BIR Ruling No. 011-86 (February 18, 1986)

091-b 000-00 011-86

Gentlemen:

This refers to your letter dated December 6, 1985 requesting a ruling for and in behalf of your clients, the heirs of the late Lim Boon Hai, as to the valuation for estate tax purposes, of certain shares of stock of the following companies, viz: cda

“a)            Banco Filipino Savings & Mortgage Bank, (suspended)

“b)            Marinduque Mining & Industrial Corp. (suspended)

“c)            Philippine Iron Mines, Inc. (delisted)

“d)            Paper Industries Corporation of the Philippines (PICOP-B) (no transaction)”

In reply, please be informed that pursuant to Section 91 (b) (formerly Section 103) of the Tax Code as amended, for estate tax purposes, the value of every item of property includible in the gross estate is the fair market value thereof at the time of the decedent’s death. However, shares of stock which had been either suspended, delisted or where no transactions involving them have been made, shall be valued at their book value nearest the valuation date which in this case, is the date of descendents death. Said book value shall be prima facie considered as their fair market value. If there have been previous bona fide sales/exchanges of such shares, the price at which such shares exchanged hands should be taken or considered as their fair market value. The shares of stock of Banco Filipino Savings & Mortgage Bank which, as represented, had been found insolvent and presently under liquidation, may be given a zero valuation for estate tax purposes. In other words, should the said shares later on appreciate in value and are subsequently sold or disposed, for tax purposes, their cost basis shall be zero.

Be that as it may, the valuation given to every item of property included in the gross estate of the decedent shall be subject to verification by the Bureau of Internal Revenue. cdtech

Very truly yours,

(SGD.) RUBEN B. ANCHETA

Acting Commissioner

Add comment June 5th, 2009

BIR Ruling No. 009-99 (January 22, 1999)

86(A)-000-00-009-99

Mr. Pepito A. Gonzales

Certified Public Accountant

2895 Benita Street

Tondo, Manila

S i r :

This refers to your letter dated November 19, 1998, requesting for a ruling to the effect that all items enumerated in Section 86(A) of the Tax Code of 1997 are allowable as deductions from the value of the gross estate of a resident decedent, in computing the net estate upon which the estate tax shall be due.   cdasia

Section 86(A) of the Tax Code of 1997 enumerates the allowable deductions in computing the net estate of a deceased resident or citizen, to wit:

1.            Expenses, Losses, Indebtedness, and Taxes – . . .;

2.            Property Previously Taxed – . . .;

3.            Transfers for Public Use – . . .;

4.            The Home – . . .;

5.            Standard Deduction – . . .;

6.            Medical Expenses and – . . .; and

7.            Amount Received by Heirs under Republic Act No. 4917 – . . .

In reply, please be informed that when the provisions of a law contain an enumeration of things, the enumeration shall be construed in the sense of “mentioned,” “indicated,” “referred to,” or “authorized.” (Words and Phrases Permanent Edition, Vol. 14A, p. 415). The interpretation that must prevail, therefore is, that the above enumerated items are separate and distinct items, independent of each other. As such, the above enumerated items are properly authorized by law to be deducted as independent, separate and distinct items of deduction, which may properly be deducted from the gross estate of a resident decedent, subject to the limitations or conditions that are provided for under each said item above.   cdasia

Clearly, therefore, it is not a requirement of the law, that the amounts computed, corresponding to the other remaining items in the enumeration (namely #s1-4 and 6-7 of Section 86(A) of the Tax Code of 1997), be included in the standard deduction, in #5 above, which will limit the entire deduction to the amount of the said item, amounting to One Million Pesos (P1,000,000.00). This interpretation is certainly contrary to the intention of the law.

Very truly yours,

(SGD.) BEETHOVEN L. RUALO

Commissioner of Internal Revenue

Add comment June 5th, 2009

BIR Ruling No. 003-80 (Aug. 25, 1980)

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. cdphil

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

Add comment June 5th, 2009