BIR Ruling [DA-055-99]

February 4, 1999 BIR RULING [DA-055-99] Aguilar & Aguilar Law Firm 8/F Galleria Corporate Center EDSA corner Ortigas Avenue 3701 Quezon City Attention: Mr . Mariano A . Aguilar, Jr . Gentlemen : This refers to your undated letter requesting for a ruling regarding the basis for computing the documentary stamp tax on the transfer of real properties to a corporation in exchange for the latter's shares of stock. It is represented that a document evidencing the transfer of the property to the corporation was executed on September 24, 1996; that a ruling as to the non-taxability of the transfer of properties to the corporation in exchange for shares of stock had already been issued by this Office under then Section 34(c)(2) and (6)(c) of the Tax Code; that due to the inadvertence on the part of transferor-taxpayer, only the documentary stamp tax on original issues of certificates of stocks had been paid; and that the documentary stamp tax on the transfer of properties to the corporation has not been paid up to the present. In reply, please be informed that pursuant to Section 196 of the Tax Code, as amended, a conveyance or deed whereby land is assigned or transferred to the purchaser is subject to documentary stamp tax based on the consideration or value received or contracted to be paid for such realty. A stock in a corporation is a valuable consideration for transfer of real property. (Section 177, Documentary Stamp Tax Regulations). Accordingly, is a parcel of land, is exchanged with stocks in a corporation as in this case, the latter is the consideration, the value of which shall be the basis of the documentary stamp tax on the Deed of Assignment executed to effect the aforesaid transfer (BIR Ruling No. 245-00-000-00-109-82 dated April 06, 1982). The value shall be the fair market value which shall not be less than the par value of the stocks. LLpr Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)