Swap of Real Properties for Shares of Stock Exempt from Capital Gains Tax

April 21, 1993 BIR RULING NO. 132-93 SWAP OF REAL PROPERTIES FOR SHARES OF STOCK EXEMPT FROM CAPITAL GAINS TAX 50 (b) 000-00 132-93 ARCYA Commercial Corporation Room 310 Echelon Tower, 2100 A. Mabini Street Makati, Metro Manila Attention: Mr . S . Antonio Roxas Chua, Jr . President This refers to your letter dated September 22, 1992 stating that the following are the registered owners pro indiviso of seventeen (17) parcels of land situated in Calamba, Laguna covered by Transfer Certificates of Title Nos. T-237600, T-237601, T-238386, T-237588, T-237589, T-237600, T-237591, T-237592, T-237593, T-237594, T-237595, T-237596, T-237597, T-237598, T-237599, and T-240195 all of the Registry of Deeds of Calamba, Laguna: Name Ratio Percentage 1. Arcya Commercial Corporation 19/50 35% 2. S. Antonio Roxas Chua, Jr. 10/50 20% 3. Pacita R.C. Rodriguez 5/50 10% 4. Lucita R.C. Limpe 5/50 10% 5. Severino Roxas Chua 5/50 10% 6. Lim Sin Chiso Yu 5/50 10% 7. Peter T. Roxas Chua 1/50 5% Total 50/50 100% ==== ===== that the abovementioned real estate properties with a total market value of P6,152,878.95 based on the current real estate tax declarations, were purchased by the pro indiviso owners for a total consideration of P9,609,600.00; that the owners pro indiviso acquired the real estate properties with the intention of using them as payment of their respective subscriptions at par value to the authorized capital of a corporation, which will be organized to develop and manage the same; that the equity ratio in the corporation of the owners pro indiviso of the 17 parcels of land as a result of the transfer of the abovementioned real estate properties will be the same as abovementioned; and that the transfer of real estate properties to the corporation to be organized in exchange for shares of the latter will result only in the conversion to equity in the corporation of their pro indiviso interest in the real estate properties, without any change in their proportionate interest. In connection therewith, you now request a ruling to the effect that the transfer is exempt from the payment of the 5% creditable withholding tax; and that the Revenue District Officer in Calamba, Laguna be authorized to issue the Certificate Authorizing Registration (CAR) authorizing the Register of Deeds of Calamba, Laguna to register the Deed of Transfer/Exchange covering the abovementioned real estate properties in the name of the corporation without the prior payment of the 5% creditable withholding tax. In reply thereto, I have the honor to inform you that since the proposed transfer of real estate properties of the pro indiviso owners in exchange for shares of stock of a corporation which is still to be organized is in payment of their respective subscriptions to the authorized capital stock of the corporation, the same is not subject to the 5% creditable withholding tax on sale, exchange or transfer of real property pursuant to Revenue Memorandum Order No. 7-90 clarifying Revenue Regulations Nos. 12-89 and 1-90 implementing Section 50(b) of the Tax Code, as amended. Such being the case, the Revenue District Officer in Calamba, Laguna is hereby authorized to issue the Certificate Authorizing Registration (CAR) in order that title to the aforementioned properties may be transferred in the name of the corporation without the payment of the 5% creditable withholding tax. cdtech VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue