Академический Документы
Профессиональный Документы
Культура Документы
DONOR’S TAXATION
*Donation
- it is an act of transferring property or rights motivated by the liberality of the donor in favour
of the donee who accepts it.
*Kinds of Donation
1. Donation Mortis Causa- takes effect upon the death of the donor. This is to be observed based
on the law of succession and to be imposed with estate tax.
2. Donation Inter Vivos- a gratuitous transfer of rights and property that shall take effect during
the lifetime of the donor. This transfer is subject to donor’s tax.
*Requisites of Donation
1. Capacity of the Donor
The donor must be capacitated to make a valid donation.
The donee need not be capacitated to receive the gift to make the donation valid. It
is enough that the duly authorized representative of the incapacitated donee
received the donation.
2. Donative Intent
Refers to the proper declaration of the legal owner of the property or right to
transfer ownership to another without consideration. Such intent followed by a
donative act is essential to constitute a gift especially in case of direct donation.
When donative intent not necessary: if a gift is an indirect gift, taking place by way
of sale, exchange or other transfer of property as contemplated by transfer for
inadequate consideration.
3. Delivery of the Gift
The delivery of the object of donation may be actual or constructive. The delivery
may be made to a trustee.
4. Acceptance by the Donee
Acceptance is the acknowledgement of the thing or the right donated. The transfer
is perfected from the moment the donor knows of the acceptance by the done; it is
completed by the delivery, actual or constructive.
Donee may accept the donation personally or through an authorized person.
Donation to conceive and unborn children may be accepted by those persons who
would legally represent them.
5. Forms
Required Forms to Effect Donation
Verbally Where the value of the property (movable) donated is
5,000 or less
In Writing Where the value of personal property donated exceeds
5,000 otherwise it is void.
In Public Instrument In order that a donation of real property (immovable)
shall be valid, it must be made in public instrument
(deed of donation) specifying therein the property
donated, otherwise it is void ab initio.
*Special Cases
Page 1 of 5
BUSINESS LAW AND TAXATION REVIEW
Prepared by: N.A. Alauya-Sani MSU-CBAA
1. Cancellation of Indebtedness
Condonation or remission of debt where the debtor did not render service in favour
of the creditor is a donation.
There is no donation in the following cases:
i. The cancellation of indebtedness due to rendition of services is compensation
ii. The cancellation of indebtedness in favour of a stockholder is dividend.
2. Renunciation of Inheritance
Renunciation specifically and categorically done in favour of identified heir(s) to the
exclusion or disadvantage of the other co-heirs in the hereditary estate is subject to
donor’s tax.
General renunciation by an heir of his share in the hereditary estate left by
decedent is not subject to donor’s tax.
3. Compromises on Will Disputes
Payments made to a dissatisfied heir who has no legal enforceable rights may
constitute donation.
Generally, compromises and settlements of will contests and other disputes are not
gifts.
4. Beneficiaries of Trust
Where a gift is made to a trustee for the benefit of one or more beneficiaries, the
beneficiaries and not the trustee, are the donees of the gift.
The transfer of a bare legal title to a trustee is not, by itself, a gift. Hence, a transfer
from one trust to another trust is not a gift if the beneficiaries of the two trusts are the
same.
5. Corporation’s Share of Stock
A donation by a foreign corporation of its own shares of stock to a resident employee is
not subject to gift tax; but if the “donation” was given in consideration of the latter’s
services, the value of the shares can constitute taxable income.
6. Court Ordered Payments
Court ordered payments out of the estate of an incompetent or a minor for the benefit
of relatives whom the incompetent or minor is not legally obligated to support have
been held to be gifts.
Generally, court ordered payments are not gifts.
*Classification of Donor
-a donor or a done may be natural or juridical person. A taxable donor need not be a natural
person.
*Conjugal Donation
Page 2 of 5
BUSINESS LAW AND TAXATION REVIEW
Prepared by: N.A. Alauya-Sani MSU-CBAA
The husband or wife cannot transfer any conjugal property without the consent
of the other, except in moderate donations for charity or on the occasion of
family rejoicing or family distress.
Spouses who make donations out of conjugal property shall be considered a
separate donor of his or her interest in the conjugal property. Hence, one-half
of the donation shall be considered donation of the husband and the other half
a donation of the wife.
Unless the wife expressly joins in making the donation, it shall be deemed to
have been made by the husband alone.
Donation made between husband and wife during the marriage are void, and
not subject to donor’s tax, except moderate gifts between spouses on the
occasion of family rejoicing.
*Gross Gifts
The value of the gross gift shall be the value existing at the time when the gift is made.
Specifically, the following valuations shall be observed:
a. Cash gifts- face amount of the currency.
b. Personal Property- fair market value.
c. Real Property- current and fair market value as shown in the schedule of values fixed by
the Provincial and City Assessors or the fair market value as determined by the BIR
Commissioner, whichever is higher.
Transfer for Inadequate consideration
o Property other than real property, the amount in excess of the property’s fair market
value or the consideration shall be deemed a gift.
o Real properties are subject to capital gains tax.
Page 3 of 5
BUSINESS LAW AND TAXATION REVIEW
Prepared by: N.A. Alauya-Sani MSU-CBAA
*Destroyed Donations
The donor’s tax accrues upon the completion of a gift. If the donated property was destroyed
after delivery, the donor is still liable to pay the related donor’s tax. The law may suspend the
payment of tax.
*Donor’s Tax
- it is not a property tax, but one which is imposed on the transfer of property by way of gift
intervivos. The law in force at the time of the perfection/completion of the donation shall
govern the imposition of the donor’s tax.
Page 4 of 5
BUSINESS LAW AND TAXATION REVIEW
Prepared by: N.A. Alauya-Sani MSU-CBAA
Page 5 of 5