BIR Ruling

March 22, 1976 Philippine Foundation for Cultural and Educational Development, Inc. Rm. 606 FGR Bldg., Buendia Ave. Makati, Rizal Attention: Mr . Pedro C . Dimaculangan General Manager & Asst . Treasurer Gentlemen : This refers to your letter dated November 12, 1975 requesting ruling on the following queries: "1. When a donor gives personal property, it seems that under Sec. 4(b) of said Revenue Regulation, the donor can claim the acquisition cost; or if the property had already been used at the time of donation, the depreciated or book value thereof. However, under Sec. 7 of said regulations, in the notice of donation to be submitted by the donor to your office, the fair market value of the personal property has to be stated. Is it correct then to advise the donors to deduct in their income tax returns the acquisition cost of depreciated/book value of the personal property donated to the Foundation? Is this the same information that they should communicate to your offices as 'the fair market value' of the asset donated? "2. Do shares of stock constitute personal property? "3. At what value should the Foundation take up the donation in its books? Will this value be the 'cost' to the Foundation of the property donated in case it is sold in the future, giving rise to a profit or a loss? "4. Section 7, stated that the donor need not send to BIR their notice of donations to cash contribution in small or moderate amounts. May we know your quantitative definition of small or moderate amount?" In reply thereto, I have the honor to inform you as follows: 1. For income tax purposes, the amount to be deducted by the donors on account of their donations of personal properties to the Foundation is the acquisition cost or depreciated or book value of the property donated as the case may be. These same amounts or valuations assigned or claimed by the donors as deductions should be the amounts communicated to the Bureau of Internal Revenue in relation to the notice requirement. cdta 2. Shares of stock constitute personal property, and when donated shall be valued in accordance with Section 3 of Revenue Regulations No. 2-70 dated November 11, 1970 pertinent portions of which are quoted hereunder as follows: "Section 3. Meaning of 'gross value in money' . The term 'gross value in money' means the 'fair market value'. In the case of shares traded thru the stock exchange, 'fair market value' shall consist of the actual price as certified by the stock exchange where the sale was effected. "In the case of shares not traded through the stock exchange, but listed in one or more stock exchanges, the highest closing price on the day when the shares are sold, transferred or exchanged shall be the 'fair market value'. Where no sale is made in any stock exchange, the highest closing price on the day nearest to the date of sale, transfer or exchange of the shares shall be the 'fair market value'. "In the case of sale, transfer or exchange of shares not listed in the stock exchange the fair market value shall be determined by considering the nature and history of the business, book value of the stock, earning and dividend paying capacity of the company, goodwill, and sales of both the stock to be valued and that of companies similarly situated." 3. The donee Foundation should enter in its books as value of the donated property, the acquisition cost or adjusted cost basis (depreciated or increased value) of the donor of the property donated. Such value shall be the cost basis of the property to the Foundation upon the subsequent sale or disposition thereof. 4. There is no hard and fast rule as to how much is the cash contribution or donation which can be considered "small or moderate". Suffice it to state that the cash contribution may be considered "small or moderate" depending on the financial, social and economic standing or circumstance of the donor and the donee and other extrinsic circumstances leading to the giving of contribution or donation. acd Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3