BIR Ruling [DA-146-00]

March 10, 2000 BIR RULING [DA-146-00] 24 (D) (1), 188, 196 DA-014-99 DA-146-2000 Summit Point Realty and Development Corporation 2nd Floor, LPL Mansions 122 L.P. Leviste St., Salcedo Village Makati City Attention: Mr . Lauro S . Leviste II President Gentlemen : This refers to your letter dated February 3, 2000 requesting for a ruling that the conveyance of real properties held in trust by a Trustee to a Trustor be exempt from capital gains and documentary stamp taxes. It is represented that the Trustee, First LPL Land Syndication, Inc. is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippines with office address at the 2nd Floor, LPL Mansions, 122 LP Leviste Street, Salcedo Village, Makati City; that the Trustor, Summit Point Realty and Development Corporation was a de facto corporation in the process of incorporation with the Securities and Exchange Commission; that on September 1, 1995, a Deed of Acknowledgment and Declaration of Trust was executed by and between the Trustor and the Trustee whereby the former which was still in the process of incorporation but wants to take advantage of offices in the acquisition of real properties, will provide funds to the latter being a duly registered corporation, to purchase real properties in trust for and for the benefit of the Trustor; that in the said document the Trustee acknowledges the trust reposed upon itself by taking advantage of possible offers for the purchase of real properties with the use of funds provided by the Trustor and which it shall hold in trust for and for the benefit of the Trustor, while in the meantime that the Trustor is being registered into a de jure corporation in accordance with the laws of the Philippines; that the Trustee further undertakes to reconvey such properties to the Trustor once registered as a de jure corporation being the beneficial and lawful owner thereof; that on February 2, 2000, a Deed of Reconveyance was executed by and between First LPL Land Syndication, Inc. and Summit Point Realty and Development Corporation, now a domestic corporation duly organized and existing in accordance with the laws of the Philippines terminating the fiduciary responsibility of the Trustee, thus causing the conveyance of the subject real properties to the Trustor being the lawful and beneficial owner thereof; that as a result thereof, the Trustee cedes, transfers and conveys unto the Trustor, absolutely and irrevocably several parcels of land covered by Transfer Certificates of Title Nos. T-119350, T-119367, T-119368, T-119369, T-119366, T-119355, T-119359, T-119370, T-119351, T-119348, T-119349, T-119357, T-119358, T-119353, T-119352, T-119354, T-119365, T-119360, T-119363, T-119362, T-119364, T-119361, T-19356, and TD #00488/00122; and that the conveyance of the aforementioned properties by the Trustee to the Trustor does not involve any monetary consideration. In reply please be informed that since the transfer of the subject properties pursuant to a Deed of Reconveyance dated February 2, 2000 is without monetary consideration the transfer of the said properties in favor of Summit Point Realty and Development Corporation is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 nor to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997. Moreover, the transfer of the above-mentioned properties is exempt from the donor's tax imposed under Section 98 of the same Code due to lack of donative intent on the part of First LPL Land Syndication Inc. Furthermore, it is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to the said deed is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 027-93 dated January 15, 1993) 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)