casareno were built on each other's lots; that a civil case for quieting of title was initiated to settle the issue; that on June 8, 2000, the Regional Trial Court of Quezon City, Branch 82 after trial, rendered judgment as follows: HESAIT "WHEREFORE, premises considered, judgment is hereby rendered ordering the parties herein to execute a Deed of Exchange, sufficient in form and substance, whereby for and in consideration of the mutual conveyance therein effected, the plaintiffs shall absolutely convey to the defendant their rights and title to and ownership of the lot described in and covered by TCT No. 128209 issued by the Register of Deeds of Quezon City in their names on March 25, 1995, and the defendant in turn shall absolutely convey to the plaintiffs his rights and title to and ownership of the lot described in and covered by TCT No. 61613 (175092) issued by the Register of Deeds of Quezon City on March 10, 1972. Upon presentation of the aforesaid Deed of Exchange, the Register of Deeds of Quezon City shall cause the cancellation of both their respective names, separate new titles corresponding to the area whereon their respective residential houses at present located, pursuant to this Decision and to the Deed of Exchange above-ordered, the legal fees for which shall be paid by the parties herein in equal shares. Upon presentation of the aforesaid new and corrected titles, the City Assessor of Quezon City shall make the proper adjustments in the records of his Office to effect and reflect the change of the owners of the lots herein involved as above-ordered, crediting to the new owner of each lot payment of realty taxes made by the previous owner thereof; provided, that each of the parties herein shall have first paid or updated payments of corresponding realty taxes up to and including the year 1999." and that a Deed of Exchange was executed by and between Nenita Jusay Casareno, Maribel Battung and Elmer Battung on August 17, 2009 pursuant to the order of the Court. In reply, please be informed that the court's Decision (as stated above) ordered the parties therein to execute a Deed of Exchange. By 'parties', the court is referring to the parties of the Civil Case for quieting of title, to wit: Elmer P. Battung and Maribel P. Battung-Andrada as plaintiffs and Adolfo Casareno as defendant. Therefore, the Deed of Exchange should be in the names of the foregoing. THCSEA Submitted documents reveal that the 210 sq.m. parcel of land covered by TCT No. 128209 (Lot 15-A) is registered in the names of Elmer P. Battung and Maribel P. Battung while the 210 sq.m. land covered by RT-61813 (Lot 15-B) is registered under the name of the late Adolfo Casareno. Since is no showing that the Estate of the late Adolfo Casareno has been settled and subjected to estate taxation, the title to the property to be received in exchange should be issued in the name of Adolfo Casareno, not in the name of Nenita Jusay Casareno. A direct transfer of the real property in the name of Nenita Jusay Casareno would amount to an evasion of the payment of estate taxes on the land that is part of her husband's estate. The title resulting from the exchange of properties should still be in the name of Adolfo Casareno as its registered owner which should properly belong to his estate. WHEREFORE, in view of the decision of the trial court in Civil Case No. Q-98-34012 and subject to the execution of a Deed of Exchange by and between Elmer P. Battung, Maribel P. Battung-Andrada and Adolfo Casareno, as represented by the administrator of his estate, this Office is of the opinion that the exchange transaction is neither subject to the capital gains tax, imposed under Section 24 (D)(1) of the Tax Code of the 1997, nor to the withholding tax imposed under Revenue Regulations No. 2-98, as amended, considering that properties to be exchanged are of the same area, adjoining each other and is without any monetary consideration. ( BIR Ruling No. 027-93 dated January 15, 1993; BIR Ruling No. UN-293-95 dated August 10, 1995; BIR Ruling No. UN-418-95 dated November 27, 1995; BIR Ruling No. DA-268-97 dated August 11, 1997; BIR Ruling No. DA-027-03 dated January 30, 2003 ) Furthermore, the said exchange 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 acknowledgement to the said deed is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. ( BIR Ruling No. DA-068-98 dated March 2, 1998 ). 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. cEATSI Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service