Multilinked Consultants, Inc.

December 14, 2007 BIR RULING [DA-648-07] DA 240-04 Multilinked Consultants, Inc. MMM House, 71 Orbiter Street Moonwalk Village Las Pias City Attention: Atty. Millard M. Manseguiao Gentlemen : This refers to your letter dated May 7, 2007 stating that your client, Radio Mindanao Network, Inc. (RMN), is a corporation duly registered with the Securities and Exchange Commission (SEC) with postal address at the 4th Floor, State Condominium I Building, Salcedo Street, Legaspi Village, Makati City; that it is organized primarily to undertake and engage in the business of radio and television broadcasting and communications anywhere in the Philippines in accordance with existing laws and government regulations; that it has authorized capital stock of Four Hundred Million Pesos (P400,000,000.00) divided into 40,000,000 shares with a par value of P10.00 per share; that Henry R. Canoy is one of the incorporators of the said corporation and holding 67% or 1,160,172 shares of stock of RMN; that he is the father of Carlos S. Canoy, Ildefonso (Ike) S. Canoy and Eric S. Canoy and three daughters namely Harriet Canoy-Valencia, Ma. Theresa Canoy Sambile and Rebecca Canoy-Krikorian who are all American residents; that on December 12, 1990, Henry R. Canoy executed separate Bills of Sale transferring 98.94% of his shareholdings equally to Eric S. Canoy, Ildefonso (Ike) S. Canoy and Carlos S. Canoy, inclusive of the shares intended for his daughters; that the corresponding taxes for the said transfer of shares not traded in the stock exchange were paid; that as of December 31, 2004, the shares of stock held by the three (3) brothers have increased to P12,597,000.00 inclusive of stock increments from conversion of retained earnings to additional shares of stock, to wit: DEacIT Eric S. Canoy 4,200,515 shares Ike S. Canoy (BSC) 4,198,243 shares Carlos S. Canoy 4,198,242 shares Total 12,597,000 shares that on June 1, 2007, four (4) separate Declarations of Trust were executed as follows: (1) by Ildefonso Canoy, as Trustee, for Harriet C. Valencia involving 815,816 shares in RMN; (2) by Carlos Canoy, as Trustee, for Harriet C. Valencia involving 184,184 shares in RMN; (3) by Carlos Canoy, as Trustee, for Ma. Theresa C. Sambile involving 1,000,000 shares in RMN; (4) by Ildefonso Canoy, as Trustee, for Eric S. Canoy involving 368,369 shares in RMN. and that on November 11, 2007, four (4) separate Deeds of Assignment were executed by the above-named Trustees in favor of the above-mentioned beneficiaries whereby the former transferred to the latter the said shares in RMN without any consideration. AaSIET Based on the foregoing representations, you now request that the transfer of the above-mentioned shares of stock in RMN by the Trustees in favor of the beneficiaries without any consideration is not subject to capital gains 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 a final tax of six percent (6%) is imposed on the gains presumed to have been realized on 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 estates and trusts. Corollarily, Article 1448 of the Civil Code provides that there is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. Moreover, Article 1453 of the Civil Code provides that when the property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated. In the instant case, an implied trust is deemed created by law. The transfer of the aforesaid shares of stock in the names of Ildefonso Canoy and Carlos Canoy, as Trustees, to Harriet C. Valencia, Eric S. Canoy and Ma. Theresa C. Sambile, as Trustors, without monetary consideration by way of Deeds of Assignment is not subject to capital gains tax imposed under Section 24 (C) of the Tax Code of 1997. CADHcI Moreover, Section 185 of Regulations No. 26 provides that conveyances of realty, not in connection with a sale, to trustees or other persons without consideration are not taxable. Accordingly, the Deeds of Assignment executed by Ildefonso Canoy and Carlos Canoy, as Trustees, in favor of Harriet C. Valencia, Eric S. Canoy and Ma. Theresa C. Sambile, as the true and beneficial owners, is not subject to the documentary stamp tax imposed under Section 176 of the Tax Code of 1997, as amended by R.A. No. 9243. But subject to the P15.00 documentary stamp tax prescribed in Section 188, supra . Finally, the above transactions are not subject to donor's tax imposed under Section 99 of the Tax Code as there is no intention to donate on the part of the parties. IN VIEW OF THE FOREGOING, the aforementioned shares of stock in RMN may now be transferred by the Corporate Secretary in the names of the above-mentioned beneficiaries in the Stock and Transfer Book of the said Corporation. 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. TEAaDC Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service