Empire East Land Holdings, Inc.

March 14, 2007 BIR RULING [DA-158-07] 27 (D) (5), 188; DA-385-2004 Empire East Land Holdings, Inc. 21/F The World Centre 330 Sen. Gil Puyat Avenue Extension Makati City Attention: Atty. Dennis E. Edao Head, Legal and Corporate Affairs Division Gentlemen : This refers to your letter dated November 10, 2006 requesting for confirmation of opinion that the reconveyance by Empire East Land Holdings, Inc. (Empire East for brevity) of the unsold residential and commercial subdivision lots in Laguna Bel Air 1 and 2 to the Yulos, which were previously the subject of a Deed of Trust with the Yulos as trustor and Empire East as trustee, is not subject to the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, nor to the expanded withholding tax prescribed in Revenue Regulations No. 2-98, as amended, nor to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 nor to value-added tax (VAT). It appears that Estrellita B. Yulo, Jose Miguel B. Yulo, Jorge Manuel B. Yulo, and Ma. Rosanna B. Yulo (collectively referred as Yulos) were the registered owners of nine (9) parcels of land located in Sta. Rosa, Laguna with a total area of Six Hundred Ninety Nine Thousand Nine Hundred Eighty Two (699,982) square meters, more or less, covered by Transfer Certificate of Title (TCT) Nos. T-84126, T-84127, T-84128, T-84129, T-84130, T-84131, T-84132, T-84133 and T-84134 (the Mother Titles) issued by the Registry of Deeds for Sta. Cruz, Laguna. On October 19, 2004, Megaworld Corporation and the Yulos entered into a joint venture agreement to develop and market a commercial/residential subdivision project (the Project) on the parcels of land described above, as embodied in a Memorandum of Agreement dated the same day. Under the said Memorandum of Agreement, the Yulos will contribute the land, while Megaworld shall contribute its expertise in the real estate business and capital to develop and market the Project. In consideration of their respective contributions, the parties agreed to share in the revenue generated from the sale of the Project to the public. Megaworld Corporation thereafter assigned its rights and interests over the Project to Empire East. In order to bolster consumer confidence in the Project and to facilitate the marketing and sale thereof to the public, Empire East and the Yulos agreed to register all the subdivided titles of the residential and commercial lots in Laguna Bel Air 1 and 2 in the name of Empire East under a Deed of Trust and Undertaking dated February 7, 1996. EADCHS The parties are now winding up the subdivision project. They agreed to terminate the trust over the unsold residential and commercial lots in Laguna Bel Air 1 and 2 and to reconvey title over the afore-quoted lots back to the Yulos. In reply, please be informed that since the transfer of the aforestated properties by Empire East in favor of the Yulos is without monetary consideration and is merely confirmation of title in favor of the beneficial owner thereof, the same is not subject to the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997 nor to the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended. Likewise, the conveyance of realties to trustees or other persons without consideration is not taxable under Section 185 of the Revised Documentary Stamp Tax Regulations. Thus, the transfer by Empire East to the Yulos which is made without monetary consideration is not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code. However, the notarial acknowledgement to the said deed of reconveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service