BIR Ruling

January 19, 1973 Reverend Fr. Ramon Salinas, O. P. Economic Administrator Dominican Province of the Philippines P. O. Box 3992, Manila Rev. Father : This refers to your letter dated December 28, 1972 requesting a ruling on the tax consequence on the proposed transfer of certain properties from the name of the Province of Our Lady of the Rosary (hereinafter referred to as the Old Province) to that of the new jurisdiction of the Dominican Province of the Philippines. In reply, I have the honor to inform you as follows: Generally, direct or indirect transfer, in trust or otherwise, of real or personal, tangible or intangible property for anything other than an adequate and full consideration in money or money's worth shall be subject to the gift taxes. (See Section 108, Tax Code). However, donative intent must be present in the transfer of property in order that the gift taxes can be assessed and collected (P.R. Federal Gift Tax (1956), par. 25.010). A donative intent followed by a donative act is essential to constitute a gift; and no strained and artificial construction of a supplementary statute should be indulged to tax as a gift a transfer actually lacking a donative intent. (144 F. 2d 78, 82). Thus, in the case of "The Christian and Missionary Alliance Churches of the Philippines vs. Collector of Internal Revenue", C. T. A. Case No. 688, promulgated August 21, 1964, the Court held that the transfer of property from one corporation to another corporation which is connected with, subordinate to, and a district or local organization or branch of the transferor corporation is not subject to the gift taxes because wanting in donative intent, such, transfer of property is in name only, and merely to enable the transferee corporation to perform its obligation to administer, supply and use the said properties for the same purpose for which the transferor was created and still exists today. The aforesaid decision finds application to the instant case, if as represented, the Mother Association will, transfer several properties to the new jurisdiction in order to enable the latter to carry more effectively the objectives on the local level, and to use and apply the said properties for the same religious and educational purposes. Considering that the proposed transferees are the transferor's branch or local organization, the contemplated transfer of properties in this case will, in the light of the decision in the case of The Christian and Missionary Alliance Churches of the Philippines supra just be "a transfer from the right hand to the left hand". Taxwise, the proposed transfer of property by the Old Province is not by gift which is subject to tax within the purview of the gift tax statute. In view of the foregoing considerations, this Office is of the opinion as it hereby holds that the contemplated transfer of certain properties, e. g. Santo Domingo Convent in Quezon City, Letran College in Manila, Aquinas University in Legaspi City and others, exclusively for carrying on the Old Province activities, from the name of the Old Province of Our Lady of the Rosary, is not subject to any tax. cdt This Office may reverse and modify this ruling if upon investigation, it will appear that the facts are different from those upon which the ruling is predicated. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue