Amount of Documentary Stamp Tax Due on Deed of Exchange Which under BIR Ruling No. S34-310-95 was Determined to Qualify as Tax-Free Exchange

August 25, 1997 BIR RULING NO. 093-97 196-000-00 093-97 Penthe Enterprises, Inc. 225 Gen. Luis Street Kaybiga, Caloocan City Attention: Mr . Rolando S . J . Garcia Accountant Gentlemen : This refers to your letter dated October 26, 1996 requesting for our opinion on the amount of documentary stamp tax due on the Deed of Exchange entered into by and between SY PENG HONG and PENTHE ENTERPRISES, INCORPORATED on July 13, 1995, which this Office, under BIR Ruling No. S34-310-95 dated July 29, 1995, has determined to qualify as a tax-free exchange under Section 34 (c)(2) and (6)(c) of the Tax Code, as amended. BIR Ruling No. S34-310-95 shows that Sy Peng Hong, the registered owner of two (2) parcels of land situated at Kaybiga, Caloocan City covered by TCT Nos. 59099 and 58886 issued by the Registry of Deeds of Caloocan City, transferred and conveyed the said realties in favor of Penthe Enterprises, Incorporated in exchange for P3,000,000.00 worth of its shares of stock or 30,000 shares of stock in partial payment of his (Sy Peng Hong) subscription of P9,000,000.00 in the increase in capital stocks of Penthe Enterprises, Incorporated; and that as a result thereof, Sy Peng Hong gained control of Penthe Enterprises, Incorporated by owning 82.88% of its total voting stocks. In reply, please be informed that a conveyance or deed whereby land is assigned or transferred to the purchaser is subject to documentary stamp tax based on the consideration or value received or contracted to be paid for such realty. (Sec. 196, Tax Code) A stock in a corporation is a valuable consideration for transfer of real property (Section 177, Documentary Stamp Tax Regulations). Thus, if parcels of real properties are exchanged with stocks in a corporation, as in this case, the latter (shares of stock) is the consideration, the value of which shall be the basis of the documentary stamp tax due on the aforesaid Deed of Exchange. The value shall be the fair market value which shall not be less than the par value of the stocks. Very truly yours, SIXTO S. ESQUIVIAS IV Assistant Commissioner Legal Service