Tax Consequence of the Transfer of Properties

November 22, 1989 BIR RULING NO. 238-89 21 (e) 000-00 238-89 Gentlemen : This refers to your letter dated October 13, 1989 stating that Mr. Edward M. Grimm died on November 27, 1977 leaving as estate which included the following properties: (a) one parcel of land and improvements containing an area of 14 hectares, more or less situated in Laguna de Bay; covered by Transfer Certificate of Title No. 111659 of the Registry of Deeds of Rizal; (b) one parcel of land and improvements situated in Bacood, Sta. Mesa, Sampaloc, Metro Manila, (Lot 3-C-1-A of the subdivision plan (LRC) Psd-25313, being a portion of Lot 3-C-1, described on plan Psd-18599, LRC (GLRO) Record No. 7680) covered by Transfer Certificate of Title No. 70223 of the Registry of Deeds for the City of Manila; and (c) one parcel of land and improvements situated in Bacood, Sta. Mesa, Sampaloc, Metro Manila (Lot 3-C-3-A of the subdivision plan (LRC) Psd-25313, being a portion of Lot 3-C-3, described on plan Psd-18599, LRC (GLRO) Records No. 7680) covered by Transfer Certificate of Title No. 70224 of the Registry of Deeds for the City of Manila; that pursuant to a judgment entered in Special Proceedings No. R-82-3386 and No. 113024 dated September 20, 1988, the said properties will be transferred to a trustee for it to market the said properties; that the co-administrators of the Estate are Messrs. Randy Gleave Lawyer and Ramon J. Quisumbing that Messrs. Lawyer and Quisumbing have appointed the Rizal Commercial Banking Corporation (RCBC) as the trustee of the heirs of Mr. Edward M. Grimm with respect to the above described properties. cd In connection therewith, you now request confirmation of your opinion to the effect that the transfer of the aforementioned properties to RCBC as Trustee for the Heirs of Mr. Edward M. Grimm is not subject to the 5% capital gains tax imposed by Section 21(e) of the Tax Code. Moreover, the deed conveying the aforementioned properties to RCBC as trustee is not subject to documentary stamp tax. In reply thereto, 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 properties, as a result of the transfer of the properties to RCBC as trustee for the Heirs of Mr. Edward M. Grimm pursuant to a judgment entered in Special Proceedings No. R-82-3386 and No. 113024, 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 RCBC as trustee is not subject to documentary stamp tax. The aforementioned real properties may now be registered by the Registry of Deeds concerned in the name of RCBC as trustee for the heirs of Mr. Edward M. Grimm. 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. Very truly yours, (SGD.) VICTOR A. DEOFERIO, JR. Deputy Commissioner