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  • BIR RULING NO. 039-02 Facts

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    TA Bank is decreasing its authorized capital stock and canceling outstanding preferred and common shares owned by its sole shareholder, The Manila Banking Corporation (TMBC). In exchange, TA Bank will transfer real, personal, tangible, and intangible properties to TMBC. TA Bank asked if it would be liable for income tax on receiving the surrendered shares or transferring assets to TMBC as liquidating dividends. The ruling held that TA Bank would not be liable for income tax on either the transfer of assets or receipt of surrendered shares, as a liquidating corporation does not realize gain or loss during partial or complete liquidation.

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    BIR RULING NO 39-02

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    TA Bank is decreasing its authorized capital stock and canceling outstanding preferred and common shares owned by its sole shareholder, The Manila Banking Corporation (TMBC). In exchange, TA Bank will transfer real, personal, tangible, and intangible properties to TMBC. TA Bank asked if it would be liable for income tax on receiving the surrendered shares or transferring assets to TMBC as liquidating dividends. The ruling held that TA Bank would not be liable for income tax on either the transfer of assets or receipt of surrendered shares, as a liquidating corporation does not realize gain or loss during partial or complete liquidation.

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    33 views1 page

    BIR RULING NO. 039-02 Facts

    Uploaded by

    MC
    TA Bank is decreasing its authorized capital stock and canceling outstanding preferred and common shares owned by its sole shareholder, The Manila Banking Corporation (TMBC). In exchange, TA Bank will transfer real, personal, tangible, and intangible properties to TMBC. TA Bank asked if it would be liable for income tax on receiving the surrendered shares or transferring assets to TMBC as liquidating dividends. The ruling held that TA Bank would not be liable for income tax on either the transfer of assets or receipt of surrendered shares, as a liquidating corporation does not realize gain or loss during partial or complete liquidation.

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    BIR RULING NO.

    039-02

    FACTS:

    TA Bank of the Philippines, Inc. is a corporation organized and existing under Philippine laws,
    engaged primarily in commercial banking. TA has a total authorized capital of 5B pesos divided
    into 25M common shares and 25M preferred shares, each with a par value of P100.00 per
    share.

    TA’s outstanding capital consists of 1.25B pesos, divided into 625M pesos in preferred shares,
    and 625M pesos in common shares. All of the outstanding shares of TA are wholly owned by
    The Manila Banking Corporation (TMBC).

    TA is planning to decrease its authorized capital stock to 1,129,000 common shares, with a par
    value of P100 per share, and a total value of P112,902,000.00.

    Under the Plan, all of TA’s outstanding preferred shares, and 5,120,980 of its outstanding
    6,250,000 common shares shall be surrendered by TMBC and cancelled immediately upon
    approval by the TA stockholders, the SEC, and the BSP of the said decrease.

    In exchange of the surrender of the shares by TMBC, TA shall transfer to TMBC both real and
    personal, tangible and intangible properties.

    ISSUE: Whether or not TA shall be liable for income tax for its receipt of the surrendered
    shares, or its transfer of the Distributed Assets to TMBC as liquidating dividends.

    HELD: TA shall not be liable for income tax either on its receipt of the surrendered shares, or its
    transfer of the Distributed Assets to TMBC as liquidating dividends.

    The transfer by the liquidating corporation of its remaining assets to its stockholders is not
    considered a sale of these assets. Thus, a liquidating corporation does not realize gain or loss
    in partial or complete liquidation.

    Conversely, neither is a liquidating corporation subject to tax on its receipt of the shares
    surrendered by its shareholders pursuant to a complete or partial liquidation.

    Accordingly, TA Bank is not liable for income tax on either the transfer of its assets to its
    stockholders, or on its receipt of the shares surrendered by the shareholder, TMBC.

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