Mr. Ricardo Delfin A. King

October 8, 2009 BIR RULING [DA-(C-226) 586-09] DA690-07; DA138-07; DA162-05; DA385-04; DA646-04; DA369-03 Mr. Ricardo Delfin A. King Paseo Eulalia, Maria Luisa Estate Park Banilad, Cebu City Sir : This refers to your letter dated September 16, 2009 stating that on October 11, 2004, a Deed of Declaration of Trust Agreement was executed by you, as Trustee, and the hereunder mentioned, as Trustors, to wit: Castilex Industrial Corporation, a corporation organized and existing under the laws of the Philippines with business address at M.L. Quezon Street, Cabancalan, Mandaue City; Cebu Tristar Corporation, a corporation organized and existing under the laws of the Philippines with business address at 168 Quano Avenue, North Reclamation Area, Mandaue City; Juanito King & Sons, Inc. a corporation organized and existing under the laws of the Philippines with business address at 201 Magallanes Street, Cebu City; Regan Rex T. King married to Roselle C. King with address at Paseo Eulalia, Maria Luisa Estate Park, Banilad, Cebu City; Robin A. King married to Eleanor H. King with address at 7752 Sherwood Street, Marcelo Green Village, Paraaque, Metro Manila; and Mario A. King married to Haydee C. King with address at Forest Hills, Banawa, Cebu City; cECTaD that pursuant to the said Deed the Trustee and the Trustors agreed to buy several parcels of land owned by the Philippine National Bank (PNB) and in order to simplify the negotiation with the said PNB the Trustee has been authorized and empowered by the Trustors to deal with the PNB and agree with the terms and conditions of the sale and execute and deliver the needed documents between the Trustee, as Buyer, and the PNB, as Seller, on the following parcels of land covered by TCT Nos. 50028, 50025, 50027, 50026 and 50946 all issued by the Registry of Deeds for the City of Mandaue; that however, as between the Trustee and the Trustors the buyers from the PNB are the Trustors and Trustee in proportion to their respective contributions in the purchase of the aforesaid land; that the Trustors and Trustee have agreed that as soon as titles on the said parcels of land are transferred in the name of the Trustee they will hire the services of a reputable geodetic engineer to prepare the subdivision plan showing the designated areas assign to each of them in proportion to their respective contribution in the purchase price; that the Trustee does recognize that, except for the portion that pertains to him in his own right in proportion to his contribution in the purchase price, he is only holding the titles on the other portions as Trustee in trust for the Trustors who are the beneficial owners thereon in proportion to their respective contributions in the purchase price; and that on July 29, 2008, an Addendum to the Deed of Declaration of Trust Agreement was executed by the above-named parties and have agreed that the parcels of land subject to the said Deed are subdivided among them in the following proportions: Free of Easement: Castilex Industrial Corporation 4,000 square meters Cebu Tristar Corporation 658 Ricardo Delfin A. King 3,513 Juanito King & Sons, Inc. 1,896 Robin A. King 1,811 Mario A. King 965 Regan Rex T. King 829 Easement of Right of Way Ricardo Delfin A. King 2,208 square meters Juanito King & Sons, Inc. 964 Robin A. King 1,049 Mario A. King 465 Regan Rex T. King 601 Total 5,287 square meters Based on the foregoing representations, you now request for an opinion on the tax consequence relative to the transfer of the above-mentioned properties, without consideration, by the Trustee in favor of the Trustors by virtue of a Deed of Declaration of Trust Agreement. In reply thereto, please be informed that your opinion is hereby confirmed as follows 1. The transfer of titles over the aforesaid properties by the Trustee in favor of the Trustors, the beneficial owners thereof, to be effected through a Deed of Conveyance is not subject to capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997 nor to the creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended, considering that the transfer is not for monetary consideration but merely acknowledges and confirms the title and ownership over the above-mentioned properties of Trustors, as the Principal. (BIR Ruling No. DA222-00 dated April 27, 2000) 2. The transfer of titles over the properties to the Trustors is likewise not subject to the 12% value-added tax because the said properties are not held primarily for sale to customers or for lease in the ordinary course of business. 3. The transfer of the said properties to the Trustors without any monetary consideration is not subject to gift tax imposed under Section 98 of the Tax Code of 1997, since there is no donative intent on the part of the parties. (BIR Ruling No. 061-93 dated February 10, 1993) TSCIEa 4. Finally, the Deed of Reconveyance executed by and between Trustee and Trustors, whereby the former will convey to the latter the above-mentioned properties without monetary consideration is likewise not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgment is subject to the documentary stamp tax of P15.00 under Section 188, supra. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service