BIR Ruling No. 401-13

November 7, 2013 BIR RULING NO. 401-13 PD 1529; 000-00 Mr. Raphael C. Fernandez 113 Main St., Aeropark Subd. Betterliving Subd., Paraaque City Sir : This refers to your letter dated March 8, 2012, requesting exemption from capital gains and documentary stamp taxes on your exchange of properties without monetary consideration. It is represented that Mr. Raphael C. Fernandez with Tax Identification Number 219-901-611-000, is the registered owner of 2 parcels of land, identified as Lot 13-A and Lot 13-B of the subdivision plan PSD-00-079597, being a portion of Lot 13, Block 1, (LRC) PSD-63927, LRC Record No. N-14977 covered by Transfer Certificate of Title (TCT) Nos. 010-2011000072 and 010-2011000071; that on March 31, 2011, Mr. Raphael C. Fernandez sold Lot 13-A covered by TCT No. 010-2011000072 to Mr. Edward A. Eguaras for P2,800,000.00; and that as a result, TCT No. 010-2011000072 was cancelled by TCT No. 010-2011001072. It is further represented that there was mistake in the delivery of title to Mr. Edward A. Eguaras such that instead of the title for Lot 13-B, it was the title for Lot 13-A that was delivered to him. Hence, Mr. Raphael C. Fernandez and Mr. Edward A. Eguaras executed a Deed of Exchange, swapping their respective real properties including all the improvements without 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. HTASIa 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. 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. 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.