BIR Ruling [DA-574-06]

September 22, 2006 BIR RULING [DA-574-06] 27 (D) (5); 196; 188; DA-225-2006; DA-105-2006; DA-458-2006 Bueno Corporation 844 G. Puyat Street Quiapo, Manila Attention: Ms. Blesilda O. Buencamino President Gentlemen : This refers to your letter dated May 19, 2006 requesting for a ruling that the transfer of a building constructed on a real estate property by Bueno Corporation, as trustee in favor of Ramona Buencamino Abundo, as trustor/beneficiary is exempt from capital gains, income, donor's and documentary stamp taxes. Based on your representations, as well as from the documents submitted, it appears that on May 8, 2004, Bueno Corporation and Ramona Buencamino Abundo executed an Indemnity Agreement and Declaration of Trust with Deed of Assignment ("Deed"), whereby the former is the Trustee/Assignor and the latter is the Beneficiary/Assignee; that Bueno Corporation ("Trustee/Assignor") acknowledges that the five-storey building located at 1069-1073 C.M. Recto Avenue, Sampaloc, Manila covered by Tax Declaration No. 041-03-00159 was built out of the money belonging to Ramona Buencamino Abundo ("Beneficiary/Assignee") and is being held by the Trustee/Assignor in trust and for the benefit of the Beneficiary/Assignee; that the Trustee/Assignor acknowledges that all income, profits and interest earned from the building were treated as remuneration for the administration of the said property and were similarly field in trust for the benefit of the Beneficiary/Assignee as the beneficial owner; that the Trustee/Assignor is under obligation to transfer the aforesaid building including the income, profits and interest earned therefrom to the Beneficiary/Assignee; that pursuant to the Deed, the Trustee/Assignor has transferred and assigned all its rights, title, and interest over the aforesaid building including the profits and interests thereof unto the Beneficiary/Assignee; and that upon transfer and delivery by the Trustee/Assignor of the building to the Beneficiary/Assignee, the former shall be discharged of its duties as trustee of the building and shall have no power, discretion, rights and obligations in relation to the building. ICAcHE In reply, please be informed that since the transfer of the building by Bueno Corporation, as trustee, in favor of Ramona Buencamino Abundo, as trustor, is without monetary consideration and is merely a confirmation of title/ownership in favor of the beneficial owner, the same is not subject to the income and capital gains taxes imposed under Section 27(A) and (D)(5) of the Tax Code of 1997, as amended. Likewise, the conveyance of realties to trustees or other persons without consideration is not taxable under Section 185 of the Revised Documentary Stamp Tax Regulations. Thus, the transfer by Bueno Corporation to Ramona Buencamino Abundo pursuant to the Indemnity Agreement and Declaration of Trust with Deed of Assignment, which is made without monetary consideration, is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgment to the said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service