BIR Ruling [DA-509-98]

November 19, 1998 BIR RULING [DA-509-98] Bengzon Narciso Cudala Jimenez Gonzales & Liwanag SOL Building, 112 Amorsolo Street Legaspi Village Makati City Attention: Attys . Ma . Romela M . Bengzon and Clara Beltran-Sanchez Gentlemen : This refers to your letter dated August 5, 1998 requesting for confirmation of your opinion that (a) no gain or loss shall be recognized on the transfer of real properties by College Assurance Plan Philippines, Inc. (CAP) to its Trustee-Allied Banking Corporation (Trustee); (b) that the transfer of the said real properties to the Trust Fund is not subject to documentary stamp tax; and (c) the transfer of the properties to its Trustee is not subject to donor's tax. LLphil It is represented that CAP is primarily engaged in the selling of educational assistance plans, as well as other types of pre-need plans and services; that on September 24, 1980, CAP executed a Trust Agreement with Allied Banking Corporation; that in the said Agreement, CAP created a Trust Fund and Allied Banking Corporation was appointed as Trustee for the said Trust Fund, to manage and administer the same for the benefit and account of CAP; that CAP is the absolute and registered owner of several parcels of land including the improvements thereon; that in compliance with the pertinent corporate laws, including the rules and regulations of the Securities and Exchange Commission (SEC), CAP intends to transfer eleven (11) of its real properties to its Trustee; that on December 29, 1997, CAP transferred to the Trustee under a Deed of Trust the aforementioned parcels of land together with the improvements thereon more particularly described as follows: TCT No. Location Area Sq. M. Appraised Value 1. 270561-R San Fernando, 349 sq. m. P23,874,000.00 Pampanga 2. 270560-R San Fernando, 486 sq. m. Included in No. 1 Pampanga 3. 33135 San Fernando, La 595 sq. m. 40,809,000.00 Union 4. 20536 Dumaguete City 714 sq. m. 24,492,000.00 5. T-42846 General Santos 423 sq. m. 22,294,000.00 6. T-5982 Butuan City 606 sq. m. 28,505,000.00 7. T-6021 Butuan City 394 sq. m. Included in No. 6 8. T-22351 Kalibo, Aklan 338 sq. m. 15,642,000.00 9. T-22352 Kalibo, Aklan 282 sq. m. Included in No. 8 10. T-42264 Tagbilaran, Bohol 375 sq. m. 30,449,000.00 11. T-42265 Tagbilaran, Bohol 374 sq. m. Included in No. 10 P186,065,000.00 In reply, please be informed that your opinion is hereby confirmed as follows: 1. Since there is no actual transfer of ownership over the aforementioned properties, as a result of the transfer of the properties to Allied Banking Corporation as Trustee for the CAP Trust, the said transfer is not subject to the 6% capital gains tax imposed under Section 24 (D)(1) of the Tax Code of 1997. Moreover, pursuant to Section 185 of Regulations No. 26, conveyances of realty, not in connection with a sale, to trustee, or other persons without consideration are not taxable. (BIR Ruling No. 126-93 dated April 5, 1993) 2. The Deed of Trust executed to convey the aforementioned properties to Allied Banking Corporation as Trustee to form part of the Trust Fund is not 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 pursuant to Section 188 of the said Code. 3. The above-mentioned transaction is not subject to the gift tax as there is no intention to donate on the part of the parties. The aforementioned real properties may now be registered by the Registry of Deeds concerned in the name of Allied Banking Corporation as Trustee for College Assurance Plan Philippines, Inc. LexLib This ruling is being issued in 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)