BIR Ruling [DA-446-03]

December 5, 2003 BIR RULING [DA-446-03] 24 (D) (1); 124-93 Equitable PCIBank Equitable PCI Bank Towers Makati Avenue cor. H.V. dela Costa Street Makati City Attention: Ms. Clarissa G. Ocampo Senior Vice-President & Trust Officer Gentlemen : This refers to your letter dated November 14, 2001 relative to your letter dated September 18, 2000 stating that on June 13, 2000, Ms. Christine Marie Angco (Trustor) and Equitable PCI Bank Trust Banking (Trustee) have established a revocable inter vivos (living) trust with Trust Account No. 110-78311-0, for the use of the hereinafter described real property: TCT No. Location Area (sq. m.) T-538354 The Manila Southwoods 494 sq. m. Residential Estates Lot No. 73 Block No. 41 situated at Municipality of Carmona, Cavite for her own benefit and for the benefit of all the other beneficiaries, as well as to make provisions for the care and management of the Trust Estate, the collection and investment of the income therefrom, and the use and disposition of both the income and the principal or corpus of the Trust Estate for the lifetime support of the Trustor, her incapacity both physical and/or mental and her eventual death; and that in consideration of the acceptance by the Trustee of the Trust created, the Trustor hereby conveys, transfers, assigns and delivers to Trustee, their successors in trust and assigns, the aforesaid property. In connection therewith, you now request for a ruling that the transfer of the above-mentioned property to the Trustee of Ms. Christine Marie Angco is not subject to capital gains tax, ordinary income tax and the corresponding documentary stamp tax. In reply thereto, please be informed that Section 24(D)(1) of the Tax Code of 1997 provides that capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estate and trust, shall be taxed at the rate of 6% based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of the said Code, whichever is higher. Such being the case, and considering that there is no actual transfer of ownership over the above-mentioned property, as a result of the transfer of the said property to Equitable PCI Bank, as Trustee, for Ms. Christine Marie B. Angco, the said transfer is not subject to the 6% final capital gains tax nor to the ordinary income tax, respectively, imposed under Sections 24(D)(1) and 24(A)(1)(c) of the Tax Code of 1997. (BIR Ruling No. 124-93 dated April 5, 1993) Moreover, Section 185 of Revenue Regulations No. 26, otherwise known as the Documentary Stamp Tax Regulations, provides that conveyances of realty, not in connection with a sale, to a trustee or to other persons without consideration are not taxable. Accordingly, the deed conveying the aforesaid property to the above-named trustee is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the acknowledgment is subject to the documentary stamp tax of P15.00 prescribed in Section 188 of the said Code. Finally, the aforesaid property may now be registered by the Registry of Deeds concerned in the name of the above-named trustee for Ms. Christine Marie Angco, as Trustor. The Trust Agreement should be annotated on the new title certificate. CTIEac 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