Manila Memorial Park Cemetery, Inc. Neither Subject to 35% Corporate Income Tax Nor to 10% Value-Added Tax (VAT) on Contributions to the Memorial Park Care Fund from Customers

September 10, 1996 BIR RULING NO. 098-96 24, 100 (a) 000-00 098-96 Siguion Reyna Montecillo & Ongsiako 8755 Paseo de Roxas, Philcom Bldg. Makati City Attention: Atty . Jose Lis C . Leagogo Gentlemen : This refers to your letters dated July 1 and July 16, 1996 stating that your client, the Manila Memorial Park Cemetery, Inc. (MMPC) receives contributions from its customers for the Memorial Park Care Fund separately and independently of the purchase price of the memorial lots; that said contributions are being turned over by MMPC to the Trustee of an Irrevocable Trust established to pay for the care of the cemetery, i.e . cutting of grass upon plots, raking and clearing of plots, pruning shrubs and trees and the general preservation of the plots and grounds, walks, roadways, boundaries and structures, to the end that said grounds shall remain and be reasonably cared for as a memorial park cemetery; that in the standard "Offer to Purchase" and "Deed of Sale and Certificate of Memorial Park Care" the amount covering the customers contribution to the Fund is separately indicated as contribution to the Fund in contradistinction with the purchase price of the cemetery lot; that in the said "Offer to Purchase" and "Deed of Sale and Certificate of Memorial Park Care" MMPC is obligated to set aside and deliver the amount covering the contribution to the Fund to the Trust established to care for the cemetery; that the contribution does not form part of the purchase price of the lot; that MMPC merely acts as the collecting agent and immediately turns the same over to the Trustee; that MMPC is responsible to develop the area into a cemetery, divide the same into lots and sell the same; that once the lots are fully sold, the responsibility of MMPC to maintain the cemetery ceases; and that the income of the Memorial Park Care Fund shall hence forth be utilized to cover the maintenance expenses of the cemetery. LLjur Based on the foregoing representations, you are now requesting, in effect, for a ruling that MMPC is not subject to income tax nor to the value added tax (VAT) on the amount paid by its customers as their contributions to the Memorial Park Care Fund since said contributions do not form part of the purchase price of the cemetery lot. In reply thereto, please be informed that income tax accrues only when taxable income has been realized. Economic gain realized or realizable by the taxpayer is necessary to produce a taxable income. (Helvering vs. Horst, 311 U.S. 112). Moreover, in the case of sale, barter or exchange of real property subject to VAT, gross selling price shall mean the consideration stated in the sales document or the zonal value of the real property being sold, whichever is higher. Provided however, that in the absence of zonal value, gross selling price refers to the market value shown in the latest tax declaration or the consideration whichever is higher (Sec. 4, 100-1 Revenue Regulations No. 7-95 implementing Sec. 100 (a), Tax Code, as amended). Such being the case, since it is clearly stipulated in paragraph A, No. 6 of the Deed of Sale and Certificate of Memorial Park Care that the contribution by the purchaser of the memorial lot to the Memorial Park Care Fund will be set aside by MMPC and delivered to a trust for the care of the cemetery; that as a trust fund, said contributions will be applied to the care of the cemetery such as cutting of grass upon plots, raking and clearing of plots, pruning shrubs and trees and the general preservation of the plots and grounds, walks, roadways, boundaries and structures to the end that said grounds shall remain and be reasonably cared for as a memorial park cemetery; and that the consideration for the sale of the memorial lot is treated separately and distinctly from the contribution to the memorial park care fund, said contribution to the Memorial Park Care Fund received by MMPC from its customer is not considered as income taxable to MMPC. Accordingly, MMPC is neither subject to the 35% corporate income tax prescribed under Section 24 of the Tax Code as amended nor to the 10% value-added tax (VAT) under Section 100 (a) of the Tax Code, as amended on the contributions to the Memorial Park Care Fund received by it from its customers. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. jurLL Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue