Mr. Domingo P. Nakpil

December 3, 2007 BIR RULING [DA-608-07] Section 101 (A) (3) DA-123-2001 Mr. Domingo P. Nakpil No. 5 Mount Vernon St. Mountainview Village Marikina, Metro Manila Gentlemen : This refers to your letter dated November 6, 2007 requesting on behalf of Divine-Sunday Foundation, Inc. for the tax consequence on the proposed transfer by Divina G. Nakpil and/or Domingo P. Nakpil of the following real properties in favor of the aforesaid foundation: TEDAHI TCT No. Location Area in Sq. M. 537648-R Olongapo Gapan Road, Km 74, Sta. Barbara, Bacolor, Pampanga 2,146 103592 Citicenter, Tabun, Angeles City, Pampanga 966 103591 Citicenter, Tabun, Angeles City, Pampanga 966 516973-R Lualan, San Antonio, Bacolor, Pampanga 30,000 164627 7 Mount Vermont, Mountainview Village, Marikina City 302 164626 7 Mount Vermont, Mountainview Village, Marikina City 302 147281 7 Mount Vermont, Mountainview Village, Marikina City 302 147280 7 Mount Vermont, Mountainview Village, Marikina City 302 196243 18 Kalantiao, Calumpang, Marikina City 472 As represented, Divine-Sunday Foundation, Inc. is a non-stock, non-profit association registered with the Securities and Exchange Commission (SEC) under SEC Registration No. A200116347 dated October 26, 2001. The purpose for which the foundation was organized is to provide educational scholarship and engage in other related humanitarian activities. HTcDEa In reply, please be informed that gifts in favor of an educational an/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization is exempt from the payment of the donor's tax pursuant to Section 101 (A) (3) and (B) (2) of the Tax Code of 1997, subject to the condition that not more than 30% of said gift shall be used by the donee for administration purposes. The donation of the above real properties is not subject to capital gains tax because when the donor parts with his property, he did not realize a taxable gain. Moreover, the Deed of Donation is not subject to the documentary stamp tax under Section 196 of the Tax Code of 1997 but only to the documentary stamp tax of PhP15.00 on certification under Section 188 of the same Code (BIR Ruling No. DA-123-2001 dated July 18, 2001). However, if the same property acquired by gift is subsequently conveyed by way of sale or exchange, the sale will be subject to corporate income tax on the gain realized which is determined by deducting from the gross selling price the historical cost or the adjusted basis thereof, as it would be in the hands of the donor, pursuant to Section 27 in relation to Section 101, both of the Tax Code, and consequently to the creditable expanded withholding tax under Revenue Regulations No. 2.57.2 of Revenue Regulations No. 2-98, as amended. If it is donated to a nonexempt donee, the donor shall be liable for donor's tax pursuant to Section 98 in relation to Section 91 (B) of the Tax Code. 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. cCSEaA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service