Clarification on the Valuation of Improvements for Internal Revenue Tax Purposes

February 15, 2001REVENUE AUDIT MEMORANDUM ORDER NO. 1-01SUBJECT:Clarification on the Valuation of Improvements for Internal Revenue Tax Purposes   TO:All Internal Revenue Officers and Others ConcernedI. OBJECTIVES1. To clarify the procedures in the determination of the valuation of improvements for purposes of computing the internal revenue tax on the sale, transfer or exchange of real property; and2. To prescribe a uniform guideline in the valuation of improvements for tax purposes. II. RATIONALEIn view of the conflicting interpretations concerning the correct valuation of improvements for internal revenue tax purposes as provided under Revenue Audit Memorandum Order No. 1-2000 against BIR Ruling No. UN-089-95 dated March 5, 1995 and DA 179-97 dated April 16, 1997 which state that the basis of the internal revenue taxes on the sale, transfer or other disposition of real properties shall be the fair market value which appears in the 1994, or later years' Tax Declaration covering the property involved, and for the purpose of uniformity in the application of the said rulings vis-a-vis the provisions of the existing Handbook on Audit Procedures...