Puno and Puno Law Offices

December 28, 2007 BIR RULING [DA-690-07] 24 (D) (1), 196, 98, 105 DA-138-07 Puno and Puno Law Offices 12th Floor, East Tower Philippine Stock Exchange Centre Exchange Road, Ortigas Center Pasig City Attention: Attys. Ma. Elizabeth E. Peralta-Loriega and Gracejenn Vizcarra Giron Gentlemen : This refers to your letter dated December 13, 2007 stating that a Declaration of Trust was executed between Renato V. Puno, as Trustee and Ronaldo V. Puno, as Trustor on February 15, 2007. In the said document, the Trustee acknowledged that he purchased two (2) parcels of land located at Brgy. Sta. Cruz, Antipolo City, more particularly described and previously covered by Transfer Certificates of Title (TCT) Nos. R-42060 and R-42061 for and on behalf of the Trustor, with the latter as the beneficial owner and that any and all payments made on the said properties were funded by and made on behalf of and for the benefit of the said Trustor. TCT Nos. R-42060 and R-42061 were cancelled on February 22, 2007 and thereafter TCT Nos. R-44175 and R-44176 were issued in the name of the Trustee. On August 17, 2007, a Deed of Termination of Trust with Consolidation of Beneficial and Legal Title in Favor of the Trustor was executed by Renato V. Puno, in favor of Ronaldo V. Puno. As a result thereof, the trust relationship between them was terminated and the legal title and beneficial ownership over the subject properties will be consolidated in favor of the Trustor. You now request confirmation of your opinion that: 1. The transfer of title over a parcel of land without consideration by the Trustee in favor of the beneficial owner thereof is neither subject to capital gains tax nor to the creditable withholding tax imposed under Revenue Regulations (RR) No. 2-98, as amended; 2. The transfer of title over the aforesaid property by the Trustee in favor of the Trustor shall not be subject to the 12% value-added tax (VAT) because the said property is not held by the Trustee primarily for sale to customer or for lease in the ordinary course of business, considering that it only holds the same in trust for the Trustor; 3. The transfer of title over the property without consideration by the Trustee in favor of the Trustor shall not be subject to donor's tax imposed under Sec. 98 of the Tax Code of 1997 due to lack of donative intent on the part of the Trustee; and 4. The transfer of title over the property by the Trustee in favor of the Trustor shall not be subject to documentary stamp tax imposed under Sec. 196 of the Tax Code of 1997. In reply thereto, please be informed that your opinion is hereby confirmed as follows: 1. The transfer of title of the aforestated properties by the Trustee in favor of the Principal, who is the beneficial owner thereof is not subject to capital gains tax imposed under Sec. 24 (D) (1) of the Tax Code of 1997 nor to the creditable withholding tax prescribed in RR 2-98, as amended, considering that the conveyance is not motivated by a valuable consideration and merely acknowledges, confirms and consolidates the legal title and beneficial ownership over the 2 parcels of land in the name of Ronaldo V. Puno, the Trustor. (BIR Ruling Nos. DA-138-07 dated March 6, 2007) EIDaAH 2. The transfer of the above-named realties to the Trustor is not likewise subject to the 12% VAT because the said properties are not held primarily for sale to customers or for lease in the ordinary course of trade or business. (BIR Ruling No. DA-138-07 dated March 6, 2007) 3. The conveyance of the said properties to the Trustor without any monetary consideration is not subject to gift tax imposed under Sec. 98 of the 1997 Tax Code, since there is no donative intent on the part of the trustee. (BIR Ruling No. DA-138-07 dated March 6, 2007) 4. The Deed of Termination of Trust with Consolidation of Beneficial and Legal Title in Favor of the Trustor was executed to terminate the trust relationship between Renato V. Puno and Ronaldo V. Puno and the consolidation of the legal title and beneficial ownership over the 2 lots is a conveyance without monetary consideration, and as such not subject to the documentary stamp tax imposed under Sec. 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgment to said deed is subject to the documentary stamp tax of P15.00 under Sec. 188 of the same Tax Code. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service