BIR Ruling No. 031-12

January 16, 2012 BIR RULING NO. 031-12 BIR RULING [DA-(I-007) 082-10]; 24 (D) (1); 196; 188; [DA-(I-033) 371-08]; [DA-(I-032) 363-08]; [DA-(I-022) 011-08] Hayzel D. Pena 824 8th Street Extension Golden Gate Subdivision Talon 3, Las Pias City Angela Mildred Serneo Block 5, Lot 8 21st Street Golden Gate Subdivision Talon 3, Las Pias City Mesdames : This refers to your letter dated May 7, 2011, requesting for an exemption from capital gains tax and documentary stamp tax on the rectification and correction of entries in your respective titles to real properties. It is represented that the two (2) lots which are subject of the Deed of Exchange between the Spouses Aldrin S. Pena and Hayzel D. Pena, registered owners of Lot 28-B of the subdivision plan (LRA) PSD-349937 with TCT No. 005-2010002974 and the Spouses Demetrio P. Serneo and Angela Mildred C. Serneo, registered owners of Lot 28-A of the subdivision plan (LRA) PSD-349937 with TCT No. 005-2010003088 were originally acquired by the first owners/sellers from Response Realty & Development Corporation, the developer of the Golden Gate Subdivision in which the lots owned by the parties are located; that the Spouses Aldrin S. Pena and Hayzel D. Pena acquired their lot from the spouses Domingo P. Maglanque and Violeta L. Maglanque, who bought the same lot from Corazon D. Blanco, who acquired the same lot from Response Realty & Development Corporation. On the other hand, the Spouses Demetrio P. Serneo and Angela Mildred C. Serneo acquired their lot from Aurora M. Aserit, who acquired the same lot from Response Realty & Development Corporation; that Aurora M. Aserit bought Lot 28-B of the subdivision plan (LRA) PSD-349937 from the developer of the Golden Gate Subdivision, Response Realty & Development Corporation and the technical description of Lot 28-B in acknowledgement receipt was correct, but when the title thereof was transferred into the name of Aurora M. Aserit a wrong technical description was annotated as Lot 28-A of the subdivision plan (LRA) PSD-349937 instead of Lot 28-B of the subdivision plan (LRA) PSD-349937 which is the correct technical description of the lot Aurora M. Aserit bought and occupied; that the Spouses Aldrin S. Pena and Hayzel D. Pena realized that the technical description of the property appearing in their respective title did not match the actual description of their property when they hired a geodetic engineer for the intended construction of their house, in other words, Lot 28-B of the subdivision plan (LRA) PSD-349937 with TCT No. 005-2010002974 issued in the name of the Spouses Aldrin S. Pena and Hayzel D. Pena bears the technical description of the property owned by Spouses Demetrio P. Serneo and Angela Mildred C. Serneo and Lot 28-A of the subdivision plan (LRA) PSD-349937 with TCT No. 005-2010003088 in the name of Spouses Demetrio P. Serneo and Angela Mildred C. Serneo describes the property owned and occupied by the Spouses Aldrin S. Pena and Hayzel D. Pena; that obviously there was a mistake in the technical description embodied in each other's titles; that both registered owners executed a document before Notary Public Atty. Florentino M. Alumbres expressing their intention to correct the mistake; and that while the document executed was a Deed of Exchange, in truth and in fact, there is no exchange of property but rather a mere rectification and correction of entries in their respective titles to truly reflect the technical description of the properties they own and possess. cDCaTS 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 by the Spouses Aldrin S. Pena and Hayzel D. Pena and the Spouses Demetrio P. Serneo is merely to correct and rectify the entries made on their respective titles, the same is not subject to the 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 exchange 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 is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA 068-98 dated March 2, 1998) This ruling is issued on the basis of the foregoing representations. 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, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue