BIR Ruling [DA-217-98]

June 2, 1998 BIR RULING [DA-217-98] Ms. Concepcion C. vda. De Manguerra 1020 Pasay Road Makati City M a d a m : This refers to your letter dated August 5, 1997 requesting the revocation of BIR Ruling No. S-34-195-96 dated April 23, 1996 issued in favor of Marianne Development Corporation which in part, reads: "xxx xxx xxx "It is represented that Marianne Development Corporation is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) with an authorized capital stock of P10,000,000.00 divided into 100,000 shares with a par value of P100.00 per share; that the incorporators of the corporation with their corresponding number of shares subscribed and paid-up are as follow: LexLib Name No. of Shares Amount Subscribed Amount Paid Ma. Patricia Concepcion 5,000 P500,000.00 P125,000.00 Manguerra Jose Mariano 5,000 500,000.00 125,000.00 Manguerra Miguel Angel Fernando 5,000 500,000.00 125,000.00 Manguerra Mamerto Luis 5,000 500,000.00 125,000.00 Manguerra Christine Martina 5,000 500.000.00 125,000.00 Manguerra Total 25,000 P2,500,000.00 P625,000.00 "that Concepcion C. Manguerra is the absolute and registered owner of a parcel of land, together with the improvements thereon, located at Camputhaw, Cebu City and covered by TCT No. RT-2202 (T-22188) issued by the Registry of Deeds of Cebu City with the acquisition cost of P4,725.00; that on September 6, 1994, a Deed of Assignment was executed by and between Mrs. Concepcion C. Manguerra and Marianne Development Corporation, whereby the former assigns to the latter above-mentioned real property in exchange for 6,506 shares of stock of said corporation; that as a result of the above transaction, Mrs. Concepcion C. Manguerra gained control of the corporation by owning 60.80% of the subscribed and paid-up capital stock of the said corporation as follows: Name No. of Shares Amount Subscribed Amount Paid Ma. Patricia Concepcion 11,506 P1,150,600.00 P775,000.00 Manguerra Jose Mariano 5,000 500,000.00 125,000.00 Manguerra Miguel Angel Fernando 5,000 500,000.00 125,000.00 Manguerra Mamerto Luis 5,000 500,000.00 125,000.00 Manguerra Christine Martina 5,000 500.000.00 125,000.00 Manguerra Total 31,506 P3,150,600.00 P1,275,600.00 "xxx xxx xxx "Accordingly, your opinion that no gain or loss shall be recognized both to the transferor and the transferee corporation on the transfer by Mrs . Concepcion C . Manguerra of her property in exchange for shares of stock of the transferee corporation, Marianne Development Corporation, considering that as a consequence of the exchange, the transferor gained control of the transferee corporation, is hereby confirmed. (Emphasis supplied) "xxx xxx xxx" In your letter dated August 5, 1997, you stated that there was an irregular issuance of the aforementioned ruling in favor of Marianne Development Corporation, thereby making Ms . Ma . Patricia Concepcion E . Manguerra gain 60.80% control of the subscribed and paid-up capital of the said corporation. cdll In reply, please be informed that after a careful restudy of the aforesaid ruling together with the documents and other papers you presented, this Office finds the said ruling to be devoid of legal basis and without any force and effect. While it is true that a close perusal of the abovementioned ruling disclosed that Ms. Concepcion C. Manguerra is the true and registered owner of the subject property, this Office erred in not including Ms. Concepcion C. Manguerra as one of the stockholders, who transferred her Camputhaw property in exchange for 6,506 shares of stock of the said corporation, but instead inadvertently added the said 6,506 shares of stock to the original 5,000 shares subscription of Ms. Ma. Patricia Concepcion Manguerra thus increasing her subscribed shares to 11,506 shares; and that Ms . Ma . Patricia Concepcion Manguerra , an incorporator of Marianne Development Corporation, was mistaken for as Ms . Concepcion C . Manguerra . In this connection, it should be emphasized, that this Office issued the aforementioned ruling in good faith and without any intention to cause harm or injury to the registered owner of the Camputhaw property, Ms . Concepcion C . Manguerra . In view thereof, the subject BIR Ruling No. S-34-195-96 dated April 23, 1996 issued to Marianne Development Corporation has to be, as it is hereby revoked, the same being null and void from the date of issuance. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue