Atty. Francis M. Zosa

July 23, 2008 BIR RULING [DA-(I-008) 073-08] Sections 24 (D) (1) & 196; BIR Ruling No. DA-486-05 Atty. Francis M. Zosa Zosa & Quijano Law Offices Don Mariano Cui St. Fuente Osmea, Cebu City S i r : This refers to your letter dated April 9, 2008 requesting for a ruling exempting from the payment of capital gains tax the exchange of real properties based on a court order to correct an error. IaDcTC Documents show that sometime on September 4, 2000, a Decision was rendered by the Municipal Circuit Trial Court of Consolacion Caordova, 7th Judicial Region, Consolacion, Cebu in a Petition for Registration of Title in LR Case No. N-03, LRA Record No. N-67440. However, there was an error committed by the aforementioned Court in the designation of lots and their respective owners. Due to the aforesaid error, the titles issued by the Register of Deeds to owners Euclid Po and Magno Lauron were interchanged. In order to correct this error, the Court called the parties for a conference on December 14, 2007, wherein the parties agreed to just execute a Deed of Exchange to correct the error. On March 6, 2008, the Court issued an Order, as follows: "WHEREFORE, the Court in order to facilitate the exchange also motu proprio correct its error in the dispositive portion of this case, to wit: FOR LOT 21014-A FROM: MAGNO LAURON, Filipino, of legal age, and a resident of Tayud, Consolacion, Cebu, a his separate property, having inherited the same from his late father Basilio Lauron, TO: EUCLID C. PO, Filipino, of legal age, married to Joanna Po, and resident of Quezon City; FOR LOT 21014-C FROM: EUCLID C. PO, Filipino, of legal age, married to Joanna Po, and resident of Quezon City; TO: MAGNO LAURON, Filipino, of legal age, and a resident of Tayud, Consolacion, Cebu, a his separate property, having inherited the same from his late father Basilio Lauron, The Office of the Register of Deeds of Mandaue City is hereby Ordered to correct the titles of parties particularly OCT No. 1700 for Lot No. 21014-C with an area of 718 square meters to MAGNO LAURON; and OCT No. 2062 for Lot No. 21014-A with an area of 712 square meters to EUCLID PO, the respective rightful owners. SO ORDERED. xxx xxx xxx" In reply, please be informed that considering that the exchange transaction is without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely to correct the above mistake committed by the Court, this Office is of the opinion as it hereby holds that the aforementioned Deed of Exchange is not subject to the capital gains tax imposed under Section 24 (D) (1) of the 1997 Tax Code, as amended. cHCIEA Moreover, the Deed of Exchange is likewise not subject to the documentary stamp tax imposed under Section 196 of the same Code. However, the Acknowledgment on the said Deed is subject to the documentary stamp tax imposed under Section 188 of the same Code. 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 as null and void. AaSTIH Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service