BIR Ruling [DA-576-06]

September 22, 2006 BIR RULING [DA-576-06] RR 16-05; BIR Ruling Nos. 329-92; DA-158-02; 021-96; 16-05; 024-05 Laya Mananghaya & Co . Certified Public Accountants & Management Consultants 22/F, Philamlife Tower, 8767 Paseo de Roxas Makati City 1226 Metro Manila Attention: Francisco G. Tagao Head, Tax & Corporate Services Ronald L. Carreon Director, Tax & Corporate Services Gentlemen : This refers to your letter dated July 28, 2006, requesting on behalf of your client, Fort Bonifacio Development Corporation (FBDC) , confirmation of your opinion on the tax implications arising from the conveyance of the lots to DPWH and the lot replacements that FBDC facilitated in transferring to the residents and lot owners affected by the construction of the KALAYAAN VIADUCT PROJECT of the DPWH. Background The KALAYAAN VIADUCT PROJECT is a public works project to improve public road network linking the areas along the eastern and western flanks of the Epifanio de los Santos Avenue, specifically the Makati and Taguig areas. The project provides an alternate route to the main road artery of Kalayaan Avenue directly improving access to the eastern towns of Taguig and Pateros as well as the C5 road network that is now a main artery on the eastern side of the metropolitan area accessing the southern part of the National Capital Region. Private lots along the construction route are affected, necessitating their expropriation while at the same time it will enhance the development of the Fort Bonifacio area as the project provides direct access to it from the Makati area. On October 28, 1996, a Memorandum of Agreement (hereinafter referred to as the "1996 MOA") was entered into between the Department of Public Works and Highways (DPWH), the Bases Conversion and Development Authority (BCDA) and Fort Bonifacio Development Corporation (FBDC) to coordinate the construction of vital roads and other infrastructures of the government that will enhance the development of Fort Bonifacio, specifically the KALAYAAN VIADUCT PROJECT. As provided for in the agreement, DPWH is to expropriate or acquire land for off-site road and other infrastructure projects and coordinate with FBDC in the manner of over all construction supervision. FBDC and BCDA were to jointly provide and transfer to DPWH all incremental cost estimates in the pre-construction and construction of various works, particularly the development of the relocation site for the affected residents and right of way cost. TcHCIS Sometime in May 1997, the residents affected by the KALAYAAN VIADUCT PROJECT executed a Memorandum of Agreement (1997 MOA) wherein they agreed to convey their ownership or rights over their lots to DPWH in order to avoid their eventual expropriation. DPWH sought the assistance of FBDC to address the demands of the residents. Pursuant to the 1997 MOA, FBDC was made fully responsible for the provision of replacement lots for all residents displaced as well as for the compensation of each resident for the replacement value of the improvements each had introduced to his lot. In addition to this obligation, FBDC will also donate certain lots to the City of Taguig to serve as service roads to the replacement lots given to the residents. FBDC shall also shoulder subsequent expenses resulting from the implementation of the transfer of the properties. For purposes of complying with its obligation of providing replacement lots to the affected residents, FBDC requested the BIR for the valuation of several parcels of lots located at Taguig Metro Manila, which are intended to be given to the residents as replacement lots. On January 4, 2006, the Asset Valuation, Division of the BIR issued TCRPV Resolution No. 82-2005 retaining P7,500.00 as the zonal value per square meter of several properties of FBDC for purposes of expropriation. This valuation is valid up to January 3, 2007. The said FBDC lots have fair market values ranging from P2,000.00 to P2,500.00, with road lots at about P500.00/sq. m as per latest tax declarations. Consequent to the foregoing agreements, forty-two (42) affected residents are required to transfer the ownership of their lots or portions thereof for the implementation of the KALAYAAN VIADUCT PROJECT. Lots over which the flyover has a direct right of way are to be transferred directly to DPWH. Other lots, although not used directly for the flyover, are to be transferred directly by the affected residents to other affected residents as part of the latter's compensation to implement the KALAYAAN VIADUCT PROJECT. Some of these affected lots, however, are presently prohibited from being subdivided pursuant to Presidential Proclamation No. 518 which prohibits subdivision of lands with lot areas less than 50 square meters. Considering that these lots are necessary to the implementation of the KALAYAAN VIADUCT PROJECT, the parties agreed that a right of way in favor of the DPWH will be initially annotated on the titles of these lots pending the issuance of permission from the DENR allowing their subdivision. It was intended, however, that these lots shall be transferred to DPWH after the issuance of the DENR permit. The affected residents will be compensated with replacement lots which shall either come from FBDC relocation lots or from the residual lots surrendered by other residents, or replacement value of the improvements each had introduced to his lot, or both. A more detailed outline of the specific lot transfers are attached herewith as Annex "D". Rulings Requested A confirmation is now sought on the following: I. No Income or Capital Gains tax or Final or Creditable Withholding Tax A. Transfer of FBDC Relocation Site Lots to DPWH Following the doctrine of involuntary conversion, the transfer of FBDC relocation lots to the affected lot owners is not subject to capital gains, income or withholding taxes. The doctrine of involuntary conversion states that if property, as a result of its destruction, theft or seizure, or an exercise of the power of requisition or condemnation or the threat or imminence thereof, is compulsorily or involuntary converted into property similar or related in service or use to the property so converted, no gain shall be recognized. This doctrine of involuntary conversion of property is rooted in the American case of Herder v. Helvering , 23 AFTR, p. 322, where it was ruled that: "Gains from the involuntary conversion of a property is not subject to income tax to the recipient if the property, as a result of its destruction, in whole or in part, theft or seizure, or an exercise of power of requisition or condemnation or the threat or imminence thereof is compulsorily or involuntarily converted. into property similar or related in service or use to the property so converted. . ." This doctrine of involuntary conversion has been applied by the US Tax Courts in cases of involuntary sale of real properties where the landowners are left with no recourse except to enter into sale agreements with the government. ( Maixner v. Commissioner of Internal Revenue , 30 T.C. 191, 1959; Masser v. Commissioner of Internal Revenue , 33 T.C. 191, 1959) HEcSDa Pursuant to the obligation imposed by the DPWH, FBDC is left with no choice except to provide the relocation lots to the residents in lieu of their eventual expropriation by the DPWH and applying the doctrine of involuntary conversion, no taxable gain that may have been derived pursuant to the implementation of the KALAYAAN VIADUCT PROJECT ( BIR Ruling No. 329-92, dated 18 November 1992 ; BIR Ruling No . DA-158-2002, dated 12 September 2002 ; BIR Ruling No. DA-203-03, dated 30 July 2003 ) B. Transfer of the affected lots by the residents to the DPWH The transfer of the affected lots by the residents to the DPWH is an involuntary conversion of their lots for public purpose. The residents are constrained to surrender their lots in lieu of their expropriation. Consequently, the gains, if any, either consisting of monetary consideration or their acquisition of FBDC provided lots or residual portion of lots surrendered by other residents, is a result of the involuntary conversion of their lots surrendered for the purpose of implementing the KALAYAAN VIADUCT PROJECT. As such, the gain is exempt from capital gains tax or income tax or withholding tax. ( BIR Ruling No. DA-203-03, dated 30 July 2003 ; BIR Ruling Nos. 373-87 dated 23 November 1987 ; 429-88 dated 02 September 1988 and 329-92 dated 18 November 1992 ) C. Transfer of portions of the residual lots to other affected residents The transfers of portions of residual lots to other affected residents are not subject to income tax or to capital gains tax or withholding tax on the part of the residents following the doctrine of involuntary conversion. ( BIR Ruling No. 329-92, dated 18 November 1992 ; BIR Ruling No . DA-158-2002, dated 12 September 2002 ; BIR Ruling No. DA-203-03, dated 30 July 2003 ) II. Donor's Tax A. No Donor's tax on the Donation of Lots to the City of Taguig The intended donation of the access roads and easements in favor of the City of Taguig is exempt from donor's tax under Section 101 (A) (2) of the Tax Code. The direct donation of the lots to the City of Taguig properly falls under the above cited provision of the Tax Code as a donation to a political subdivision of the National Government, and thus, exempt from the imposition of donor's tax. ( BIR Ruling No. 021-96 dated 21 February 1996 ; BIR Ruling No. DA-202-99 dated 30 March 1999 ). B. No Donor's Tax on the Transfer of FBDC Relocation Lots to the Residents The transfer of FBDC relocation lots to the residents is not a donation subject to donors' tax considering that the transfer of the relocation lots is with sufficient business consideration and is not a mere act of liberality. The enhancement of Bonifacio Global City, as a result of the implementation of the KALAYAAN VIADUCT PROJECT, is sufficient business consideration on the part of FBDC to remove such transfer from the ambit of a donation subject to donor's tax ( BIR Ruling No. 16-05, dated 24 August 2005 ; BIR Ruling DA-444-05 , dated 27 October 2005 , BIR Ruling DA-136-05, dated 7 April 2005 ). C. No Donor's Tax on the Monetary Consideration Given by FBDC to the Affected Residents as Part of Compensation The payment by FBDC of monetary consideration to the residents is not a donation subject to donor's tax considering that such payment is for a sufficient business consideration and is not a mere act of liberality. The enhancement of Bonifacio Global City, as a result of the implementation of the KALAYAAN VIADUCT PROJECT, is sufficient business consideration on the part of FBDC to remove such transfer from the ambit of a donation subject to donor's tax ( BIR Ruling No. 16-05, dated 24 August 2005 ; BIR Ruling DA-444-05 , dated 27 October 2005, BIR Ruling DA-136-05, dated 7 April 2005 ). cHaADC III. Documentary Stamp Tax A. Transfer of FBDC Relocation Lots to Affected Residents The contemplated direct transfer of the FBDC replacement lots to the affected residents is subject to DST under Section 196 of the Tax Code. In BIR Ruling DA 203-03, dated 30 June 2003, the BIR ruled that while the exchange of properties resulting from an involuntary conversion is not subject to the corporate income tax or to the capital gains tax nor to the creditable withholding tax, the same shall be subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. Furthermore, the notarial acknowledgment to the said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Code. B. Documentary Stamp Tax on Transfer of Lots of the Affected Residents The transfer of lots by the affected residents both to DPWH and to other residents, resulting from the implementation of the KALAYAAN VIADUCT PROJECT, is subject to DST under Section 196 of the Tax Code. The DST shall be imposed on the total consideration received by the residents which consists of replacement lots or monetary consideration, or both. IV. Value-Added Tax A. VAT on Transfer of Relocation Lots by FBDC The transfer of the relocation lots by FBDC is subject to the 12% VAT. Considering that the relocation lots of FBDC were held either for sale or lease in FBDC's ordinary course of trade or business, their conveyance to the residents shall be subject to VAT. ( Sec . 106 of the Tax Code ; Sec . 4 . 106-3 of RR 16-05 ; BIR Ruling No. 024-05, dated 23 December 2005 ). B. VAT on Donation of Lots to the City of Taguig The donation of lots to the City of Taguig by FBDC is a completed gift subject to VAT. The donation by FBDC of its lots to the City of Taguig is a completed gift that may be treated as a deemed sale transaction under Section 4.1.06-3 of RR 16-05 and Sec. 106 of the Tax Code. This is so because the lots to be donated to the City of Taguig were held by FBDC either for sale or lease in the ordinary course of its business. C. No VAT on the Transfer of Lots by the Affected Residents The transfer of lots by the residents to DPWH is not subject to VAT. The transfers of the lots from the residents to DPWH are not made in the course of trade or business nor were the affected lots held by the residents for sale or lease in the ordinary course of trade or business. The transfer of such lots cannot be considered as a transaction subject to VAT. ( BIR Ruling No. 024-05, dated 23 December 2005 ). D. No VAT on the Transfer of Replacement Lots to Other Residents The residual lots to be transferred to the residents are not held for sale or lease in the ordinary course of trade or business. The transfers of the residual lots to the other residents are not made in the course of trade or business nor were the affected lots held by the transferring residents for sale or lease in the ordinary course of trade or business. Thus, we believe that the transfer of these lots cannot be considered as transactions subject to VAT. ( BIR Ruling No. 024-05, dated 23 December 2005 ) V. Zonal Value of Lots Covered by TCRPV Resolution No. 82-05 remains at P7,500.00 per square meter TCRPV Resolution No. 82-2005 was issued by the BIR precisely to determine the zonal value of the FBDC replacement lots and the lots to be donated to the City of Taguig for purposes of implementing the KALAYAAN VIADUCT PROJECT. The said resolution was issued by the BIR in response to the request of FBDC for the valuation of several parcels of lots located at Taguig, Metro Manila, which are intended to be given to the residents pursuant to FBDC's obligation under the 1996 and 1997 MOAs. Thus, the zonal value of the FBDC relocation lots and the lots to be donated to the City of Taguig covered by the said resolution should remain as P7,500.00 per square meter for purposes of the implementation of the KALAYAAN VIADUCT PROJECT. TCDHIc Further, the transfer of the replacement lots by FBDC to the affected residents for the implementation of the KALAYAAN VIADUCT PROJECT satisfies the condition imposed by TCRPV Resolution No. 82-2005, that the zonal value of P7,500.00 per square meter applies for expropriation purposes only. Pursuant to its obligation under the 1996 and 1997 MOAs, FBDC is left with no choice except to provide the relocation lots to the residents as compensation for the latter's surrender of lots to DPWH. Hence, such transfer of property is akin to expropriation of lots for purposes of applying the P7,500.00 per square meter zonal value pursuant to TCRPV Resolution. VI. The Zonal Value of the FBDC Lots as Basis in Imposing the VAT and DST The VAT and DST, which may be imposed on the transfer of the FBDC relocation lots, should be based on the zonal values of the said lots of P7,500.00 as per TCRPV Resolution No. 82-2005 considering that the same are higher than the fair market values of said lots, as stated in the respective tax declarations, which ranges from P2,000.00 to P2,500.00, with road lots at about P500.00/sq. m. VI. Ruling as basis for issuance of Certificate Authorizing Registration and Tax Clearance Certificate Finally, it also requested that the requested ruling be a sufficient basis for the BIR to issue the Certificates Authorizing Registration and Tax Clearance Certificates, for all the property transfers effected pursuant to the details of the attached annexes of properties and the manner of compensation received on account of the implementation of the KALAYAAN VIADUCT PROJECT, including the subsequent transfer of properties initially annotated with the right of way in favor of DPWH as well as the transfers of properties which are presently unregistered/untitled and their subsequent registration/titling. BIR Reply We reply as follows: 1. Income Tax/Capital Gains Tax Section 27(A) of the Tax Code of 1997, as amended by RA 9337 reads as follows: "(A) In General. Except as otherwise provided in this Code, an income tax of thirty-five percent (35%) is hereby imposed upon the taxable income derived during each taxable year from all sources within and without the Philippines by every corporation, as defined in Section 22(B) of this Code and taxable under this Title as a corporation, organized in, or existing under the laws of the Philippines: Provided, That effective January 1, 2009, the rate of income tax shall be thirty percent (30%). xxx xxx xxx" On the other hand, sale, exchange or disposing lands and/or buildings which are not actually used in the business of a corporation and treated as capital assets is subject to the six percent (6%) capital gains tax imposed under Sec. 27(D)(5) of the Tax Code. For purposes of determining whether income received is subject to the 35% normal income tax rate or to capital gains tax, the business of the taxpayer is paramount in concluding whether the real property sold, transferred or disposed by the taxpayer is an ordinary asset or a capital asset. In this connection, Sec. 3 of Revenue Regulations (Rev. Regs.) 7-2003 provides the following guidelines: "a. Taxpayers engaged in the real estate business. Real property shall be classified with respect to taxpayers engaged in the real estate business as follows: SHTEaA 1. Real Estate Dealer. All real properties acquired by the real estate dealer shall be considered as ordinary assets. 2. Real Estate Developer. All real properties acquired by the real estate developer, whether developed or undeveloped as of the time of acquisition, and all real properties which are held by the real estate developer primarily for sale or for lease to customers in the ordinary course of his trade or business or which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year and all real properties used in the trade or business, whether in the form of land, building, or other improvements, shall be considered as ordinary assets. xxx xxx xxx 4. Taxpayers habitually engaged in the real estate business. All real properties acquired in the course of trade or business by a taxpayer habitually engaged in the sale of real estate shall be considered as ordinary assets. Registration with the HLURB or HUDCC as a real estate dealer or developer shall be sufficient for a taxpayer to be considered as habitually engaged in the sale of real estate. If the taxpayer is not registered with the HLURB or HUDCC as a real estate dealer or developer, he/it may nevertheless be deemed to be engaged in the real estate business through the establishment of substantial relevant evidence (such as consummation during the preceding year of at least six (6) taxable real estate sale transactions, regardless of amount registration as habitually engaged in real estate business with the Local Government Unit or the Bureau of Internal Revenue, etc.)." In short, sale or disposition of real property classified as ordinary assets shall be subject to income tax under said Sec. 27(A) of the tax Code, as amended and consequently to creditable withholding tax. The Doctrine of Involuntary Conversion "Involuntary Conversion if property (as a result of its destruction, in whole or in part, theft or seizure, or an exercise of the power of requisition or condemnation or the threat or imminence thereof) is compulsorily or involuntarily converted into property similar or related in service or use to the property so converted, or into money which is forthwith in good faith . . . expended in the acquisition of other property, or in the acquisition of a control of a corporation owning such other property, or in the establishment of a replacement fund, no gain or loss shall be recognized. If any part of the money is not so expended, the gain, if any, shall be recognized, but in an amount not in excess of the money so expended." ( MERTENS, Chap. 20, 121, Vol., 3, pp. 337-338 ) This doctrine is one of the several doctrines enunciated by US Courts to explain the meaning of the term "income" and "realization of income." Indeed, this doctrine has been discussed in the case of Herder v. Helvering , 23 AFTR, p. 322, viz: The facts in the Herder v. Helvering case were: On January 15, 1934 fire destroyed the milling property owned by the partnership of George Herder and R. L. Williams. For this loss, the partnership received $50,000 as fire insurance proceeds. This amount was immediately distributed to the partners, being pro-hated in accordance with their respective interest in the partnership, namely, two-thirds to George Herder, and one-third to R. L. Williams. George Herder received $33,333.67 under such distribution and that $19,199.50 thereof represented his portion of the total amount received by the partnership in excess of the adjusted cost basis of the property at the time of its destruction. ATICcS The Court held the said gain ($19,199.50) is not a realized income, hence, not subject to income tax, ( supra ) pursuant to the rule that no realized income may be recognized from a compulsory or involuntary conversion of a property. This doctrine is one of the several doctrines enunciated by the Courts in the U.S.A. that explain the meaning of the term "income" and "realized of income". Although under the foregoing Herder case the involuntary conversion of property was the direct result of fire loss sustained by the partners and for which they were compensated by the insurance, the doctrine of involuntary conversion was nonetheless applied by the BIR in various cases in holding that the income or gain from involuntary conversion of property is not recognized as realized income and may not be subject to income tax, capital gains tax or withholding tax. 1 In view of the foregoing, this Office is of the opinion as it hereby rules that A. Transfer of FBDC relocation lots to affected residents is not subject to income tax and consequently, to withholding tax . The construction of vital roads and other infrastructures/facilities of the government that will enhance the development of Fort Bonifacio, including the Kalayaan Viaduct Project was the subject of the 1996 MOA between the DPWH, the BCDA and the FBDC; and subsequently, under the 1997 MOA, between DPWH, FBDC, the City Government of Makati and all the RESIDENTS affected by Buendia-Kalayaan Bonifacio Viaduct. Under the 1997 MOA, FBDC is tasked to provide the replacement lot for all the displaced residents. In BIR Ruling No. DA-158-2002 dated 12 September 2002, Manila Bay Development Corporation (MBDC) and Public Estates Authority (PEA) entered into a Deed of Exchange for the transfer of the land of PEA to MBDC, which shall serve as payment for the lands required to be ceded by MBDC to PEA. Following the Manila Jockey Club ruling (BIR Ruling No. 329-92, dated 18 November 1992), the BIR ruled that any gain realized on the involuntary conversion of MBDC property to PEA is not recognized as realized income, hence not subject to income tax. The BIR considered that the Deed of Exchange was executed between MBDC and PEA for the conveyance of real property in favor of MBDC, in substitution for the parcels of land involuntarily ceded by MBDC to PEA pursuant to Boulevard 2000 Integrated Framework Plan. Particularly, the ruling states in part as follows: "[t]he applicability of the involuntary conversion of property doctrine is apparent when MBDC was required to cede certain portions of its parcel of land located in the Boulevard Reclamation Area to PEA pursuant to the Boulevard 2000 Integrated Framework Plan which was approved by no less than then President of the Philippines, Fidel V. Ramos. As payment for the lands required to be ceded by MBDC to PEA, PEA's lands also in the same area were transferred to MBDC. xxx xxx xxx In view of the foregoing, this Office is of the Opinion as it hereby holds that the gain, if any, on the involuntary conversion of MBDC's property is not recognized as realized income, hence, not subject to income tax. (Emphasis supplied) Likewise, in BIR Ruling No. DA-203-03 dated 30 June 2003, involving the land swap transaction between Shoemart, Inc. ("SM") and the PEA, the BIR ruled that the substitution of the parcel of land that SM involuntarily ceded to PEA partakes of the nature of an involuntary conversion. The exchange of properties between PEA and Shoemart is not subject to the corporate income tax or to the capital gains tax nor subject to the credible withholding tax under Revenue Regulations No. 2-98, as amended. TDcAIH The surrender of relocation lots by FBDC directly in favor of the affected residents is necessary to implement the 1997 MOA entered into by all the parties. As noted, the 1997 MOA is necessary to the implement the KALAYAAN VIADUCT PROJECT. As a rule, a public works project of the Government could only be implemented through the expropriation of the affected residential lots as well as the relocation lots from FBDC. In the instant case, expropriation proceeding is no longer necessary in view of the 1997 MOA, wherein the affected residents signified their willingness to convey, surrender and transfer the ownership and possession of their respective lots to DPWH provided they are replaced by lots of the same size and they can be compensated for the cost of the improvements existing on their respective lots. On the side of FBDC, the surrender of relocation site is in considerations of the improved public road access to its Taguig properties. Indeed, the KALAYAAN VIADUCT PROJECT can only be implemented by way of involuntary conversion of properties of the lot owners with that of the FBDC relocation sites. Accordingly, following the tax implications arising from the application of the doctrine of involuntary conversion, no taxable gain may be derived by the residents and by FBDC pursuant to the implementation of the KALAYAAN VIADUCT PROJECT. Assuming arguendo that there is no 1997 MOA to speak of, the acts of disposition by FBDC of relocation lots in favor of all the affected residents and the latter of their respective lots may be viewed as a mere swapping of properties. In short, while the surrender was made to DPWH and the ownership of relocation lots conveyed in exchange thereof belonged to FBDC, the concept of swapping may still be resorted to in order to implement the intention of the parties to complete the Viaduct Project. Technically, the arrangement would call first for actual transfer by FBDC of such relocation lots to DPWH before the latter can exchange the same for the properties of affected residents. Thereafter, DPWH may swap the relocation lots with the properties of affected residents to finally implement the project. If this option has been made, the transfer by FBDC as the transferor-donor would not be subject to income tax nor to withholding tax. Likewise, the transfer by FBDC to DPWH would be a donation to the government which is exempt from donor's tax under Sec. 101(A)(2) of the Tax Code of 1997, as amended. In the case of affected residents, the conveyance of their properties in favor of DPWH in exchange of relocation lots is not subject to capital gains tax under Sec. 24(D)(1) in relation to par(2) thereof, to wit: (D) Capital Gains from Sale of Real Property. (1) In General. The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts: Provided, That the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government-owned or controlled corporations shall be determined either under Section 24 (A) or under this Subsection, at the option of the taxpayer. (2) Exception. The provisions of paragraph (1) of this Subsection to the contrary notwithstanding, capital gains presumed to have been realized from the sale or disposition of their principal residence by natural persons, the proceeds of which is fully utilized in acquiring or constructing a new principal residence within eighteen (18) calendar months from the date of sale or disposition, shall be exempt from the capital gains tax imposed under this Subsection: Provided, That the historical cost or adjusted basis of the real property sold or disposed shall be carried over to the new principal residence built or acquired: Provided, further, That the Commissioner shall have been duly notified by the taxpayer within thirty (30) days from the date of sale or disposition through a prescribed return of his intention to avail of the tax exemption herein mentioned: Provided, still further, That the said tax exemption can only be availed of once every ten (10) years: Provided, finally, that if there is no full utilization of the proceeds of sale or disposition, the portion of the gain presumed to have been realized from the sale or disposition shall be subject to capital gains tax. For this purpose, the gross selling price or fair market value at the time of sale, whichever is higher, shall be multiplied by a fraction which the unutilized amount bears to the gross selling price, in order to determine the taxable portion and the tax prescribed under paragraph (1) of this Subsection shall be imposed thereon. TESICD Moreover, any amount received by the affected residents as compensation for the improvements on their respective lots, and which was paid by FBDC pursuant to the 1997 MOA (or even without the 1997 MOA) is not also subject to income tax or capital gains tax imposed under Sections 27(A) and 27(D)(5) of the Tax Code of 1997, as amended. B. Any gain that may be derived from the transfer of lots by the affected residents to DPWH is not taxable . Section 24(D)(1) of the Tax Code of 1997, as amended provides that, " the provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts: Provided, That the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government-owned or controlled corporations shall be determined either under Section 24 (A) or under this Subsection, at the option of the taxpayer ." Under the foregoing proviso, an individual taxpayer has the option to report his tax liabilities, if any, gains or dispositions of real property to the government or any of its political subdivisions or agencies either as a transaction subject to capital gains tax of 6% under the aforesaid Sec. 24(D) of the Tax Code of 1997, as amended or under Sec. 24(A)(1) of the same Tax Code. In BIR Ruling DA-203-03 issued to Shoemart, Inc., supra , and citing BIR Ruling No. 392-92 dated November 18, 1992 and DA-158-2002 dated September 12, 2002, the doctrine of involuntary conversion was applied. Pertinent factual consideration was made the basis in applying the doctrine, to wit: "One of the significant highlights of the JVA dealt on the "sharing/development options." "In line with its commitment to comply with the schedule of work in relation to the development plan, Shoemart (the Developer) timely commenced and successfully implemented the development works on CBP-1, Island A under the JVA. In return and in accordance with the terms and conditions of the JVA, PEA (the Owner) has caused the transfer of the agreed portion of the developed area equivalent to Six Hundred Four Thousand Three Hundred Forty Eight (604,348) Square Meters to Shoemart (the Developer) by way of a Deed of Conveyance in favor of Shoemart. . . "Notably, under Section 7.2.1 Estimated Power Requirement) of the Boulevard 2000 Integrated Framework Plan which was prepared in pursuit of the objectives to implement the development objectives of CBP-1, Island A Project, two (2) Power Substations were allocated to meet the power requirement of CBP-1, Island A. Nonetheless however, the Manila Electric Company (hereinafter "MERALCO"), based on their study on the power requirement of CBP-1, Island A, recommended the establishment of an additional two (2) Power Substations in the area. Purportedly in consonance thereto, under the SM (Shoemart) Master Development plan duly approved by the PEA Board of Directors on 9 November 1998, the said four (4) MERALCO Power Substations were proposed to be built in the following areas, to wit: a) Open space adjacent to Manila Bay (50 meter green strip) two (2) Substations, b) Open space beside the Libertad Channel One (1) Substation; and c) Pasay Hongkong Realty Dev't. Corp. (PHRDC) property One (1) Substation AEIcSa xxx xxx xxx "With particular reference to MERALCO Power Substation No. 2, the same is proposed to be built on PEA's Lot No. 13-A (a common area) in CBP-1, Island A, (which is covered by Transfer Certificate of Title No. 141665 under the name of PEA) and is located at the intersection of Bay and Seaside Boulevards, specifically on the west side of Bay Boulevard . . . After several detailed discussions on the viability of placing the MERALCO Power Substation No. 2 on the said proposed site however, it became apparent that normal seawave actions not to mention the seawave conditions during a stormy weather, will bring about certain technical difficulties or problems to said MERALCO Power Substation No. 2, due to the proximity of its proposed location to the seawall along Seaside Boulevard. In simple terms, the presence of this MERALCO Power Substation No. 2 in the proposed site (PEA's Lot No. 13-A) carries great technical risks since the said proposed location is extremely open and exposed to elements coining from actions of the sea. . . . "To address this concern, PEA interposed the remedy of "land swapping", which was accepted by Shoemart. In doing so, the parties agreed that PEA's Lot. No. 13-A (the original proposed site) having an area of Three Thousand Four Hundred One (3,401) Square Meters, be exchanged with Shoemart's Lot No. 19 (covered by Transfer Certificate of Title No. 142610 under the name of Shoemart, Inc.). Through this exchange or swap, Shoemart's Lot 19 (taken from the usable or disposable portion of Shoemart's land will then be converted as to form part of the common area within PEA's land and vice versa. Much to the desire of Shoemart to hold on to this (usable and, disposable) parcel of land, it nevertheless, for the good interest of all locators in the estate consented to forego of such parcel of land as the (new) location where the proposed MERALCO Power Substation No. 2 will be placed. It is believed that the transfer or relocation of the proposed site of MERALCO Substation No. 2 from PEA's Lot No. 13-A to the aforesaid Shoemart's Lot No. 19 (which is found across the eastern side of Bay Boulevard) is the most prudent thing that can be done since the new proposed location at Shoemart's Lot No. 19 stands protected from the actions of the sea coming near the Bay Boulevard Bridge as well as the seawall not to mention that the inland location of Shoemart's Lot 19 as the site for said MERALCO Power Substation No. 2 will provide easier transmission line accesses as well as a sheltered location for the power equipments. "By way of a Deed of Exchange, Shoemart thereby cedes, transfers and conveys to PEA its land with an area of Three Thousand Four Hundred One (3,401) Square Meters, identified as Lot 19 and on the other hand, PEA cedes, transfer and conveys to Shoemart its land with an equal area of Three Thousand Four Hundred One (3,401) Square Meters, identified as Lot 13-A, both lands being situated in CBP-1 Island A, Pasay City. . . . "In reply, please be informed that the execution of the Deed of Exchange between PEA and Shoemart, conveying real property in favor of Shoemart, in substitution for the parcels of land involuntarily ceded by Shoemart to PEA to give way to the construction of MERALCO Power Station No. 2 partakes the nature of an involuntary conversion. The doctrine of involuntary conversion of property was relied upon by this Office in BIRRulingNo.3 7 3-87 dated November 23, 1987 and BIRRulingNo.4 2 9-88 dated September 2, 1988 and reiterated in BIRRulingNo.3 2 9-92 dated November 18, 1992. The Involuntary Conversion of Property Doctrine, as explained in BIRRulingNo.3 2 9-92." Following the doctrine of involuntary conversion as applied in the abovecited rulings, this Office opines that the surrender of the lots by the affected residents to the DPWH, is also not subject to capital gains, income, or withholding taxes. The foregoing doctrine is applicable to the transfer of lots to DPWH by the residents because the residents were left with no choice except to surrender their lots for the implementation of the KALAYAAN VIADUCT PROJECT. The residents are constrained to surrender their lots or portions thereof in lieu of their eventual expropriation. Accordingly, any gain that may be derived by the residents as a result of the transfer of their lots to DPWH for the implementation of KALAYAAN VIADUCT PROJECT are not taxable under the aforecited Sections 24(A)(1) and (D) of the Tax Code of 1997, as amended. HcaATE C. Any gain that may be derived from the transfer of residual lots by the affected residents to other residents is not subject to capital gains tax or income tax or withholding tax . Similarly, the doctrine of involuntary conversion applies to the transfer residual lots of the affected residents to the other residents. The owners of these residual lots, which are to be used as replacement lots of other residents, surrendered such portions of their lots to avoid their eventual expropriation to facilitate the implementation of the KALAYAAN VIADUCT PROJECT. Such direct conveyance of residual lots to other residents is the means by which the latter affected residents are partly or fully compensated for their property that were either surrendered as well or otherwise affected by the KALAYAAN VIADUCT PROJECT. Consequently, the gain that may be derived from such transfer is not subject to capital gains tax or income tax or withholding tax under the provisions of Section 24(A)(1) and (D) of the Tax Code of 1997, as amended the same being the result of involuntary conversion ( BIR Ruling No. 329-92, dated 18 November 1992; BIR Ruling No. DA-158-2002, dated 12 September 2002; BIR Ruling No. DA-203-03, dated 30 July 2003 ). D. Annotation of Right of Way and subsequent transfer of encumbered lots to DPWH is not subject to capital gains tax or income tax, the same being the result of involuntary conversion . In the case of BIR Ruling No. 329-92, supra , a portion of MJC's real property was expropriated by the DPWH. At the time of expropriation, its net book portion of MJC's real property (horse racetrack premises) was expropriated by the DPWH for public purposes (i.e., road improvement premises). At the time of expropriation, its net book value is P250,000. Its compensation for the said expropriation is P29,462.440. However, the said compensation is not even enough to repair, restore, and rehabilitate its racetrack premises and facilities. On the contrary, MJC's contract for the partial repair, restoration and rehabilitation of the said premises and facilities is P53,530,000. The query is whether or not the compensation received by MJC in excess of the net book value of the said expropriated property may legally be recognized as realized taxable income notwithstanding that, simply because of the said expropriation MJC's normal business operations was not only disrupted but, in addition, it would incur a total obligation of more than P53 million just to repair, restore and rehabilitate its horse racetrack premises and facilities. The BIR thus ruled that the aforementioned expropriation of MJC's real property embraced under the involuntary conversion of property doctrine which this Office relied upon in BIR RULING NO. 373-87, dated November 23, 1987, in the case of the Mercury Group of Companies. As earlier discussed, the doctrine of involuntary conversion of property is one of the several doctrines enunciated by the US Courts that explains the meaning of the term "income" and "realization of income". As held in the case of Herder vs. Heldering , supra , "the said gain ($19,199.50) is not a realized income, hence, not subject to income tax." Applying this doctrine, BIR had ruled that "Pursuant to the rule that no realized income may be recognized from a compulsory or involuntary conversion of a property. . . . In view of the foregoing, and in the light of your comprehensive dissertation on the doctrines re the meaning of the term "income" and "realization of taxable income", this Office hereby confirms your position that MJC's aforementioned gain from the involuntary conversion of its property is not recognized as realized income, hence, MJC is not subject to income tax thereon, pursuant to BIRRULINGNO.3 7 3-87 and as reiterated by BIR RULINGNO.4 2 9-88. TcIaHC Thus, following the same concept this Office hereby opines that the receipt of compensation by the affected residents whose lots will be encumbered with annotation of right of way, as well as their eventual transfer to DPWH after securing permission from DENR pursuant to Presidential Proclamation No. 518, is not subject to capital gains tax or individual income tax or withholding tax, the same being the result of an involuntary conversion. In lieu of the standard process of expropriation, the residents permitted the encumbrance on their lots and allowed them to be used for public purpose. Such being the case, the resulting gain or income should not be subject to capital gains tax or income tax or withholding tax on the part of the residents imposed either under the provisions of Sec. 24(A)(1) or Sec. 24(D) of the Tax Code of 1997, as amended. 2. Donor's Tax A. No Donor Tax on donations in favor of the Local Government of Taguig The intended donation of the access/service roads and easements in favor of the City of Taguig is exempt from donor's tax under Section 101(A)(2) of the Tax Code of 1997, as amended. The said provision exempts from donor's tax gifts made to or for the use of the National Government or any entity created by any of its offices, which is not conducted for profit, or any political subdivision of the said Government. In BIR Ruling No. 021-96 , this Office had ruled that the donation by Fortune Tabacco Corporation to the Municipal Government of Marikina was exempted from donor's tax pursuant to then Sec. 94(a)(2) of the 1977 Tax Code, as amended (now Sec. 101(A)(2) of the Tax Code of 1997, as amended). Likewise, in BIR Ruling DA-203-99 , the donation of Donavilla to the City of Las Pias was held to be exempt from donor's tax pursuant to Sec. 101(A)(2) of the same Tax Code. In view of the foregoing bases, this Office hereby rules that the direct donation of the lots to the City of Taguig properly falls under the abovecited provision of the Tax Code as a donation to a political subdivision of the National Government, and thus, exempt from the imposition of donor's tax. B. No Donor's Tax on the transfer of FBDC relocation lots to the residents The transfer of FBDC relocation lots to the residents is not subject to donor's tax. The transfer of the relocation lots is with sufficient consideration and is not a mere act of liberality. While FBDC is obliged by DPWH to transfer replacement lots to the residents in lieu of the eventual expropriation of said replacement lots, nevertheless, FBDC will be benefited by the KALAYAAN VIADUCT PROJECT. In previous rulings, this Office has clarified, that where a transfer is made with a business consideration, the same shall not be subject to donor's tax since there is a clear absence of donative intent on the part of the transferor. In the instant case; this Office ruled that "GBCI is not subject to income tax on the amount of P38,459,130.00 suspended or waived or condoned by PPMV. Furthermore, the suspension, waiver or condonation is not subject to donor's tax since there is no donative intent on the part of PPMV, but was made solely for business consideration to assist GBCI to continue with its operations. Since the transfer of the replacement lots by FBDC to the affected residents is without donative intent because FBDC will be benefited by the construction of the KALAYAAN VIADUCT PROJECT as it would help spur the development of Bonifacio Global City, the same is not a taxable donation and thus not subject to donor's tax. The KALAYAAN VIADUCT PROJECT would lead to the development of Bonifacio Global City as it will provide easier means of access between Epifanio Delos Santos Avenue (EDSA) and Bonifacio Global City. The enhancement of Bonifacio Global City, as a result of the implementation of the KALAYAAN VIADUCT PROJECT, is sufficient business consideration on the part of FBDC to exempt such transfer from the imposition of donor's tax. In conformity with the above cited ruling where the BIR clarified that where a transfer is made with a business consideration, the same shall not be subject to donor's tax imposed under Sec. 99(B) in relation to Sec. 98, both of the Tax Code of 1997, as amended, since there is a clear absence of donative intent on the part of the transferor. DCcTHa C. No Donor's Tax on the monetary compensation given by FBDC to the residents The payment of monetary consideration by FBDC to the affected residents is not subject to donor's tax imposed under Sec. 99(B) in relation to Sec. 98, both of the Tax Code. Such payment is with sufficient consideration and is not a mere act of liberality. FBDC will be benefited by the KALAYAAN VIADUCT PROJECT. The KALAYAAN VIADUCT PROJECT would lead to the development of Bonifacio Global City as it will provide easier means of access between Epifanio Delos Santos Avenue (EDSA) and Bonifacio Global City. The enhancement of Bonifacio Global City, as a result of the implementation of the KALAYAAN VIADUCT PROJECT, is sufficient business consideration on the part of FBDC to exempt such transfer from the imposition of donor's tax. This is in conformity with the above cited ruling where this Office had clarified that where a transfer is made with a business consideration, the same shall not be subject to donor's tax since there is a clear absence of donative intent on the part of the transferor. 3. Documentary Stamp Tax A. DST on FBDC transfer of the replacement lots The contemplated direct transfer of the FBDC replacement lots to the affected residents is subject to DST under Section 196 of the Tax Code of 1997, as amended by RA 9243. As consistently held by this Office, while the exchange of properties resulting from an involuntary conversion is not subject to the corporate income tax or to the capital gains tax nor to the creditable withholding tax, the same shall be subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. Furthermore, the notarial acknowledgment to the said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Code. 2 B. No DST on FBDC donation of lots to the Local Government of Taguig The contemplated donation of FBDC lots to the City of Taguig is exempt from documentary stamp tax because the government stands to benefit from such transaction and there is no valuable consideration received by FBDC. As consistently held by this Office, donation to a local government is exempt not only from the imposition of the donor's tax but also from the imposition of DST. 3 Under the existing provision of the Tax Code of 1997, as amended, and rationalizing that because the donation redounds to the benefit of the government and serves the best interest of the public, donation to the local government is exempt from DST under Section 196 of the Tax Code. Moreover, since there is no valuable consideration for the transfer, thus no DST is imposable other than the DST of P15 for each notarial acknowledgement imposed under Section 188 of the Tax Code of 1997, as amended. C. Documentary Stamp Tax on transfer of lots of the affected residents To implement the project, portions of lots that will be surrendered by some of the residents will be partly conveyed to DPWH and the remainder thereof conveyed to other affected residents as part of the latter's compensation for transferring their own lots for the implementation of the project. Only one transfer document to effectuate the transfer to DPWH and to the other residents will be executed, the consideration for which is the entire amount of property or cash received by the surrendering resident. Payment of DST is due therefore on the single transfer document based on the consideration received. Thus, the transfers of lots by the affected residents, resulting from the implementation of the KALAYAAN VIADUCT PROJECT, are subject to DST under Section 196 of the Tax Code of 1997, as amended, as based on the total consideration received for such transfers. EDCTIa Accordingly, DST shall be imposed on the total consideration received by the residents which consists of replacement lots either from the FBDC replacement lots or from residual lots of residents or monetary consideration, or both. For purposes of the FBDC replacement lots, the DST shall be based on their zonal value of P7,500.00 considering that this is higher than their fair market value per tax declarations. As for the residual lots of the residents, the DST shall be based on the zonal value or fair market value of the lots, whichever is higher. D. Annotation of right of way and eventual transfer of annotated lots The annotation of the easement of right of way on the lots which are prohibited from being subdivided is not subject to DST under Section 196 of the Tax Code of 1997, as amended. Although the annotation of the right of way creates a real sight over the subject lots, the same merely involves its creation and it does not involve its transfer. This proposed annotation of the perpetual easement of right of way on the affected lots are preparatory steps to be taken by the parties pending the issuance of the DENR permit for the subdivision of the lots to implement the actual sale of the properties. However, the subsequent transfer of the lots after DENR permission is obtained shall be subject to DST under Section 196 of the Tax Code of 1991, as amended. Considering that the perpetual annotation of the right of way is actually intended as part of the sale between the parties, it shall be subject to DST as imposed by Sec. 196 of the same Tax Code only after issuance of the DENR permit and execution of the Deed of Absolute Sale/Transfer in favor of DPWH by the affected residents. 4. Value-Added Tax The transfer of lots by FBDC to the DPWH as well as its donation to the City of Taguig is subject to Value-added Tax (VAT). The transfers of lots by the residents are, however, not subject to VAT because they are not primarily held for sale or lease in the ordinary course of business pursuant to Sec. 109(P) of the Tax Code of 1997, as amended. A. VAT on transfer of relocation lots by FBDC Considering that the relocation lots of FBDC were held either for sale or lease in FBDC's ordinary course of trade or business, the transfer of relocation lots to the affected residents shall be subject to VAT pursuant to Sec. 105 in relation to Sec. 106, both of the Tax Code of 1997, as amended. The VAT shall be imposed on the zonal value or fair market value, which ever is higher, pursuant to Section 106 (A)(1)(a) of the Tax Code, as implemented by Section 4.106-3 of RR 16-05. Considering that the zonal value of the FBDC replacement lots of P7,500.00 is higher than their fair market value per their tax declaration, their zonal value shall be used as basis for imposition of the 12% VAT. B. VAT on Donation of Lots to the City of Taguig The donation of lots to the City of Taguig by FBDC is a completed gift subject to VAT. Section 4.106-3 of Revenue Regulations (Rev. Regs.) No. 16-05, provides that a completed gift of property, which is one for sale, lease or use in the ordinary course of trade or business shall be considered a deemed sale transaction, and thus, subject to VAT. Pertinent provisions of Rev. Regs. No. 16-05 states as follows: "Transmission of property to a trustee shall not be subject to VAT if the property is to be merely held for the trustor and/or beneficiary. However, if the property is one for sale, lease or use in the ordinary course of trade or business and the transfer constitutes a completed gift, the transfer is subject to VAT as a deemed sale transaction pursuant to Sec. 4.106-7 (a)(1) of these regulations. The transfer is a completed gift if the transferor divests himself absolutely of control over the property, i.e., irrevocable transfer of corpus and/or irrevocable designation of beneficiary." Pursuant to this provision and in correlation to the deemed sale provision under Section 106 Tax Code of 1997, as amended, the donation by FBDC of its lots to the City of Taguig is a completed gift that may be treated as a deemed sale transaction. This is so because the lots to be donated to the City of Taguig are being held by FBDC either for sale, lease in the ordinary course of its business. Considering the foregoing, the said donation is subject to the 12% VAT based on their zonal value P7,500.00 as this is higher than the fair market value per their tax declarations. AcSHCD C. No VAT on the transfer of lots by the affected residents However, the foregoing VAT exposure on the transfers by FBDC does not give rise to a vatable transaction for the residents' transfer of lots to DPWH as well as to transfers of residual lots to other residents. This is so because the affected residents do not hold the properties for sale or lease in the ordinary course of trade or business, unlike the manner by which FBDC held the properties. In the same BIR Ruling No. 024-05, this Office has also ruled that the transfer of properties by one corporation to another is not subject to VAT where such properties are not held for sale or for lease in the ordinary course of trade or business. Specifically, the BIR ruled: "In the instant case, the transfer by PSPC of the FIXED Assets of its LPG business to SGLPI in exchange of the latter's shares of stock pursuant to a tax-free exchange transaction under Section 40 (C) (2) of the Tax Code of 1997 is by reason a reorganization, a transaction which is not done with regularity and would no longer be repeated. The assignment of the Fixed Assets is not undertaken in the course of trade or business or in pursuit of a commercial or an economic activity, nor is it incidental thereto. The Fixed Assets are not held by PSPC for sale or for lease in the ordinary course of trade or business. Furthermore, the Fixed Assets do not constitute PSPC's stock-in-trade or inventory. Consequently, the assignment of the Fixed Assets is not subject to VAT." Based on the foregoing and considering that the residents do not hold the subject lots for sale or lease in the ordinary course of trade or business, this Office hereby rules that the transfer of lots by the affected residents are not subject to VAT pursuant to Sec. 109(P) of the Tax Code of 1997, as amended. D. No VAT on the subsequent transfer of lots initially annotated with right of way The eventual surrender by the residents of the lots initially annotated with the right of way is not subject to VAT. The transfer of lots from the residents to DPWH are not made in the course of trade or business nor were the affected lands held by the resident for sale, lease or use in the ordinary course of trade or business. The transfer of such lots cannot be considered as a taxable transaction for purposes of imposing VAT. 4 5. Replacement Lots Covered by TCRPV Resolution No. 82-2005 valued a P7,500.00 for expropriation purposes As noted, the zonal value of the FBDC lots covered by TCRPV Resolution No. 82-2005 is P7,500.00 per square meter. Accordingly, for purposes of transferring the replacement lots to the affected residents and donating service of access roads to the City of Taguig, the zonal value of the FBDC lots covered by TCRPV Resolution No. 82-2005 continues to be P7,500.00 per square meter. This is so because the condition imposed by TCRPV Resolution No. 82-2005, that the zonal value of P7,500.00 per square meter shall apply for expropriation purposes only, is satisfied by the transfer of the said lots for the implementation of the KALAYAAN VIADUCT PROJECT. As earlier intimated, the transfer of the lots by FBDC to the affected residents and to the City of Taguig arises from its obligation imposed by DPWH under the 1996 and 1997 MOAs for the implementation of the KALAYAAN VIADUCT PROJECT. FBDC is left with no choice except to provide the relocation lots to the residents in lieu of their eventual expropriation by the DPWH. Further, as pointed out, the facts surrounding the implementation of the KALAYAAN VIADUCT PROJECT constitute the same factual circumstances that were considered by the Technical Committee on Real Property Valuation (TCRPV) in resolving the zonal value of the subject properties. The "Bonifacio-Kalayaan Flyover" as referred to in the TCRPV Resolution, is the same project referred to as KALAYAAN VIADUCT PROJECT in this instant request for ruling. So also, the negotiations by FBDC with the affected residents for the acquisition and expropriation of the affected lots and the replacement of their lots with the Pitogo Relocation Area referred to in the TCRPV Resolution pertain to the obligations of FBDC imposed under the 1990 MOA and the 1997 MOA for purposes of implementing the KALAYAAN VIADUCT PROJECT as referred to in the requested ruling. HCDAac This ruling shall serve as sufficient basis for the BIR to issue the Certificates Authorizing Registration and Tax Clearance Certificates, for all the property transfers effected in connection with the implementation of the KALAYAAN VIADUCT PROJECT, including the subsequent transfer of properties initially annotated with the right of way in favor of DPWH as well as the transfers of properties which are presently unregistered/untitled and their subsequent registration/titling provided that FBDC and the concerned parties submit all the necessary Deeds of Exchange effecting the said transfers to the concerned RDO for evaluation pursuant to the foregoing. Finally, this ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue Footnotes 1. BIR Ruling No. 329-92 dated November 18, 1992; BIR Ruling Nos. 373-87 dated Nov. 23, 1987 & 429-88 dated September 2, 1988; DA-158-2002 dated September 12, 2002; DA-203-03 dated June 30, 2003. 2. BIR Ruling DA 203-03, dated 30 June 2003. 3. BIR Ruling No. DA-135-01, dated 8 August 2001. 4. BIR Ruling No. 024-05, dated 23 December 2005.