Tax Consequence of the Exchange of Residential Lot for an Adjacent Residential Lot

August 12, 1985 BIR RULING NO. 125-85 34-h 000-00 125-85 S i r : This refers to your letter requesting a ruling on the tax consequence of the exchange of your residential lot for an adjacent residential lot owned by Mr. Pablo H. Espiritu, Jr. both located in Phase VII Pasig Green Park Village, Cainta, Rizal. It is represented that you purchased from Solid Homes, Inc. Lot 13, Block I of the consolidation and subdivision plan Pcs-04-000304 consisting of two hundred three (203) square meters covered by Transfer Certificate of Title No. 529491, located at Phase VII, Pasig Green Park Village, Cainta, Rizal having a fair market value of P40,600.000 based on a unit price of 200.00 per square meter, that adjacent to your lot is Lot 12 consisting of two hundred one (201) square meters covered by Transfer Certificate of Title No. 528314 and has a fair market value of P40,200.00 also at P200.00 per square meter, owned by Mr. Pablo H. Espiritu, Jr.; that due to an error in relocation you had your house constructed on Lot No. 12 which is owned by Mr. Espiritu; and that to settle matters extra-judicially you and Mr. Espiritu executed a Deed of Exchange of said properties on March 23, 1985. In reply, please be informed that the net capital gains realized from the sale, exchange or other disposition of real property by a citizen of the Philippines or resident alien individuals shall be subject to the final income tax at the rates prescribed by Section 34(h) of the Tax Code, as amended by Batas Pambansa Blg. 37 and implemented by Revenue Regulations No. 8-79. Based on the foregoing facts, Mr. Espiritu is subject to 10% capital gains tax imposed by Section 34(h) of the Tax Code on the income of P400.00 realized by him on account of the exchange of his real property consisting of 201 square meters for your property which is 203 square meters. aisadc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner