BIR Ruling No. 102-10

October 12, 2010 BIR RULING NO. 102-10 Sections 24 (D) (1) & 196 of the Tax Code of 1997; Revenue Regulations No. 2-98; BIR Ruling No. DA-370-06; BIR Ruling No. DA-159-02; BIR Ruling No. DA-155-02; BIR Ruling No. DA-127-01; BIR Ruling No. DA-158-01; BIR Ruling No. [DA-(I-004) 101-09] Ms. Cleofe T. Soliven No. 113 Jasmin Street United Paraaque Subdivision IV Barangay Marcelo Green Paraaque City Madam : This refers to your letter dated June 18, 2010 stating that on June 24, 1994, you bought a house and lot located at No. 113 Jasmin Street, UPS-IV (Lot 5 Block 11, UPS-IV), Barangay Marcelo Green, Paraaque, covered by TCT No. 82820; that you even availed of the PCIB Home Loan package to finance the said purchase and used the said property as collateral for the said loan; that on November 21, 2006, you were summoned by the Office of the Lupong Tagapamayapa of Barangay Marcelo Green, bearing Barangay Case No. 2006-2070, to attend a hearing, that the above-mentioned property was constructed on Lot No. 6 instead of Lot 5; that on November 23, 2006, you have verified with the Paraaque City Hall's Tax Mapping Division and the Registry of Deeds as to the truth and validity of the complaint; that per records of the Paraaque City Hall Tax Mapping Division disclosed that indeed a mistake in the construction of the above-mentioned property was committed; and to correct the error, a Deed of Exchange dated June 25, 2010 was executed by Florencia B. Ilagan and yourself, whereby the former as the registered owner of a parcel of land consisting of 300 square meters and located at 113 Jasmin Street, UPS-IV (Lot 6, Block 11, UPS-IV) and covered by TCT No. 55508 issued by the Registry of Deeds for Paraaque City, transferred and exchanged the said property for the property owned by you and covered by TCT No. 82820 likewise issued by the Registry of Deeds for Paraaque City, likewise, consisting of 300 square meters. SIcCEA Based on the foregoing representations, you now request for a ruling that the exchange of properties due to mistake is exempt from the payment of capital gains tax and the corresponding documentary stamp tax. In reply thereto, 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 you and Florencia B. Ilagan is not subject to the capital gains tax imposed under Section 24 (D) (1) or the Tax Code of 1997, nor to the withholding tax imposed under Revenue Regulations No. 2-98, as amended. Furthermore, the said exchange of the said properties is likewise not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgment of 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-159-2002 dated September 12, 2002) 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, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue