BIR Ruling [DA-237-00]

May 17, 2000 BIR RULING [DA-237-00] Britanico Consunji & Sarmiento 2nd Floor, Dacon Building Pasong Tamo Extension Makati City Attention: Atty . Kennedy B . Sarmiento Gentlemen : This refers to your letter dated November 18, 1998 requesting amendment or modification of BIR Ruling No. S-40-203-98 dated September 25, 1998 addressed to your office which in part, reads: "xxx xxx xxx "It is represented that Sunrise is domestic corporation in the process of registration with the Securities and Exchange Commission (SEC); that it has an authorized capital stock of Fifty Million Pesos (P50,000,000.00) divided into Five Hundred Thousand (500,000) common shares with a par value of One Hundred Pesos (P100.00) per share; that the incorporators of the said corporation are as follows: Name No. of Shares Amount Subscribed Enrique O. Olonan 7,000 P700,000.00 Cecilia R. Olonan 3,500 350,000.00 Luis Liwanag 3,500 350,000.00 Manuel Go Kim 3,500 350,000.00 Fernando T. Esquerra 2,500 250,000.00 Specified Contractors & 331,680 33,168,000.00 Development, Inc. Total 351,680 P35,168,000.00 ======= ============ "that Specified is the absolute and registered owner of ten (10) condominium units located at Sunrise Hill Condominium, Alfonso, Cavite with the construction cost of P15,150,000.00 and more particularly described as follows: CCT No. Floor Area CT-605 Ground Floor-Restaurant 190 sq.m Commercial CT-615 Second Floor 210 Studio 36 sq.m CT-617 Second Floor 212 Studio 36 sq.m CT-618 Second Floor 213 Studio 36 sq.m CT-619 Second Floor 214 Studio 36 sq.m CT-621 Second Floor 216 2 Bed 84 sq.m Room CT-637 Third Floor 315 Studio 36 sq.m CT-644 Fourth Floor 406 Studio 36 sq.m CT-650 Fourth Floor 412 Studio 36 sq.m CT-899 (1) Unit Function Room 80 sq.m "that on July 23, 1998, ten (10) Deeds of Assignment were executed by and between Specified and Sunrise whereby the former transferred to the latter the above-mentioned real properties as full payment of its subscription in the total amount of P33,168,000.00; that as a result of the above transaction, Specified gained control of Sunrise by owning 94.31% of the total voting stocks of the said corporation as follows: Name No. of Shares Amount Subscribed Percentage of Ownership Enrique O. Olonan 7,000 P700,000.00 1.99% Cecilia R. Olonan 3,500 350,000.00 1% Luis Liwanag 3,500 350,000.00 1% Manuel Go Kim 3,500 350,000.00 1% Fernando T. Esquerra 2,500 250,000.00 .7% Specified Contractors & 331,680 33,168,000.00 94.31% Development, Inc. Total 351,680 P35,168,000.00 100% ======= ============ ====== "xxx xxx xxx "Accordingly, no gain or loss shall be recognized both to the transferor and the transferee corporation on the transfer by Specified of its ten (10) condominium units in exchange for shares of stock of the transferee corporation, Sunrise, considering that as a consequence of the exchange, the Specified gained control of the transferee corporation by owning 94.31% of the total voting stocks of the said corporation. "xxx xxx xxx" In your letter dated November 18, 1998, you stated that amendments were made regarding the assignment of condominium units by Specified solely in exchange for the shares of stock of Sunrise, as follows: 1. that Specified cancelled the assignment of two (2) condominium units covered by Condominium Certificate of Title Nos. CT-605 (Ground Floor-Restaurant Commercial; 190 sq. m) and CT-899 (Function Room; 80 sq. m.) while leaving as is the assignment of the eight (8) condominium units covered by CCT Nos. CT-615, CT-617, CT-618, CT-619, CT-621, CT-637, CT-644 and CT-650); HSCAIT 2. that Sunrise decreased its subscribed capital from Three Hundred Fifty One Thousand Six Hundred Eight (351,680) common shares amounting to Thirty Five Million One Hundred Sixty Eight Thousand Pesos (P35,168,000.00), to One Hundred Eighty Nine Thousand Six Hundred Eighty (189,680) common shares amounting to Eighteen Million Nine Hundred Sixty Hundred Thousand Pesos (P18,968,000.00); 3. that Sunrise also decreased its paid-up capital to Eighteen Million Nine Hundred Sixty Eight Thousand Pesos (P18,968,00.00); 4. that Mr. Luis Liwanag was replaced by Mr. Benjamin S. Talan as incorporator, director and subscriber; 5. that the subscription and payment of Specified decreased from Three Hundred Thirty One Thousand Six Hundred Eighty (331,680) common shares amounting to Thirty Three Million One Hundred Sixty Eight Thousand Pesos (P33,168,000.00), to One Hundred Sixty Nine Thousand Six Hundred Eighty (169,680) common shares amounting to Sixteen Million Nine Hundred Sixty Eight Thousand Pesos (P16,968,000.00); 6. that Specified decreased its stockholding in Sunrise from Ninety Four and 31/100 percent (94.31%) to Eighty Nine and 46/100 percent (89.46%); and 7. that the total construction cost for the eight (8) condominium units assigned is Ten Million One Hundred Eighty Thousand Pesos (P10,180,000.00). In view thereof, this Office hereby amends and modifies the pertinent portion of BIR Ruling No. S-40-203-98 dated September 25, 1998 and which should now read as follows: "It is represented that Sunrise is a domestic corporation in the process of registration with the Securities and Exchange Commission (SEC); that it has an authorized capital stock of Fifty Million Pesos (P50,000,000.00) divided into Five Hundred Thousand (500,000) common shares with a par value of One Hundred Pesos (P100.00) per share; that the incorporators of the said corporation are as follows: Name No. of Shares Amount Subscribed Enrique O. Olonan 7,000 P700,000.00 Cecilia R. Olonan 3,500 350,000.00 Benjamin S. Tan 3,500 350,000.00 Manuel Go Kim 3,500 350,000.00 Fernando T. Esquerra 2,500 250,000.00 Specified Contractors & 169,680 16,968,000.00 Development, Inc. Total 189,680 P18,968,000.00 ======= ============ "that Specified is the absolute and registered owner of eight (8) condominium units located at Sunrise Hill Condominium, Alfonso, Cavite with the construction cost of P10,180,000.00 and more particularly described as follows: CCT No. Floor Area CT-615 Second Floor 210 Studio 36 sq.m CT-617 Second Floor 212 Studio 36 sq.m CT-618 Second Floor 213 Studio 36 sq.m CT-619 Second Floor 214 Studio 36 sq.m CT-621 Second Floor 216 2 Bed 84 sq.m Room CT-637 Third Floor 315 Studio 36 sq.m CT-644 Fourth Floor 406 Studio 36 sq.m CT-650 Fourth Floor 412 Studio 36 sq.m "that on July 23, 1998, eight (8) Deeds of Assignment were executed by and between Specified and Sunrise whereby the former transferred to the latter the above-mentioned real properties as full payment of its subscription in the total amount of P16,968,000.00; that as a result of the above transaction, Specified gained control of Sunrise by owning 89.4% of the total voting stocks of the said corporation as follows: Name No. of Shares Amount Subscribed Percentage of Ownership Enrique O. Olonan 7,000 P700,000.00 3.6% Cecilia R. Olonan 3,500 350,000.00 1.9% Benjamin S. Talan 3,500 350,000.00 1.9% Manuel Go Kim 3,500 350,000.00 1.9% Fernando T. Esquerra 2,500 250,000.00 1.3% Specified Contractors & 169,680 16,968,000.00 89.4% Development, Inc. Total 189,680 P18,968,000.00 100% ======= ============ ====== "xxx xxx xxx "Accordingly, no gain or loss shall be recognized both to the transferor and the transferee corporation on the transfer by Specified of its eight (8) condominium units in exchange for the shares of stock of the transferee corporation, Sunrise, considering that as a consequence of the exchange, Specified gained control of the transferee corporation by owning 89.4% of the total voting stocks of the said corporation." HIEASa Such being the case, the subject BIR Ruling No. S-40-203-98 dated September 25, 1998 addressed to your office has to be, as it is hereby amended. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner (Legal Service)