BIR Ruling

April 21, 1967 Sison & San Juan Law Office 7th Floor, J. M. Tuason Bldg. 303 Escolta, Manila Attention: Mr . A . P . San Juan Gentlemen : This refers to your letter dated June 27, 1966 requesting a ruling on the following queries: "1. (a) Will 'ABC' corporation continue to be liable for taxes as a real estate dealer during the 3-year liquidation period if it continues to receive installment payments on the contracts to sell executed prior to the expiry of its charter? LexLib (b) Will the answer to the foregoing query depend upon whether or not ABC corporation continue to be run by (1) its Board of Directors or by (2) trustees under Section 78 of the Corporation Law? If the answer is in the affirmative, please inform us what internal revenue privilege or other business tax may be separately payable under (a) and (b). "2. (a) Will ABC corporation during the liquidation period be subject to income tax? (b) Will the answer to the immediately preceding question depend on whether or not the corporation continues to be run by its Board of Directors or by trustees?" In reply thereto, I have the honor to inform you that under Section 77 of Act 1459, otherwise known as the Corporation Law, a corporation, during the period following its dissolution, exists only for the purpose of closing its corporate affairs, and not for the purpose of continuing the business for which it was established. As it appears that ABC corporation continues the activities of receiving installment payments on contracts of sale executed prior to the date of the expiration of its charter, the corporation is deemed to be still engaged in the business as a real estate dealer. As such, it is liable to pay the corresponding privilege tax. The weight of authorities is to the effect that a private business corporation acting and carrying on its business in its corporate name after its legal existence has ended by the expiration of its charter is considered to be a corporation de facto . (13 Am. Jur. 1192). Viewed otherwise, several corporations would voluntarily dissolve or cut its corporate existence and continue its business activities under the guise of corporate liquidation, and thus evade the payment of taxes. In view thereof, this Office is of the opinion and so holds that ABC corporation is liable to all forms of taxes in the same manner as a corporation de jure . Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue