Miguel R. Paterno

March 10, 2009 BIR RULING [DA-(I-009) 147-09] 24 (D) (1); 196; DA-127-2001; DA-158-2001; DA-155-2002; DA-159-2002 Miguel R. Paterno No. 31, Luna Street, Corinthian Gardens Mandaluyong Sir : This refers to your letter dated March 6, 2009 requesting for exemption from the payment of capital gains tax and documentary stamp tax on the swapping of real properties to correct a mistake and without consideration. Background Spouses Manuel V. Paterno and Ma. Regina Roces-Paterno (the "Parents") are the registered owner of two (2) parcels of land adjacent to each other covered by Transfer Certificates of Title (TCT) No. 92282-R ("Lot 1") and 92283-R ("Lot 2") having the same area of 600 square meters each. On March 25, 2008, the Parents sold Lot 1 to Spouses Miguel R. Paterno and Jean Marie Yap-Paterno and Manuel Roces Paterno, Jr. (the "Children") and accordingly executed a Deed of Absolute Sale for which the corresponding capital gains and documentary stamp taxes were paid. The Certificate Authorizing Registration was thereupon issued by the BIR and the sale was duly registered with the Registry of Deeds and TCT No. N-315180 was issued in favor of the Children. TCcIaA Subsequently, the Parents and Children noticed that the Deed of Absolute Sale erroneously stated that the property sold therein was Lot 3, and not Lot 1. Thus, TCT No. N-315180 was issued for Lot 3. Due to the foregoing mistake, the Children and Parents executed a Deed of Exchange on March 5, 2009 to rectify the above error wherein the parties have mutually agreed to exchange their respective properties whereby the Children conveyed Lot 3 to the Parents and the Parents, in turn, conveyed Lot 1 to the Children, without monetary value of any kind, each free from all liens and encumbrances. In reply, please be informed that since the exchange transaction is without any 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 realties by and between Spouses Manuel V. Paterno and Ma. Regina Roces-Paterno and Spouses Miguel R. Paterno and Jean Marie Yap-Paterno and Manuel Roces Paterno, Jr. is not subject to the 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. AaCcST Furthermore, the said swapping of real properties 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. ( BIR Ruling Nos. DA-159-2002 dated September 12, 2002 and DA-155-2002 dated September 11, 2002 ) 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. CHATEa Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service