BIR Ruling No. 181-11

June 7, 2011 BIR RULING NO. 181-11 Sec. 24 (D) (1) of the Tax Code of 1997, as amended; BIR Ruling No. 102-10; BIR Ruling No. DA-159-2002 Marieta C. Rosales Block 6, Lot 2, Kanlaon St., Montevista Heights Subd. East Road, Taytay, Rizal Madam : This refers to your letter dated January 31, 2011, requesting exemption from capital gains and documentary stamp taxes on your exchange of properties without monetary consideration. aHATDI It is represented that on December 16, 2010, a simultaneous Deed of Absolute Sale was executed by Spouses Maximiano S. Melad and Isabel C. Melad as represented by Marietta C. Rosales whereby they transferred their ownership over a parcel of land, designated as Lot 2-B-3 containing an area of eighty two (82) sq.m. covered by Transfer Certificate of Title (TCT) No. 004-2010001329 to Jebee D. Solis and Lot 2-B-1 containing an area of eighty two (82) sq.m. covered by Transfer Certificate of Title (TCT) No. 004-2010001327 to Katherine Grace P. Rodulfa. However, it was found out that the property sold to Jebee D. Solis should have been Lot 2-B-1 and Katherine Grace P. Rodulfa should have been Lot 2-B-3. In order to execute/give effect the true intention of the parties, Jebee D. Solis and Katherine Grace P. Rodulfa voluntarily agreed to exchange their respective properties by virtue of a Deed of Exchange in order to correct the mistake committed by sheer oversight and inadvertence by simply swapping their respective titles to the properties without any monetary consideration; that as early as January 20, 2011 they filed the intention with the Legal Division of Quezon City to rectify the error committed. 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 between Jebee D. Solis and Katherine Grace P. Rodulfa 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 and BIR Ruling No. 102-10 dated October 12, 2010) 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. EHSIcT Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue