BIR Ruling [DA-385-04]

July 12, 2004 BIR RULING [DA-385-04] 27 (D) (5), 188, 196 DA-014-99, DA-102-04 Cordova & Associates Ground Floor, Cordova Mansion 978 General Malvar Street, Malate Manila Attention: Atty. Ebenezer D. Cordova Counsel Gentlemen : This refers to your letter dated July 2, 2004 requesting for a confirmation of your opinion that the conveyance of real properties held in trust by a Trustee (Santos Realty Investment Corporation) to a Trustor (Cosmopolitan Funeral Homes, Inc.) is exempt from capital gains, donor's and documentary stamp taxes. We quote the facts of the request, thus: "Santos Realty Investment Corporation is owned by members of the Santos Family and Cosmopolitan Funeral Homes is likewise owned by the same family; "The stockholders of the mentioned corporation agreed that the trustee, being a realty and investment corporation with a know-how on the best price and location for the funeral business of the trustor, would take charge in buying properties for the trustor; "In the expansion plans of the trustor and possible franchising of its business, trustor plans to apply for a loan from different banks with the properties acquired as collateral but the banks for their protection and security requires that the properties be in the name of the trustor; "To comply with the bank's requirements, the parties agreed that all properties acquired by the trustee for and on behalf of the trustor be transferred to the latter without any consideration and to truly reflect the legal and true ownership of the property." In reply, please be informed that since the transfer of the properties acquired by the trustee, Santos Realty Investment Corporation for and on behalf of the trustor, Cosmopolitan Funeral Homes, Inc. is without monetary consideration, the same is not subject to the capital gains tax imposed under Section 27(D)(5) of the Tax Code of 1997 nor to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997. Moreover, the transfer of the above-mentioned properties is exempt from the donor's tax imposed under Section 98 of the same Code due to lack of donative intent on the part of trustee. Furthermore, it is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to the said deed is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. ( BIR Ruling No. 027-93 dated January 16, 1993 ) 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, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service