BIR Ruling [DA-062-03]

March 3, 2003 BIR RULING [DA-062-03] 84; 24 (D) (1); 196 021-98 dated February 19, 1998 Romulo Mabanta Buenaventura Sayoc & De Los Angeles 30th Floor, CITIBANK Tower CITIBANK Plaza 8741 Paseo de Roxas Makati City Attention: Attys. Frances T. Yuyucheng and Jayson L. Fernandez Gentlemen : This refers to your letter dated September 25, 2002 requesting on behalf of your client, Estate of Angel A. Gil, for a ruling that the transfer of two (2) parcels of land from the trustor to the trustee/beneficial owner without consideration is exempt from the payment of income tax, donor's tax and documentary stamp tax. It is represented that on May 7, 1992, Angel Gil acquired the following parcels of land from Eusebia Reyes by virtue of a Deed of Absolute Sale and more particularly described as follows: Property TCT No. Area Registry of Deeds Land 5045-R 272 sq.m. Municipality of San Juan Land 5046-R 273 sq.m. Municipality of San Juan that the above-mentioned properties were issued in the name of Angel Gil married to Josephine A. Gil; that per records of the Securities and Exchange Commission (SEC) Case No. 10-95-5163, Angel Gil admitted that: (1) the properties were acquired by St. John's Academy, a non-stock, non-profit educational institution: (2) upon instructions of Angel Gil's grandmother, Angel Gil registered the properties in his name and admits holding the same in trust for St. John's Academy; and (3) since the time of the acquisition of such parcels of land, Angel Gil has devoted its use for the purpose for which it was intended; that on November 22, 1999, the SEC in SEC Case No. 10-95-5163 entitled "St. John's Academy, et al. vs. Angel A. Gil, et al.," issued an Order, to wit: "xxx xxx xxx "Respondent Angel Gil is hereby ordered immediately to cause the transfer reconveyance of the properties covered by TCT Nos. 5045-R and 5046-R, issued by the Registry of Deeds, San Juan, Metro Manila in favor of St. John's Academy". that this Order has since become final and executory; that on December 16, 2001, Angel Gil died without implementing the SEC Order to transfer/reconvey the properties in favor of St. John's Academy; and that on September 25, 2002, the Estate of Angel Gil executed a Deed of Transfer to effect the reconveyance of the properties in favor of St. John's Academy. Based on the foregoing representations, you now request for a ruling that "(1) the properties do not form part of the Estate of Angel Gil and are therefore not subject to the estate tax under Section 84 of the Tax Code of 1997; "(2) the transfer of the properties from the Estate of Angel Gil to St. John's Academy is not subject to the 6% capital gains tax under Section 24(D) of the Tax Code of 1997, or any withholding tax; "(3) the transfer of the properties from the Estate of Angel Gil to St. John's Academy is not subject to the donor's tax under Section 98 of the Tax Code of 1997; "(4) the transfer of the properties is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997". In reply thereto, please be informed as follows: 1. The estate tax is due on the net estate of the decedent at the time of his death. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated. ( Sec. 85, Tax Code of 1997 ) In the instant case, since the above-mentioned properties were held merely by Angel Gil only in his capacity as trustee of St. John's Academy, the same did not form part of his gross estate. Consequently, the aforesaid properties are not subject to the estate tax upon the death of Angel Gil. 2. Since the transfer of the above-mentioned properties from the Estate of Angel Gil to St. John's Academy is without monetary consideration pursuant to the Deed of Transfer and considering further that the execution of the Deed of Transfer was ordered by the SEC in its Order dated November 22, 1999 which has long been final and executory, the transfer of the said properties to St. John's Academy is not subject to the six percent (6%) capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, ( BIR Ruling No. 021-98 dated February 19, 1998 ) Moreover, the said Deed of Transfer in favor of St. John's Academy is not a sale or exchange, nor disposition of real property and its purpose is merely to rectify the situation by transferring the title to the rightful owner to reflect the true facts of its ownership and is therefore, not made in connection with a sale, no income was generated and therefore, no income tax or any withholding tax is due and payable. TcIaHC 3. The Transfer of the properties from the Estate of Angel Gil to St. John's Academy is not subject to the donor's tax imposed under Section 98 of the Tax Code of 1997, since there was no donative intent on the part of the Estate of Angel Gil. 4. Finally, the Deed of Transfer is likewise not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, because Section 185 of Regulations No. 26, otherwise known as the Documentary Stamp Tax Regulations provides that conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable. Considering that the transfer of the above-mentioned properties is without consideration but for the purpose of rectifying the situation to reflect the true facts of its ownership to the rightful owner, no income was generated therefrom and therefore not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the acknowledgment to the said deed is subject to the documentary stamp tax of P15.00 under Section 188 of the same Code. 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. Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service