Tax Consequence of the Exchange of Property Between Two Persons

July 15, 1987 BIR RULING NO. 205-87 21 (e) 88-87 205-87 M a d a m : This refers to your letter dated June 19, 1987 requesting a ruling on the tax consequence of the exchange of your property with that of the property of Mr. Sotero Mongcog. It appears that on May 7, 1987, you and Mr. Sotero Mongcog executed a Deed of Exchange whereby your property identified as Lot No. 83-A will be exchanged for Lot No. 83-B which is owned by Mr. Sotero Mongcog; that in a Joint Affidavit executed by you and Mr. Sotero Mongcog both of you alleged that upon verification, the parcel of land designated as Lot No. 83-A which belongs to Mr. Sotero Mongcog was titled in your name while the parcel of land designated as Lot No. 83-B which belongs to you was titled in the name of Mr. Sotero Mongcog; that both parcels of land are identical and adjacent to each other with an area of 75 square meters each situated in Callejon 5, Sta. Ana, Metro Manila; that the erroneous designation of lot numbers to the said parcels of land was allegedly due to the mistake of the private land surveyor who did the survey and subdivision of the said lots; that both of you can no longer locate the whereabouts of said private land surveyor; and that the Deed of Exchange executed by you and Mr. Sotero Mongcog is allegedly for the purpose of correcting said error. adc Based on the foregoing facts, you are subject to the capital gains tax at the rate of 5% based on the fair market value of your property while Mr. Sotero Mongcog is likewise subject to the capital gains tax based on the fair market value of his property, pursuant to Section 21(e) of the Tax Code, as amended by Executive Order No. 37. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner