Chapter 6: Donor's Tax

Question 1

Term

act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it

Answer 1

Donation

Question 2

True or False

Donation is a contract

Answer 2

True

because it requires acceptance

Question 3

Term

Tax imposed on the exercise of the right during the lifetime to transfer property to others in the form of gift.

Answer 3

Donor’s tax

Question 4

True or False

Donor’s tax is a property tax not an excise tax.

Answer 4

False

is not a property tax; an excise tax

Question 5

True or False

Donor’s tax applies to natural persons only

Answer 5

False

natural and juridical persons

Question 6

True or False

Donor’s tax is a direct tax.

Answer 6

True

Question 7

Question

Transfer becomes complete and taxable only when

Answer 7

the donor has divested himself of all beneficiary interest in the property transferred and has no power to revest any such interest

Question 8

Enumerate

Elements of donation

Answer 8

1. Capacity to donate (capacity to contract and dispose)
2. Donative intent of the donor
3. Knowledge by the donor of acceptance by the donee
4. Delivery of donated property or instrument to the donee

Question 9

Term

proper declaration of the legal owner of a property or right to transfer ownerhsip to another without consideration

Answer 9

Donative intent

Question 10

True or False

Donative intent is necessary for direct gifts and transfers for inadequate considerations

Answer 10

False

direct gifts only

Question 11

Question

Donation is perfected on

Answer 11

the time of knowledge of the donor that the donee has accepted the same

Question 12

True or False

Acceptance must be made during the lifetime of the donee but not the donor

Answer 12

False

during the lifetime of donee and donor

Question 13

True or False

Donor’s tax shall not apply unless and until there is a complete gift.

Answer 13

True

Question 13

Enumerate

Forms required for donation of movable property

Answer 13

• may be orally or in writing
• if oral, requires simultaneous delivery
• if value exceeds P5,000, donation and acceptance shall be in writing

Question 14

Question

Consequence for noncompliance with formalities of donation of movable property

Answer 14

Donation shall be void

Question 15

Question

Donation of immovable property

Answer 15

must be in public document

Question 16

Question

Noncompliance of forms for donation of immovable property

Answer 16

deemed void

Question 17

Question

In what form must acceptance of immovable property be?

Answer 17

• In the same deed of donation, or
• In separate public document

Question 18

Enumerate

Characteristics of donor’s tax

Answer 18

• excise tax
• does not apply unless and until there is a completed gift
• transfer is perfected from the moment donor knows of acceptance of the donee
• direct tax

Question 19

Term

Donation where cause is pure liberality

Classification of donation

Answer 19

Simple donation

Question 20

Term

Donation made due to past services rendered or future services or charges and burdens

Classification of Donation

Answer 20

Renumeratory donations

Question 21

Inclusion, Exclusion, Deduction

Renumeratory donations

Answer 21

not subject to donor’s tax

Question 22

Term

Donation where consideration is less than the value of the thing donated

Classification of donation

Answer 22

Modal

Question 23

Donations or not

Those made between persons who were guilty of adultery or concubinage at the time of donation

Answer 23

Void donations

Question 24

# **Donations or not** Those made between persons found guilty of the same criminal offense

Answer 24

Void donation

Question 25

# **Donations or not** Those made to a public officer or his wife, descendants, and ascendants, by reason of his office

Answer 25

Void donation

Question 26

# **Value of the gross gift** In general

Answer 26

Fair market value at time of donation

Question 27

# **Value of gross gift** Real Property

Answer 27

Higher between: * FMV determined by Commissioner * Assessed value or FMV for real estate tax purposes

Question 28

# **Value of the gross gift** Unlisted common share

Answer 28

Book value per share

Question 29

# **Value of the gross gift** Unlisted preference share

Answer 29

Par value per share

Question 30

# **Value of the gross gift** Listed shares

Answer 30

Arithmetic mean between the highest and lowest quotation at a date nearest the date of donation

Question 31

Rate of Donor's Tax

Answer 31

6% on the basis of total gifts in excess of P250,000 exempt gift made during the year

Question 32

# **Inclusion, Exclusion, Exemption, Deduction** Any contribution in cash or in kind to any candidate, political party or coalition parties for campaign purpose | Donor's Tax

Answer 32

Excluded

Question 33

# **Inclusion, Exclusion, Exemption, Deduction** R/C: Property donated inside and outside the Philippines | Donor's Tax

Answer 33

Inclusion

Question 34

# **Inclusion, Exclusion, Exemption, Deduction** NRA: Properties outside the Philippines

Answer 34

Exclusion

Question 35

# **Inclusion, Exclusion, Exemption, Deduction** NRA: Intangible property outside the Philippines subject to reciprocity rule | Donor's tax

Answer 35

Exclusion

Question 36

# **Inclusion, Exclusion, Exemption, Deduction** Transfers for insufficient consideration | Donor's Tax

Answer 36

Inclusion ## Footnote of the amount by which FMV of the property exceeded the value agreed or actual consideration or selling price

Question 36

# **Inclusion, Exclusion, Exemption, Deduction** Direct Gifts | Donor's Tax

Answer 36

Inclusion

Question 37

# **Inclusion, Exclusion, Exemption, Deduction** Transfers for insufficient consideration where consideration is fictitious | Donor's tax

Answer 37

Inclusion ## Footnote of the entire value of the transferred property

Question 37

# **Inclusion, Exclusion, Exemption, Deduction** Bonafide transfers in the ordinary course of business and free from donative intent, but for inadequate consideration on account of bad bargain | Donor;s tax

Answer 37

Exclusion

Question 38

# **Inclusion, Exclusion, Exemption, Deduction** Sale of shares of stock for insufficient consideration without donative intent | Donor's Tax

Answer 38

Inclusion ## Footnote except if made in ordinary course of business

Question 39

# **Inclusion, Exclusion, Exemption, Deduction** Condonation or remission of debt | Donor's tax

Answer 39

Inclusion

Question 39

# **Inclusion, Exclusion, Exemption, Deduction** Shares of stock **not** traded in the stock exchange are sold for less than its fair value | Donor's tax

Answer 39

Inclusion ## Footnote except when sold in ordinary course of business

Question 40

# **Inclusion, Exclusion, Exemption, Deduction** Condonation due to rendition of service | Donor's tax

Answer 40

Exclusion ## Footnote not gratuitous; has effect of payment of compensation

Question 41

# **Inclusion, Exclusion, Exemption, Deduction** Condonation made by corporation in favor of its shareholders | Donor's Tax

Answer 41

Exclusion ## Footnote not gratuitous; has effect of payment of dividend

Question 42

# **Inclusion, Exclusion, Exemption, Deduction** Guarantee, in general | Donor's tax

Answer 42

Inclusion

Question 43

# **Inclusion, Exclusion, Exemption, Deduction** Guarantee where obligation is jointly entered into by the guarantor and the borrower of the creditor bank | Donor's tax

Answer 43

Exclusion ## Footnote not gratuitous; guarantor must be indemnified by the principal debtor in case guarantor pays for the debt

Question 44

# **Inclusion, Exclusion, Exemption, Deduction** General renunciation by an heir | Donor's tax

Answer 44

Exclusion

Question 45

# **Inclusion, Exclusion, Exemption, Deduction** Renunciation in favor of identified heir(s) | Donor's tax

Answer 45

Inclusion ## Footnote if renunication also results to exclusion or disadvantage of other co-heir(s)

Question 46

# **Inclusion, Exclusion, Exemption, Deduction** Renunciation resulting to exclusion or disadvantage of other co-heirs | Donor's tax

Answer 46

Inclusion ## Footnote if renunciation is done in favor of identified heir(s)

Question 47

# **Inclusion, Exclusion, Exemption, Deduction** Renunciation of share in common property by the surviving spouse in favor of heir(s) | Donor's tax

Answer 47

Inclusion

Question 48

# **Inclusion, Exclusion, Exemption, Deduction** Donations not exceeding P250,000 | Donor's tax

Answer 48

Exemption/Deduction

Question 49

# **Inclusion, Exclusion, Exemption, Deduction** Gifts made to or for use of the national government or any entity created by any of its agencies which is not conducted for profit

Answer 49

Exemption/Deduction

Question 50

# **Inclusion, Exclusion, Exemption, Deduction** Gifts in favor of non-profit educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited NGO where not more than 30% of said gifts shall be used by donee for administration purposes | Donor's tax

Answer 50

Exemption/deduction

Question 51

# **Inclusion, Exclusion, Exemption, Deduction** Gifts in favor of non-profit educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited NGO where more than 30% of said gifts shall be used by donee for administration purposes | Donor's tax

Answer 51

Inclusion ## Footnote No deduction/exemption

Question 52

# **Inclusion, Exclusion, Exemption, Deduction** Gifts made to or for use of the national government or any entity created by any of its agencies which is conducted for profit | Donor's tax

Answer 52

Inclusion ## Footnote No exemption/deduction

Question 53

# **Inclusion, Exclusion, Exemption, Deduction** Encumbrances on the property donated if assumed by the donee | Donor's tax

Answer 53

Deduction/Exemption

Question 54

# **Inclusion, Exclusion, Exemption, Deduction** Diminution | Donor's tax

Answer 54

Deduction/Exemption

Question 55

# **Term** Diminution | Donor's Tax

Answer 55

Decrease in value of donated property as result of condition made by a donor to the donee

Question 56

# **Inclusion, Exclusion, Exemption, Deduction** Donations and legacies and gifts made to the Philippine Red Cross to support its objectives | Donor's tax

Answer 56

Exemption/Deduction

Question 57

# **Value of Gross Gift** Donations made by spouses | Donor's Tax

Answer 57

one half of the FMV to each donor spousse

Question 58

# **Inclusion, Exclusion, Exemption, Deduction** Gift from common property of spouses | Donor's tax

Answer 58

Inclusion ## Footnote 1/2 to each donor spouse

Question 59

# **Inclusion, Exclusion, Exemption, Deduction** Donation between husband and wife during marriage | Donor's tax

Answer 59

Exclusion

Question 60

# **Inclusion, Exclusion, Exemption, Deduction** Moderate gifts between spouses | Donor's tax

Answer 60

Inclusion

Question 61

# **Inclusion, Exclusion, Exemption, Deduction** Donation of foreign corporation of properties located in the Philippines | Donor's tax

Answer 61

Inclusion

Question 62

# **Inclusion, Exclusion, Exemption, Deduction** Donation of foreign corporation of its own shares of stocks | Donor's tax

Answer 62

Exclusion ## Footnote except if 85% of the business of the foreign corporation is located in the Philippines or shares donated have acquired busiess situs in the Philippines

Question 63

# **Inclusion, Exclusion, Exemption, Deduction** Donation of foreign corporation of its own shares of stocks in favor of resident employee | Donor's tax

Answer 63

Exclusion ## Footnote not gratuitous; has effect of payment of services

Question 64

# **Term** Tax minimization scheme which is done by spreading the gifts over numerous calendar years | Donor's tax

Answer 64

Splitting of gift

Question 65

# **Question** Who can claim tax credit for foreign donor's? | Donor's tax

Answer 65

Residents or citizens of the Philippines at the time donation was made