BIR Ruling No. 003-80

August 25, 1980 BIR RULING NO. 003-80 030-a 000-00 03-80 Wack Wack Golf and Country Club Mandaluyong, Manila Attention : Mr . Eduardo C . Lim Director-Corporate Secretary Gentlemen: This refers to your letter dated August 14, 1980 requesting a ruling on the tax consequences of the Corporate Hole Sponsorship Scheme adopted by that Corporation per its Resolution approved on March 30, 1980. You have represented that under this Scheme, you are authorized to solicit from selected private corporations specific amounts at P250,000.00 per hole for the so-called TV holes of which there are nine (9) holes in the East course and at P200,000.00 per hole for the remaining nine (9) holes of the East Course; that the amounts raised under this Scheme will be used for the accomplishment of the purposes of the Club; and that each hole shall be named after the paying corporation or a product which it will specify. You also stated that in exchange for the amount paid, the paying corporation can advertise its name, business or product not only on the green of the hole for which payment was made but also on the teeing area of the said hole, aside from advertisements in official documents and communications and during televised tournaments. Such privileges to advertise can be made by the paying corporation for ten (10) years, renewable upon mutual agreement of both parties. In reply, I have the honor to inform you that, under the foregoing facts, the payments to be made by the paying corporations constitute advertising and business promotion costs. They are included in business expenses; hence deductible from gross income. (Sec. 65, Revenue Regulations No. 2) "Both advertising and business promotion costs can be deducted currently, even though the business benefit which they generate may extend over a period beyond the year in which they are incurred or paid." (34 Am. Jur. 2d, 1976 Ed., p. 380) In other words, therefore, the paying corporations can claim the whole amount as deductible from gross income during the year payment was made even if the business benefit they will derive therefrom will extend for a period of ten (10) years. The paying corporation is not subject to the donor's gift tax or to any tax liability, since its payment does not constitute a gift to that Club. cdpr Very truly yours, TOMAS C. TOLEDO Acting Commissioner