BIR Ruling No. 196-15

June 10, 2015 BIR RULING NO. 196-15 PD 1529; 000-00 Cecilia Joyce Bascara No. 60, K 9th Street Kamias, Quezon City Gentlemen : This refers to your letter dated July 19, 2012, requesting exemption from capital gains and documentary stamp taxes on your exchange of properties. It is represented that Cecilia Joyce Bascara is the registered owner of a parcel of land, identified as Lot 5 of the consolidation subdivision plan (LRA) PCS-31612 approved as a non-subdivision project, being a portion of lots 42 & 43, sub-block 11, Psd-2202, LRC Record No. 15282 covered by Transfer Certificate of Title (TCT) No. 002-2012002054 with an area of sixty four square meter (64 sq.m.), more or less. On the other hand, Spouses Noel B. Ruzol and Joyce R. Ruzol is the registered owners of a parcel of land, identified as Lot 5 of the consolidation subdivision plan (LRA) PCS-31612 approved as a non-subdivision project, being a portion of lots 42 & 43, sub-block 11, Psd-2202, LRC Record No. 15282 covered by Transfer Certificate of Title (TCT) No. 284833 with an area of sixty four square meter (64 sq.m.), more or less. However, it was found out later that there was a mistake committed in the giving of title to Spouses Noel B. Ruzol and Joyce R. Ruzol pertaining to the lot of Cecilia Joyce Bascara. In order to correct the foregoing mistake or inadvertence, Cecilia Joyce Bascara and Spouses Noel B. Ruzol and Joyce R. Ruzol executed a Deed of Exchange wherein the parties agreed to exchange their respective properties with that of the other 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 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. . . . Pursuant to the above provisions, the Regional Trial Court (formerly Court of First Instance) has 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. Thus, it has the authority and power to hear and determine all questions arising from such applications or petitions. Thus, any change or amendment on the land titles or in the ownership of such properties should be done by seeking judicial relief since the properties are titled and registered in the names of the respective owners. CTIEac The determination of whether or not mistake or inadvertent error attended the titling of the subject properties necessitating the exchange by or reconveyance to the rightful owner thereof is an issue that is within the jurisdiction of the courts. Absent such determination, the herein exchange of properties without monetary consideration finds no basis in fact and in law to be exempt 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. Accordingly, this Office finds no factual and legal basis to grant your request. 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.