Transfer of Certain Real Properties (e.g., Land and Building Used for Carrying on Activities) from Name of Mother Association to That of Its Different Local Branch Offices is Not Subject to Tax

May 18, 1972 BIR RULING NO. 015-72 Transfer of certain real properties (e . g . , land and building used for carrying on activities) from name of mother association to that of its different local branch offices is not subject to tax . This refers to your letter dated February 15, 1971 requesting a ruling on the tax consequence of the proposed transfer of certain real properties from the name of the Association of the Philippines, Inc. (hereinafter referred to as the Mother Association) to that of the different local X organizations. Generally, direct or indirect transfer, in trust or otherwise, of real or personal, tangible or intangible property for anything other than an adequate and full consideration in money or money's worth shall be subject to the gift taxes. (see Sec. 108, N.I.R.C.) However, donative intent must be present in the transfer of property in order that the gift taxes can be assessed and collected. (P-R Federal Gift Tax (1956), par. 125,010) a donative intent followed by a donative act is essential to constitute a gift; and no strained and artificial construction of a supplementary statute should be indulged to tax as gift a transfer actually lacking donative intent. (144 F. 2d 78, 82) Thus, in the case of "The Christian and Missionary Alliance Churches of the Philippines vs. Collector of Internal Revenue", C.T.A. Case No. 668, promulgated August 21, 1964, the Court held that the transfer of property from one corporation to another corporation which is connected with, subordinate to, and a district or local organization or branch of the transferor corporation is not subject to the gift taxes because wanting in donative intent, such transfer of property is in name only, and merely to enable the transferee corporation to better perform its obligation to administer, apply and use the said properties for the same purposes for which the transferor was created and still exists today. The aforecited decision finds application to the instant case, if as represented, the Mother Association will divide, transfer and allocate its real properties to its different local branches and organizations, in order to enable the latter to carry more effectively the XYZ objectives on the local level, and to use and apply the said properties for the same religious, charitable and educational purposes for which the transferor Mother Association was founded, and is presently being conducted. Moreover, the records show that upon the dissolution of the local organizations which are proposed to be incorporated, land which had been federated under the Mother Association, their assets and whatever may remain thereof after settlement of their legitimate may remain thereof after settlement of their legitimate obligations, shall be conveyed and disposed of in favor of the latter. Considering that the proposed transferees are the Alliance Churches of the Philippines, supra just be "a transfer from the right hand to the left hand." Tax-wise, the proposed transfer of property by the Mother Association is not by gift which is subject to tax within the purview of the gift tax statute. In view of the foregoing considerations, this Office is of the opinion as it hereby holds that the contemplated transfer of certain real properties, e.g., the land and the building used exclusively for carrying on XYZ activities, from the name of the XYZ -of the Philippines, Inc. to that of the different local XYZ organizations is not subject to any tax. This Office may however, reverse or modify this ruling if upon investigation, it will appear that the facts are different from those upon which the ruling is predicated. Very respectfully yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue