BIR Ruling [DA-521-06]

August 30, 2006 BIR RULING [DA-521-06] DA-567-2004 dtd 11/9/04 Norma G. Pechueco San Jose, Antique 5700 M a d a m : This refers to your letter dated February 20, 2006, requesting exemption from the payment of the capital gains tax in the transfer of the title of the property held in-trust by the bank to the beneficial owner. It is represented that you are the owner of some portions of Lot No. PCS-16345 designated as Lots 13 & 15, situated in Las Pias City and embraced under Transfer Certificate of Titles (TCT's) S-25818 and S-25819 of the Registry of Deeds for the Province of Rizal; that the aforesaid properties were formerly held in-trust by the Bank of Philippine Island (BPI) (successors-in-interest of the Far East Bank and Trust Co.) pursuant to a Deed of Revocable Trust executed between one CESAR J. PECHUECO and the FAR EAST BANK and TRUST CO. (FEBTC) on October 31, 1974; that the said Trust Agreement is effective during the lifetime of the Settlor (Cesar J. Pechueco); that the trustor Cesar J. Pechueco died on January 16, 1990, without revoking the Trust Agreement; that it appears that you are the legal wife of the deceased-trustor and as such one of the beneficiaries of the Trust Agreement; that in December, 2005, the BPI executed in your favor a document designated as "Termination of Trust Services and Distribution and Transfer of Trust Property to the Beneficiary; that you contemplated to transfer the title in your name proportionately however, you are requesting exemption from the payment of capital gains tax in effecting the transfer itself. In reply, please be informed that since the transfer of the title of the property from the trustee-bank to the beneficial owner in the Trust Agreement, does not involve any consideration, the same is not a taxable transaction; hence, the transferor BPI (successor-in-interest of FEBTC) is not subject to capital gains tax. Moreover, the above transaction is not subject to the donor's tax, since there is no donative intent under the above circumstances. It has been held that in a direct gift, the element of donative intent must be present in the transfer of the property to be donated ( Perez vs. Commissioner , CTA Case No. 1797, Feb. 10, 1969). Moreover, the transfer of the said Certificate is not subject to the documentary stamp tax imposed under Section 176 of the Tax Code of 1997. 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. SEcAIC Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service