Ms. A. M. Cornejo

July 15, 1981 Ms. A. M. Cornejo 349 Buendia Avenue Extension MCC P.O. Box 967 Makati, Metro-Manila Dear Ms. Cornejo: This refers to your letter dated June 25, 1981 requesting opinion of this Commission as to the propriety of recording liquidating dividends at fair market values and based thereon recognized the difference between such fair market values and the investment of your company as an accounting income. It appears from your letter-query that in 1979 your corporation acquired a 100% interest in a realty company that owns a lot and building with book value of P25M for a total consideration of P40M; that you recorded the acquisition in the books of your corporation as investments in stocks for P40M; that for this current fiscal year your corporation is contemplating of dissolving the realty company and thereby transfer the lot and building with present fair market value of P60M by way of liquidating dividends. You allege that the Commission has, in the past, allowed revaluation of assets at fair market value in quasi-reorganization. You wish to know if you can use the same rule in valuing real estate received as liquidating dividends. Relative thereto, our reply is in the affirmative thereby reiterating an earlier ruling that since there will be an actual disposition of investments in exchange of which your corporation will receive properties (estate and building) worth more than the cost of the investments to be disposed of, the excess or gain of P20M is considered realized income of your corporation and therefore could be declared as liquidating dividends. Please be advised accordingly. LexLib Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department