Ms. Antonina D. Ronquillo

September 18, 2008 BIR RULING [DA-(I-021) 234-08] Sec. 27; DA-325-04 Ms. Antonina D. Ronquillo No. 26, Mariposa Street, Quezon City M a d a m : This refers to your letter dated June 22, 2007 requesting exemption from the payment of capital gains and documentary stamp taxes on the transfer of title of a real property to the trustor-owner. It is represented that on September 12, 1988, you purchased a parcel of land from Portland Trade & Realty Corporation through ANRI DEVELOPMENT CORPORATION ("ANRI" for brevity), a corporation then registered with the Securities and Exchange Commission (SEC) at a price of P2,092,500.00; that the property was registered in the name of ANRI wherein you were the designated corporate president; that the funds used to purchase the said property came from your personal account and not from ANRI since at the time the subject property was bought, the subscribed capital stock of ANRI was only at P500,000.00, with P125,000.00 paid-up, thus, clearly showing that ANRI has no capability to buy the property; that you placed the title of the said realty in the name of ANRI, with the understanding that ANRI shall only hold the legal title to the property and that the equitable title will remain with you; that the subject property has been your residence since the time it was acquired up to the present; that due to non-operation of ANRI since the time of its inception, its Certificate of Registration was revoked by SEC in 2003; that as a consequence thereto, the only property under its name is required to be transferred in your favor as the real owner thereof; and that to implement the transfer, you executed a Deed of Self-Adjudication dated June 26, 2007, with supporting Affidavits executed by the other stockholders/incorporators dated June 21, 2007, recognizing your ownership over the subject realty and waiving all their rights over ANRI. Based on the foregoing, you are requesting in effect for a confirmation of your opinion that an implied trust was created when you placed in the name of ANRI the property you bought from Portland Trade & Realty Corporation in accordance with Article 1448 of the Civil Code of the Philippines and that the subsequent transfer of title of the subject property in your favor, the trustor-owner, is not subject to capital gains and documentary stamp taxes. In reply, please be informed that Article 1448 of the Civil Code of the Philippines provides as follows: "ART. 1448. 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. . . . ." Considering that in the instant case, it was you who purchased the subject parcel of land from Portland Trade & realty Corporation, through ANRI, using your personal funds and with the understanding that ANRI only holds the legal title to the property and the equitable title thereto remains with you, an implied trust under Art. 1448 of the Civil Code of the Philippines, therefore, was created. Consequently, the transfer of title of the property in your favor as a result of the cancellation of the corporate existence of ANRI, the trustee, and without any monetary consideration, is not subject to capital gains tax nor to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the Tax Code of 1997, as amended. (BIR Ruling No. 108-98 dated June 29, 1998 cited in DA-325-2004 dated June 16, 2004). AHEDaI Moreover, under Section 191 of Revenue Regulations No. 26, otherwise known as the "Documentary Stamp Tax Regulations", conveyances to a trust without valuable consideration, or from a trustee to a cestui que trust without valuable consideration are not subject to tax. From the foregoing and since the transfer of title of the subject real property from ANRI, the trustee, to you, the trustor-owner, is in connection and in recognition of an implied trust, the said transfer, therefore, is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgement to the said Deed of Self-Adjudication is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the same Code. (BIR Ruling No. 027-93 dated January 15, 1993 and BIR Ruling No. 080-02 dated April 29, 2002 cited in BIR Ruling No. DA-325-2004 dated June 16, 2004). 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