Taxation of FBDC's property transfer to BCDA

Redemption defined as repurchase or reacquisition of stock by issuing corporation in exchange for property.
RR No. 6-2008 governs taxation of shares redeemed for cancellation or retirement.
Capital gain or loss recognized on difference between redemption value received and cost of preferred shares.
Capital gain or loss subject to regular income tax rates for individuals or corporate income tax rates for corporations.
Treasury shares reacquired voluntarily by corp. are subject to stock transaction tax or capital gains tax, depending on listing status.
For FBDC, no income tax on shares redeemed as they are considered retired and non-issuable.
For BCDA, gain realized on redemption subject to corporate income tax and creditable withholding tax.

RR No. 7-2003 defines guidelines for classifying real properties as capital or ordinary assets.
Real estate developers classify all acquired real property, whether developed or undeveloped, and held for sale or lease, as ordinary assets.
Sale of real properties held primarily for sale or lease generally subject to VAT.
Transfer of real properties by FBDC to BCDA in redemption considered a deemed sale subject to 12% VAT under Section 106(B)(1) of the Tax Code.
VAT base is gross selling price, higher of consideration received or fair market value (FMV) based on zonal value or real property tax declaration.
Transfer considered "use or consumption not in the course of business" under VAT regulations.

Section 196 of the Tax Code imposes DST on sale and conveyances of real property.
DST based on consideration paid or FMV, whichever is higher.
When one party is the government, tax is based on actual consideration.

Previous BIR ruling modified to reflect that conveyance of real properties by FBDC to BCDA in partial redemption is subject to income tax, VAT, and DST.
Revenue District Offices are instructed to follow the modified ruling and disseminate this information widely.

Redemption of shares as repurchase or reacquisition distinct from treasury stock transactions.
Recognition of capital gains or losses on redemption and their tax treatment.
VAT treatment of real properties held as inventory by real estate developers.
Transactions deemed sale for VAT under the Tax Code and Revenue Regulations.
Documentary Stamp Tax on deeds and conveyances involving real property, especially when government is party.

RR No. 6-2008 (Taxation of redeemed shares).
RR No. 7-2003 (Classification of real properties for VAT).
Sections 105, 106, and 196 of the Tax Code of 1997.
RR No. 16-2005 (Implementation of VAT provisions).
Jurisprudence: Goodyear Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8188, March 25, 2013.