BIR Ruling [DA-078-02]

April 29, 2002 BIR RULING [DA-078-02] 24 (D) (1); 143-2000 Chato Eleazar & Liboro 8th Floor Strata 2000, Emerald Avenue Ortigas Center, Pasig City Attention: Atty. Victor Y. Eleazar Gentlemen : This refers to your letter dated December 13, 2000 stating that Mrs. Florangel Tandoc Campos, widow and residing in San Fabian, Pangasinan, has established a revocable living ( inter vivos ) trust, known as the Florangel Tandoc Campos Family Trust; that in view of the execution of the revocable living trust, Mrs. Campos would like to change the manner of holding title of her real and personal properties and transfer the titles to the trust properties from Florangel Tandoc Campos to Florangel Tandoc Campos, Sixta Sevidal Tandoc, and Andrea Tandoc Lontoc, trustees (and any subsequent trustees) to the Florangel Tandoc Campos Family Trust where Florangel Tandoc Campos, as trustor and one of the trustees, continues to hold all incidents of ownership to the trust properties. Based on the foregoing facts, you now request for a confirmation that since there is no actual transfer of ownership over the Trust Properties as a result of the transfer of ownership to the trustees, the said transfer is not subject to capital gains tax and documentary stamp tax; and that the aforementioned properties as well as deposits and placements may now be registered by the Registry of Deeds and the banks and other financial institutions concerned in the name of Florangel Tandoc Campos, Sixta Sevidal Tandoc and Andrea Tandoc Lontoc as trustees for the said Trust. In reply, please be informed that Section 24(D)(1) of the Tax Code of 1997 provides that capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts shall be taxed at the rate of 6% based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of the said Code, whichever is higher. Such being the case, and considering that there is no actual transfer of ownership over the aforementioned properties, as a result of the transfer of the properties to Mrs. Florangel Tandoc Campos and trustees for Florangel Tandoc Campos Family Trust, the said transfer is not subject to the 6% final capital gains tax nor to the ordinary income tax respectively imposed under Sections 24(D)(1) and 24(A)(1)(c) both of the Tax Code of 1997. Moreover, 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 trustee, or other persons without consideration are not taxable. Accordingly, the deed conveying the aforementioned properties to Florangel Tandoc Campos, Sixta Sevidal Tandoc and Andrea Tandoc Lontoc as trustees is not subject to documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the acknowledgment is subject to the documentary stamp tax of P15.00 prescribed in Section 188 of the said Code. Finally, real and personal properties as well as deposits and placements may now be registered by the Registry of Deeds and the banks and other financial institutions concerned in the name of Florangel Tandoc Campos, Sixta Sevidal Tandoc and Andrea Tandoc Lontoc, as trustees for the Florangel Tandoc Campos Family Trust. (BIR Ruling No. 143-2000 dated March 9, 2000) 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.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group