Exemption from Income Tax - Assignment/Transfer of the Club Shares

March 15, 1990 BIR RULING NO. 029-90 178 233-89 029-90 Gentlemen : This refers to your letter dated March 9, 1990 stating that SGV & Co. owns Membership Certificate No. 3583 of the Manila Polo Club, Inc. having purchased the same a number of years ago; that the share was assigned to Mr. John D. Smith, an American computer systems consultant of the firm, from January 26, 1988 to August 21, 1988 to enable him to avail of the facilities of the Club for the duration of his stay in the Philippines; that Mr. Smith has since ended his tenure in the firm but before he left, he executed a Declaration of Trust and Assignment of Share Certificate acknowledging SGV & Co.'s absolute ownership of the share and transferring the same in favor of the new consultant, Mr. John A. Meier as the newly-designated nominee and playing representative; that the assignment was without any consideration; that the aforementioned share was placed in the name of Mr. Smith and now Mr. Meier instead of SGV & Co. because that is required by Polo Club rules; and that the share has, however always been carried in your books as an asset of the firm. cdt In connection therewith, you now request confirmation of your opinion that: "1. The assignment/transfer of the club shares from Mr. Smith to Mr. Meier is not subject to income tax because no consideration was involved; "2. The assignment/transfer of the said share from Mr. Smith to Mr. Meier is not subject to gift tax for lack of donative intent; "3. That the only tax involved in the said assignment/transfer is the documentary stamp tax (DST) of 20 centavos for every P200 or fraction thereof, of the face value of such certificate, in accordance with Section 178 of the Tax Code." In reply thereto, I have the honor to inform you that your aforementioned opinion is hereby confirmed. Since the transfer does not involve any consideration, the same is not a taxable transaction; hence, the transferor, Mr. Smith is not subject to income tax. Moreover, while the above transaction is considered a gift since it is a valid transfer of property from one person to another without consideration or compensation therefore, the same however, is not subject to the gift tax because there is no donative intent on the part of the transferor. It has been held that in a direct gift, the element of donative intent must be present in the transfer of property to be donated (Perez vs. Commissioner, CTA Case No. 1707, February 10, 1969) Furthermore, the transfer of the Proprietary Membership Certificate is subject to the documentary stamp tax of P0.20 on each P200.00 on fractional part thereof, of the face value of such certificate, in accordance with Section 178 of the Tax Code. Very truly yours, (SGD.) EUFRACIO D. SANTOS Officer-in-Charge