BIR Ruling [DA-106-03]

April 3, 2003 BIR RULING [DA-106-03] 85, 176; DA-221-02 Mrs. Rosario P. Melchor 1568 Princeton St., Wack-Wack Village Mandaluyong City M a d a m : This refers to your letter dated February 17, 2003 requesting for a legal opinion relative to the computation of the estate tax imposed by BIR Revenue District No. 41 Mandaluyong on the estate of Alejandro B. Melchor, Jr. It is represented that Mr. Melchor a resident of 1566 Princeton St., Wack-Wack Village, Mandaluyong City died on July 12, 2002; that you have already paid the estate tax due on January 13, 2003 in the total amount of P101,917.11; that when said tax was recomputed by a BIR Examiner it included the premium on capital stock of Tampangco Realty and Agricultural Development Corporation (TRADC); that it is your opinion that the premium on capital stock should not be included in the computation of Mr. Melchor's estate tax, inasmuch as the aforesaid premium now forms part of TRADC's property; that the above-stated computation also made mention of his shares in stock and non-stock corporations but did not explain why the alleged documentary stamp tax is due under Sec. 176 of the 1997 Tax Code; and that you further wish to be clarified on the legality of the additional imposition of the said tax on the transfer of shares of stock in the amount of P19,120.43. In reply, please be informed that Sec. 85 of the Tax Code of 1997 identifies what constitutes the gross estate of a decedent for purposes of determining the estate tax. It includes the value of all property, real or personal, tangible or intangible, wherever situated owned by the decedent at the time of his death. Details of the computation prepared by the BIR Examiner included the premium on capital stock as part of your husband's gross estate. Premium on capital stock is the excess received over the par value of stock issued. The premium account is shown under the paid-in capital section of the stockholders' equity because it resulted from the issuance of stock. In another occasion, this Office ruled that the infusion of APIC (additional paid-in capital or premium on capital stock) . . . is in the nature of additional funds which will be used as, and forms part of, the recipient corporation's working capital for which no corresponding shares of stock will be issued. (BIR Ruling No. DA-221-02 dated November 25, 2002) Hence, premium on capital stock should form part of TRADC's property. Therefore, it is not proper to include it in the computation of Mr. Melchor's gross estate. As for the additional imposition of the documentary stamp tax in the amount of P19,120.43, considering that there was no sale nor transfer for a consideration of certificates of stock involved in the instant case, Section 176 of the same Tax Code shall not apply. TCHcAE 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; Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group