BIR Ruling

January 28, 1974 Mr. J. P. Lukban Manager The Chartered Investment & Finance Co., Inc. P. O. Box 561 Makati, Commercial Center Makati, Rizal S i r : This refers to your letter dated December 7, 1973 requesting information as to whether or not gain or loss shall be recognized in an exchange of shares of stock under the following circumstances: "The Chartered Investment & Finance Co., Inc. owns shares of Common Stock in Republic Cement and Eternity Corporation. These shares have a fair market value of approximately P3 million. Theo H. Davies & Co., Far East, Ltd. owns shares of Common Stock in Chartered Investment & Finance Co., Inc. with a fair market value of P3 million. Chartered Investment & Finance Co., Inc. would like to swap/exchange the shares of Republic Cement and Eternit Corporation with its own shares held by Theo H. Davies & Co., Far East, Ltd. peso for peso. In effect, the exchange would be undertaken for the equivalent amount of Republic Cement and Eternit's shares." In reply, I have the honor to inform you that under the foregoing facts, Chartered Investment and Finance Co., Inc. in effect redeemed its shares from Theo H. Davies and company, Far East, Ltd. and, therefore, Davies shall be liable to tax on the gains it shall derive measured by the difference between the market value of the Republic Cement and Eternit corporation shares and its acquisition cost of the Chartered Investment shares. aisa dc Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."