Tax Consequences of the Transfer/Sale of Shares of Stocks of a Corporation at Par Value to an Individual Purchaser Who, in Turn, Assigned Some of Said Shares to His Associates for Purposes of the Latter Qualifying as Members of the Board of Directors in that Corporation

September 4, 1995 BIR RULING NO. 133-95 24 (e) (2) (A) 000-00 133-95 Bali Development Corporation 17 Don Vicente Ang Street Caloocan, Metro-Manila Attention: Mr . Alfonso Arceo Gentlemen : This refers to your letter dated June 28, 1995 requesting a ruling on the tax consequences of the transfer/sale of shares of stocks of a corporation at par value to an individual purchaser who, in turn, assigned some of said shares to his associates for purposes of the latter qualifying as members of the Board of Directors in that corporation. llcd It appears that your stockholders are the following: Name No. of Shares Value Manuel L. Ang 225,000 P225,000.00 900,000 900,000.00 Gloria L. Ang 225,000 225,000.00 900,000 900,000.00 Raymond L. Ang 50,000 50,000.00 200,000 200,000.00 Randolph L. Ang 15,000 15,000.00 60,000 60,000.00 Alfonso Arceo 10,000 10,000.00 40,000 40,000.00 Maria Enriquez Dy 145,000 145,000.00 580,000 580,000.00 Arturo E. Dy 140,000 140,000.00 560,000 560,000.00 Dy Bon Hi Jr. 140,000 140,000.00 560,000 560,000.00 Yee Tech Chee 50,000 50,000.00 200,000 200,000.00 Total 5,000,000 P5,000,000.00 ======== =========== that collectively, the above stockholders assigned all their shares to Mr. Archiemedes R. King who together with his group will acquire and manage that corporation; and that to enable the rest of Mr. King's group to become members of the Board of Directors, he will assign nominal shares to his nominees in the Board; that the rest of the shares will be in the name of Mr. King who will now control that corporation; that in your financial statements for calendar years 1994 and 1993, the value per share is P1.00; that the sum of your authorized shares of 5,000,000 is also P5,000,000.00 for both calendar years; and that the total stockholders' equity, representing the book value of all the authorized shares is P3,393,988.00 and P4,074,516.00, respectively for 1994 and 1993. In reply, please be informed that if no gain is generated, you are not subject to capital gains tax under Section 24(e)(2)(A) of the Tax Code, as amended. For the same reason, no gain or loss is also recognized in the transfer of nominal shares by Mr. King to his nominees in the Board of Directors. However, in both transactions, a documentary stamp tax of one peso (P1.00) for each two hundred pesos or fractional part thereof, of the par value of such shares of stock shall be imposed pursuant to Section 176 of the Tax Code, as amended by R.A. No. 7660. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue