Transfer Taxation - Part III Flashcards
Define donation.
It is an act of liberality to gratuitously transfer or dispose of gifts in favor of another, whether the gifts are in trust or otherwise, direct or indirect, naturally including rights and interest in properties; whether from residents or non-residents; whether to natural or juridical person; and whether it is a real or personal property, tangible or intangible. It is a contract that presupposes a meeting of the minds, requiring perfection that only happens after the donor knows of donee’s acceptance.
Define Donor’s Tax and its characteristics.
Donor’s taxes are also called GIFT TAXES. They are considered EXCISE TAXES as they are imposed on the privilege or rights to gratuitously transfer property, rights, or interest. They’re DIRECT TAXES as they are imposed on the donor and determined with reference to the gift disposed of. Renunciation of an heir, including surviving spouses, from the share of the decedent’s estate will not be taxable, unless it is in favor of another specific heir.
List down all the Elements of Donation, including all other facts needed to be considered.
- Capacity
- Donative Intent - as there is transfer without consideration. Only applicable to DIRECT GIFTS.
- transfer from parent to subsidiary—NO DONATIVE INTENT
- cancellation of debt by the creditor—THERE IS DONATIVE INTENT, unless it is in exchange for services.
- cancellation of debt of debtor-shareholder—NO DONATIVE INTENT, as it is tantamount to declaration of dividend, subject to FWT on shareholder.
- Delivery - actual or constructive
- Acceptance
- if given to an unborn child, it may be accepted by those WHO WOULD LEGALLY REPRESENT them if they were born.
What are the purposes of donor’s taxes?
- To prevent avoidance of estate taxes.
- To prevent or compensate for the loss of progressive rates when large estates are split up by gifts to numerous donees.
What are the formalities of donations?
- Movable Property
- Oral - has to be simultaneously made with delivery of gift
- Writing - required if a gift exceeds ₱5,000 - Immovable property - has to be made in a public instrument. Acceptance can either be made in the SAME deed of donation or in a SEPARATE public document.
What happens when the acceptance of a gift or donation is made in a separate instrument?
If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form. This notification shall be done in both instruments.
When shall an incomplete gift due to the reservation of powers become complete?
- When the donor renounces his powers; or
- When the donor’s right to exercise the powers ceases because of the happening of a certain event or contingency, or because of a fulfillment of a certain condition, OTHER THAN THE DEATH OF THE DONOR.
Tax rate and ceiling of Donor’s Tax after TRAIN Law.
6%; ₱250,000
Tax Rate and ceiling of Donor’s Tax before TRAIN Law.
Progressive rate; ₱100,000
What are the classifications of donation as to motive or purpose?
- Simple - cause is pure liberality—subject to donor’s taxes.
- Remuneratory - made due to past or future services, charges, or burdens—not subject to donor’s taxes.
- Modal - consideration is less than the value of the thing donated—the difference subject to donor’s tax.
Discuss the valuation of gross gifts.
General: Fair Market Value
Real property: Higher between Assessed Value and Zonal Value. Both are FMVs.
Personal property: Fair Market Value
Unlisted common share: Book value
Unlisted preference share: Par value
Listed share: Arithmetic mean between highest and lowest quoted price
Is installment price fair market value?
ABSOLUTELY NOT.
Can FMV determined by independent real property appraisers be considered for valuation of gross gifts?
Never. Only by city or provincial assessors, or by the Commissioner of Internal Revenue
When is filing and payment of donor’s taxes?
Within 30 days from perfection
Is there an extension for the filing and payment of donor’s taxes? How do you pay?
No extension. Pay as you file.
