Zapanta vs Posadas 52 Phil 557 Facts:Father Braulio Pineda died without any ascendants or descendants leaving a will in which he instituted his sister Irene Pineda as his sole heiress. During his lifetime Father Braulio donated some of his property to the six plaintifffs, his relatives, severally, with the condition that some of them would pay him a certain amount of rice, and others of money every year, and with the express provision that failure to fulfill this condition would revoke the donations ipso facto. The donations contained another clause that they would take effect upon acceptance. They were accepted during Father Braulio's lifetime by every one of the donees. CIR then imposed upon the 6 plaintiffs separate inheritance taxes on the property donated to them in accordance with Section 1536 of the Administrative Code, as amended, which states that Every transmission by virtue of inheritance, devise, bequest, gift mortis causa or advance in anticipation of inheritance, devise, or bequest of real property located in the Philippine Islands and real rights in such property. The 6 plaintiffs paid the inheritance tax under protest and subsequently filed a separate civil action against the CIR. The trial court in deciding these six cases, held that the donations to the six plaintiffs made by the deceased Father Braulio Pineda are donations inter vivos, and therefore, not subject to the inheritance tax, and ordered the CIR to return to each of the plaintiffs the sums paid by the latter. Issue: W/n the donation made by Father Braulio was in fact a donation mortis causa, and thus taxable. Held: NO, the donation was inter vivos. It was thus not taxable.

Donations were inter vivos considering that not only was it stated as such in the instruments in which they appeared, but they were also made in the nature of a donation inter vivos. In donations mortis causa, it is the donors death that determines the acquisition of, or the right to, the property, and that it is revocable at the will of the donor.

In donations inter vivos, as in the present case, the donees acquired the right to the property while the donor was still alive, subject only to their acceptance and the condition that they pay the donor rice and/or money. The nature of these donations is not affected by the fact that they were subject to the condition of payment since it was imposed as a resolutory condition, and in this sense, it is necessarily implies that the right came into existence first, otherwise there would be nothing to resolve upon the non fulfillment of the condition imposed. If the donor's life is mentioned in connection with this condition, it is only fix the donor's death as the end of the term within which the condition must be fulfilled, and NOT because such death of the donor is the cause which determines the birth of the right to the donation. The property donated passed to the ownership of the donees from the acceptance of the donations, and these could not be revoked except upon the non fulfillment of the condition imposed, or for other causes prescribed by the law, but not by mere will of the donor. (However, considering that these donations had onerous conditions, they are not donations to the full extent. Rather, they are partly contractual and partly donations. They are donations inter vivos only insofar as they exceed to the encumbrance imposed.)

Neither can these donations be considered as an advance on inheritance or legacy, since they

were not heirs or legatees of their predecessor in interest upon his death (Sec. 1540 of the Administrative Code). Neither can it be said that they obtained this inheritance or legacy by virtue of a document which does not contain the requisites of a will (Sec. 618 of the Code of Civil Pocedure). Besides, if the donations made by the plaintiffs are, as the appellants contended, mortis causa, then they must be governed by the law on testate succession (art. 620 of the Civil Code). In such a case, the documents in which these donations appear, being instruments which do not contain the requisites of a will, are not valid to transmit the property to the donees (Sec. 618, Code of Civil Procedure.) Then the defendants are not justified in collecting from the donees the inheritance tax, on property which has not been legally transferred to them, and in which they acquired no right.

Dissenting Opinion by Justice Street: Justice Street strongly believed that the present case

involved advances in anticipation of inheritance considering that the donees were entitled to receive an inheritance if no will had been made by the decedent. He believed that what transpired in the present

case is an attempt by the donor to evade the payment of taxes by disposing of the bulk of his property before his death.

PUIG V. PENAFLORIDA- DONATION MORTIS CAUSA OR INTER VIVOS The reservation by the donor of the right to dispose of the property during her lifetime in the deed does not indicate that title had passed to the donee in her lifetime but that the donor merely reserves power to destroy the donation at any time. FACTS: Carmen Ubalde Vda. de Parcon died in the City of Iloilo, without forced heirs, leaving certain properties in the City and province of Iloilo. She left a will and was survived by nephews and nieces, children of her predeceased brother, Catalino Ubalde, and sister, Luisa Ubalde, married to Ariston Magbanua. Besides her will, the deceased had executed two notarial deeds of donation. One, entitled DONACION MORTIS CAUSA, was executed on November 24, 1948, in favor of her niece, Estela Magbanua. The deceased executed another deed of donation, also entitled "ESCRITURA DE DONACION MORTIS CAUSA" in favor of the same donee, Estela Magbanua Peaflorida, conveying to her three parcels of land. Defendants-appellants Estela Magbanua Peaflorida, et al., insist that the reservation by the donor of the right to dispose of the property during her lifetime in the deed of December 28, 1949 indicates that title had passed to the donee in her lifetime, otherwise, it is argued, the reservation would be superfluous. ISSUE: Is the donation mortis causa or inter vivos? HELD: The Court in its decision took to account not only the foregoing circumstance but also the fact that the deceased expressly and consistently declared her conveyance to be one of donation mortis causa, and further forbade the registration of the deed until after her death. The power, as reserved in the deed, was a power to destroy the donation at any time, and that it meant that the transfer is not binding on the grantor until her death made it impossible to channel the property elsewhere.

PIROVANO VS. COMMISSIONER FACTS: Enrico Pirovano is the father of herein petitioners. In early 1941, De la Rama Steamship Co. insured the life of Enrico, its President and General Manager. During the Japanese Occupation, Enrico died. De la Rama issued a Resolution granting P400,000 to the hiers of Pirovano converted into 4,000 shares of stock. This was modified thereafter. Instead, the company would renounce its title to the proceeds of the insurance in favor of the heirs. Mrs. Estefania Pirovano, in behalf of heir children executed a public document formally accepting the donation and the Board of Directors took official notice of this acceptance. Two years thereafter, the majority stockholders revoked said donation. De La Rama was ordered by the SC in a case (remember Pirovano vs. De La Rama Steamship!) to pay. The CIR assessed the amount as donees gift tax inclusive of surcharges, interests and other penalties. The heirs contested the assessment and imposition of the donees gift taxes and donors gift tax and also made a claim for refund of the said collected taxes. The claims were denied by the CIR. CTA affirmed. Hence, this petition. Petitioners contend that that the proceeds of the insurance was made not for an insufficient or inadequate consideration but rather it a was made for a full and adequate compensation for the valuable services rendered by the late Enrico Pirovano to the De la Rama Steamship Co.; hence, the donation does not constitute a taxable gift under the provisions of the then Section 108 of the National Internal Revenue Code. ISSUE: Whether the donation constitutes a taxable gift? HELD: Yes. As provided in Article 619 of the Code of 1889 (identical with Article 726 of the present Civil Code of the Philippines), when a person gives to another thingon account of the latters merits or of the services rendered by him to the donor, provided they do not consisted a demandable debt,, there is also a donation There is nothing on record to show that when the late Pirovano rendered services as President and General Manager of the De la Rama Steamship Co. he was not fully compensated for such services. The fact that his services contributed in a large measure to the success of the company did not give rise to a recoverable debt, and the conveyances made by the company to his heirs remain a gift or donation. Also, whether remuneratory or simple, the conveyance remained a gift, taxable under the Code. But then appellants contend, the entire property or right donated should not be considered as a gift for taxation purposes; only that portion of the value of the property or right transferred, if any, which is in excess of the value of the services rendered should be considered as a taxable gift. But, as we have seen, Pirovano's successful activities as officer of the De la Rama Steamship Co. cannot be deemed such consideration for the gift to his heirs, since the services were rendered long before the Company ceded the value of the life policies to said heirs. What is more, the actual consideration for the cession of the policies, as previously shown, was the Company's gratitude to Pirovano; so that under the Code there is no consideration the value of which can be deducted from that of the property transferred as a gift. Like "love and affection," gratitude has no economic value and is not "consideration" in the sense that the word is used in this section of the Tax Code. (Note: In other words, the whole proceed of the insurance is taxable income given that gratitude cannot be deducted for taxation purposes.)

Abello v CIR GR No. 120721 February 23, 2005 Azcuna, J.: ----------------------------------------------- FACTS: Petitioners contributed to the campaign fund of Senator Edgardo Angara, who was running for a Senate position. BIR assessed and deemed that the contributions were donations and thus taxed the each petitioners the amount of P263,032.66 for their contribution to the said campaign fund. Petitioners claimed otherwise and stated that the said contributions are not considered gifts under the NIRC, hence they are not liable for donors tax. ISSUE: Whether or not contributions to a campaign fund is falls under the definition of a gift tax and thus subject to donors tax. HELD: The court held that under the NIRC, Sec. 91. Imposition of Tax. (a) There shall be levied, assessed, collected, and paid upon the transfer by any person, resident, or non-resident, of the property by gift, a tax, computed as provided in Section 92. (b) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible.

And pursuant to the above-quoted provisions of law, the transfer of property by gift, whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible, is subject to donors or gift tax.

A gift is generally defined as a voluntary transfer of property by one to another without any consideration or compensation therefor (28 C.J. 620; Santos vs. Robledo, 28 Phil. 250).

In the instant case, the contributions are voluntary transfers of property in the form of money from private respondents to Sen. Angara, without considerations therefor. Hence, they squarely fall under the definition of donation or gift.

As correctly pointed out by the Solicitor General:

The fact that the contributions were given to be used as campaign funds of Sen. Angara does not affect the character of the fund transfers as donation or gift. There was thereby no retention of control over the disposition of the contributions. There was simply an indication of the purpose for which they were to be used. For as long as the contributions were used for the purpose for which they were intended, Sen. Angara had complete and absolute power to dispose of the contributions. He was fully entitled to the economic benefits of the contributions.

Section 91 of the Tax Code is very clear. A donors or gift tax is imposed on the transfer of property by gift.

The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988, which reads:

Political Contributions. For internal revenue purposes, political contributions in the Philippines are considered taxable gift rather than taxable income. This is so, because a political contribution is indubitably not intended by the giver or contributor as a return of value or made because of any intent to repay another what is his due, but bestowed only because of motives of philanthropy or charity. His

purpose is to give and to bolster the morals, the winning chance of the candidate and/or his party, and not to employ or buy. On the other hand, the recipient-donee does not regard himself as exchanging his services or his product for the money contributed. But more importantly he receives financial advantages gratuitously.

In the light of the above BIR Ruling, it is clear that the political contributions of the private respondents to Sen. Edgardo Angara are taxable gifts. The vagueness of the law as to what comprise the gift subject to tax was made concrete by the above-quoted BIR ruling. Hence, there is no doubt that political contributions are taxable gifts.