BIR Ruling [UN-167-94]

May 30, 1994 BIR RULING [UN-167-94] Mr. Carlos A. Lardizabal 817 EDSA, South Triangle Quezon City, Metro Manila S i r : This refers to your letter dated August 17, 1993 requesting on behalf of your clients, Mr. & Mrs. Benjamin C. Bautista for a ruling based on the following representation of facts: cdtech "Benjamin C. Bautista, married to Ma. Lourdes R. Bautista, has established a revocable inter vivos trust and would like to change the manner of holding title to their real properties and stocks and securities from: Benjamin C. Bautista and Ma. Lourdes R. Bautista to: BENJAMIN C. BAUTISTA AND MA. LOURDES R. BAUTISTA, Trustees (and subsequent trustees), B & M. BAUTISTA FAMILY TRUST." "This is a revocable trust under Sec. 56 of the NIRC and the transfer of the properties into the trust is a non-taxable event and not subject to documentary stamp tax. The spouses, during their lifetime, are trustors, trustees and beneficiaries and hold all incidents of ownership." In reply, 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 the spouses Bautista as trustees for the B & M. BAUTISTA FAMILY TRUST, 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 properties to the Spouses Bautista as trustees is not subject to documentary stamp tax imposed by Section 196 of the Tax Code, but the notarial acknowledgment is subject to the stamp tax of P10.00 under Section 188 of the same Code, as amended. The aforementioned real properties as well as the stocks and securities may now be registered by the Registry of Deeds concerned and the Securities and Exchange Commission respectively, in the name of the Spouses Benjamin C. Bautista and Ma. Lourdes R. Bautista as trustees for the B & M BAUTISTA FAMILY TRUST. This ruling is being issued on the basis of the foregoing facts as represented. However, if it will be discovered upon investigation that the facts are different, then this ruling shall be considered null and void from the date of issue. (BIR-Ruling UN-130-94 dated April 11, 1994). Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)