Merger of Liddell Building Corporation and Sing, Yee and Cuan, Inc.

October 6, 1959 BIR RULING NO. 634-59 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants 490 San Luis, Manila Gentlemen : Reference is made to your letter dated September 18, 1959 requesting information whether or not the contemplated merger of your clients, Liddell Building Corporation and Sing, Yee and Cuan, Inc. both domestic corporations, will give rise to the recognition of any gain or loss. According to you, Liddell Building Corporation (hereafter referred to as the transferee) and Sing Yee and Cuan, Inc. (hereafter referred to as the transferor), were incorporated on June 11, 1948 and January 3, 1930, respectively, and are both engaged in the real estate business. The transferee's present authorized capital consists of 10,000. common voting shares with a par value of P100 each and are fully issued and outstanding; whereas that of the transferor consists of 1,000 common voting shares with a par value of P1,000 each and are likewise fully issued and outstanding. The proposed plan of merger consist of the following: "1. The Transferee will increase its authorized capital stock from P1,000,000 to P5,000,000 which will consist of P50,000 shares of common voting stock of a par value of P100 per share. For the purpose of complying with the requirements of the Securities and Exchange Commission, minutes of the stockholders voting on the increase of capital will be submitted. "2. The Transferor will transfer all its assets to the Transferee solely in exchange for 10,000 shares of the common voting stock of the Transferee and the assumption by the Transferee of all the liabilities of the Transferor subject, or course, to the conformity of the creditors of the latter. The share of stock will be issued by the Transferee to the Transferor for the account of, and thereafter immediately distributed to the latter's stockholders in proportion to their holdings therein. No money, property or dividends whatsoever will be received by the stockholders of the Transferee except the shares of stock issued as aforestated by the Transferee to the Transferor. "3. The Transferor will thereupon cease to do business and will be completely liquidated and dissolved, its stockholders surrendering to the corporation, for cancellation, their shares of stock in the Transferor." As purposes for the proposed merger, you stated firstly, the strengthening of the financial position of both corporations and secondly, business expansion. In reply thereto, I have the honor to inform you that, under the facts and circumstances represented by you, this Office believes that a merger of the two corporations is effected within the purview of section 35 of the Tax Code, as amended by Republic Act No. 1921. Such being the case, no gain or loss shall be recognized on the part of the transferor corporation or any stockholder thereof by reason of the exchange envisaged herein. The basis of the stocks or shares to be received by the stockholders of the Transferor corporation in exchange of the stocks or shares issued by the Transferee corporation will be the cost or other basis to such stockholders of the stocks of the Transferor and not the cost of the stocks or shares issued by the Transferee. cdll Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue