BIR Ruling No. 384-61

No date supplied BIR RULING NO. 384-61 Reference is made to your letter . . . stating as follows: llcd "If a resident foreign corporation with a branch in the Philippines forms a wholly-owned domestic corporation and transfers thereto a part of its branch assets in exchange for shares of stock, would this transfer be considered tax free (1) if the transfer is made at book value? (2) if the transfer is made at fair market value which is higher than book value?" In reply, I have the honor to inform you that under Section 35(c) of the National Internal Revenue Code, all exchanges of property are taxable except in cases of merger and consolidation. Inasmuch as the above transaction is neither a merger nor a consolidation, the transfer of part of the branch assets in exchange for the shares of stock of a wholly owned corporation may give rise to a taxable gain or loss. If the transfer is made at book value, no taxable gain will be realized. However, if the transfer is made at the fair market value which is higher than the book value, the difference will be subject to tax. LibLex