BIR Ruling [DA-283-97]

August 22, 1997 BIR RULING [DA-283-97] Benquet Management Corporation 391 J.P. Rizal St., Bo. Namayan Mandaluyong City Attention: Ms. Lina G. Fernandez Gentlemen : This refers to your letter dated May 19, 1997 requesting for our opinion as to the kind and amount of tax due on the Deed of Exchange entered into by and between you and Benquetrade, Inc. (BTI) which this Office under BIR Ruling No. 5-34-100-97 dated March 19, 1997 has determined to qualify as a tax-free exchange under Section 34 (c) and (6) (c) of the Tax Code, as amended. BIR Ruling Nos. 5-34-100-97 and 5-34-123-97 show that Benquet Management Corporation (BMC) is the registered owner of four (4) parcels of land situated at Baguio City and Tuding Province of Benquet; that BMC transferred and conveyed said realties with a total book value of P2,400,000.00 in favor of BTI in exchange for 240,000 shares of stock; and that as a result thereof BMC will gain control of BTI by owning 99.99% of its total voting shares. In reply, please be informed that you and BTI are not subject to the capital gains tax imposed under Section 21 (e) of the Tax Code, as amended, and to the creditable expanded withholding tax prescribed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, implementing Section 50 (b) of the Tax Code, as amended, by reason of the said exchange transactions. However, under BIR Ruling Nos. S-34-123-97 dated April 11, 1997 and S-34-100-97 dated March 19, 1997, you are subject to the documentary stamp tax imposed under Sections 196 and 175 of the Tax Code, as amended. ETHCDS Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner Legal Service