BIR Ruling

June 25, 1974 UNISALES Marketing Agency Suite 402 Burke Bldg. Escolta, Manila Attention: Mr . P . S . Madamba, Jr . President Gentlemen : In reply to your letter dated March 27, 1974, I have the honor to inform you that, pursuant to Section 35(c)(2) of the Tax Code, as amended by Republic Act No. 4522, no gain or loss will be recognized if you and four other individuals exchange your real properties for shares of stocks in the corporation you are intending to organize, provided that, as a result of such exchange, you and said individuals will gain control of the new corporation. The term "control" means ownership of stocks in the corporation representing at least 51% of the total voting power of all classes of stocks entitled to vote. It is understood that the basis of the shares of stocks received by the transferors upon the exchange specified above shall be the same as the basis of the property exchanged. It may be stated that the transferors must file with their income tax returns for the taxable year in which the exchange is consummated a statement of all facts pertinent to the exchange, including 1. A description of the assets transferred together with a statement of the cost or other bases thereof adjusted to the date of transfer; and 2. The kind and number of shares of each class received. The transferee corporation must also file with its income tax return 1. A complete description of all the assets received from the shareholders-transferors; 2. A statement of the cost or other bases thereof in the hands of the transferors adjusted to the date of transfer; 3. The total issued capital stock and outstanding capital stock immediately prior to and immediately after the exchange, with a complete description of each class of stock; 4. The classes of stock and number of shares issued to the transferors; and 5. The fair market value of the capital stock as of the date of exchange. Finally, permanent records in substantial form shall be kept by all parties involved in exchange showing the information listed above. cdt 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."