BIR Ruling No. 308-61

July 11, 1961 BIR RULING NO. 308-61 This is in reply to the query contained in your letter . . ., which is stated as follows: "The spouses Joseph R. and Mercedes Z. McMicking are, with the exception of qualifying shares, stockholders in Mermac, Inc., a domestic corporation engaged in the real estate business. They also own shares of stocks in several corporations, which shares they acquired both before and after the last war. In addition to this, Mrs. McMicking is buying the present ten-story Makati Building situated in Ayala Avenue, Makati, Rizal. "In order to consolidate their holdings and have their various businesses and investments operated through a corporation, the spouses propose to transfer at cost to Mermac, Inc. their various investments as well as the building which Mrs. McMicking is to acquire, in exchange for the issuance by Mermac, Inc. of shares of stocks in favor of the spouses and the assumption by the said corporation of any liability incurred in connection with the acquisition of the foregoing building. "In your Rulings Nos. 59, series of 1959 and 74, series of 1960, dated November 24, 1959 and February 29, 1960, respectively, you ruled that the incorporation of the business of a sole proprietorship and the transfer of the assets and liabilities of the sole proprietorship to the corporation for this purpose, can be undertaken without any income tax or gift tax consequences, subject to the condition that the corporation will have as its cost basis for the assets transferred to it their cost basis in the hands of the individual, while the cost basis to the individual of the shares of stocks received by him will be the aggregate cost basis of the assets transferred to the corporation. "In view of the foregoing, we would appreciate your confirming that the transfer by the spouses Joseph R. and Mercedes Z. McMicking of their investments and of the Makati Building to Mermac, Inc. will not be subject to any income tax or gift tax consequences subject to the condition set out in the preceding paragraph hereof. If your reply should be in the negative, we would appreciate your confirming that if a separate corporation were to be newly organized by the spouses for the purpose of transferring the said assets to the corporation, that the transfer will not be subject to any income tax or gift tax consequences, in accordance with the aforesaid rulings." cdpr If as represented the properties of the spouses are to be transferred at cost for shares of Mermac, Inc., a corporation owned by the spouses except for qualifying shares, the said transfer will not be subject to any income or gift tax.