BIR Ruling [UN-293-95]

August 10, 1995 BIR RULING [UN-293-95] Mr. Paulo S. Bamba 315 Gen. Geronimo St. Sampaloc Manila S i r : This refers to your letter dated July 1, 1995 stating that Messrs. Augusto M. Magno and Norberto M. Magno are brothers; that Augusto is the registered owner of a parcel of land situated in Barangay Diliman, Botocan, Quezon City, covered by TCT No. 42212 issued by the Register of Deeds of Quezon City, while Norberto is also the registered owner of a parcel of land situated in Barangay Diliman, Botocan, Quezon City, covered by TCT No. 42214, also issued by the Register of Deeds of Quezon City; that Norberto built a house of strong and semi-concrete materials on the parcel of land he thinks he owns; that upon inspection however, the parcel of land where the said house was erected is not his property; and that to rectify the error made, a Swapping Agreement was executed on January 9, 1995 by and between the brothers Norberto and Augusto without any consideration involved. Based on the foregoing, you now request for exemption from the payment of capital gains tax as well as documentary stamp tax on the said exchange transaction. cdta In reply, please be informed that since the exchange transaction is without any monetary consideration, and considering further that the execution of the Deed of Exchange or Swapping Agreement is merely to correct the mistake above-described, the exchange of realty by and between Mr. Augusto M. Magno and Norberto M. Magno is not subject to the capital gains tax, imposed under Section 21(e) of the Tax Code, as amended, nor to the creditable expanded withholding tax imposed under Revenue Regulations No. 1-90, as amended. Furthermore, the said swapping of real property is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. 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 Ruling No. 027-93 dated January 15, 1993; and BIR Ruling No. UN 186-94 dated June 27, 1994) This ruling is issued on the basis of the foregoing representations. 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, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)