RR No. 18-2001: Prescribes the guidelines on the monitoring of the basis of property transferred and shares received, pursuant to a tax-free exchange of property for shares, as well as establishes the policies governing the imposition of fees for the monitoring thereof

Key points

1. Substituted basis for the transferor. The basis of stock or securities received is the original basis of the property transferred, less money received and the fair market value of other property received. It is then increased by any amount treated as dividend of the shareholder and any gain recognized on the exchange.
2. Boot and assumed liabilities. Property received as boot has its fair market value as basis. Boot means money and other property received in excess of the stock or securities received. A liability assumed by the transferee, or property acquired subject to a liability, is treated as money received.
3. Substituted basis for the transferee. The transferee’s basis in the property is the transferor’s original basis plus the gain recognized to the transferor. If the transferor gets several kinds of stock or securities, the Commissioner may allocate the basis among the classes.
4. CAR and ruling. The Revenue District Officer or authorized Internal Revenue Officer issues the Certificate Authorizing Registration/Tax Clearance based on the Commissioner’s certification or ruling that the transaction qualifies as a tax-free exchange. A BIR certification or ruling is not valid unless the parties submit copies of the new certificates of title or stock, certified by the Register of Deeds or Corporate Secretary, within ninety (90) days from receipt of the ruling.
5. Fees. The applicant pays in advance a processing and certification fee of Five Thousand Pesos (P 5,000.00) per application of not more than ten (10) real properties and/or Certificates of Stock. An additional One Hundred Pesos (P 100.00) is due for each TCT, Condominium Certificate of Title or Certificate of Stock beyond ten (10).

Who is affected

• Parties to a tax-free exchange under Section 40(C)(2) of the Tax Code
• Transferors and transferees of property

Deadlines and effectivity

• Submission of new certificates: within ninety (90) days from receipt of the certification-ruling