1. When the donee or beneficiary is a stranger, the tax payable by the donor shall be 30% of the net gifts.

of the net gifts. For

purposes of this tax, who is a stranger?
A STRANGER is a person who is not a:
A. Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal descendant; or
B. Relative by consanguinity in the collateral line within the fourth degree of relationship.
2. X is a friend of Y, the chairman of Political Party Z, who wants to run for President in the 2004 elections.
Knowing that Y needs funds for posters and streamers, X is thinking of donating to Y P150,000.00 for his
campaign. He asks you whether his intended donation to Y will be subject to the donor's tax. What would your
answer be? Will your answer be the same if he were to donate to Political Party Z instead of to Y directly?
The donation to Y, once he becomes a candidate for an elective post, is not subject to donor's tax provided
that he complies with the requirement of filing returns of contributions with the Commission on Elections as
required under the Omnibus Election Code.
The answer would be the same if X had donated the amount to Political Party Z instead of to Y directly
because the law places in equal footing any contribution to any candidate, political party or coalition of parties
for campaign purposes
3. What conditions must occur in order that all grants, donations and contributions to non-stock, non-profit
private educational institutions may be exempt from the donor's tax under Section 101 (a) of the Tax Code?
The following are the conditions:
a. Not more than thirty percent (30%) of said gifts shall be used by such donee for administration
purposes;
b. The educational institution is incorporated as a non-stock entity,
c. paying no dividends,
d. governed by trustees who receive no compensation, and
e. Devoting all its income, whether students' fees or gifts, donations, subsidies or other forms of
philanthropy, to the accomplishment and promotion of the purposes enumerated in its Articles of
Incorporation.
4. A, an individual, sold to B, his brother-in-law, his lot with a market value of P1,000,000 for P600.000. A's cost in
the lot is P100.000. B is financially capable of buying the lot. A also owns X Co., which has a fast growing
business. A sold some of his shares of stock in X Co. to his key executives in X Co. These executives are not
related to A. The selling price is P3,000,000, which is the book value of the shares sold but with a market value
of P5,000,000. A's cost in the shares sold is P1,000,000. The purpose of A in selling the shares is to enable his
key executives to acquire a propriety interest in the business and have a personal stake in its business. Explain
if the above transactions are subject to donor's tax.
The first transaction where a lot was sold by A to his brother-in-law for a price below its fair market value
will not be subject to donor's tax if the lot qualifies as a capital asset. The transfer for less than adequate and full
consideration, which gives rise to a deemed gift, does not apply to a sale of property subject to capital gains tax.
However, if the lot sold is an ordinary asset, the excess of the fair market value over the consideration
received shall be considered as a gift subject to the donor's tax.
The sale of shares of stock below the fair market value thereof is subject to the donor's tax pursuant to the
provisions of Section 100 of the Tax Code. The excess of the fair market value over the selling price is a deemed
gift.
The sale of shares of stock below the fair market value will not give rise to the imposition of the donor's tax.
In determining the gain from the transfer, the selling price of the shares of stocks shall be the fair market value of
the shares of stocks transferred. (Section 6, RR No. 2-82). In which case, the reason for the imposition of the
donor's tax on sales for inadequate consideration does not exist.
5. Are contributions to a candidate in an election subject to donor's tax?
No, provided the recipient candidate had complied with the requirement for filing of returns of
contributions with the Commission on Elections as required under the Omnibus Election Code.