BIR Ruling

January 27, 1970 Mr. D. D. Pamintuan, Jr. Metropolitan Theatre Bldg. P.O. Box 277, Manila S i r : This refers to your request for information on a query stated as follows: "We have a duly organized and registered Homeowners' Association in Quezon City. We are negotiating to acquire a lot which we intend to develop into a park for public use particularly of the village we live in. cdta "We were informed that the transfer of the park from the subdivision to the Homeowners' Association from one peso and other considerations will subject both to donor's and donee's taxes. That while the government encourages the development of parks inasmuch as this is in effect a park to be owned and operated by the Homeowners' Association, we were told that the lot and all improvements introduced thereon will be subject to assessment and realty taxes. The development and operational expenses for the park will be shouldered by the Homeowners' Association which is a non-profit organization and whose revenue is derived from contributions or assessments from its members. "May we be informed if the foregoing view is correct or if there is a law or regulation under which said park may be registered in order to be relieved of said levies, the use of the park being public in nature whose operation is sustained by contributions." In reply, I have the honor to inform you that when property is transferred for less than an adequate and full consideration in money or money's worth, the excess in such money value shall for the purpose of the tax imposed by Chapter II, Title III of the Tax Code be deemed a gift. (See Sec. 111, N.I.R.C.; also Comm. v. Wemyss, 324 U.S. 303, 65 S.Ct. 562(1965). Accordingly, the transfer of the lot from the subdivision owner to the Homeowners' Association referred to in your query shall be subject to the donor's and donee's gift taxes prescribed by Sections 109 and 110 of the Tax Code as amended to the extent that the value of the property transferred by the donor exceeds the value of the consideration given therefor. Both the transferor and transferee of the property in this case are not by any law or regulation, entitled to any tax exemption. Exemption from taxation must be clear and unambiguous (City of St. Louis v. Ry. Co., 210 U.S. 266, 28 Sup. Ct. 630, 52 L. ed. 1054) and a claim of exemption from tax payment must be clearly shown. It should be based on the language in the law too plain to be mistaken. (Gov't. of P. I. vs. Monte de Piedad, 51 Phil. 352). aisa dc Finally, the determination of the liability of the Homeowners' Association for the payment of real property tax, is not within the jurisdiction of this Office. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue