ARTS-PRTC CPA Review

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TAXATION (DONOR’S TAX) OMAR G. AMPONGAN

Definition–DONATION is an act of liberality New York St., Cubao 140,000
whereby a person disposes gratuitously of a thing Accounts receivable, debtor residing in
or a right in favor of another who accepts it. New York City 35,000
Franchise exercised in New York 225,000
Essential Requisites of a Donation Franchise exercised in Philippines 120,000
1. Capacity of the donor. Investment in Good Time Co., partnership 160,000
2. Donative intent in cases of direct gift. established in New York City
3. Acceptance by the donee. Investment in Lovers Company,
4. Delivery, whether actual or constructive, of the partnership established in the Philippines 125,000
subject matter of the gift.
1. The gross gift if Ara is a resident or citizen
Formal requisites of donation A. 13,895,000 C. 8,520,000
1. Movable or personal property – maybe made B. 8,955,000 D. None
orally or in writing.
Exception: If the value of the property donated 2. The gross gift if Ara is a resident and citizen of
exceeds P5,000, the donation and acceptance United States (without reciprocity).
shall be made in writing, otherwise the A. 13,895,000 C. 8,520,00
donation shall be void. B. 8,955,000 D. None
2. Immovable or real property – must be in public 3. The gross gift if Ara is a resident and citizen of the
instrument specifying therein the property United States (with reciprocity).
donated and the value of the charges, if any, A. 13,895,000 C. 8,520,000
which the donee must satisfy. The acceptance B. 8,955,000 D. None
maybe made in the same deed of donation or in
separate public instrument but it shall not take Deductions from gross gifts
effect unless it is done during the lifetime of the 1. Mortgage on the property donated assumed by
donor. the donee.
2. Amount specifically provided by the donor as
Kinds of donation diminution on the property donated.
1. Donation inter-vivos – made between living
persons and which is perfected from the Exemptions from gross gifts
moment the donor knows of the acceptance by 1. Gifts made to the national government or any
the donee; subject to donor’s tax. entity created by any of its agencies which is
not conducted for profit, or any political
2. Donation mortis causa –which takes effect upon subdivision.
the death of the donor and partakes of the
nature of a testamentary disposition; subject to 2. Gifts in favor of the following non-profit
estate tax. institutions:
a. Educational
Donor’s tax is a tax on the privilege to transmit b. Charitable
property between two or more persons who are c. Religious
living at the time of the donation; tax shall apply d. Cultural
whether the transfer is in trust or otherwise, e. Social welfare
whether the gift is direct or indirect. f. Accredited NGO
g. Trust or philanthropic organization
Formula in computing Donor’s Tax:
h. Research institution
First donation during the year:
Gross Gift x x Requisites:
Less: Exemption/Deduction x x 1. Provided, that not more than 30% of said gifts
Net gift x x shall be used for administration purposes;
x Tax rate 6%
2. The non-profit institutions must be accredited
Donor’s tax payable x x
by the Philippine Council for NGO Certification
Succeeding donations during the year: (PCNC).

Gross gift x x A non-profit institution is one which is:

Less: Exemption/Deduction x x a. organized as a non-stock entity;
Net gift x x b. paying no dividends;
Add: Prior net gifts during the year x x c. governed by trustees who receive no
Total net gifts subject to tax x x compensation; and
x Tax rate 6% d. devoting all income whether students’ fees
Donor’s tax due x x or gifts, donation subsidies or other forms
Less: Tax/es paid during the year x x of philanthropy, to the accomplishment of
Donor’s tax payable x x the purposes enumerated in its Articles of
Incorporation.
Composition of gross gifts – same with the
rule on estate taxation 3. P250,000 of the net gift per year.
Properties classified as intangibles within– Gifts exempt under special law – Donations to
see estate tax 1. Rural Farm School
2. People’s Television Network,
Prob 1
Incorporated
Ara gave the following properties to various 3. People’s Survival Fund
donees on April 25, 2018: 4. Aurora Pacific Economic Zone and
Freeport Authority
House and lot in London P3,500,000 5. Girl Scouts of the Philippines
Apartment house in Cebu City 8,000,000 6. Philippine Red Cross
Car in Cebu City 520,000 7. Tubbataha Reefs Natural Park
Car registered in New York City 900,000 8. National Commission for Culture
Savings deposit with BDO, Cebu City 50,000 and the Arts
Time deposit, Santander Bank, New York 120,000 9. Philippine Normal University
Accounts receivable, debtor residing in 10. University of the Philippines
11. National Water Quality gift shall be computed together and contained in
Management Fund one donor’s tax return only.
12. Philippine Investors Commission
13. Ramon Magsaysay Award Prob 3
Foundation Conde, resident, gave the following donations:
14. Philippine-American Cultural
Foundation Donee January 22, 2018
15. International Rice Research Barba Legitimate daughter, on account of
Institute passing the CPA board exams - P400,000
16. Task Force on Human Settlements Davao City A parcel of land to be used for public
17. National Social Action Council purpose – P200,000.
18. Aquaculture Department of the
Southeast Asian Fisheries Development Center March 25, 2018
19. Development Academy of the Barba On account of marriage on April 10, 2018 –
Philippines P150,000.
20. Integrated Bar of the Philippines Phil Red Cross For medical and rescue purposes,
P50,000.
RATE OF TAX: be 6% computed on the basis of
7. The donor’s tax payable on January 22, 2018 .
total gifts in excess of P250,000 exempt gift made
A. 800 B. 660 C. 9,000 D. None
during the calendar year.
8. The donor’s tax due on March 25, 2018.
Donations made by spouses A. 16,700 B. 15,900 C. 9,000 D. 15,720
In case of donation made by husband and wife out of
conjugal or community funds: Prob 4
1. Each is donor to the extent of 1/2 of the donation. Mr. and Mrs. Aban gave the following donations on July
2. If only one spouse signed the deed of donation,
1:
there is only one donor for donor’s tax purposes,
without prejudice to the right of the other spouse to Community property was donated to Balae, sister of Mr.
question the validity of the donation. Aban. The fair market value of the property is
P650,000.
Prob 2
9. The tax payable on Mr and Mrs Aban, respectively, if
Mr. and Mrs. Alba gave the following donations:
the donation is made in 2018
05/03/18 - Community property valued at P800,000 A. 4,500; 97,500 C. 19,500; 37,500
donated to Barbado, legitimate son who B. 4,500; 19,500 D. 4,500; 4,500
got married January 1, 2018.
07/14/18 - Exclusive property donated to Carla, Transfer for less than adequate consideration
legitimate daughter who got married June Where property, other than real property (capital
1, 2018. Value– P500,000 asset) is transferred for less than adequate
12/30/18 - Community property donated to Carla. consideration in money or money’s worth, the
The dowry has a market value of amount by which the fair market value exceeded
P800,000 the value of consideration shall be deemed a gift
3. The gift tax payable of Mrs. Alba on May 3 subject to donor’s tax.
A. 1,000 B. 8,400 C. 9,000 D. 6,000 A sale, exchange, or other transfer of property
4. The gift tax payable of Mr. Alba on July 14 made in the ordinary course of business (a
A. 21,800 B. 21,000 C.12,600 D. 15,000 transaction which is bona fide, at arm’s length,
and free from any donative intent) will be
6. The gift tax payable of Mrs. Alba on Dec 30. considered as made for an adequate and full
A. 15,000 B. 24,000 C. 8,200 D. 15,800 consideration in money or money’s worth).
Donation to several donees
If the donor had made several donations to
different persons on the same date, the total net
Prob 5

Arandasi sold the following assets:

Cost/
Date of Sale Buyer Market Value Selling Price Book Value
Jewelry June 11 Niece P 530,000 P 15,000 P100,000
Residential House June 22 Girlfriend 1,000,000 600,000 750,000
Apartment house Sept. 25 Legally adopted child 900,000 600,000 750,000
Del. Truck Oct. 10 Controlled corp. 450,000 150,000 350,000
11. The gift tax, if any, in each of the independent transactions above.
(a) (b) (c) (d)
Jewelry P 15,900 P 15,900 P 31,800 P 31,800
Residential house 120,000 None 120,000 75,000
Apartment house 3,000 3,000 18,000 18,000
Delivery truck None 3,000 90,000 None
Valuation of person as descendants 1st limitation
property – at fair beneficiary which and
Net gift per foreign country xP
market value at the is payable upon ascendants, by
Total net gift
time of gift (see the death of the reason of his
estate tax). insured results to office.
a donation in 2nd limitation
OTHER MATTERS: Prob 8
favor of
1. Renunciation of beneficiary on the Net gift all foreign countries
13. One of the xP
inheritance - A amount of Total net gift
following
renunciation of premiums paid by statements is Prob 9
inheritance by the insured. false:
surviving spouse 14. A, a citizen
A. As a rule,
or an heir in favor 3. Donation to and resident of the
contracts of
of: candidates or Philippines, made
donation
political parties. donations on
a. Co-heir - not between
Any contribution January 10, 2018,
a donation husband and
in cash or in kind as follows:
b. Not a co-heir wife are void.
to any candidate,
– there is B. The Donation to B, a legitimate
political party or
donation donation by a account of marriage, to be ce
coalition of
subject to public works on February 14, 2018, propert
parties for
donor’s tax contractor to a United States (on which a U.S.
campaign
c. Renunciation Mayor, in view tax of P1,200 was paid), wit
purposes shall be
by surviving of her public market value of
governed by the
spouse of office is void in Donation to B, cash in the Philip
Electoral Code as
his/her share in all cases.
amended.
the conjugal C. Donations Donor’s tax credit
partnership or 4. Donations given by a for donor’s tax paid to
absolute between senator to his the U.S.:
community spouses - Every friend, a PNP A. P1,200 C. P
after the donation or grant Chief, is void in B. 1,000 D.
dissolution of of gratuitous all cases.
D. Donation Filing and payment
the marriage in advantage, direct
favor of the to a conceived 1. Time of filing –
or indirect,
or unborn within 30 days
heirs of the between the
children is valid. from date of gift
deceased spouses during
spouse or any the marriage 2. Date of payment –
Tax credit for at the time the
other person/s shall be void,
donor’s tax paid to return is filed.
– subject to except moderate
a foreign country. 3. Place of filing –
donor’s tax gifts which the
spouses may give 1. Who can claim? Authorized Agent
Prob 6 Bank (AAB), RDO,
each other on the O
occasion of any n Collection Agent,
12. Which of the
family rejoicing. l or duly authorized
following examples
y Treasurer of the
is taxable?
The prohibition City or
A. On June 1, c
shall also apply to Municipality where
2018, D made a i
persons living the donor was
gift of P200,000 t
together as domiciled at the
to his daughter i
husband and wife time of gift.
on account of z
without a valid
her marriage e If there is no legal
marriage.
celebrated on n residence in the
May 1, 2017. Philippines, with
B. On June 1, 5. Other persons o the Office of the
2018, T made a who cannot r Commissioner or
gift of P260,000 donate property r with the Philippine
to his daughter to each other e Embassy or
on account of (Void s Consulate in the
her marriage donations) i country where he
celebrated on a. Those made d is domiciled at the
May 1, 2018. between e time of the
C. U, a minimum persons who n transfer.
wage earner, were guilty of t
gives his son a adultery or a Returns filed with
gift worth P2,000 concubinage li the Philippine
as a birthday at the time of e Embassy or
gift. donation. n consulate shall be
D. V and W are b. Those made paid thereat.
the only heirs of between
d 4. VALIDATION OF
X. V renounces persons found
o TAX RETURN –
his share of guilty of the
n Where the return
inheritance in same criminal
o was filed with an
favor of W. offense in
r AAB, the lower
consideration
. portion of the
2. Donation of life thereof; and
insurance c. Those made to 2. Limitations on tax return must be
Life insurance a public officer duly machine
naming a third or his wife,
credit: validated and
stamped received
 by the AAB to to a relative is presentation (front and back
serve as receipt of at graduated during the audit pages) of the
payment. rates while the of the tax case donated property,
donor’s tax on depending upon if applicable.
The machine the donation to existing audit 4. Certified true
validation shall a non-relative is procedures. copies of the latest
reflect the amount at the flat rate C. If the tax declaration of
paid, the date of of 30%. donee is a non- lot and/or
payment and the b. One donor’s tax individual, the improvement, if
transaction code return only, tax shall be applicable.
and the stamp where the computed by 5. “Certificate of No
mark shall also donor’s tax at using 30% rate Improvement”
show the name of graduated rates even if the issued by the
the bank, branch on the donation donation is Assessor’s Office
code, teller’s code to a relative will made in 2018. where the donated
and teller’s initial. be shown D. The real property/ies
The AAB shall also together with donor’s tax have no declared
issue an official the donor’s tax return shall be improvements, if
receipt or bank at the flat rate filled-up in applicable.
debit advice or of 30% on the triplicate by the 6. Proof of valuation
credit document, donation to a donor. of shares of stocks
whichever is non-relative, the at the time of
Surcharges (ad
applicable, as total being the donation, if
valorem penalty)
additional proof of donor’s tax to applicable.
payment. pay. 50% – False or fraudulent return
7. Proof
is willfully
of valuation
filed.
c. If there were – Willful neglect to file the
of return
other ontypes
time.of
Prob 10 previous 25% – Failure to file any returnpersonal
and pay the tax
15. One of the donations to due thereon. properties, if
following statements non-relatives – If the return is not filedapplicable.
with the proper
is correct. The during the year, internal revenue officer.
8. Proof of claimed
donor’s tax return: the prior net – Failure to pay on timedeductions,
the deficiency tax if
A. Must be gifts need not shown in the notice of assessment.
applicable.
filed within thirty be added 9. Copy of tax debit
days after the anymore in the Interest for failure memo used as
end of the computation of to pay tax per payment, if
calendar year. aggregate net return on time applicable.
B. Must be gifts, donor’s Rate – 12% per
filed within thirty tax on annum, or such
days from the aggregate net higher rate as may
date of donation. gifts and be prescribed by
C. Must be donor’s tax due rules and regulations,
accompanied by on the computed from the
a certificate of an donations to date prescribed for
independent strangers. payment until the
Certified Public d. One donor’s tax amount is fully paid.
Accountant if the return only,
where the Prob 11
gross gift is
P5,000,000 or donation to 18. On March 6,
more. non-relative and 2018, a Filipino
D. In the case to a relative citizen donated
of husband and shall be added house and lot with
wife making together. fair market value of
donations, one P2,000,000 to his
donor’s tax 17. Which is not child on account of
return shall be true with regard to marriage last
filed and signed filing and payment January 1, 2018.
by either the of donor’s tax Gift tax return was
husband or the return? filed and tax paid
wife. A. The on May 5, 2018.
attachments The amount
16. One of the must be payable as of May
following submitted upon 5, 2018 is:
statements is field or office
TRUE. Which is it? a. P157,500 c. P105,000
audit of the tax
If on any one date b. P136,500 d. P131,423
case before the
there is a donation Tax Clearance
by one donor to a Certificate/Certif Attachments
donee who is a icate 1. Sworn statement
relative together Authorizing of the relationship
with a donation to Registration of the donor to the
a donee who is not can be released donee.
a relative: to the taxpayer. 2. Proof of claimed
B. Additi tax credit, if
a. Two separate
onal applicable.
donor’s tax
requirements 3. Certified true
returns because
may be copies of
the donor’s tax
requested for OCT/TCT/CCT
on the donation