BIR Ruling [DA-205-97]

May 15, 1997 BIR RULING [DA-205-97] Santiago, Corpuz & Ejercito Law Offices Ground Floor, Fortune Office Building 160 Legazpi Street, Legaspi Village Makati City Attention: Atty . Gregorio S . Ejercito, Jr . Gentlemen : This refers to your letter dated February 24, 1997 stating that sometime in October, 1996, your client, Ms. Josephine Ty Chua requested Valle Verde Country Club to transfer in her name the Proprietary Membership Fee Certificate (PMFC) No. 4263 issued by the Club in the name of Mr. Fausto Rodil; that the basis of Mrs. Chua's request is a Deed of Declaration of Trust dated November 22, 1995 executed by Mr. Fausto Rodil because it was Mrs. Chua who paid for the Club share so that Mr. Rodil who was then the President of the Century Savings Bank where Mrs. Chua was and still is the Chairman could use the same for his marketing functions in the Bank; that in fact, from the time the club share was purchased, the Club was notified and given a copy of the Deed showing the foregoing arrangement; and that the club refused to transfer the PMFC in the name of Mrs. Chua stating in its letter that the said transfer could be made only of Mrs. Chua could present a Certification from this Office that the Club may transfer the PMFC in her name. cdt Based on the foregoing representation, you now request for a ruling that the Club may transfer the PMFC without payment of capital gains tax. In reply, please be informed that since no monetary consideration or other material consideration passed from Mr. Rodil to Mrs. Chua, there is no sale of the certificate and, therefore, no capital gains tax is due and payable on the aforementioned transaction. Moreover, while the above transaction is considered a gift since it is a valid transfer of property from one person to another without consideration or compensation therefore, the same is not subject to the gift tax. This is so because although there is a direct gift, there is no donative intent under the above circumstances in this case. It has been held that in a direct gift, the element of donative intent must be present in the transfer of property to be donated. (Perez vs. Commissioner, CTA Case No. 1707, Feb. 10, 1969) However, since the Proprietary Membership Certificate in this case indicates, in all probability, that the registered owner thereof shall be entitled to a pro-rata share of the assets of the club, the same is considered a certificate showing interest in the property of a corporation. Accordingly, the transfer of said certificate is subject to the documentary stamp tax of Fifty Centavos (P0.50) on each Two Hundred Pesos (P200.00) or fractional part thereof, of the face value of such certificate, in accordance with Section 178 of the Tax Code, as amended by Republic Act No. 7660. (BIR Ruling No. 152-90 dated August 16, 1990) 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, SIXTO S. ESQUIVIAS IV OIC Assistant Commissioner (Legal Service)