BIR Ruling [UN-188-95]

May 19, 1995 BIR RULING [UN-188-95] Ms. Irene A. Directo 121 Balagtas Street Malate, Manila M a d a m : This refers to your letter dated April 17, 1995 stating that on May 15, 1984, you donated your parcel of land with an area of 492 square meters situated in Malate, Manila and covered by Transfer Certificate of Title No. 36636 to your two (2) sons, Gerardo A. Directo and Manuel A. Directo, Jr.; that in order to obtain separate titles in their respective names your sons have the said lot surveyed while you were abroad; that when the titles were released, the registered name appearing in the two (2) titles were interchanged, so that Lot 2C-2 under TCT No. 204265, containing an area of 252.60 square meters in the name of Gerardo A. Directo should be for Manuel A. Directo, Jr. and that Lot 2-C-1 under TCT No. 204264, containing an area of 239.40 square meters in the name of Manuel A. Directo, Jr. should be for Gerardo A. Directo. Based on the foregoing representation and documents submitted, you now request for exemption from the payment of the corresponding donors tax. In reply, please be informed that there shall be levied, assessed, collected, and paid upon the transfer by any person, resident or non-resident, of the property by gift, a tax, computed as provided in Section 92 of the Tax Code, as amended pursuant to Section 91 of the same Code. The tax shall apply whether the property is real or personal and it is imposed on the transfer and not on the property transferred. Accordingly, the transfer of the aforementioned parcel of land to your two (2) sons is subject to donor's tax. On the other hand, if in order to correct the mistake, the brothers will exchange the properties without any monetary consideration, then this Office is of the opinion as it hereby holds that the exchange of realties between the brothers, Gerardo and Manuel Jr., both surnamed Directo is not subject to the capital gains tax, imposed under Section 21(e) of the Tax Code nor to the creditable withholding tax imposed under Revenue Regulations No. 1-90. Further, it is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code. However, the notarial acknowledgment to the said deed is subject to the documentary stamp tax of P10.00 only pursuant to Section 188 of the Tax Code, as amended by Republic Act No. 7660. (BIR Rulings No. UN-186-94 dated June 27, 1994) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)