BIR Ruling [DA-145-99]

March 10, 1999 BIR RULING [DA-145-99] Echanis Press, Inc. 760 Boni Avenue Mandaluyong City Attention: Ms . Erlinda Echanis President Gentlemen : This refers to your letter dated February 24, 1999 requesting amendment or modification of BIR Ruling No. S-40-195-98 dated September 15, 1998 addressed to Ms. Jessica A. Los Baos which in part, reads: "xxx xxx xxx "It is represented that the Transferee is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) with an original capital stock of P1,500,000.00 divided into 15,000 shares with a par value of P 100.00 per share of which P 1,012,500.00 have been subscribed and paid-up; that on March 3, 1998, at a Special Organizational Meeting duly held, the Board of Directors unanimously approved the increase of the Transferee's authorized capital stock from P1,500,000.00 to P22,500,000.00 and increased the par value of the stocks from P100.00 to P1,500.00 per share; that the amount of the said capital stock which has actually been subscribed and paid up are as follows: Original Subscriptions prior to increase: (Par Value: P100.00) Name No. of Shares Amount Subscribed Amount Paid-up Maria Isabel Echanis 2,025 P202,500.00 P202,500.00 Mae Carmelita Echanis 2,025 202,500.00 202,500.00 Catherine Echanis 2,025 202,500.00 202,500.00 Santiago Echanis 2,025 202,500.00 202,500.00 Erlinda Echanis 2,025 202,500.00 202,500.00 Total 10,125 P1,012,500.00 P1,012,500.00 ====== ============ =========== that the 10,125 shares are to be converted to 675 shares at P1,500.00 per share. Subscriptions from the Increase: (Par Value: P1,500.00) Name No. of Shares Amount Subscribed Amount Paid Maria Isabel Echanis 1,855 P2,782,500.00 P2,782,500.00 Mae Carmelita Echanis 1,855 2,782,500.00 2,782,500.00 Catherine Echanis 2,076 3,114,000.00 3,114,000.00 Santiago Echanis 1,634 2,451,000.00 2,451,000.00 Erlinda Echanis 2,296 3,444,000.00 3,444,000.00 Total 9,716 P14,574,000.00 P14,574,000.00 ===== ============ ============ that the Transferors are the registered owners of two parcels of land which they acquired by inheritance and by purchase through inherited money, more particularly described as follows: TCT No. Area (sq. m.) Location Historical Cost RT-53765 442.40 sq. m. 21 Matimtiman St., P35,991.10 Teachers Village, Quezon City 156 589 sq. m. 760 Boni Avenue, 100,000.00 Mandaluyong City that on April 13, 1998, a Deed of conveyance was executed by and between the Transferors and the Transferee corporation whereby the former transferred to the latter the property located at 21 Matimtiman St., Teachers Village, Quezon City in exchange for 2,655 shares with a par value of P1,500.00 per share or a total par value of P3,982,500.00; that as a result of the above transaction, the Transferors gained control of the transferee corporation by owning 100% control of the total voting stocks of the said Transferee corporation as follows: Name No. of Shares Amount Amount Paid-up Percentage of Subscribed Ownership Maria Isabel 1,990 P2,985,000.00 P2,985,000.00 19.15% Echanis Mae Carmelita 1,990 2,985,000.00 2,985,000.00 19.15% Echanis Catherine Echanis 2,211 3,316,500.00 3,316,500.00 21.28% Santiago Echanis 1,769 2,653,500.00 2,653,500.00 17.02% Erlinda Echanis 2,431 3,646,500.00 3,646,500.00 23.40% Total 10,391 P15,586,500.00 P15,586,500 00 100% ====== =========== =========== ====== "xxx xxx xxx "Accordingly, no gain or loss shall be recognized both to the transferors and the transferee corporation on the transfer by Mesdames Maria Isabel Echanis, Erlinda Echanis, Santiago Echanis, Catherine Echanis and Mae Carmelita Echanis of their parcel of parcel of land in exchange for shares of stock of the transferee corporation, Echanis Press, Inc., considering that as a consequence of the exchange, the Transferors gained control of the Transferee corporation by owning 100% of the total voting stocks of the said corporation. "xxx xxx xxx" In your letter dated February 24, 1999, you stated that your application for increase in capitalization filed with the SEC last May 1998 has been withdrawn last September 1998 because of substantive and procedural errors; and that amendments were made based on the following facts: 1. On February 10, 1999, the parties entered into a new agreement for the absolute conveyance from Maria Isabel Echanis, Erlinda Echanis, Santiago Echanis, Catherine Echanis and Mae Carmelita Echanis (Transferors) to Echanis Press, Inc. (Transferee) in exchange of shares with a par value of One Hundred Pesos (P 100.00) of the following properties: a. A Four Hundred Forty Two Square Meters and Forty Decimeters (442.40) lot located at 21 Matimtiman St., Teachers Village, Quezon City covered by TCT No. RT-53765 of the Register of Deeds of Quezon City in the names of Maria Isabel Echanis, Catherine Echanis, Erlinda Echanis, Santiago Echanis and Mae Carmelita Echanis with zonal value of P3,891,600.00; and b. A Five Hundred Eighty Nine (589) Square Meters lot located at 760 Boni Avenue, Mandaluyong City, Metro Manila City covered by TCT No. 156 of the Register of Deeds of Mandaluyong in the names of Maria Isabel Echanis, Catherine Echanis, Erlinda Echanis, Santiago Echanis and Mae Carmelita Echanis with zonal value of P10,591,000.00. In view thereof, this Office hereby amends and modifies the pertinent portion of BIR Ruling No. S40-195-98 dated September 15, 1998 and which should now read as follows: A. Stockholders on record before the increase in capital stock: Name No. of Shares Amount Subscribed Amount Paid-up Maria Isabel Echanis 2,025 P202,500.00 P202,500.00 Mae Carmelita Echanis 2,025 202,500.00 202,500.00 Catherine Echanis 2,025 202,500.00 202,500.00 Santiago Echanis 2,025 202,500.00 202,500.00 Erlinda Echanis 2,025 202,500.00 202,500.00 Total 10,125 P1,012,500.00 P1,012,500.00 ====== =========== ============ B. Stockholders and their holdings on record after the increase in capital. Name No. of Shares Amount Amount Paid-up Percentage of Subscribed Ownership Maria Isabel 40,694 P4,069,400.00 P1,156,799.038 19% Echanis Mae Carmelita 40,694 4,069,400.00 1,156,799.038 19% Echanis Catherine Echanis 43,959 4,395,900.00 1,488,599.038 21% Santiago Echanis 37,429 3,742,900.00 824,999.038 18% Erlinda Echanis 47,224 4,722,400.00 1,820,399.038 22% Total 210,000 P21,000,000.00 P6,447,595.19 100% ====== ============ =========== ===== 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. cdta Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)