Magno Magno & Gingoyon

August 22, 2008 BIR RULING [DA-(I-015) 171-08] 24 (D) (1); 196; DA-656-2006 Magno Magno & Gingoyon 4th Floor, 6797 Security Land Building Ayala Avenue corner Rufino Street Salcedo Village, Makati City Attention: Atty. Ariel Salvador H. Magno Counsel Gentlemen : This refers to your letter dated January 26, 2006 requesting on behalf of your clients, Ms. Ma. Teresa Cancio-Suplico and Ms. Wilhelmina Joanne L. Cruz, 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. ICHcaD The facts are as follows: 1. Ms. Ma. Teresa Cancio-Suplico is the registered owner of a parcel of land located in Barangay South Triangle, Quezon City with an area of 750 sq.m. more or less covered by Transfer Certificate of Title (TCT) No. N-179706 issued by the Registry of Deeds of Quezon City, which lot is hereinafter referred to as "Lot 5-A"; 2. On the other hand, Ms. Wilhelmina Joanne L. Cruz, is the registered owner of the adjacent parcel of land located also in Barangay South Triangle, Quezon City with the same area of 750 sq.m. more or less and covered by Transfer Certificate of Title (TCT) No. N-198457 issued by the Registry of Deeds of Quezon City which lot is hereinafter referred to as "Lot 5-B"; Cruz' mother Sally F. Leyba was the former registered owner of the said lot having transferred her ownership thereto to her daughter, Ms. Wilhelmina Joanne L. Cruz, via a Deed of Donation; 3. Both lots were previously covered only by one title-TCT No. 120987 and co-owned by Ms. Ma. Teresa Cancio-Suplico and Sally F. Leyba. Sometime in 1997, an improvement was constructed on the property. This property was subsequently subdivided into two (2) lots with equal areas through a Subdivision Agreement between them which were covered by TCT Nos. N-179706 (Lot 5-A) and N-179707 (Lot 5-B) in the names of Ms. Ma. Teresa Cancio-Suplico and Sally F. Leyba, respectively. In the subdivision of the subject property, Ms. Ma. Teresa Cancio-Suplico, the lot transferred to and registered in her name was the lot wherein the improvement was standing on; 4. An error however, was committed in the Subdivision Agreement as it did not reflect their (Cancio-Suplico and Leyba) real intention of subdividing the property for "Lot 5-B" to be assigned, owned and registered to Ms. Ma. Teresa Cancio-Suplico and for "Lot 5-A" to be assigned, owned and registered to Sally F. Leyba; 5. The opposite was reflected in the Subdivision Agreement and as such "Lot 5-A" became the property owned by and registered in the name of Ms. Ma. Teresa Cancio-Suplico while "Lot 5-B" became the property owned by and registered in the name of Sally F. Leyba. As stated, as far as Ms. Ma. Teresa Cancio-Suplico was concerned, the property transferred to and registered in her name was the property which had an improvement not knowing that the improvement is actually standing on "Lot 5-B" instead of "Lot 5-A"; cCTESa 6. In the meantime, the property of Sally F. Leyba was transferred to and registered in the name of Ms. Wilhelmina Joanne L. Cruz. After a recent review of their properties and titles, Ms. Ma. Teresa Cancio-Suplico and Ms. Wilhelmina Joanne L. Cruz learned of the afore-described error and inadvertence and desire and hope to make the necessary corrections for the subject properties to be registered in the name of the true and rightful owners particularly to have "Lot 5-A" registered in the name of Ms. Wilhelmina Joanne L. Cruz and "Lot 5-B" registered in the name of Ms. Ma. Teresa Cancio-Suplico as originally intended and that both parties shall maintain possession of the properties they are presently in possession of. In reply, please be informed that since the exchange transaction is without 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 realty by and between Ms. Ma. Teresa Cancio-Suplico and Ms. Wilhelmina Joanne L. Cruz is not subject to 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. Furthermore, the said swapping of real property 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, as amended. (BIR Ruling No. DA-656-2006 dated November 07, 2006) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service