Construction of Public Road with Taxpayer's Own Funds is a Donation to the Government, Hence Exempt from Donor's Gift Tax

November 6, 1991 BIR RULING NO. 228-91 29 (h) 081-91 228-91 S i r : This refers to your letter dated July 6, 1991, in effect, requesting a ruling as to whether the expenses that would be incurred by Mr. Jacinto Ng, owner of the Republic Biscuit Corp. to construct a cemented road at Barangay Nagkaisang Nayon, Novaliches, Quezon City, may be allowed as deduction from his gross income. It appears that Mr. Jacinto Ng is proposing to improve with his own funds Biglang-Awa St., which connects General Luis St. and Damong Maliit passing through Molave St., covering a distance of more or less 500 meters long. It is understood that once completed, that stretch of cemented road will not be for Mr. Ng's exclusive use but that it will remain part of the infrastructure of the government for public use. In reply, please be informed that if he will spend his own funds for the improvement of a government or public road, i.e., Biglang-Awa St., Mr. Ng, in effect, would be making a donation to the government in an amount equal to what he will spend for such improvement. Pursuant to Section 29 (h) (2) (A) of the Tax Code, said donation shall, for income tax purposes, be deducted in full provided that NEDA will certify that the improvement of that stretch of road is included in the National Priority Plan of the government. Otherwise, without such certification, said donation shall be deductible only in an amount not in excess of 6% of Mr. Ng's taxable income derived from business as computed without the benefit of this deduction pursuant to Section 29 (h) (1) of the Tax Code, as amended. Moreover, the abovementioned donation shall be exempt from the donor's gift tax pursuant to Section 94 (a) (2) of the Tax Code. Very truly yours, (SGD.) JOSE U. ONG Commissioner