BIR Ruling [UN-130-94]

April 11, 1994 BIR RULING [UN-130-94] Atty. Silverio Benny J. Tan E-1 Casa Verde Townhomes Rodriguez-Lanuza Pasig, Metro Manila S i r : This refers to your letter dated October 21, 1993 requesting for a ruling as to the taxability of the transfer of some real properties situated in the Philippines from the trustors to the trustees under a Revocable Inter Vivos Trust or a Living Trust. It is represented that your clients, Marina Z. Reyes, Augusto M. Zaballero, Alfredo Z. Francisco, Jr. Alfredo A. Francisco, Sr., Armando Z. Francisco and Alma Z. Francisco are all Filipinos, of legal age and residing in the Philippines; that they executed a Revocable Inter Vivos Trust in which they are the grantors, grantees and beneficiaries at the same time; that since your clients, during their lifetime, are the grantors, grantees and beneficiaries at the same time, their Living Trust is considered a Grantors' Trust; that Augusto M. Zaballero and Marina Z. Reyes are the registered owners of a parcel of land situated in Barrio Burol, Dasmarias, Cavite covered by TCT Nos. T-242856 and T-242857; that in accordance with the terms of the said trust, they now wish to charge the manner of holding their proportionate title in the aforesaid lots by transferring and registering the same to Marina Z. Reyes, Augusto M. Zaballero and Alfredo Z. Francisco, Jr., as "Trustees"; and that likewise, Alfredo A. Francisco, Sr., Alfredo Z. Francisco, Jr., Armando Z. Francisco and Angelica F. Garcia would like to change the manner of holding their proportionate title to a parcel of land situated in Barrio Burol, Dasmarias, Cavite covered by Transfer Certificate of Title No. 242856 by transferring and registering the same to Marina Z. Reyes, Augusto M. Zaballero and Alfredo Z. Francisco, Jr. as Trustees. In reply thereto, please be informed that under Section 21(e) of the Tax Code, as amended, capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales or other forms of conditional sales, by individuals, including estates and trust shall be taxed at the rate of 5% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. Such being the case, and considering that there is no actual transfer of ownership over the aforementioned property, as a result of the transfer of the property to Marina Z. Reyes, Augusto M. Zaballero and Alfredo Z. Francisco, Jr., as trustees, the said transfer is not subject to the 5% capital gains tax under Section 21(e) of the Tax Code, as amended. Moreover, the deed conveying the aforementioned property to Marina, Augusto and Alfredo as trustees is not subject to documentary stamp tax. (BIR Ruling No. 86-92 dated March 19, 1992) The aforementioned real property may now be registered by the Registry of Deeds concerned in the names of Marina Z. Reyes, Augusto M. Zaballero and Alfredo Z. Francisco, Jr. as trustees. This ruling is being issued on the basis of the foregoing facts as represented. However, if it will be disclosed upon investigation that the facts represented are different, then this ruling shall be considered null and void. cdtech Very truly yours, JAIME M. MAZA Assistant Commissioner (Legal Service)