BIR Ruling No. 229-12

March 29, 2012 BIR RULING NO. 229-12 Sec. 40 (C) (2) of NIRC of 1997; RR 18-01 DLC Holdings, Corp. 70 Calamba St.,Sta. Mesa Heights, Quezon City Attention: Ms. Maureen C. Abelardo Treasurer Gentlemen : This is to acknowledge receipt of your letter request (consisting of 2 folders) dated January 31, 2011, on behalf of DLC HOLDINGS, CORP., requesting confirmation of a tax-free exchange transaction pursuant to Section 40 (C) (2) the Tax Code of 1997 involving the transfer of a real properties of DOROTEO L. CORONEL AND DOLORES B. CORONEL to the aforementioned corporation, in exchange for its shares of stocks. Documents submitted disclosed the following facts: 1. Spouses Doroteo L. Coronel and Dolores B. Coronel are stockholders of DLC HOLDINGS, CORP. and are the registered owners of a residential house and lot covered by Transfer Certificate of Title No. (TCT) N-173012 located at Sta. Mesa Heights, Quezon City; 2. DLC HOLDINGS, CORP. is a domestic corporation registered with the Securities and Exchange Commission (SEC) under SEC Registration No. ASO9301324 dated February 18, 1993; 3. DLC HOLDINGS, CORP.,upon incorporation had Four Million Pesos (P4,000,000.00) authorized capital stock, divided into forty thousand (40,000) common shares with One Hundred Pesos (P100.00) par value per share; aASDTE 4. On September 3, 2010, DLC HOLDINGS, CORP. increased its authorized capital stock from P4,000,000.00 to P14,000,000.00, divided into 140,000 common stock at P100 par value per share. 5. According to paragraph 3 of the Certificate of Approval of Increase of Capital Stock of DLC HOLDINGS, CORP. issued by the SEC, the net increase in the authorized capital stock of Ten Million Pesos (P10,000,000.00) the amount of P10,000,000.00 has been actually subscribed by the subscribers-stockholders and of the said subscription, Eight Million One Hundred Fifty Six Thousand One Hundred Eighty Five Pesos (P8,156,185.00) has been actually paid via conversion of liabilities into equity. 6. Documentary stamp tax for the issuance of shares as a result of the conversion has been paid on October 22, 2010. 7. Spouses Doroteo L. Coronel and Dolores B. Coronel have decided to transfer and exchange their residential house and lot to DLC HOLDINGS, CORP. in for its shares of stock under the provisions of Section 40 (C) (2) of the Tax Code of 1997. In reply, please be informed that the tax-free exchange transaction between spouses Doroteo L. Coronel and Dolores B. Coronel and DLC HOLDINGS, CORP. cannot be given due course on the ground that the latter corporation has no more shares of stock to issue in exchange of the real property being assigned by the spouses. It appears from the List of Stockholders 1 reported by the DLC HOLDINGS, CORP. Corporate Secretary of Record as of March 18, 2010, that the whole authorized capital stock has been subscribed by the following stockholders and the amount of subscription paid up: IcHAaS Name of Subscriber Subscribed Amount Paid No. of Shares Amount Doroteo L. Coronel 10,000 P1,000,000.00 P625,000.00 Dolores B. Coronel 10,000 1,000,000.00 625,000.00 Maureen C. Abelardo 4,000 400,000.00 250,000.00 Evangeline C. Torres 4,000 400,000.00 250,000.00 Leopoldo B. Coronel 4,000 400,000.00 250,000.00 Doroteo B. Coronel, Jr. 4,000 400,000.00 250,000.00 Ma. Angelita Nichols 4,000 400,000.00 250,000.00 Total 40,000 P4,000,000.00 P2,500,000.00 ====== =========== =========== Upon increase of the authorized capital stock, the whole net increase equivalent to P10,000,000.00 has been subscribed via conversion of liabilities into equity. It is clear that the stockholders have subscribed to DLC HOLDINGS, CORP.'s whole authorized capital stock as well as to the increase in capital stock, hence, there are no unissued shares left which the corporation can issue in exchange for the real property being transferred by the spouses Coronel. Thus, this Office cannot grant your request to confirm a tax-free exchange transaction between spouses Doroteo L. Coronel and Dolores B. Coronel and DLC HOLDINGS, CORP. pursuant to Section 40 (C) (2) of the Tax Code of 1997, as amended and Revenue Regulations No. 18-01 (Guidelines on the Monitoring of the Basis of Property Transferred and Shares Received, Pursuant to a Tax-Free Exchange of Property for Shares under Section 40 (C) (2) of the National Internal Revenue Code of 1997, Prescribing the Penalties for Failure to Comply with such Guidelines, and Authorizing the Imposition of Fees for the Monitoring Thereof) . AScTaD 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 as represented are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Page 6 of the SEC Certificate of Approval of Increase of Capital Stock.