December 23, 1991

BIR RULING NO. 270-91

66 000-00 270-91

Gentlemen :

This refers to your letter dated March 4, 1991 stating that Montiel, Inc.
is a duly registered domestic corporation incorporated in 1965 and doing
business solely in the Philippines; that it is engaged in the realty business
actually owns only a parcel of land with certain improvements; that it now
intends to shorten the life of its corporate existence and dissolve its business
operations which will require the distribution of its assets consisting of said
real property to the stockholders in the form of liquidating dividends; and
that the distribution of the said real estate property by the corporation to its
stockholders will involve conveyance of title and ownership in said real
property to its stockholders. cdtech

In connection therewith, you now request a ruling as to whether the

conveyance of the aforesaid real property by the corporation to its
stockholders in the form of liquidating dividends is subject to documentary
stamp tax.
In reply thereto, please be informed that the Deed of Conveyance of
the aforementioned property as liquidating dividends to be executed by the
corporation in favor of its stockholders is subject to documentary stamp tax.
(Section 173, Tax Code, as amended)
In all cases involving sale, exchange or any disposition of real property
as in this case, where real property is being distributed, by the corporation to
its stockholders as liquidating dividends, the tax base for documentary
stamp tax purposes is the fair market value or zonal value of the real
property. (RMO No. 41-91)
The stockholders who will receive a portion of the parcel of land as
liquidating dividends upon the surrender of his corresponding shareholding
realizes capital gain or loss. The gain, if any, derived by the individual
stockholders consisting of the difference between the fair market value of
the liquidating dividends and the adjusted cost to the stockholders of their
respective shareholding in the corporation (Sec. 66 (a); Sec. 256, Income Tax
Regulations) shall be subject to income tax at the rates prescribed under
Section 21 (a) of the Tax Code, as amended by Executive Order No. 37.
Moreover, pursuant to Section 33 (b) of the Tax Code, as amended, only 50%
of the aforementioned capital gain is reportable for income tax purposes if
the shares were held by the individual stockholders for more than twelve
months and 100% of the capital gains if the shares were held for less than
twelve months.
Moreover, the distribution by Montiel, Inc. to its stockholders as
liquidating dividends of its assets consisting of a parcel of land in complete
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 liquidation or dissolution is not subject to the creditable withholding tax on
sales, exchanges or transfers of real property under Revenue Regulations
No. 1-90, as implemented by Revenue Memorandum Circular No. 7-90.
After payment of the corresponding documentary stamp tax, the real
property may be registered by the Register of Deeds concerned in the name
of the stockholders. aisadc

Very truly yours,

(SGD.) JOSE U. ONG

Commissioner

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