Atty. Herminia A. Bati

December 10, 2008 BIR RULING [DA-(I-042) 515-08] 24 (D) (1); DA-60-2004 Atty. Herminia A. Bati #5 15th Avenue, Murphy Cubao, Quezon City Madam : This refers to your letter dated March 31, 2008 requesting for a ruling on the tax consequences of the exchange of property between Sps. Rosalino C. Navarro & Cresencia M. Navarro and Sps. Alexander K. Ramos & Editha R. Ramos. It is represented that Sps. Navarro are the registered owners of a parcel of land, together with all the improvements thereon located at cor. Subd. R., and Avelino St., Barangay Andres de Bonifacio, Baguio City, covered by Transfer Certificate of Title No. T-58827 of the Registry of Baguio; that Sps. Ramos are the registered owners of a parcel of land, together with all improvements thereon, adjacent to the property owned by Sps. Navarro, covered by Transfer Certificate of Title No. T-71656 of the Registry of Deeds of Baguio; that the parties discovered that titles to the said properties owned by them have been unintentionally exchanged at the time the properties were sold by the original owners thereof, Sps. Cesar P. Villanueva & Asuncion E. Villanueva, with no intent to defraud anyone, but an honest mistake which was committed and not noticed by all parties thereof; and that herein parties agreed to execute a Deed of Exchange to rectify the discovered unintentional error/mistake, without any other consideration, monetary or otherwise, except the correction of the error above mentioned. 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 Sps. Navarro and Sps. Ramos is not subject to the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997. Moreover, 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. However, the notarial acknowledgement to the said Deed of Exchange is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the said Code. (DA-060-2004 dated Feb. 10, 2004) 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. IEAacS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service