Tax Consequence of Transfer of Ownership and Title to All Common Areas of the DAO 1 Condominium

March 8, 1984 BIR RULING NO. 055-84 245-00-000-00-055-84 Gentlemen : This refers to your letter dated July 27, 1982 requesting a ruling as to the tax consequence of the transfer from Insight Realty Corporation to DAO 1 Condominium Corporation of the ownership and title to all the common areas of the DAO 1 Condominium. It is represented that on May 28, 1975, upon application by Insight Realty Corporation (hereinafter referred to as Insight), DAO 1 Condominium Corporation was duly registered as a non-stock, non-profit Corporation with the Securities and Exchange Commission; that its objectives is principally to manage and maintain the DAO 1 Condominium Building, which was developed and constructed by Insight; that when all the units of the condominium were sold, Insight in compliance with the Condominium Act executed a Deed of Conveyance on August 26, 1976 and conveyed in favor of the DAO 1 Condominium Corporation the management of the building and the ownership and title to all the common areas of the DAO 1 Condominium, consisting of the following, viz: "1. The parcel of land of which the building is built and covered by Transfer Certificate of Title No. S-6944; "2. All bearing walls, facade, floors, roofs, foundations, columns, girders, beams, supports, and other common structural elements of the building; "3. All lobbies, doors, gates, fire escapes, hallways, corridors, stairs, stairways, walkways, and entrance to and exit from the buildings; "4. All surfaces of Units facing any limited or common area; "5. All driveways and parking areas; "6. The open ground and roof deck of the building; "7. All central and appurtenant equipment and installations for utility services, such as powers, light, telephone sewerage, drainage, gas, water, and airconditioning (including all outlets, pipes, ducts, wires, cables and conduits used in connection therewith, whether located in the Common Areas or in Units) which are utilized for or serve more than one Unit; all elevators, shafts, tanks, pumps, motors, fans, compressors, and control equipment; "8. All other parts of the project and all structures and facilities, apparatus, equipment, installations and areas therein which are for common use necessary or convenient to the existence, maintenance or safety of the Project." In reply, please be informed that any income derived from the transfer of ownership and the title to all common areas of DAO 1 Condominium from Insight Realty Corporation, the owner, developer of the building to DAO 1 Condominium Corporation, shall be subject to the ordinary corporate income tax prescribed under Section 24 of the Tax Code as amended. In other words, Insight Realty Corporation shall declare any income it derived from the sale of said common areas during the taxable year the transfer became effective. Moreover, the said transfer shall be subject to the documentary stamp tax imposed under Section 245 of the National Internal Revenue Code of 1977, as amended, computed as follows: "(a) When the consideration, or value received or contracted to be paid for such realty, after making proper allowance of any encumbrance, exceeds two hundred pesos and does not exceed one thousand pesos, two pesos. "(b) For each additional one thousand pesos, or fractional part thereof in excess of one thousand pesos of such consideration or value, eight pesos." Under Section 222 of the same Code, the documentary stamp tax shall be paid by the person making, signing, issuing, accepting or transferring the same, and at the same time such act is done or transaction had. Said provisions leaves the tax to be paid indifferently by either party to the transaction (Sta. Clara Lumber Co., Inc. vs. Jose Aranas, CTA Case No. 502, June 12, 1959). Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner