BIR Ruling [DA-034-99]

January 20, 1999 BIR RULING [DA-034-99] Bengzon Narciso Cudala Jimenez Gonzales & Liwanag SOL Building, 112 Amorsolo Street Legaspi Village Makati City Attention: Attys . Ma . Romela M . Bengzon and Clara Beltran-Sanchez Gentlemen : This refers to your letter dated August 5, 1998 requesting for a ruling on the tax implication of the transfer by your client, Comprehensive Annuity Plans Pension Corporation (CAP2) of ten (10) parcels of land together with the improvements thereon to Allied Banking Corporation, as administrator of CAP2's Trust Fund. prcd It is represented that CAP2 is a corporation duly organized and existing under Philippine laws; that it is primarily engaged in the selling of pension plans, under which the savings of the plan holder are pooled together and invested in profitable placements and productive enterprises in order to build a retirement estate for each individual participant or plan holder; that the Trust Fund was created by CAP2 to guarantee its undertaking under its pension plan subscribed by the plan holders; that on October 28, 1982, a Trust Agreement was executed by and between CAP2 and Allied Banking Corporation whereby the latter was appointed as Trustee for the said Trust Fund in order to manage and administer the same for the benefit and account of CAP2; that CAP2 is the absolute and registered owner of several parcels of land together with the improvements thereon, more particularly described as follows: TCT No. Location Area (sq. m.) Appraised Value 1. T-99976 Solano, Nueva Viscaya 345 P14,916,000.00 2. T-99977 Solano, Nueva Viscaya 1,011 Included in No. 1 3. T-53947 Velencia, Bukidnon 596 32,409,000.00 4. T-53948 Velencia, Bukidnon 600 No. 4 to 6 are included in No. 3 5. T-56083 Velencia, Bukidnon 600 No. 4 to 6 are included in No. 3 6. T-65083 Velencia, Bukidnon 600 No. 4 to 6 are included in No. 3 7. T-281993 Tarlac, Tarlac 805 34,081,000.00 8. T-281994 Tarlac, Tarlac 415 Included in No. 7 9. T-25639 Laoag, Ilocos Norte 1,181 44,062,000.00 10. T-20143 San Jose, Antique 768 16,520,000.00 Total P141,988,000.00 and that in compliance with the pertinent corporate laws, including the rules and regulations of the Securities and Exchange Commission (SEC), CAP2 transferred the above-mentioned parcels of land together with the improvements thereon to Allied Banking Corporation by virtue of a Deed of Trust executed on December 29, 1997. In reply, please be informed that since there is no actual transfer of ownership over the above-mentioned properties from CAP2 to Allied Banking Corporation, as trustee under Trust Account No. 194099, the said transfer is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. Moreover, Section 185 of Regulations No. 26 provides that the conveyances of realty, not in connection with a sale, to trustee, or other persons without any consideration are not taxable. cdta Furthermore, the Deed of Trust executed to convey the aforementioned properties to Allied Banking Corporation, as trustee to form part of the Trust Fund is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment is subject to the documentary stamp tax of P15.00 under Section 188 of the said Code. Finally, the transfer of the above-mentioned properties to Allied Banking Corporation without any consideration is not subject to gift tax/donor's tax imposed under Section 99 of the Tax Code of 1997, since there is not donative intent on the part of the parties. (BIR Ruling No. 061-93 dated February 10, 1993) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cdt Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)