Donors Tax(Banggawan)

Northern CPAR: Taxation – Donor’s Taxation

NORTHERN CPA REVIEW th

4 Floor Pelizloy Centrum, Lower Session Road, Baguio City, City, Philippines Mobile Numbers SM!R" SM!R" #$%$4&$'()& * +LB- #$%(%'%&%#4 -.mail !ddress n/par0yahoo1/o n/par0yahoo1/om m

REX B. BANGGAW BANGGAWAN, AN, CPA, MBA TAXATION TRANSFER TAXATION: DONOR’S TAX

Donation tax Donor’s tax is a tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or or more persons who are living at the time of the transfer. transfer. It 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. Why is donation subjected to tax? tax? 1. Donor Donor’s ’s tax serves serves to compensate compensate for loss loss of income income taxes to the governme government nt brought by splitting the capital resources to smaller portions. 2. To prevent prevent the the avoidanc avoidance e of estat estate e tax. . To compensate compensate for for the limitat limitation ion of income income taxatio taxation. n. Essential Requisites of donation: 1. !a !apa paci city ty of of the the dono donorr 2. Intention to Donate"" . Donat Donative ive #ct $ actual or constructiv constructive e %i.e.& execution execution of a public instrument instrument'' delivery delivery (. #cc #ccept eptance ance by the don donee ee "required only in direct donation but not with indirect donation as in the case of transfer with insuicient consideration. Kinds of Donation: 1. Inter )iv )ivos os $ donation donation betw between een living living individu individuals als 2. *orti *ortis s !ausa !ausa $ ta+es ta+es eect eect upon upon the death of of the donor donor Types of Donor: #. !iti-en or esident #lien /roperties transferred regardless of location %i.e.& within or outside the /hilippines' is taxable under Donor’s Taxation. 0. on onres reside ident nt #li #lien en 3nly properties within the /hilippines are sub4ect to Donor’s Tax. Which Donaton can be included in Gross Gif?

!iti-en /roper /rop erti ties es lo loca cate ted d in th the e /hilippines /roperties lo located ab abroad

Includ e Includ e

#lien eside on nt resident Include Include Include

Exclude

Which properties are considered considered located in in the Philippines? 5or purposes of Donor’s Taxation the following are situated in the /hilippines& 1. franc franchises hises which which must must be exercis exercised ed in the /hilip /hilippines pines 2. share, obligat obligations, ions, or bonds bonds issued issued by any corporation corporation or sociedad sociedad anonima anonima organi-ed organi-ed in the /hilippines in accordance with its laws . share, obliga obligations tions,, or bonds issued issued by any foreign foreign corporati corporation on 678 of the business business of which is located in the /hilippines (. share, obligat obligations, ions, or bonds bonds which have ac9uire ac9uired d situs in the /hilippi /hilippines nes 7. any personal property property,, whether whether tangible tangible or or intangible, intangible, located in the the /hilippines /hilippines Types of Recipients: 1. e ela lati tive ves s $ incl includ udes es brot othe herr or si sist ster er %w %whe heth ther er half half or wh whol ole e bl bloo ood' d',, sp spou ouse se,, ancestor or lineal a. br descendants relati ative ve by con consan sangui guinit nity y in the col collat latera erall lin line e wit within hin the fou fourth rth deg degree ree of b. a rel relationship 2. :tr :trang anger er $ othe otherr than than relati relatives ves Note to candidates: candidates: 1

Driven for real excellence!

TAX by Rex B. Banggaan, CPA, MBA

th

TAX – 4 Batch – HQ11-2


5or purposes of donor’s tax , the degree of relationship considered is up to the 4th degree of consanguinity ; for estate tax purposes, up to the 5th degree of consanguinity . ature of Donation: a. There is a transfer of properties %real or personal, tangible or intangible' directly or indirectly in trust or otherwise. b. The transfer is gratuitous %without consideration'. c. The donation is made intervivos.

!lassi"cation of Donor’s Tax: a. progressive $ when the tax base increases, the rate increases b. proportional tax $
0. /ersonal property a. Tangible i. /7,>>> and below in value $ oral is allowed ii. *ore than /7,>>> in value $ donation and acceptance should be in writing %for validity' b. Intangible $ execution public instrument The following transfers, if without adequate or full consideration , are not within the scope of Donor’s Tax but within the scope of ?state Tax& 1. evocable transfers 2. Transfers with reservation to the right to income of the property until death 3. Transfer with reservation to the right to the possession or en4oyment of the property until death 4. Transfer in contemplation of death $ refers to transfers motivated by the thought of death not from motives associated with life Transfers associated with life such as the following are not transfer in contemplation of death and hence taxable under Donor’s tax& a. to relieve the donor of the burden of management of the property b. to save income taxes c. to ma+e the children
?xempt Donation under Special Laws& 1. International ice esearch Institute 2. amon *agsaysay #ward 5oundation . ational @ealth Insurance %.#. A6A7 $ ational @ealth Insurance #ct of 1BB7' (. ational !ommission on Indigenous /eople %.#. 6A1 $ The Indigenous /eople ight #ct of 1BBA' 7. Donations in accordance with the .#. B>> $ ?cological :olid Caste *anagement #ct of 2>>>. =. Donations to the /ollution #d4udication 0oard under .#. 6A(B $ The /hilippine !lean #ir #ct of 1BBB. A. :outhern /hilippines Development #dministration 6. /hilippine #merican !ultural 5oundation B. Integrated 0ar of the /hilippines 2



th



1>.Development #cademy of the /hilippines 11.ational :ocial #ction !ouncil 12.*useum of /hilippine !ostumes 1.#9ua!ulture Department of :outh?ast #sia 5isheries Development !enter of the /hilippines 1(.Intramuros #dministration 17./hilippine Inventor’s !ommission Reciprocity in Donor’s Taxation The intangible property transferred by a nonresident alien donor shall be exempt from Donor’s Tax if either one of the following is satis
5or example& educational, charitable, religious, cultural, social welfare, philanthropic organi-ation, research institution and accredited nongovernment organi-ation. /rovided that, not !ore than "#$ of said gifts are used by the above entities for administrative purposes %i.e.& to be veri,>>> #pplicable only to residents (citizens or alien) ; provided it is made by parents to each of their legitimate, recogni-ed natural, or adopted children %i.e.& per child with dowry given' before celebration of marriage or one year thereafter . ifts made to or for the use of the ational overnment or any entity created by any of its agencies which is not conducted for pro
ot '&er

/

1>>,>>> 2>>,>>>

(asic Tax

Plus ) Excess '&er

?xempt >

28

7>>,>>> 1,>>>,>>> ,>>>,>>>

2,>>> 1(,>>> ((,>>>

(8 =8 68

.,,-,,, /,,-,,, +-,,,-,,,

7,>>>,>>>

2>(,>>>

1>8

0-,,,-,,,

1>,>>>,>>>

(>(,>>>

128

/-,,,-,,,

+-,,1-,,,

+/)

+,-,,,-,,,

*

/

P

+,,-,,,

Note to candidates: The amount of gift taxable represents the net bene


th



Taxation of $ifts to 2tran3ers Donations to strangers are sub4ect to 0,) 4inal Tax . $ifts in&ol&in3 !onju3al or !o%%unity Property or !o*o5ned property ?ach spouse or coowners shall days from the date of gift. The tax due thereon is to be paid at the time of ,>>> each for each gifts made to children on account of marriage.  The eturn shall be
2. #cceptance is essential for a valid donation to be sub4ect to donor’s tax, except transfers a. in trust by the donor in favour of a bene
d. either # nor 0

=. Esing the preceding number, the donation and acceptance should be in writing if the value of the property donated is a. Fess than /7,>>> b. /7,>>> or less c. /7,>>> or more d. *ore than /7,>>> A. # donation which ta+es eect upon the death of the donor a. Donation mortis causa 4



th



b. /arta+es of the nature of a testamentary disposition c. :hall be governed by the law on succession d. #, 0 and ! 6. # donation which is intended by the donor to ta+e eect during his lifetime a. :hall be sub4ect to donor’s tax using the tax table for donation b. :hall be in writing if the value exceeds /7,>>> c. Donation intervivos d. #, 0 and ! B. Chich is incorrect concerning donationG a. eal property is transferred by donation only if made under a public instrument b. Donation of intangible personal property should be in writing c. /ersonal property amounting to more than /7,>>> should be in writing d. o one can be forced to accept the generosity of another 1>.Chich is correct regarding transfer intervivos involving personal properties for less than an ade9uate and full considerationG a. The whole value of the property will be included in gross gift b. The dierence in fair value and consideration is a gift sub4ect to donor’s tax c. The whole value of the property will be included in gross estate d. The dierence in fair value and consideration is part of gross estate 5or os. 11 through 1B& Indicate whether covered by Donor’s Tax, ?state Tax or Income Tax& 11.# person transferred properties in trust in favor of another and the trust is irrevocably designated. HHHHHHHHHHH 12.# person transferred properties in trust in favor of another and the trust is designated as revocable. HHHHHHHHHHH 1.# person transferred properties in trust in favor of another and the trust is designated as revocable which the transferor failed to revo+e by the time of his or her death. HHHHHHHHHHH 1(.# person transferred personal properties to another during his lifetime for less than ade9uate consideration. The transfer is to ta+e eect upon the death of the transferor HHHHHHHHHHHH 17.# person transferred personal properties to another during his lifetime for less than ade9uate consideration. The transfer is to ta+e eect immediately HHHHHHHHHHH 1=.# person transferred a real property classi.Chich is incorrectG a. Donations of nonresident aliens involving properties located abroad to residents of the /hilippines is exempt from donor’s tax b. enunciation of inheritance by an heir to another is not sub4ect to donor’s tax c. Donation by a nonresident citi-en to a nonresident alien is exempt from donor’s tax d. ifts are rec+oned on an annual basis; the tax is determined for the whole gift throughout the year; hence, a computation is made every time a donation is made 21.Chich of the following donation may be exemptG a. Donation of a resident alien of its properties located abroad to a nonresident alien b. Donation of a nonresident alien of real properties located in the /hilippines to a resident alien c. Donation of nonresident alien of intangible properties located in the /hilippines to a nonresident alien d. Donation of a intangible properties located in the /hilippines by resident aliens 5



th



22.Chich of the following is not included in gross giftG a. Transfers to nonpro,>>> shall be exempt from the donor’s tax II. Donations in favour of an educational and or charitable, religious, cultural or social welfare corporation, institution, accredited non $ government organi-ation, trust or philanthropic organi-ation or research institution or organi-ation provided that n o amount of said gifts shall be used by the donee for administration purposes shall be exempt from donor’s tax a. True, true b. True, 5alse c. 5alse, True d. 5alse, 5alse 27.#. If the value of the movable property donated is /7,>>> or more the donation and the acceptance shall be made in writing, otherwise the donation shall be void 0. egardless of the value of the immovable property donated, the donation and the acceptance shall be made in writing, otherwise the donation shall be void. a. True, True b. True, 5alse c. 5alse, True d. 5alse, 5alse 2=.I. The gift is perfected from the moment the donor eects the delivery either actually or constructively of the property donated II. Donor’s tax is a property tax imposed on the property transferred by the way of gift intervivos a. True, True b. True, 5alse c. 5alse, True d. 5alse, 5alse 2A.I. Chere property is transferred during lifetime for less than ade9uate and full consideration in money or money’s worth, then the amount by which the value of the property exceeded the value of the consideration shall for the purpose of the donor’s tax, be deemed a gift II. ifts of con4ugal property made by both spouses shall be considered as having been made one $ half by the husband and the other half by the wife and is taxable  to each donor spouse a. True, True b. True, 5alse c. 5alse, True d. 5alse, 5alse 26.I. 5or purpose of the donor’s tax, second degree cousins are strangers to each other. II. ?ncumbrance on the property donated, if assumed by the donor is deductible for donor’s tax purposes. a. True, True b. True, 5alse c. 5alse, True d. 5alse, 5alse 2B.I. #s a rule, donation between husband and wife during the marriage is void. II. Donation can be made to conceived or unborn children. a. True, True b. True, 5alse c. 5alse, True d. 5alse, 5alse >.1st :tatement& Chen the donee is a stranger, the tax payable by the donor shall be >8 of the net gifts. 2nd :tatement& Chen the donee is a relative the tax payable by the donor shall be based on the scheduler rates of donor’s tax provided in :ection BB of the Tax !ode. a. 0oth statements are correct c. 3nly the


th



I $ brother, sister %whether by whole of half blood', spouse, ancestor, and lineal descendant; or II $ relative by consanguinity in the collateral line within the


th



II $ eneral renunciation by an heir, including the surviving spouse, of hisKher share in the hereditary estate left by the decedent; III $ enunciation by an heir, including the surviving spouse of hisKher share in the hereditary estate left by the decedent categorically in favor of identi.1st :tatement $ Chere property, other than a real property that has been sub4ected to ' days after the date the gift is made d. thirty %>' days after the date the gift is made or completed (7.Enless the !ommissioner otherwise permits, the donor’s tax return shall be


th



c. evenue !ollection 3icer where the donee is domiciled d. 3ice of the !ommissioner (A.In order to be exempt from donor’s tax and to claim full deduction of the donation given to 9uali,>>> to the D3 which has 4urisdiction over his place of business; II $ The notice shall be given within thirty %>' days after the receipt of the 9uali8' of the said donationsK gifts for the taxable year shall be used by such donee $ institution for administration purposes a. Les to I and II c. Les to I only b. o to I and II d. Les to II only (6 $ 7> are based on the following& The following donations during the calendar year 2>>= are made to relatives& Manuary >, 2>>= /2,>>>,>>> *arch >, 2>>= 1,>>>,>>> #ugust 17, 2>>= 7>>,>>> (6.@ow much is the tax due on the gift made on Manuary>, 2>>=G a. /2>(,>>> b. /12(,>>> c. /6>,>>> d. /7>,>>> (B.@ow much is the tax due on the gift made on *arch >, 2>>=G a. /2>(,>>> b. /12(,>>> c. /6>,>>> d. /7>,>>> 7>.@ow much is the tax due on the gift made on #ugust 17, 2>>= a. /2>(,>>> b. /12(,>>> c. /6>,>>> d. /7>,>>> 71.3n Manuary 7, 2>>7, Daisy gave a piece of land to her brother $ in $ law who is getting married on 5ebruary 1(, 2>>7. The assessed value and -onal value of the land were /A7>,>>> and /1,>>>,>>> respectively. The land had an unpaid mortgage of /2>>,>>>, which was not assumed by the donee and an unpaid realty tax of /1>,>>> which was assumed by the donee. The brother $ in $ law agreed to pay the donor’s tax on the donation which was roughly /2BA,>>>. @ow much was the donor’s tax dueG a. /2BA,>>> b. /2A,>>> c. /(,(>> d. /1,(>> 72 to 7( based on the following& *r. Mose :an Mose made the following cash donations to his legitimate son, 16 years old, who got married on Manuary 7, 2>>=& Date of donation 8%ount December 2, 2>>7 /7,>>> Manuary 7, 2>>= ,>>> Manuary 7, 2>>A 1>,>>> 72.@ow much was the exempt dowry on the gift made on December 2, 2>>7G a. /1>,>>> b. /6,>>> c. /7,>>> d. one 7.@ow much was the exempt dowry on the gift made on Manuary 7, 2>>=G a. /1>,>>> b. /6,>>> c. /7,>>> d. /,>>> 7(.@ow much was the exempt dowry on the gift made on Manuary 7, 2>>AG a. /1>,>>> b. /6,>>> c. /7,>>> d. /2,>>> 77.*r. 3scar #-ucar donated the following cash donations to his legally adopted daughter, > years old, who got married on Mune 1>, 2>>=& Date of Donation 8%ount Mune 1>, 2>>= / =,>>> #ugust 11, 2>>= (,>>> 3ctober 1>, 2>>= 7,>>> @ow much was the exempt dowry on the gift made on 3ctober 1>, 2>>=G

7=.*r. /aolo :ao /aolo donated /7>,>>> cash to his favorite grandson who is getting married on Mune 1=, 2>>A. 5or donor’s tax purposes the exempt dowry shall be& a. /7>,>>> b. /1>,>>> c. /7,>>> d. one 7A.*r. /antaleon de Feon donated a piece of land to his best friend , erman Fa ermania. The land had an assessed value of /6>>,>>> and -onal value of /1,>>>,>>> at the time of donation. It is also encumbered with an unpaid mortgage of />>,>>> which shall be assumed by the donee. In addition, the donee agreed to pay the 9



th



applicable donor’s tax of /21>,>>>. 5or donor’s tax purposes, how much shall be the total deductionsG a. /71>,>>> b. />>,>>> c. /21>,>>> d. one 76.*r. guyen andaipen, non $ resident alien, donated a brand new car valued at /1,2>>,>>> to his legitimate son who is getting married in the /hilippines. The son agreed to pay unpaid tax of /12>,>>> on the car. 5or /hilippine donor’s tax of /21>,>>>. 5or donor’s tax purposes, how much shall be the total deductionsG a. /1>,>>> b. 12>,>>> c. 1>,>>> d. one 7B.*r. eorge Morge donated /7>>,>>> to the !ity of *anila and /1>>,>>> to his best friend who graduated summa cum laude. 5or donor’s tax purposes how much shall be the& $ross Deducti 3ifts ons a /=>>,>> . > /7>>,>>> b /7>>,>> . > /7>>,>>> c /=>>,>> . > /1>>,>>> d /7>>,>> . > /1>>,>>> =>.*s. Mosie /ruitt ma+es the following gifts in the year 2>>A& Mune =, 2>>A $ /7>,>>> to Maimee, ac+nowledge natural daughter on account of her marriage celebrated on Mune 6, 2>>= #ugust 11, 2>>A $ # piece of 4ewelry purchased by *s. /ruitt for /1>>,>>> %but with a fair mar+et value of /17>,>>> at the time of donation' given to her husband 3ctober 12, 2>>A $ /7>,>>> to *arit-, her legitimate daughter, on account of her marriage on December 27, 2>>= December 27, 2>>A $ /2>,>>> cash donation to a non pro






The total taxable net gifts of *s. /ruitt as of December 27, 2>>A are& a. /2>>,>>> b. /1(>,>>> c. /B>,>>> d. /6>,>>> =1.In 2>>A, Mose made the following gifts& 1. 3n Mune 1, 2>>A, /17>,>>> to #nton, his son, on account of his marriage celebrated *ay 1, 2>>= 2. 3n Muly 1>, 2>>A, a parcel of land worth /16>,>>> to his father, sub4ect to the condition, that his father would assume the mortgage indebtedness of Mose in the amount of /(>,>>> . 3n :eptember >, 2>>A, /17>,>>> dowry to his daughter Dana, on account of her scheduled marriage on 3ctober 27, 2>>A, and another wedding gift worth /2>,>>> on ovember 2, 2>>A @ow much is the total net giftsG a. /7>>,>>> b. /(=>,>>>

c. /(7>,>>>

d. /(>,>>>

=2.3n Manuary 7, 2>>(, ?mma !rema, resident donor, made the following donations& To !rispina, recogni-ed natural child, on account of forthcoming marriage, land in the /hilippines valued at /1>,>>> To 5rancisco, legitimate son, car in :an Diego, !alifornia, E:# valued at /7>>,>>> %donor’s tax paid in E:#, /2>,>>>' 



5or /hilippine donor’s tax purposes, the donor’s tax due shall be& a. /2,>>> b. /2>,>>> c. /12,>>>

d. one

=.*r. Mames Mayme, non $ resident citi-en donor, made the following donations on Muly 17, 2>>A& To !harles, a legally adopted child, on account of marriage on Muly 1, 2>>A, property in Indonesia %donor’s tax paid in Indonesia, /A>,>>>', fair mar+et value, /71>,>>> To #d4anto, best friend in the /hilippines, a property with an unpaid mortgage of />,>>> assumed by the donee, fair mar+et value, /2>,>>> 



10



th



5or /hilippine donor’s tax purposes the allowable tax credit is a. /A(,>>> b. /A>,>>> c. /72,67A

d. one

=(.@ made a donation of property with a 5*) of /1,>>>,>>> to his legitimate daughter I and to M on December 27, 2>>= on account of I’s marriage to M to be celebrated on 5ebruary 1(, 2>>A. Required: Determine the donor’s tax due.

=7.*r. and *rs N made the following donations of con4ugal funds and properties in 2>>= %unless stated otherwise' as follows& a. 5ebruary 1(& To F, a legitimate son, a pie of land with 5*) of /(>>,>>> on account of F’s graduation from college b. *ay 1(& To *, a legitimate daughter on account of *’s marriage to be celebrated on December 27, 2>>= house and lot with 0*) of /1,>>>,>>> c. Mune 1(& To , brother of *rs. N, /2>>,>>> d. :eptember 1(& To 3, the eicient and beautiful secretary of *r. N for ta+ing care of *r. N while *rs. N is vacationing in E:#, 4ewelry worth />>,>>> e. 3ctober 1(& To /, the honest and good loo+ing driver of *rs. N who accompanied *rs. N on her trip to and from E:#, a diamond ring worth /7>>,>>> f. December 1(& To O, the daughter of 3 on account of O’s birthday, pieces of 4ewelry inherited by *r. N during marriage, with a 5*) of /(>>,>>> g. December 27& To , a legitimate son, a residential house and lot with 5*) of /1,2>>,>>> but sub4ect to the condition that  would assume the mortgage indebtedness in the amount of /(>>,>>>. Required: Determine the donor’s tax due on each donation

==.:, made the following donations in 2>>A& a. 5ebruary 1(& To T, a legitimate son on account of T’s graduation, /17>,>>> b. #pril 1(& To E, an ac+nowledge natural child on account of E’s forthcoming marriage on Manuary 1(, 2>>6, /A,>>> c. *ay 1(& To ), a legitimate daughter on account of )’s marriage celebrated on Mune 1(, 2>>=, /6,>>> d. Muly 1(& To T, on #ccount of T’s marriage on Man 1(, 2>>A, /1>>,>>> e. 3ctober 1(& To E, additional gift on account of E’s marriage on Man 1(, 2>>6, /B,>>> f. December 1(& To ), additional gift on account of )’s marriage on Mune 1(, 2>>=, /B2,>>> Required: Determine the donor’s tax due on each donation

=A.C, a resident citi-en, made the following donations in 2>>A a. 5eb 1(& To P, a legitimate son, on account of P’s marriage celebrated on December 1(, 2>>=, /16>,>>> b. Mune 1(& To L, a legitimate daughter, on account of L’s marriage on Mune 1(, 2>>A, /2>>,>>> c. 3ctober 1(& To Q, a legitimate daughter, on account of Q’s marriage on Muly 1(, 2>>7 a residential land in E:# with a 5*) of /(>>,>>>. %*r. C paid /27,>>> to the E: government as donor’s tax' Required: Determine the donor’s tax due after the tax credit

=6.*r. #, a 5ilipino citi-en made the following gifts to his children for calendar year 2>>7& et ift Donor’s tax paid

/hil E:# /7>,>>> />>,>>> 17,>>>

!anada /27>,>>> 1>,>>>

#ustralia /1>>,>>> 7,>>>

Required: !ompute the donor’s tax still due after tax credit

 ?nd of @andouts 

11



th


Donors Tax(Banggawan)

Recommend Documents