Revocable Inter-Vivos Trust Exempt from Capital Gains Tax

March 10, 1993 BIR RULING NO. 096-93 REVOCABLE INTER-VIVOS TRUST EXEMPT FROM CAPITAL GAINS TAX 21 (e) 238-89 096-93 Mr. Carlos A. Lardizabal 817 EDSA, South Triangle Quezon City, Metro Manila This refers to your letter dated December 8, 1992 requesting on behalf of your clients, Dr. & Mrs. Alberto Lardizabal for a ruling based on the following representation of facts: "Alberto A. Lardizabal, married to Cely L. Lardizabal, residents of Quezon City, Metro Manila, has established a revocable inter vivos trust referred to as the A & C Lardizabal Family Trust and would like to change the manner of holding title to their real properties located in Quezon City and Alabang, Metro Manila and the provinces of Rizal and Marinduque; and stocks and securities registered with the Securities and Exchange Commission from: Alberto A. Lardizabal and Cely L. Lardizabal, Trustees (and subsequent trustees), A & C Lardizabal Family Trust. cdtech "This is a revocable trust under Sec. 56 of the NIRC . . . is and the spouses, during their lifetime, are trustors, trustees and beneficiaries and hold all incidents of ownership." In reply, please be informed that under Section 21(e) of the Tax Code, as amended, capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales or other forms of conditional sales, by individuals, including estates and trusts shall be taxed at the rate of 5% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. Such being the case, and considering that there is no actual transfer of ownership over the aforementioned property, as a result of the transfer of the property to the spouses Lardizabal and trustees for A & C Lardizabal Family Trust, the said transfer is not subject to the 5% capital gains tax under Section 21(e) of the Tax Code, as amended. Moreover, the deed conveying the aforementioned properties to the Spouses Lardizabal as trustees is not subject to documentary stamp tax imposed by Section 196 of the Tax Code, but the notarial acknowledgment is subject to the stamp tax of P3.00 under Section 183 of the same Code. The aforementioned real properties as well as the stocks and securities may now be registered by the Registry of Deeds concerned and the Securities and Exchange Commission, respectively, in the name of the Spouses Lardizabal as trustees for the A & C Lardizabal Family Trust. This ruling is being issued on the basis of the foregoing facts as represented. However, if it will be discovered upon investigation that the facts are different then this ruling shall be considered null and void from the date of issue. cd JOSE U. ONG Commissioner of Internal Revenue