D O N O R ’S T A X

PROF. JEANEFER B. REYES CPA,

MPA
EXEMPTIONS FROM GROSS GIFTS
Gifts made to the national government or any entity created by any of its agencies
which is not conducted for profit, or any political subdivision.
Gifts in favor of the following non-profit institutions:
a. Educational e. Social welfare
b. Charitable f. Accredited NGO
c. Religious g. Trust or philanthropic
organization
d. Cultural
Requisites: h. Research institution
 Provided, that not more than 30% of said gifts shall be used for administration
purposes;
 The non-profit institutions must be accredited by the Philippine Council for NGO
Certification (PCNC).
 The donor engaged in business shall give notice on every donation worth at least
P50,000 on RDO which has jurisdiction over his place of business, within 30 days
from receipt of Certificate of Donation, stating that it has complied with 30%
requirement.
 A non-profit institution is one which is:

a. organized as a non-stock entity;

b. paying no dividends;
c. governed by trustees who receive no compensation; and
d. devoting all income whether students’ fees or gifts, donation subsidies or other
forms of philanthropy, to the accomplishment of the purposes enumerated in its
Articles of Incorporation.
 GIFTS EXEMPT UNDER SPECIAL LAW: Donations to
1.Rural Farm School
2.People’s Television Network, Incorporated
3.People’s Survival Fund
4.Aurora Pacific Economic Zone and Freeport Authority
5.Girl Scouts of the Philippines
6.Philippine Red Cross
7.Tubbataha Reefs Natural Park
8.National Commission for Culture and the Arts
9.Philippine Normal University
10.University of the Philippines
11.National Water Quality Management Fund
12.Philippine Investors Commission
13.Ramon Magsaysay Award Foundation
14.Philippine-American Cultural Foundation
15.International Rice Research Institute
16.Task Force on Human Settlements
17.National Social Action Council
18.Aquaculture Department of the Southeast Asian Fisheries Development Center
19.Development Academy of the Philippines
20.Integrated Bar of the Philippines
 PROBLEM  
1. Cabalo, widower, made the following donations:
2018:  
  March 20 P225,000 cash to Catindig, a legitimate son who got married on March 18, 2016.
  May 20 P500,000 cash to Catabac, niece who got married on April 1, 2017.
June 5 P88,000 to Cabanatan, his housemaid on account of marriage on January 1,
 
2018.
2019:  
  August 3 To Hospicio de San Jose, a charitable institution, P100,000
    To Philippine Association of Certified Tax Technicians, Inc., a NGO, P300,000.

REQUIRED: Compute the gift tax due on each donation if the donations were made in 2018.
 SOLUTIONS
On March 20, 2018 P 225,000 On June 5, 2018 88,000
Less: Exemption 250,000 Add: Previous donations 725,000
Net gift - (225,000 + 500,000)
On May 20, 2018 500,000 Total 813,000
Add: March 20, 2018 225,000 Less: Exemption 250,000
donation
Total 725,000 Taxable gift 563,000
Less: Exemption 250,000 Rate of tax 6%
Taxable gift 475,000 Tax due 33,780
Rate of tax 6%
Tax due 28,500 Less: Taxes previously 28,500
paid
Tax payable 5,280
 SOLUTIONS
On August 3, 2019:
Hospicio de San Jose 100,000
PACTT 300,000
Total gifts 400,000
Less: Deduction – Hospicio de San Jose 100,000
Net gift 300,000
Less: Exemption 250,000
Taxable gift 50,000
Rate of tax 6%
Tax due 3,000
2. Mr. and Mrs. Amigo, citizens and residents of Zamboanga City, made the following
donations of the community properties, unless otherwise specified:
May 17, 2018
To daughter, Barat, on account of marriage on November 1, 2018, cash of P370,000.
To Barat by Mr. Amigo alone, property owned exclusively by the donor, P125,000.

June 12, 2018

To Constantino, brother of Mrs. Amigo, property owned exclusively by Mrs. Amigo,
P100,000.
To Barat, on account of marriage, property subject to an unpaid mortgage of P 40,000
to be assumed by Barat. That property has a fair market value of P600,000.
REQUIREMENT: Compute the donor’s taxes due.
 SOLUTIONS
May 17, 2018     June 12, 2018
  Mr. Amigo Mrs. Amigo
Barat 185,000 185,000 Mr. Amigo Mrs. Amigo
To Constantino 100,000
(370,000/2) Barat (600,000/2) 300,000 300,000
  125,000   Total gifts 300,000 400,000
Gross gift 310,000 185,000 Less: Deduction 20,000 20,000
Less: _ - - (40,000/2)
Net gift 280,000 380,000
Deduction Add: Net gift, May 17 310,000 185,000
Net gift 310,000 185,000 Total gifts 590,000 565,000
Less: 250,000 250,000 Less: Exemption 250,000 250,000
Exemption Taxable gift 340,000 315,000
Rate of tax 6% 6%
Taxable gift 60,000 - Tax due 20,400 18,900
Rate of tax 6% ______ Less: Tax previously paid 3,600 -
Tax due 3,600 - Tax payable 16,800 18,900
     
 TRANSFER FOR LESS THAN ADEQUATE CONSIDERATION
Where property, other than real property that has been subjected to final tax is
transferred for less than adequate and full consideration in money or money’s worth, the
amount by which the fair market value at the time of the execution of the Contract to Sell
or Deed of Sale which is not preceded by a Contract to Sell exceeded the value of the
agreed or actual consideration or selling price shall be deemed a gift subject to donor’s
tax.

A sale, exchange, or other transfer of property made in the ordinary course of

business (a transaction which is bona fide, at arm’s length, and free from any donative
intent) will be considered as made for an adequate and full consideration in money or
money’s worth).
3. PROBLEM

Ramon sold a property on October 31, 2018 to his bestfriend for P1,000,000 when the
market value was P1,600,000. Cost of the property to the taxpayer in 2015 was
P400,000. He gave a commission of P50,000 to the broker and spent for documentary
stamp taxes and other fees in the amount of P25,000.
 Assumption A: The property is a residential house.
How much is the donor’s tax due on the transaction?
How much is the capital gains tax?

 Assumption B: The property is a personal car.

How much is the donor’s tax due?
How much is the income subject to tax?
  SOLUTION:
Assumption A:
A. The rule on transfer for insufficient consideration applies only
when the following requisites are present:
 The market value is higher that the selling price; and
 The property is NOT a real property-capital asset.
 Thus, even is the sale was made for an insufficient consideration
no donor’s tax is due because the property subject of sale is a real
property-capital asset.
B. Market value (higher than selling price) 1,600,000
Capital gains tax rate 6%
Capital gains tax 96,000
  SOLUTION:
Assumption A:
a. Fair market value 1,600,0 b. Selling price 1,000,000
00 Less: Cost
Less: Selling price 1,000,00 Acquisition cost 400,000
0 Commission 50,000
Deemed gift 600,000
Taxes and other fees 25,000 475,000
Less: Exemption 250,000
Taxable gift 350,000 Capital gain on sale (long-term) 525,000
Rate of tax 6% Income subject to tax (525,000 x 50%) 262,500
(stranger)
Tax payable 21,000
 Mabait made the following donations:
A. Residential house in Manila P 1,500,000
B. Condo unit in Vancouver, Canada 800,000
C. Car in the Philippines 350,000
D. Jewelries in Canada 80,000
E. Shares of stock in San Miguel Corporation, domestic 125,000
F. Shares of stock in a Canadian company, foreign 250,000
 Compute the gross gift/estate if Mabait is a:
a. Resident citizen
b. Nonresident citizen
c. Resident alien
d. Nonresident alien (with reciprocity)
e. Nonresident alien (no reciprocity)
 SOLUTION
Resident NRA (with NRA (no
or citizen* reciprocity) reciprocity)
House, Manila P1,500,000 P1,500,000 P1,500,000
Condo, Canada 800,000 - -
Car, Philippines 350,000 350,000 350,000
Jewelries, Canada 80,000 - -
Domestic shares 125,000 - 125,000
Foreign shares 250,000 - . .
Gross gift/estate P3,105,000 P1,850,000 P1,975,000

 * Resident citizen, resident alien and nonresident citizen

END