DONOR’S TAX
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MODULE 7
LEARNING OBJECTIVES:
After studying this module, the learners should be able to:
1. Determine whether the transfer of property can be considered as
taxable donation inter vivos;
2. Determine whether the gratuitous transfer will be subjected to donor’s
tax or estate tax.
Donation is an act of gratuitously transferring a property in favor of
another. Its essential requisites are as follows:
1.
Capacity of the donor - The donor's capacity shall be determined as
of the time of the making of the donation. [See Art. 737, Civil Code]
2. Donative intent – “Donative intent is a creature of the mind. It cannot
be perceived except by the material and tangible acts which manifest
its presence. This being the case, donative intent is presumed present
when one gives a part of ones patrimony to another without
consideration.” [ACRA v. CIR, G.R. No. 120721, 23 February 2005]
3. Delivery of the donated property – donation is one of the real
contracts. It can only be completed once the donated property is
delivered.
4. Acceptance by the donee - “The donee must accept the donation
personally, or through an authorized person with a special power for the
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purpose, or with a general and sufficient power; otherwise, the donation
shall be void.” [Article 745, Civil Code]
It must be noted that irrevocable donation and those which are
subject to condition, since these cannot be considered as completed
donation, are not taxable.
Donation inter vivos v. Donation mortis causa
Since the computation of tax due for donation inter vivos is different
from that of donation mortis causa, it is important to delineate these two
terms, the case of Ganuelas et al. v. Cawed et al.1, the Supreme Court
stated that:
“Donation inter vivos differs from donation mortis causa in that in
the former, the act is immediately operative even if the actual execution
may be deferred until the death of the donor, while in the latter, nothing
is conveyed to or acquired by the donee until the death of the donortestator.xxx
If the donation is made in contemplation of the donor's death,
meaning that the full or naked ownership of the donated properties will
pass to the donee only because of the donor's death, then it is at that
time that the donation takes effect, and it is a donation mortis
causa which should be embodied in a last will and testament.
But if the donation takes effect during the donor's lifetime or
independently of the donor's death, meaning that the full or naked
ownership (nuda proprietas) of the donated properties passes to the
donee during the donor's lifetime, not by reason of his death but because
of the deed of donation, then the donation is inter vivos.”
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G.R. No. 123968, 24 April 2003
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Reasons for imposing donor’s taxation
1. To recoup the possible loss of tax revenue
2. To prevent tax (estate or income) evasion
Tax exempts donations
The following are donations which are not subject to gift tax:
1. Those which are exempt by express provision of law;
2. Sale of capital asset for insufficient consideration;
3. General renunciation of share in inheritance;
4. Revocable donation;
5. Gratuitous transfer of property to the government for public use;
6. Gratuitous transfer of property to the accredited non-profit oriented
institution;
7. Void transfer;
8. Quasi-transfer;
9. Those which are covered by reciprocity rule.
END OF MODULE 7
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