Exemption from Capital Gains Tax on the Sale of Real Property by Individuals Acting as Trustees of an Employee's Trust

August 31, 1992 BIR RULING NO. 239-92 53 (b) 89-91 239-92 Capacillo Law Office 22 Jackson Street West Greenhills, San Juan Metro Manila Attention: Mr . Alfonso B . Capacillo Counsel Gentlemen : This refers to your letter dated July 14, 1992 requesting opinion whether the sale of real property by individuals acting as trustees of San Miguel Corporation Retirement and Death Benefit Plan (an employee's trust) is subject to the capital gains tax. LLphil It is represented and ascertained from documentary evidences submitted that San Miguel Corporation Retirement and Death Benefit Plan (Plan) is an employee's trust which forms part of a pension/gratuity plan set up by the Management of San Miguel Corporation (SMC) for the exclusive benefit of the employees, that said Plan is confirmed to have complied with the requirements of R.A. 1917 for a reasonable plan and as such, is exempt from income tax pursuant to Section 53(b) of the Tax Code; that the Plan owns a parcel of land covered by TCT No. 64892, which is registered in the name of the trustees designated by the President of SMC; that by virtue of a Deed of Absolute Sale executed on July 6, 1992 same property was sold for and in behalf of the Plan by its trustees to Ricardo M. Moreno, a retired employee of San Miguel Corporation; and that said sale by the trustees was held subject to capital gains tax by the Revenue District Officer of Paraaque upon the presentation of said document to him. In reply, please be informed that pursuant to Section 21(e) of the Tax Code, capital gains presumed to have been realized from the sale, exchange or other disposition of real property in the Philippines classified as capital asset by individuals, including estates and trust, are subject to the 5% capital gains tax based on the gross selling price or fair market value prevailing at the time of sale, whichever is higher. Under Section 53(a) of the same Code, the tax imposed by Title II (Tax on Income) which includes the capital gains tax imposed under Section 21(c) shall apply to income of any kind of property held in trust. However, pursuant to Section 53(b) of the Tax Code, the tax imposed on the income of any kind of property held in trust shall not apply to employee's trust which forms part of a pension, stock bonus or profit sharing plan of an employer for the benefit of some or all of his employees. Accordingly, in the above transaction, since the sale is executed by the San Miguel Corporation Retirement and Death Benefit Plan the gains derived from the aforesaid sale of its property in favor of a retiree is not subject to this capital gains tax imposed by Section 21(e) of the Tax Code, in accordance with Section 53(b) of the same Code. In view thereof, it is the opinion of this Office as it hereby holds that the sale executed in favor of Mr. Ricardo M. Moreno by the San Miguel Corporation Retirement and Death Benefit Plan is exempt from the capital gains tax. cdt Very truly yours, JOSE U. ONG Commissioner of Internal Revenue