DONORS TAX

A. GENERAL PRINCIPLES

01. Are donations inter vivos and donations mortis causa subject to estate tax? Bar, 1994!.
0". #$at is t$e %rinci%&e o' mobi&ia se(uuntur %ersona& in taxation? Bar, 1994!.
0). Ace *obacco Cor%oration bou+$t a %arce& o' &and situated at Pateros and donated it to t$e
,unici%a& Government o' Pateros 'or t$e so&e %ur%ose o' devotin+ t$e said &and as a re&ocation site 'or t$e
&ess 'ortunate constituents o' said munici%a&it-. In accordance t$ere.it$/ t$e ,unici%a& Government o'
Pateros issued to t$e occu%ants0bene'iciaries Certi'icates o' A.ard +ivin+ to t$em t$e res%ective areas
.$ere t$eir $ouses are erected. *$rou+$ 1rdinance No. "/ series o' 1223/ t$e said munici%a& +overnment
ordained t$at t$e &ots a.arded to t$e a.ardees0donees be 'ina&&- trans'erred and donated to t$em.
4etermine t$e tax conse(uence o' t$e 'ore+oin+ dis%ositions .it$ res%ect to Ace *obacco Cor%oration/
t$e ,unici%a& Government o' Pateros/ and t$e occu%ants0bene'iciaries Bar, 1998!.
05. Are contributions to a candidate in an e&ection subject to donor6s tax? Bar, 1998!.
07. A a&so o.ns 8 Co./ .$ic$ $as a 'ast +ro.in+ business. A so&d some o' $is s$ares o' stoc9 in 8 Co.
to $is 9e- executives in 8 Co. *$ese executives are not re&ated to A. *$e se&&in+ %rice is P)/000/000/
.$ic$ is t$e boo9 va&ue o' t$e s$ares so&d but .it$ a mar9et va&ue o' P7/000/000. A6s cost in t$e s$ares
so&d is P1/000/000. *$e %ur%ose o' A in se&&in+ t$e s$ares is to enab&e $is 9e- executives to ac(uire a
%ro%riet- interest in t$e business and $ave a %ersona& sta9e in its business. Ex%&ain i' t$e above
transactions are subject to donor6s tax Bar, 1999!.
0:. #$en t$e donee or bene'iciar- is a stran+er/ t$e tax %a-ab&e b- t$e donor s$a&& be )0; o' t$e net
+i'ts. <or %ur%oses o' t$is tax/ .$o is a stran+er? Bar, 2000!.
0=. #$at conditions must occur in order t$at a&& +rants/ donations and contri>butions to non>stoc9/
non%ro'it %rivate educationa& institutions ma- be exem%t 'rom t$e donor6s tax under Section 101?a@ o' t$e
*ax Code? Bar, 2000!.
03. 8 is a 'riend o' A/ t$e c$airman o' Po&itica& Part- B/ .$o .ants to run 'or President in t$e "005
e&ections. Cno.in+ t$at A needs 'unds 'or %osters and streamers/ 8 is t$in9in+ o' donatin+ to A
P170/000.00 'or $is cam%ai+n. De as9s -ou .$et$er $is intended donation to A .i&& be subject to t$e
donor6s tax. #$at .ou&d -our ans.er be? #i&& -our ans.er be t$e same i' $e .ere to donate to Po&itica&
Part- B instead o' to A direct&-? Bar, 2003!.

E. FALGA*I1N 1< GR1SS GI<*

01. Cennet$ Auso%$ o.ns a commercia& &ot .$ic$ $e bou+$t man- -ears a+o 'or P1 mi&&ion. It is no.
.ort$ P"0 mi&&ion a&t$ou+$ t$e Hona& va&ue is on&- P17 mi&&ion .$i&e t$e assessed va&ue is P10 mi&&ion. De
donates one>$a&' %ro>indiviso interest in t$e &and to $is son 4ino on )1 4ecember 1225 and t$e ot$er $a&'
%ro>indiviso interest to t$e same son on " Ianuar- o' t$e subse(uent -ear. Do. muc$ is t$e va&ue o' t$e
+i'ts in 1225 and 1227 'or %ur%oses o' com%utin+ t$e +i't tax? *$e Revenue 4istrict 1''icer (uestions t$e
s%&ittin+ o' t$e donations into t.o -ears. De sa-s t$at since t$ere .ere on&- t.o ?"@ da-s se%aratin+ t$e
t.o donations/ t$e- s$ou&d be treated as one/ $avin+ been made .it$in one -ear. Is $e correct? Bar,
1995!.
0". Aour bac$e&or c&ient/ a <i&i%ino residin+ in JueHon Cit-/ .ants to +ive $is sister a +i't o' P$%
"00/000.00. De see9s -our advice/ 'or %ur%oses o' reducin+ i' not e&iminatin+ t$e donor6s tax on t$e +i't/
on .$et$er it is better 'or $im to +ive a&& o' t$e P$% "00/000.00 on C$ristmas "001 or to +ive P$%
100/000.00 on C$ristmas"001 and t$e ot$er P$% 100/000.00 on Ianuar- 1/ "00". P&ease ex%&ain -our
advice Bar, 2001!.
0). Iose& a+reed to se&& $is condominium unit to Iess 'or P".7 ,i&&ion. At t$e time o' t$e sa&e/ t$e
%ro%ert- $ad a Hona& va&ue o' P".0 ,i&&ion. G%on t$e advice o' a tax consu&tant/ t$e %arties a+reed to
execute t.o deeds o' sa&e/ one indicatin+ t$e Hona& va&ue o' P".0 ,i&&ion as t$e se&&in+ %rice and t$e ot$er
s$o.in+ t$e true se&&in+ %rice o' P".7 ,i&&ion. *$e tax consu&tant 'i&ed t$e ca%ita& +ains tax return usin+ t$e
deed o' sa&e s$o.in+ t$e Hona& va&ue o' P".0 ,i&&ion as t$e se&&in+ %rice. 4iscuss t$e tax im%&ications and
conse(uences o' t$e action ta9en b- t$e %arties Bar, 2005!.
05. AEC Cor%oration so&d a rea& %ro%ert- in ,a&o&os/ Eu&acan to 8AB Cor%oration. *$e %ro%ert- $as
been c&assi'ied as residentia& and .it$ a Hona& va&uation o' P1/000 %er s(uare meter. *$e ca%ita& +ains tax
.as %aid based on t$e Hona& va&ue. *$e Revenue 4istrict 1''icer ?R41@/ $o.ever/ re'used to issue t$e
Certi'icate Aut$oriHin+ Re+istration 'or t$e reason t$at based on $is ocu&ar ins%ection t$e %ro%ert- s$ou&d
$ave a $i+$er Hona& va&uation determined b- t$e Commissioner o' Interna& Revenue because t$e area is
a&read- a commercia& area. Accordin+&-/ t$e R41 .anted to ma9e a recom%utation o' t$e taxes due b-
usin+ t$e 'air mar9et va&ue a%%earin+ in a nearb- ban96s va&uation &ist .$ic$ is %ractica&&- doub&e t$e
existin+ Hona& va&ue. *$e R41 a&so .anted to assess a donor6s tax on t$e di''erence bet.een t$e se&&in+
%rice based on t$e Hona& va&ue and t$e 'air mar9et va&ue a%%earin+ in a nearb- ban96s va&uation &ist.
a. 4oes t$e R41 $ave t$e aut$orit- or discretion to uni&atera&&- use t$e 'air mar9et va&ue as t$e basis
'or determinin+ t$e ca%ita& +ains tax and not t$e Hona& va&ue as determined b- t$e Commissioner o'
Interna& Revenue? Reason brie'&-.
b. S$ou&d t$e di''erence in t$e su%%osed taxab&e va&ue be &e+a&&- subject to donor6s tax? Reason
brie'&- Bar, 2007!.

C. INCLGSI1NS0E8CLGSI1NS <R1, GR1SS GI<*

01. Ime&da +ave $er %arents a C$ristmas +i't o' P100/000.00 and a donation o' P30/000.00 to $er
%aris$ c$urc$. S$e a&so donated a %arce& o' &and 'or t$e construction o' a bui&din+ to t$e PGP A&umni
Association/ a non>stoc9/ non>%ro'it or+aniHation. Portions o' t$e bui&din+ s$a&& be &eased to +enerate
income 'or t$e association.
a. Is t$e C$ristmas +i't o' P100/000.00 to Ime&da6s %arents subject to tax?
b. Do. about t$e donation to t$e %aris$ c$urc$? Do. about t$e donation to t$e PGP A&umni
Association? Bar, 1994!.
0". ,r. <rancisco borro.ed P10/000.00 'rom $is 'riend ,r. GutierreH %a-ab&e in one -ear .it$out
interest. #$en t$e &oan became due/ ,r. <rancisco to&d ,r. GutierreH t$at $e ?,r. <rancisco@ .as unab&e
to %a- because o' business reverses. ,r. GutierreH too9 %it- on ,r. <rancisco and condoned t$e &oan.
,r. <rancisco .as so&vent at t$e time $e borro.ed t$e P10/000.00 and at t$e time t$e &oan .as
condoned. 4id ,r. <rancisco derive an- income 'rom t$e cance&&ation or condonation o' $is indebted>
ness? Bar, 1995!.
0). ,r. Rodri+o/ an 30>-ear o&d retired businessman/ 'e&& in &ove .it$ "0>-ear o&d *etc$ie Sonora/ a
ni+$t c&ub $os%ita&it- +ir&. A&t$ou+$ s$e re'used to marr- $im/ s$e a+reed to be $is &ive>in %artner. In
gratitude/ ,r. Rodri+o trans'erred to $er a condominium unit .$ere t$e- bot$ &ive/ under a deed o' sa&e
'or P10.00 mi&&ion. ,r. Rodri+o %aid t$e ca%ita& +ains tax. *$e Commissioner o' Interna& Revenue 'ound
t$at t$e %ro%ert- .as trans'erred to *etc$ie Sonora b- ,r. Rodri+o because o' t$e com%anions$i% s$e
.as %rovidin+ $im. Accordin+&-/ t$e Commissioner made a determination t$at Sonora $ad com%ensation
income o' P10.00 mi&&ion in t$e -ear t$e condominium unit .as trans'erred to $er and issued a de'icienc-
income tax assessment. *etc$ie Sonora %rotests t$e assessment and c&aims t$at t$e trans'er o' t$e
condominium unit .as a +i't and t$ere'ore exc&uded 'rom income. Do. .i&& -ou ru&e on t$e %rotest o'
*etc$ie Sonora? Bar, 1995!.
05. 8/ a mu&tinationa& cor%oration doin+ business in t$e P$i&i%%ines donated 100 s$ares o' stoc9 o'
said cor%oration to ,r. A/ its resident mana+er in t$e P$i&i%%ines. #$at is t$e tax &iabi&it-/ i' an-/ o' 8
Cor%oration? Bar, 199!.
07. 8/ an em%&o-ee o' AEC Cor%oration died. AEC Cor%oration +ave 86s .ido. an amount e(uiva&ent
to 86s sa&ar- 'or one -ear. Is t$e amount considered taxab&e income to t$e .ido.? #$-? Bar, 199!.
0:. An inso&vent com%an- $ad an outstandin+ ob&i+ation o' P100/000 'rom a creditor. Since it cou&d
not %a- t$e debt/ t$e creditor a+reed to acce%t %a-ment t$rou+$ dacion en %a+o a %ro%ert- .$ic$ $ad a
mar9et va&ue o' P)0/000. In t$e dacion en %a+o document/ t$e ba&ance o' t$e debt .as condoned. #$at
is t$e tax e''ect o' t$e disc$ar+e o' t$e un%aid ba&ance o' t$e ob&i+ation on t$e debtor cor%oration? Bar,
1997!.
0=. *$e Con+re+ation o' t$e ,ar- Immacu&ate donated a &and and a dormitor- bui&din+ &ocated a&on+
Es%aKa St. in 'avor o' t$e Sisters o' t$e Do&- Cross/ a +rou% o' nuns o%eratin+ a 'ree c&inic and $i+$
sc$oo& teac$in+ basic s%iritua& va&ues. Is t$e donation subject to donor6s tax? Reason Erie'&- Bar, 2007!.
03. AEC Cor%oration so&d a rea& %ro%ert- in ,a&o&os/ Eu&acan to 8AB Cor%oration. *$e %ro%ert- $as
been c&assi'ied as residentia& and .it$ a Hona& va&uation o' P1/000 %er s(uare meter. *$e ca%ita& +ains tax
.as %aid based on t$e Hona& va&ue. *$e Revenue 4istrict 1''icer ?R41@/ $o.ever/ re'used to issue t$e
Certi'icate Aut$oriHin+ Re+istration 'or t$e reason t$at based on $is ocu&ar ins%ection t$e %ro%ert- s$ou&d
$ave a $i+$er Hona& va&uation determined b- t$e Commissioner o' Interna& Revenue because t$e area is
a&read- a commercia& area. Accordin+&-/ t$e R41 .anted to ma9e a recom%utation o' t$e taxes due b-
usin+ t$e 'air mar9et va&ue a%%earin+ in a nearb- ban96s va&uation &ist .$ic$ is %ractica&&- doub&e t$e
existin+ Hona& va&ue. *$e R41 a&so .anted to assess a donor6s tax on t$e di''erence bet.een t$e se&&in+
%rice based on t$e Hona& va&ue and t$e 'air mar9et va&ue a%%earin+ in a nearb- ban96s va&uation &ist.
a. 4oes t$e R41 $ave t$e aut$orit- or discretion to uni&atera&&- use t$e 'air mar9et va&ue as t$e basis
'or determinin+ t$e ca%ita& +ains tax and not t$e Hona& va&ue as determined b- t$e Commissioner o'
Interna& Revenue? Reason brie'&-.
b. S$ou&d t$e di''erence in t$e su%%osed taxab&e va&ue be &e+a&&- subject to donor6s tax? Reason
brie'&- Bar, 2007!.
02. S%ouses Iose San Pedro and C&ara San Pedro/ bot$ <i&i%ino citiHens/ are t$e o.ners o' a
residentia& $ouse and &ot in JueHon Cit-. A'ter t$e recent .eddin+ o' t$eir son/ ,ario/ to ,aria/ t$e
s%ouses donated said rea& %ro%ert- to t$em. At t$e time o' donation/ t$e rea& %ro%ert- $as a 'air mar9et
va&ue o' P" mi&&ion.
a. Are ,ario and ,aria subject to income tax 'or t$e va&ue o' t$e rea& %ro%ert- donated to t$em?
Ex%&ain. ?4!@
b. Are Iose and C&ara subject to donor6s tax? I' so/ $o. muc$ is t$e taxab&e +i't o' eac$ s%ouse and
.$at rate s$a&& be a%%&ied to t$e +i't? Ex%&ain Bar, 2008!.

4. 41N1R6S *A8PAAERS

01. #$en t$e donee or bene'iciar- is a stran+er/ t$e tax %a-ab&e b- t$e donor s$a&& be )0; o' t$e net
+i'ts. <or %ur%oses o' t$is tax/ .$o is a stran+er? Bar, 2000!.
0". ,r. Ei&& ,or+an/ a Canadian citiHen and a resident o' Scarborou+$/ 1ntario sends a +i't c$ec9 o'
L"0/000.00 to $is 'uture <i&i%ino dau+$ter>in>&a. .$o is to be married to $is on&- son in t$e P$i&i%%ines. Is
t$e donation b- ,r. ,or+an subject to tax? #$at is t$e tax conse(uences/ i' an-/ to t$e donee/ <i&i%ino
dau+$ter>in>&a. o' ,r. ,or+an? Ex%&ain Bar, 1992!.
0). S%ouses Iose San Pedro and C&ara San Pedro/ bot$ <i&i%ino citiHens/ are t$e o.ners o' a
residentia& $ouse and &ot in JueHon Cit-. A'ter t$e recent .eddin+ o' t$eir son/ ,ario/ to ,aria/ t$e
s%ouses donated said rea& %ro%ert- to t$em. At t$e time o' donation/ t$e rea& %ro%ert- $as a 'air mar9et
va&ue o' P" mi&&ion.
a@ Are ,ario and ,aria subject to income tax 'or t$e va&ue o' t$e rea& %ro%ert- donated to t$em?
Ex%&ain.
b@ Are Iose and C&ara subject to donor6s tax? I' so/ $o. muc$ is t$e taxab&e +i't o' eac$ s%ouse and
.$at rate s$a&& be a%%&ied to t$e +i't? Ex%&ain Bar, 2008!.

E. 4E4GC*I1NS <R1, GR1SS GI<*

01. Can -ou name one 9ind o' +i't t$at is exem%t 'rom donor6s tax .$ic$ is extendib&e to bot$
residents and non>residents or non>citiHens o' t$e P$i&i%%ines? Inc&ude (ua&i'ications/ i' an- Bar, 1992!.
0". #$at conditions must occur in order t$at a&& +rants/ donations and contributions to non>stoc9/ non>
%ro'it educationa& institutions ma- be exem%t 'rom t$e donor6s tax under Section 101?a@ o' t$e *ax Code?
Bar, 2000!.
0). ,i+ue&/ a citiHen and resident o' ,exico/ donated GSL1/000.00 .ort$ o' stoc9s in Earac9 ,otors
Cor%oration/ a ,exican com%an-/ to $is &e+itimate son/ ,i+ue&ito/ .$o is residin+ in t$e P$i&i%%ines and
about to be married to a <i&i%ino +ir&'riend. ,exico does not im%ose an- trans'er tax o' .$atever nature on
a&& +ratuitous trans'ers o' %ro%ert-.
a. Is ,i+ue& entit&ed to c&aim a do.r- exc&usion? #$- or .$- not? ?);@
b. Is ,i+ue& entit&ed to t$e ru&e o' reci%rocit- in order to be exem%t 'rom t$e P$i&i%%ine donor6s tax?
#$- or .$- not? Bar, 2009!.
05. ,i+ue&/ a citiHen and resident o' ,exico/ donated GSL1/000.00 .ort$ o' stoc9s in Earac9 ,otors
Cor%oration/ a ,exican com%an-/ to $is &e+itimate son/ ,i+ue&ito/ .$o is residin+ in t$e P$i&i%%ines and
about to be married to a <i&i%ino +ir&'riend. ,exico does not im%ose an- trans'er tax o' .$atever nature on
a&& +ratuitous trans'ers o' %ro%ert-.
a. Is ,i+ue& entit&ed to c&aim a do.r- exc&usion? #$- or .$- not?
b. Is ,i+ue& entit&ed to t$e ru&e o' reci%rocit- in order to be exem%t 'rom t$e P$i&i%%ine donor6s tax?
#$- or .$- not? Bar, 2010!.