University of Santo TomasMarinor A. Gallardo-Quintilla, CPA, MBA

2011

Refers to a voluntary transfer of property made by a person to another for without consideration or compensation

Donation includes sales, exchange or other property transfers during lifetime for an adequate and full consideration in money or money’s worth.

Mean in equal money or in money’s worth of some goods or services capable of being evaluated in money

For love and affection, or for services rendered

It has no economic value

Total amount/value of the donation/gift/contributions without deductions

Refers to the total amount/value of the donations/gifts/contributions after considering deductions permitted by law.

Classes/Kinds of donor (RC, RA, NRC, NRA donor)

Location of the property gift Classification of the property donation of

the spouses (exclusive assets/gifts of the donor, of the spouse or conjugal assets/gifts of both spouses

Relationship of the donee to the donor (relative or a stranger)

Dates of donation (first donation or subsequent donation in the same year

The transferor retains the ownership (full or naked) and control of the property before his death

The transfer is revocable by the transferor at will, or the donor reserved the power to dispose of the properties conveyed ; and

The transfer should be void if the transferor should outlive the transferee.

Ms. Eva Ngon donated her real property to Mr. Nato Lug which will take effect upon the death of Ms. Ngon.

Is this subject to Estate tax or Donor’s tax?

Since the transfer will take effect upon the death of Ms. Ngon then this serves as a testamentary disposition and therefore, subject to ESTATE TAX.

Gratuitous transfer of rights and property that shall take effect during the lifetime of the donor

Hence, the transfer is subject to donor’s tax.

Mr. Nato Lug gave a diamond necklace as a gift to Ms. Eva Ngon who immediately accepted the gift.

Since the donation took effect while the donor and donee are still alive, this is subject to donor’s tax.

Capacity of the donor Donative intent Delivery of the gift Acceptance of the donee

Refers to the condition and legal capacity of the donor to enter a valid contract

Donor – must be in capacity Donee - need not be

capacitated to receive the gift to make the donation valid provided he must have a duly authorized representative.

Don Rox, a capacitated philantropist, donated 1M in behalf of a mentally retarded child. The child is represented by his parents to accept the donation.

Is the donation valid?

Yes because donor is capacitated and the acceptance is made by the authorized representative.

Refers to the proper declaration of the legal owner of a 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 cases of direct donation.

Verbally – where the value of the personal property (movable) donated is P5,000 or less, the donation can be made orally. An oral donation requires simultaneous delivery of the thing or of the document representing the right donated

In Writing – value of personal (movable) property exceeds P5,000; otherwise donation is void.

In PUBLIC INSTRUMENT – immovable property donation to be valid it must be made in public document (deed of donation) specifying therein the property donated

DONATIVE INTENT is required only in a direct gift

But if a gift in indirect by way of sale, exchange or other transfer of property, donative intent is not necessary

Object of donation : real property, personal property or even rights

Delivery of the object : constructive or actual

The delivery made be made to a trustee The completion of the gift = requires

delivery of the subject matter of the gift; If physical delivery is impossible, delivery of

the instrument of assignment or deed

The donee must accept the donation personally or through an authorized person with a special power for that purpose

Mr. Ado Datung donated the following properties for the year 2010:

Jewelry as a birthday gift to his mother-in-law P 5,000Land donated to a domestic corp.

100,000Car given to his son as a wedding gift

200,000

1. WHO ARE THE DONEES? 2. STATE THE RULES for each donation

Jewelry amounting to P 5,000. The gift can be orally donated with simultaneous delivery of the donee.

Car given to his son exceeds P5,000. Hence, should be in writing to be a valid donation.

Land with a value of P100,000 should be in writing

Donation of real property should always be in writing , regardless of value, to be valid.

Condonation or remission of debt where the debtor did not render service in favor of the creditor is a DONATION

MR. Que donated all his properties to his relatives in the Philippines as follows:

Property A in Baguio to Mr. Angkin P 1.5M

Property B in Canada to Mr. Amin 2.5M

A.In case Mr. Q is a resident citizen, how much is the gross taxable donation?

B. If Mr. Q is a non resident alien, the gross taxable donation is?

1. P 4M 2. P 1.5M

Anne Tukin, a resident citizen of a foreign country donated to Sahibul real properties located in that country .

Will the donation be included in his gross gift and therefore subject to donor’s tax in the Philippines?

NOT subject to DONOR’S TAX

Real property = outside

Citizen or resident – real, tangible personal and intangible : TAXABLE within and without

Nonresident Alien – real, tangible and intangible property ; TAXABLE within only

Note: Intangible personal property donated by a nonresident alien is subject to the rule of reciprocity. When there is reciprocity, the transmission of gift with situs in the Philippines of a NRA is not subject to tax.

Enn Tsik, a Chinese residing in Taiwan, gave the following fits to his daughter in the Philippines:Tricycle in the Philippines P 140,000Shares of stock in the Phil. 100,000Franchise in the Philippines 60,000

Patent in Taiwan 150,000 time deposit in Taiwan 70,000a. If without reciprocity : gross gifts?b. If with reciprocity: gross gift?

1. P 300,000 within the Phil. 2. P 140,000 with reciprocity

Those made between persons who committed adultery or concubinage

Guilty of criminal offense Hence, not subject to donor’s tax

Cash or in kind – contributions to any candidate, political party for campaign are not subject to the payment of any gift tax if duly reported to the Commission on Election

Mica donated the following properties: House and lot in New York, USA P1M Land in Pasig City 450,000 Car in New York City 600,000 Jewelry in the Philippines 400,000 Shares of stock w/M Corp, domestic 60,000 Shares of stock in E Corp, foreign, with 40% of the business in the Philippines 50,000 Shares of stock in B corp, foreign

90% of the business in the Phil.P120,000

Shares of stock in Goto More Corp, foreign corp, operating in and with office in Makati

550,000

REQUIRED:1.RC/RA/NRC2.NRA (W/0 RECIPROCITY)3.NRA (W/ RECIPROCITY)

1, RC/RA/NRC P1M 2. NRA (W/O RECIPROCITY) (450+400+60+120+550)

1.580M3.NRA (W/RECIPROCITY) (450+400)

850,000

FMV (Zonal Value) or FMV (Assessed value) whichever is HIGHER

If listed and traded in the stock exchange, the FMV shall be the mean between the highest and lowest quoted selling prices of the securities on the valuation date

If not listed and traded in the stock exchange, the FMV shall depend on whether the stocks are preferred or common

If common – MV is the book value on the valuation date

If preferred – FMV shall be the par value of the security

Neither spouse may donate any conjugal or community property WITHOUT the consent of the other

However, moderate donations from the conjugal or community property – charity or on family rejoicing or distress

Paraphernal property –exclusive property of the wife

Capital property – exclusive property of the husband

1. dowries- made before marriage or within one year thereafter

2. encumbrance assumed by the donee 3. diminution of gift provided by the

donor 4. donations to the national gov’t 5. donation to non-profit organizations

RC/CITIZEN – Deductible: dowries, encumbrance, diminution, to gov’t, to NGO

NRA - Deductible: encumbrance, diminution, to gov’t, to NGO

- NON-DEDUCTIBLE: Dowries

GROSS GIFTS P XXX lESS: exemptions xxx NET TAXABLE GIFTS XXX Multiply by tax rate % DONOR’S TAX DUE XXX

Good day to all and God bless us all!!!