BIR Ruling No. 364-61

September 19, 1961 BIR RULING NO. 364-61 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants 490 San Luis, Manila Gentlemen : This is in connection with your request for a ruling as to whether or not the exchange or assets for shares of stock of a new corporation which will be effected as follows is tax-exempt: "It is proposed that this Office building be separated and taken up as a separate and distinct asset. It is intended by the partnership to transfer the lot and building to a corporation in exchange for the latter's shares of stock. The shares of stock shall thereafter be distributed to the partners in the same proportion as the interests they now have in the partnership. Thereafter, a fair rental for the premises occupied by the partnership will be established; the rental so determined will be paid by the partnership to the corporation. "In our present inquiry, it is also understood that the corporation shall carry the tax basis of the lot and building in its books and control of the corporation will be in the same persons in the same proportionate interests." In reply, I have the honor to inform you that inasmuch as the new corporation will be owned wholly by the same partners in the same proportionate interest, and considering further that the net book value (acquisition cost less depreciation claimed and allowed in prior years) of the lot and building will be carried in the books of the corporation as tax basis, the exchange of the above assets of the partnership for the shares of stock of the corporation of equivalent value, will not give rise to any taxable gain because no gain will actually be realized on such transfer or exchange. However, if subsequently the shares of stock are sold or transferred to other parties, the excess of the selling price over the cost of the shares shall be taxable income. aisadc Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue