Publishing the Amendment Effected by Presidential Decree No. 1457 to Section 210 of the National Internal Revenue Code of 1977

October 30, 1978 REVENUE MEMORANDUM CIRCULAR NO. 087-78 SUBJECT : Publishing the Amendment Effected by Presidential Decree No. 1 457 to Section 210 of the National Internal Revenue Co de of 1977 TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, there is published below Section 210 of the National Internal Revenue Code of 1977, as amended by Presidential Decree No. 1457. aisa dc "SEC. 27. The third paragraph of Section 210 of the National Internal Revenue Code is hereby amended to read as follows: 'Pending the suspension of the effectivity of Section 34 paragraph (g) of this Code by Presidential Decree No. 1116, any capital gain arising from a stock transaction on which the tax herein imposed has been paid shall not be taken into account in computing net capital gain or loss under Section thirty-four of this Code if (1) both the acquisition and the disposition of said stock by the taxpayer are effected after the effectivity of this Code and (2) the sale, exchange and transfer is bona fide and the consideration for the transaction represents the substantial fair market value of the stock: Provided , That gains from the sale or exchange of shares of stock acquired by a person in exchange for property where no gain or loss was recognized under the provisions of paragraph (c) (2) of Section 35 of this Code or under any other law, shall be subject to income tax imposed under Title II of this Code. However, any capital loss arising from such transaction shall be taken into account in computing net capital gain in accordance with the provisions of this Code: Provided , That there shall be no capital loss carry-over. aisa dc FEATURES OF THE AMENDMENT Heretofore, the phrase "gain not arising from but realized out of the said stock transaction" has been the subject of various interpretations, giving rise to controversy between taxpayers and the Office. In order to have a common interpretation of the said proviso in the law, the amendatory provision clarifies that gain arising from sale or exchange of shares of stock acquired by a person in exchange for property where no gain or loss was recognized under the provisions of paragraph (c) (2) of Section 35 of the National Internal Revenue Code or under any other law, are subject to income tax imposed under Title II of this Code. EFFECTIVITY The amendment to Section 210 of the National Internal Revenue Code under Presidential Decree No. 1457 became effective on June 11, 1978, subject to the exceptions mentioned in Revenue Memorandum Circular No. 85-78 dated October 27, 1978. ENFORCEMENT All internal revenue officers and others concerned are enjoined to be guided accordingly and to give this circular as wide a publicity as possible. EFREN I. PLANA Acting Commissioner