BIR Ruling [DA-394-06]

June 26, 2006 BIR RULING [DA-394-06] 24 (C); DA-522-2005 Uy Clerigo & De Guzman Law Offices Unit 1208 Cityland Condominium 10 Tower II H.V. dela Costa cor. Valero Sts. Salcedo Village, Makati City Attention: Atty. Stevenson Y. Uy Gentlemen : This refers to your letter dated March 28, 2006 requesting on behalf of your client, Consolidated Industrial Gases, Inc. (CIGI) for exemption from the payment of capital gains tax on its transfer of a proprietary share presently in the name of Peter A. Hyland in favor of Emmanuel V. Rubio. It appears that Mr. Peter A. Hyland is the owner of one (1) proprietary share of the Manila Polo Club, Inc. evidenced by Proprietary Membership Certificate No. 5431. The subject share of stock is owned by CIGI and retained as asset in its books, but because of Manila Polo Club's policy disallowing ownership of corporate shares, the said share was named to its former officer, Peter A. Hyland, in order for the latter to avail of the privileges of the club. The aforestated share is now being transferred to another officer of CIGI, Mr. Emmanuel V. Rubio. In reply, please be informed that since the transfer of the proprietary membership certificate representing 1 share of Manila Polo Club, Inc. beneficially owned by CIGI, from its present nominee, Peter A. Hyland to a new nominee, Emmanuel V. Rubio, does not involve any monetary consideration, the same is not a taxable transaction and therefore, no capital gains tax is due and payable on the aforementioned transaction. Moreover, while the said transaction is considered a gift since it is a valid transfer of property from one person to another without consideration or compensation therefore, the same is not subject to the gift tax. This is so because although there is a direct gift, there is no donative intent under the above circumstance. It has been held that in a direct gift, the element of donative intent must be present in the transfer of property to be donated. (BIR Ruling No. DA-522-2005 dated December 23, 2005) Furthermore, the transfer of the said certificate is not subject to the documentary stamp tax under Section 176 of the 1997 Tax Code, as amended, but only to the P15.00 documentary stamp tax imposed under Section 188 of the same Code. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. EDSAac Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service