Separation Pay - Tax-Exempt

January 15, 1993 BIR RULING NO. 027-93 SEPARATION PAY TAX-EXEMPT 50 (b) 000-00 027-93 XFGL Realty, Inc. 6-D 6th Floor, Maya Arcade Bldg., Cubao, Quezon City Attention: Mr . Jose Carlos D . de Villa Corp . Secretary This refers to your letter dated September 25, 1992 stating that you are the registered owner/developer of San Fernando Compound Subdivision located in Cotta, Lucena City; that a parcel of land in your said subdivision particularly Block 8, Lot 4 with an area of 300 square meters was resubdivided into two portions namely Block 8, Lot 4-A and Lot 4-B with each lot containing an area of 150 square meters; that Lot 4-A was sold in favor of Ms. Elena R. Loyola while the other half, Lot 4-B, was retained by you; that you paid the corresponding capital gains tax and documentary stamp tax due on said sale in favor of Ms. Elena R. Loyola and separate titles were issued on said lots TCT No. T-67678 for Lot 4-A and TCT No. T-67679 for Lot 4-B; that due to typographical error in the preparation of the sales documents relative to the said sale of Lot 4-A in favor of Ms. Elena R. Loyola, it was discovered that the lot actually being occupied by Ms. Elena R. Loyola is Lot 4-B and not Lot 4-A as indicated in the title of the lot TCT No. T-67678 registered in her name; that as a consequence, you and Ms. Elena R. Loyola executed on September 14, 1992, a Deed of Exchange wherein you both agreed to have Lot 4-B adjudicated in favor of Ms. Elena R. Loyola and Lot 4-A adjudicated in your favor in order to correct the titles of said lots. cdt Based on the foregoing representation and documents submitted, you now request in effect a ruling exempting from the payment of the corresponding taxes due on said exchange transaction. In reply, please be informed that considering the exchange transaction in question is without any monetary consideration, and considering further that the execution of the deed of exchange is merely to correct the mistake resulting from the typographical error committed in the preparation of the sales documents; this Office is of the opinion as it hereby holds that the aforementioned exchange of realties covering TCT No. T-67678 and TCT No. T-67679 between FGL Realty, Inc. and Ms. Elena R. Loyola on September 14, 1992 is not subject to the capital gains tax, imposed under Section 21(e) of the Tax Code nor to the creditable withholding tax imposed under Revenue Regulations No. 1-90. Furthermore, it is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code. However, the said deed shall be subject to the P3.00 documentary stamp tax imposed under Section 188 of the same Code. JOSE U. ONG Commissioner of Internal Revenue