BIR Ruling No. 470-11

December 5, 2011 BIR RULING NO. 470-11 Sec. 24 (D) (7), Sec. 196 NIRC; BIR Ruling No. 154-2010 Cynthia Alda R. Cruz No. 23, Anonas St., Project 2 Quezon City Ma'am : This refers to your letter dated February 9, 2011, requesting for a confirmation that an exchange of real property between you and your brother, Andres S. Raola, without monetary consideration and only for the purpose of correcting the mistake on your respective titles is exempt from the payment of capital gains tax and documentary stamp tax. Documents submitted show that you and your brother were co-heirs to a certain parcel of land located in Brgy. Culiat, Quezon City; that said parcel of land was later on subdivided and allocated in equal shares between you and your brother as part of your inheritance; that at the time when you took possession of your respective allocations, the draft of the subdivision plan was not yet complete so that when the titles to the lots were issued, it appeared that there was a mistake in the titling of the lots. The lot that is being occupied by your brother was registered in your name under Transfer Certificate of Title (TCT) No. N-279112, identified as lot 10-A-1 of the subdivision plan Psd-00-067589, being a portion of lot 10-A (LRC) Psd-288688, while the lot that you are occupying was registered in the name of your brother under TCT No. N-279113, identified as lot 10-A-2 of the subdivision plan Psd-00-067589, being a portion of lot 10-A (LRC) Psd-288688. Thus, to rectify the mistake, you and your brother agreed to enter into a deed of exchange without any monetary consideration. In reply, please be informed that since there is no actual sale, exchange or voluntary disposition of real properties, but just a mere exchange without valuable consideration and considering that the conveyances were made merely for the purpose of correcting a mistake, the herein exchange of properties is therefore, not subject to capital gains tax under Section 24 (D) (1) of the Tax Code of 1997. ( BIR Ruling No. 154-2010 dated December 22, 2010.) TaEIcS Moreover, conveyances of realty to trustees or other persons without consideration is not taxable under Revenue Regulations No. 26 otherwise known as the Revised Documentary Stamp Tax Regulations. Thus, the Deed of Exchange executed by the parties which was made without monetary consideration is not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code, as amended. However, the notarial acknowledgment to said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Tax Code, as amended. 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue