Mr. Jerry R. Benavidez

September 5, 2008 BIR RULING [DA-(I-017) 199-08] 24 (D) (1); DA-146-2002 Mr. Jerry R. Benavidez Mira-Nila Homes Tandang Sora, Quezon City S i r : This refers to your letter dated June 26, 2008 requesting for exemption from the payment of capital gains tax relative to the swapping of real properties to rectify an error effected through a Deed of Exchange made without consideration. IEDaAc Documents submitted disclosed that Jerry R. Benavidez is the owner of a parcel of land situated at Anyatam, San Ildefonso, Bulacan covered by Transfer Certificate of Title No. T-266544 issued by the Register of Deeds of the Province of Bulacan, containing an area of 5,782 square meters more or less; that Reynaldo Tamayo is the owner of a parcel of land situated at Anyatam, San Ildefonso, Bulacan covered by Transfer Certificate of Title No. T-265342 issued by the Register of Deeds of the Province of Bulacan, containing an area of 5,994 square meters more or less; that on June 26, 2008, a Deed of Exchange was executed by and between Jerry R. Benavidez and Reynaldo Tamayo in order to correct the erroneous entry of their names with their actual occupancy. 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 to correct a mistake, this Office is of the opinion as it hereby holds that the above-stated exchange of realties by and between the aforesaid parties is not subject to the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended, and to the documentary stamp tax under Section 196 of the same Tax Code. However, the fair market value of 212 sq.m. which is the difference in the area received by Jerry R. Benavidez being transferred by Reynaldo Tamayo is subject to the capital gains tax pursuant to Section 24 (D) (1) of the same Tax Code, which provides 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 hereby 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. Moreover, pursuant to Section 196 likewise of the same Code, the aforestated value of 212 sq.m. is subject to the documentary stamp tax based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6 (E) of the same Code, whichever is higher. Moreover, the notarial acknowledgment to the aforesaid Deed of Exchange is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997, as amended. DCScaT 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