Deductibility of the Gift to the Municipality of Cardona

June 2, 1988 BIR RULING NO. 228-88 94 (a) (2) 000-00 228-88 S i r : This refers to your letter dated July 30, 1987 requesting information as to whether Concrete Aggregates Corporation would be entitled to a credit or tax deduction in the event it donates its 16-hectare property to the Municipality of Cardona, Rizal. It is represented that residents of Barangay Ticulio have for several years been treated as squatters in a two-hectare lot owned by Concrete Aggregates Corporation; that said two-hectare area is part of a 16-hectare property titled in the name of said firm; and that on account of difficulties that often arise between the corporation and the barrio residents, said corporation has favorably considered the idea of donating its 16-hectare land to the Municipality of Cardona, Rizal. In reply, I have the honor to inform you that the aforesaid gift to the Municipality of Cardona which is presumed to be for public purposes exclusively, shall be deductible to an amount not in excess of 3% of the donor's taxable net income as computed without the benefit of said contribution or donation pursuant to Section 29(h)(l) of the Tax Code, as amended by Executive Order No. 273. However, said gift shall be deductible in full if the same is exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture, and in economic development according to a national plan to be determined by the NEDA, in consultation with appropriate government agencies, including regional development councils and private philanthropic persons and institutions. (Sec. 29(h)(2)(A), Tax Code, as amended) Moreover, the fair market value of the real property as determined by the Commissioner of Internal Revenue or the fair market value as shown in the schedule of values fixed by the Provincial and City Assessors, whichever is higher, at the time of the gift, shall be considered the amount of the gift. (Section 95, in relation to Section 81 both of the Tax Code, as amended) Said amount shall be the basis for calculation of the amount of the gift to be claimed as deduction for income tax purposes. (Sec. 116, Revenue Regulations No. 2) Finally, the aforesaid donation shall be exempt from the donor's gift tax. [Sec. 94(a)(2), Tax Code] cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner