BIR Ruling No. 129-15

April 30, 2015 BIR RULING NO. 129-15 PD 1529; BIR Ruling No. 401-2013 Lerma U. Peralta 1413 Alegre St., Tondo, Manila Madam : This refers to your letter dated November 10, 2011 duly indorsed by Revenue Region No. 6-Manila, requesting exemption from capital gains and documentary stamp taxes on your exchange of properties without monetary consideration. It is represented that Transfer Certificate of Title (TCT) No. 100724 was the consolidation of Lots 10, 11 and 12, Block 2824, issued in the names of Teofilo, Amalia, and Aristeo, all surnamed Raymundo and Resurreccion Quiambao; that on February 17, 1993, Amalia Raymundo y Ortiz caused the subdivision of the lot allocated to her identified as Lot 4, (LRC) Pcs-18259 into five (5) lots identified as Lots No. 4-A to 4-E, inclusive under a subdivision plan Psd-003901-025189-D duly approved by the Regional Technical Directors for Land; that on July 22, 1993, Amalia Raymundo y Ortiz sold Lot 4-B of the subdivision plan Psd-003901-025189-D, being a portion of Lot 4, (LRC) Pcs-18259, L.R.C. Record No. 219 containing an area of fifty & 65/100 (50.65) sq.m. to Normita Timbang married to Danilo Bonifacio, who was not aware then that the lot delivered to her by the owner-seller and which she had been actually occupying was not the lot described in her TCT No. 211843 but instead Lot 4-C of the said subdivision plan; that on May 18, 1995, Spouses Normita Timbang and Danilo Bonifacio executed Deed of Absolute Sale, whereby the spouses transfer and convey to Lerma U. Peralta Lot described in TCT No. 211843. On the other hand also on July 22, 1993, Amalia Raymundo y Ortiz sold to the Spouses Eduardo Ramos and Rosalinda M. Ramos the lot identified as Lot 4-C of the subdivision plan Psd-003901-025189-D, being a portion of Lot 4, (LRC) Pcs-18259, L.R.C. Record No. 219 containing an area of fifty seven & 90/100 (57.90) sq.m. who were likewise not aware that the lot delivered to them was Lot 4-B instead of Lot 4-C. In order to correct the foregoing mistake or inadvertence, Lerma U. Peralta and Spouses Eduardo Ramos and Rosalinda M. Ramos thru their Attorney-in Fact, Rosela Ramos, executed a Deed of Exchange whereby it is stated therein that Lerma U. Peralta and Spouses Eduardo Ramos and Rosalinda M. Ramos thru their Attorney-in Fact, Rosela Ramos swapped their respective properties by transferring the title of the property held by Lerma U. Peralta to Spouses Eduardo Ramos and Rosalinda M. Ramos and vice versa. The said exchange was made without any monetary consideration. In reply, please be informed that Section 2 of Presidential Decree (PD) 1529 1 partly provides: Sec. 2. Nature of registration proceedings; jurisdiction of courts. Judicial proceedings for the registration of lands throughout the Philippines shall be in rem, and shall be based on the generally accepted principles underlying the Torrens System. Courts of First Instance (now Regional Trial Courts) shall have exclusive jurisdiction over all applications for original registration of title to lands, including improvements and interests therein, and over all petitions filed after original registration of title , with power to hear and determine all questions arising upon such applications or petitions . . . . (emphasis supplied) The above provision has conferred upon the Regional Trial Court (formerly Court of First Instance) the authority to act not only on applications for original registration of title to land but also on all petitions filed after the original registration of title, with power to hear and determine all questions arising upon such applications or petitions. ( Ligon vs. Court of Appeals, et al. ; G.R. No. 107751 dated June 1, 1995) acEHCD Section 108 of P.D. 1529 likewise provides that any error, mistake or omission committed in entering a certificate of title or of any memorandum thereon may be corrected only upon order of the court. Thus, any change or amendment on the land titles or in the ownership of properties should be done by seeking judicial relief since the properties are titled and registered in the names of the respective owners. (BIR Ruling No. 401-2013 dated November 7, 2013) The determination of whether or not mistake or inadvertent error attended the titling of the subject properties necessitating the exchange or conveyance thereof to the rightful owner is an issue that is within the jurisdiction of the courts. Absent such determination, there is as yet no basis in fact and in law to exempt the exchange of properties from CGT and DST imposed by Sections 24 (D) and 196 of the Tax Code, as amended. Based on the foregoing, your request for exemption from CGT and DST is hereby denied for lack of factual and legal basis. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. AMENDING AND CODIFYING THE LAWS RELATIVE TO REGISTRATION OF PROPERTY AND FOR OTHER PURPOSES.