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  • BIR Ruling No. 163-89

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    Jade Clemente
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    This document is a ruling from the Bureau of Internal Revenue (BIR) regarding the taxability of property sales from a deed of trust. It finds that: 1) The properties transferred within three years of the death of the trustors are considered transfers in contemplation of death and are subject to estate tax based on tax code provisions. 2) Future sales of remaining properties by the trustees are subject to capital gains tax under the tax code. 3) All properties covered by the deed of trust form part of the decedent's gross estate for estate tax purposes, regardless of transfers during the trustor's lifetime.

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    This document is a ruling from the Bureau of Internal Revenue (BIR) regarding the taxability of property sales from a deed of trust. It finds that: 1) The properties transferred within three years of the death of the trustors are considered transfers in contemplation of death and are subject to estate tax based on tax code provisions. 2) Future sales of remaining properties by the trustees are subject to capital gains tax under the tax code. 3) All properties covered by the deed of trust form part of the decedent's gross estate for estate tax purposes, regardless of transfers during the trustor's lifetime.

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    © All Rights Reserved
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    291 views2 pages

    BIR Ruling No. 163-89

    Uploaded by

    Jade Clemente
    This document is a ruling from the Bureau of Internal Revenue (BIR) regarding the taxability of property sales from a deed of trust. It finds that: 1) The properties transferred within three years of the death of the trustors are considered transfers in contemplation of death and are subject to estate tax based on tax code provisions. 2) Future sales of remaining properties by the trustees are subject to capital gains tax under the tax code. 3) All properties covered by the deed of trust form part of the decedent's gross estate for estate tax purposes, regardless of transfers during the trustor's lifetime.

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    © All Rights Reserved
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    of 2

    August 8, 1989

    BIR RULING NO. 163-89

    21 (e) 000-00 163-89

    Gentlemen :

    This refers to your letters dated May 8 and 11, 1989 requesting a ruling on the
    taxability of the sale of real properties covered by a Deed of Trust executed by spouses
    Emilio Benitez, Sr., and Eulalia Benitez.
    cdtech

    Documentary evidence submitted disclosed that on December 31, 1975, the late
    spouses Emilio Benitez, Sr., and Eulalia Brillo Benitez (hereinafter referred to as
    trustors), executed a Deed of Trust conveying all their properties in favor of their
    daughter, Sister Scholastica Benitez, OSB, and/or their son Faro Benitez (hereinafter
    referred to as trustees) for the bene t of their six (6) children as bene ciaries of the
    trust; that pursuant to paragraph 7 of the Deed of Trust, the rights and interest over 16
    parcels of memorial lots acquired by the trustors from the Manila Memorial Park
    Cemetery, Inc. shall be for the sole and exclusive use, bene t and enjoyment of Sister
    Scholastica and/or the Community of Benedictine Sisters (Philippines), to the exclusion
    of other bene ciaries and the legal title may be conveyed by the trustees any time
    during the trust to Sister Scholastica and/or Community of Benedictine Sisters
    (Philippines) (hereinafter referred to as Community) as in fact the same were already
    conveyed to the latter under Deed of Assignment executed on September 3, 1976 or
    after one of the trustors' (Emilio Benitez, Sr.) death; that the trustors granted and
    conveyed to the trustees, in trust for the bene ciaries, certain parcels of land, together
    with all existing improvements thereon; that the trustees or either of them, with the
    consent of the other shall have the power to lease or mortgage said properties and
    shall have and hold all rents, income and proceeds from any lease, mortgage or other
    disposal of said properties in trust for the sole bene t of the bene ciaries; that the
    trustees have likewise been designated to divide, apportion and pay over each of the
    named bene ciaries, the equitable share or portion of the properties, pro ts, income
    and/or proceeds from the properties until the termination of the trust which is fteen
    (15) years from and after the execution of the trust indenture or when the last survivor
    trustee shall have died unless sooner terminated by the conveyance or disposition of
    the trust properties; that on April 8, 1976, or barely four months after the execution of
    the aforesaid Deed of Trust, the trustor Emilio Benitez, Sr. died; that on November 3,
    1977, or one year and 11 months after jointly executing the Deed of Trust, the surviving
    wife Eulalia Benitez also died; that on different dates the trustees have transferred four
    (4) parcels of land described as Lot 42 of the Subdivision Plan Psd-64478 situated in
    Tagum, Davao; Lot 2 of the Subdivision Plan Psd-64478 located in Barrio Magugpo,
    Tagum, Davao; Lot 2157-B-1 of the Subdivision Plan Psd-212920 located in Anibong,
    Tacloban City; and lot 2157-B-3 of the Subdivision Plan 212920 located in Anibong,
    Tacloban City; and that the trustees are planning to sell/transfer the remaining
    properties located in Manila and covered by Transfer Certi cate of Title Nos. 20156,
    20157, 20158 and 20159.
    In reply, please be informed that the transfer of all the properties of the trustors
    who died within three years from the date of said transfer come within the purview of
    transfer in contemplation of death as provided under then Section 88 of the Tax Code
    CD Technologies Asia, Inc. © 2018 cdasiaonline.com
    before its amendment by P.D. No. 1705 reading:
    "SEC. 88. Gross Estate. — The value of the gross estate of the decedent
    shall be determined by including the value at the time of his death of all property,
    real or personal, tangible or intangible, wherever situated, except real property
    situated outside the Philippines.

    xxx xxx xxx

    "(b) Transfer in contemplation of death . — To the extent of any interest


    therein of which the decedent has at any time made a transfer, by trust or
    otherwise, in contemplation of or intended to take effect in possession or
    enjoyment, or after his death, or of which he has at any time made a transfer, by
    trust or otherwise, under which he has retained for his life or for any period not
    ascertainable without reference to his death or for any period which does not in
    fact end before his death (1) the possession or enjoyment of, or the right to the
    income from the property; or (2) the right, either alone or in conjunction with any
    person, to designate the persons who shall possess or enjoy the property or the
    income therefrom; except in case of a bona de sale for an adequate and full
    consideration in money or money's worth. Any transfer of a material part of his
    property in the nature of a nal disposition or distribution thereof, made by the
    decedent within three years prior to his death without such consideration, shall,
    unless shown to the contrary, be deemed to have been made in contemplation of
    death within the meaning of this Chapter." (Emphasis supplied)
    In other words, all properties covered by the Deed of Trust shall be considered as
    forming part of the decedent's gross estate subject to estate tax pursuant to then
    Section 85 of the Tax Code. Thus, contrary to your observation, the transfer of the
    aforesaid properties during the lifetime of the trustor does not preclude the imposition
    of the estate tax prescribed under then Section 85 of the Tax Code in relation to the
    aforequoted provision of the same Code.
    Moreover, the contemplated transfers of the real properties by the trustees are
    subject to the capital gains tax pursuant to Section 21(e) of the Tax Code, as amended.
    cdasia

    Very truly yours,

    (SGD.) JOSE U. ONG


    Commissioner

    CD Technologies Asia, Inc. © 2018 cdasiaonline.com

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