BIR Ruling [DA-247-04]

May 12, 2004 BIR RULING [DA-247-04] Sec. 24 (c); DA-125-97; 031-99 De Guzman & Celis Law Office Suite C 15th Floor, Strata 2000 Building Emerald Avenue, Ortigas Center Pasig City Attention: Amalia E. Dionisio Tax Counsel Gentlemen : This refers to your letter dated April 23, 2003 requesting confirmation of your opinion that: 1. The assignment or transfer of the certificates of club membership share at the Valle Verde Country club and the Manila Polo Club by the heirs of the late Wellington Ty to the name of the beneficial owner WIMC, is neither a sale, barter, exchange nor other disposition contemplated under Section 24 (C) of the Tax Code of 1997, and therefore, no capital gains tax or creditable withholding tax accrue thereto; and 2. The assignment or transfer contemplated above is not a sale, or agreement to sell or memoranda of sale, or deliveries or transfer within the purview of Section 176 of the Tax Code of 1997 and, therefore, no documentary stamp tax accrues thereto. It is represented that sometime in March 1997 and June 1990, Wellington Investment & Manufacturing Corporation (WIMC for brevity), purchased a proprietary club membership share in the Valle Verde Country Club, Inc. and in the Manila Polo Club, respectively. The certificates of membership were placed in the name of Mr. Wellington Ty, who was then the President of WIMC. Unfortunately, on August 5, 2000 Mr. Wellington Ty died when his residence was completely destroyed by fire. In the belief that the aforementioned shares are not part of the estate of Mr. Ty, WIMC requests that the same be reverted back to the corporation as the beneficial owner. The supposed transfer of the membership shares of Valle Verde Country Club, Inc. and Manila Polo Club is supported by the two (2) Deeds of Acknowledgment and Waiver both executed on April 9, 2003 by the heirs of the late Wellington Ty. In the same document, it is acknowledged by the heirs that the Proprietary Membership shares in Valle Verde Country Club, Inc. under Certificate No. 1049 and in Manila Polo Club under Certificate No. 3900 were acquired with the funds belonging to WIMC and that the late Wellington Ty only acted as the Corporate assignee of the shares. In reply thereto, please be informed that in BIR Ruling DA-125-97, this Office held that the conveyance by the trustee in favor of the trustor of the subject properties which the former acquired by virtue of the trust agreement is not to be treated as another transfer separate and distinct from the sale between the original owner and the trustee. The conveyance is merely to be treated as a continuation and confirmation of title in favor of the ultimate and real beneficiary of the shares of stocks. Since the transfer of the Proprietary Membership shares in Valle Verde Country Club, Inc. under Certificate No. 1049 and in Manila Polo Club under Certificate No. 3900 is without any consideration because WIMC is the real owner and Mr. Wellington Ty acted only as a trustee, the same is not subject to the capital gains tax imposed under Section 24(C) of the Tax Code of 1997. Furthermore, the deeds of acknowledgment with waiver executed by the heirs of Wellington Dy to effect the transfer of the Proprietary Membership shares to WIMC are not subject to the documentary stamp tax imposed under Section 196 of the same Code. However, the notarial acknowledgement to the said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. ( BIR Ruling No. 031-99 dated March 19,1999 ) 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 , (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group