Mr. Mauricio D. Tuazon

October 22, 2008 BIR RULING [DA-(I-030) 327-08] Sections 24 (D) (1) & 196; BIR Ruling Nos. DA-486-05 Mr. Mauricio D. Tuazon c/o Lot 16, Block 5 Del Mundo Subdivision Llano Road, Novaliches Kalookan City S i r : This refers to your letters dated April 14, 2008 and October 3, 2008 requesting on behalf of Spouses Cosme Dela Cruz & Miranda Tuazon-Dela Cruz ("Sps. Dela Cruz" for brevity) for a ruling exempting from the payment of capital gains and documentary stamp taxes the exchange of their real properties in order to correct an error. As represented, Sps. Dela Cruz are the absolute owners of a parcel of land (Lot 16, Blk. 5 situated in Del Mundo Subdivision, Bo. Llano, Novaliches, Kalookan City) covered by Transfer Certificate of Title No. 286665 of the Registry of Deeds of Kalookan City containing an area of 240 square meters, more or less. Likewise, Sps. Dela Cruz are the owners of a Bungalow house built on the adjacent Lot No. 17, Block 5 constructed sometime in 1983. On the other hand, Patricio V. Llonillo with residence and address at 2520 Calleion N.R. Fernandez St., Gagalangin, Tondo, Manila is the absolute owner of a parcel of land described as Lot 17, Blk. 5 situated in Del Mundo Subdivision, Bo. Llano, Novaliches, Kalookan City and covered by Transfer Certificate of Title No. 37683 of the Registry of Deeds of Kalookan City also containing an area of 240 square meters, more or less in which Sps. Dela Cruz built their house. CDAHaE Sometime in 1983, there was only one (1) house built in the entire Block 5 of the subdivision plan in Del Mundo Village. The aforesaid house is owned by Mr. Johnny Maomay and is situated on the left side at far length from where the then proposed bungalow house of Sps. Dela Cruz was to be built. The specific spot where the house was to be constructed was identified and pinpointed, by Mr. Pio Cristal, the subdivision caretaker and homeowner, to the Development Bank of the Philippines' (DBP) project engineer. Relying on the technical expertise of the DBP project engineer, the authorized personnel from the City Engineer's Office of Caloocan, as well as the personal knowledge and familiarity of Mr. Cristal, the bungalow house with fence at Lot 16, Block 5 of the Del Mundo Subdivision, Novaliches, Caloocan was constructed. On April 10, 2008, Sps. Dela Cruz and Patricio V. Llonillo executed a "Deed of Exchange of Parcels of Land" in order to correct the above errors. In reply, please be informed that considering that the exchange transaction in question is without any monetary consideration, and considering further that the execution of the "Deed of Exchange of Parcels of Land" is merely to correct the above mistake committed by the DBP project engineer, the authorized personnel from the City Engineer's Office of Caloocan and Mr. Cristal, the subdivision caretaker and homeowner, 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. Moreover, the "Deed of Exchange of Parcels of Land" 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. CIAHDT Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service