BIR Ruling [DA-143-00]

March 09, 2000 BIR RULING [DA-143-00] Chato Eleazar Liboto & Santos 8th Floor, STRATA 2000 Emerald Avenue, Ortigas Center Pasig City Attention: Atty . Redentor G . Liboro Gentlemen : This refers to your letter dated December 14, 1999 stating that your client, Mrs. Natividad R. Cabuag, widow and residing in Makati City, is owner of several properties more particularly described as follows: TCT No. Location Area (sq. m.) Zonal Value 51699 Retiro cor. D. 1,103.50 sq. m. P12,414,375.00 Tuazon Street, Quezon City 165038 No. 8 Abelardo 542 sq. m. (lot) Lot-P21,680,000.00 Street, San Lorenzo 223 sq. m. (house) House 1,376,160.00 Village, Makati City P23,056,160.00 CT1390 The Sunrise Hill- 36.0 sq. m. P900,000.00 Royale Tagaytay Estate, Brgy. Matabac and Kaytitinga, Alfonso, Cavite Bank Deposit AsianBank Accounts and Corporation, Banco Money Market de Oro Universal Investments Bank and other financial institutions that on October 28, 1999, Mrs. Natividad R. Cabuag (Trustor), Natividad R. Cabuag (Trustee), Antonio R. Cabuag and Rogelio R. Cabuag (Co-Trustees) have established a revocable inter vivos (living) trust otherwise known as the Natividad R. Cabuag Family Trust, for the use of the above-mentioned properties for her own benefit and for the benefit of all the other beneficiaries, as well as to make provisions for the care and management of the Trust Estate, the collection and investment of the income therefrom., and the use and disposition of both the income and the principal or corpus of the Trust Estate for the lifetime support of the Trustor, her incapacity both physical and/or mental and her eventual death; and that in consideration of the acceptance by the Trustee and Co-Trustees of the Trust created, the Trustor hereby conveys, transfers, assigns, and delivers to Trustee and Co-Trustees, their successors in trust and assigns, the aforementioned properties. LibLex Based on the foregoing, you now request for a ruling that the transfer of the above-mentioned properties to the Trustees of the Natividad R. Cabuag Family Trust is not subject to the 6% final capital gains tax, normal income tax and the corresponding documentary stamp tax; and that the aforementioned properties as well as deposits and placements may now be registered by the Register of Deeds and the banks and other financial institutions concerned in the name of Natividad R. Cabuag, Antonio R. Cabuag and Rogelio R. Cabuag, 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 estate 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 above-mentioned properties, as a result of the transfer of the said properties to Natividad R. Cabuag, Antonio R. Cabuag and Rogelio R. Cabuag as Trustees for the Natividad R. Cabuag 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. (BIR Ruling No. 124-93 dated April 5, 1993). 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 the above-named trustees is not subject to the 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, the aforementioned properties as well as the deposits and placements may now be registered by the Registry of Deeds and the banks and other financial institutions concerned in the name of the above-named trustees for Natividad R. Cabuag Family Trust. 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)