Donor's Tax Info 2

8/8/2019 Donor's Tax Info 2

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DONOR'S TAX

A. Definition and Concepts:

Gift tax is an excise on the transfer by a living person to another of money or other propertywithout consideration.

Donation is an act of liberality whereby a person disposes gratuitously of a thing or right infavor of another, who accepts it.

TOP What Constitutes A "Gift" For Gift Tax Purposes?

1. Transfer of property without consideration.2. It also includes sales, exchanges and other dispositions of property for a consideration tothe extent that the value of the property transferred exceeds the value in money or money'sworth of the consideration received therefor.

Concept of Consideration:

1. Consideration must be measurable in money or money's worth. Mere legal considerationis not sufficient.2. The consideration must flow to the donor, mere detriment to the donee does not satisfythe purpose of the statute.

Commissioner V. Wemyss (324 U.S. 303, 1945)

Marriage is not a consideration reducible to money value. If a person transfers a property toa trust in consideration of marriage, a gift is made because no money consideration flows tothe transferor/donor. Donative intent on the part of the tranferor is not an essential elementfor the imposition of the gift tax to the transfer.

When Does The "Gift" Occur?

A gift occurs when the donor surrenders CONTROL over the property. If the donor retains anunlimited power to revoke the gift, it is clear that no gift has occurred.

ty referred to in Section 24(D) and Section 27(D)(5) of the NIRC).

B. Requisites of A Taxable Gift:

1. Capacity of the donor2. Donative intent (Except gift under Section 93 NIRC)3. Acceptance by the donee, and4. Delivery of the gift to the donee, actually or constructively.

C. Kinds of Donation:

1. Inter-vivos2. Mortis causa
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3. Indirect donation (Except real property referred to in Section 24(D) and Section 27(D)(5)of the NIRC).

D. Persons Subject to Donor's Tax:

(Same as in estate tax)1. Before September 1, 1969 - Only donation made by individual is

subject to donor's tax.2. On or after September 1, 1969 (RA 6110) Donation made by all person, whether naturalor juridical, is subject to donor's tax.

E. Gross Gifts:

1. Composition -(Same as in estate tax)2. Valuation - At the time the gift was made (Same as in estate tax)

F. Deductions from the Gross Gift:

1. Dowries or gifts by parents to children on account of marriage, beforeits celebration or within one (1) year thereafter to the extent ofP10,000.2. Gifts to the National Government or any of its agencies.3. Gifts made in favor of an educational, and/or charitable, religious,cultural or social welfare corporation, foundation, trust orphilanthropic organization or research institution or organization.4. Encumbrance on the property donated if assumed by the donee in the deed of donation.5. Those specifically provided by the donor as a condition of the donation which will diminishthe value of the property received by the donee.6. Exempt donation under special laws.

G. Tax Payable by the Donor:

1. On or before December 31, 1972:a) Donor's and donee's gift taxes were imposed based on graduated rates.b) Gifts made during previous year or years are collated to the

present gift and the gift tax computed on the total gift.2. January 1, 1973 to January 15, 1981 (PD 69)

a) Donor's tax was imposed on graduated rates.b) Gifts made during the previous year or years are computed separately.c) Donor's tax computed on the total gifts made during each calendar year.d) Collation of gifts are made only on gifts made during the same calendar year.

3. January 16, 1981 to July 27, 1992 (PD 1773)

a) Tax payable by the donor in favor of relatives are computed based on thegraduated rates.

b) Tax payable by the donor in favor of stranger is computed at 20% or based ongraduated rates, whichever is higher.

c) Gifts made during the same calendar year are collated and the donor's taxcomputed on the total gifts during the calendar year.

4. July 28, 1992 to December 31, 1997 (RA 7499)a) Tax payable by the donor on gifts made in favor of relatives is computed based

on graduated rates.b) Tax payable by the donor on gifts made in favor of strangers is


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computed at 10% of the net gifts.5. January 1, 1998 to present (RA 8424)

a) Tax payable by the donor on gifts made in favor of relatives is computed basedon graduated rates.

b) Tax payable by the donor on gifts made in favor of strangers is computed at30% of the net gifts.

6. Relatives for donor's tax purposes:a) Spouse, ancestor and lineal decedentb) Brother, sister (whether by whole or half blood)c) Relatives by consanguinity in the collateral lines within the fourth degree of

relationship.

H. Rates of Donor's Tax (RA 8424)

a) Donations to Relatives (Graduated Table)

THE DONORS TAX OF EXCESS

SHALL BE PLUS OVER

Exempt

0 2% P100,000

2,000 4% 200,000

14,000 6% 500,000

44,000 8% 1,000,000

204,000 10% 3,000,000

404,000 12% 5,000,000

1,004,000 15% 10,000,000

b) Donations to Stranger - 30%

Sample Problem of Donor's Tax

Mr. Joseph Ramos, single made the following donation'sa) January 15, 1999 - to his brother, Jun, P100,000b) March 10, 1999 - to Clara, his sister, P250,000

c) Sept 8, 1999 - to his girlfriend, Loi, a brand new car worth P 600,000d) Oct 25, 1999 - to his father, Carlos, a vacant lot worth P1,000,000

w/ FMV of P800,000 and zonal value of P1,500,000e) Nov 12, 1999 - to Luis, his brother in law, P 200,000f) Feb 14, 2000 - to his mother, Maria, P 300,000

Answer:


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Date Donation Amount Tax Due

a) 1/15/99 Cash 100,000 Exempt

b) 1/15/99 Cash 100,0003/10/99 Cash 250,000

350,000

Tax on :200,000 - 2,000150,000 x 4% 6,000

8,000

Less:Tax on previousdonation -- 8,000

c) 9/8/99 Cash 600,000-Stranger

Tax Due: 600,000

X 30%180,000

d) 10/25/99 lot (ZV)1,500,0003/10/99 Cash 250,0001/15/99 Cash 100,000Total donation 1,850,000

Tax on:1,000,000 44,000850,000 x 8% 68,000

Total Tax Due 112,000

Less:Tax on previousdonation 8,000 104,000

e) 11/12/99 Cash 200,000 - Stranger

Tax Due 200,000x 30%

60,000

f) 2/14/2000 Cash 300,000

Tax On: 200,000 2000

100,000 x 4% 4000 6,000

Note: Letter (f) was donated in year 2000 therefore; this is not included in the cumulativetotal for 1999's donations.

ADMINISTRATIVE REQUIREMENTS ON DONOR'S TAX

A. Donor's Tax Return:


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1. Requirements (State the following information/data):a) Each gift made during the calendar yearb) Deductions claimed and allowablec) Previous net gifts during the same calendar yeard) Name of donee and addresse) Other pertinent information

2. Time of filing:a) Before December 31, 1972:

1) On or before March 1 following the close of the calendar year.b) January 1, 1973 to December 31, 1997

1) Within thirty (30) days after each donation.2) Extension not exceeding thirty (30) days maybe granted.

c) January 1, 1998 to present1) Within thirty (30) days after each donation- No Extension

3. Place of filing of donor's tax returna) Commissioner of Internal Revenueb) Revenue District Officer, Collection Officer or duly authorized

Treasurer of the municipality where the donor was domiciledat the time of donation.

B. Payment of Donor's Tax:

1. Donor's tax should be paid at the time the return is filed or withinthirty (30) days after the date of gift.

2. Extension to pay tax may be granted not exceeding six (6) months.Effective January 1, 1998 (RA 8424), no extension for thepayment of the donor's tax shall be granted.

C. Surcharges:

1) Late filing of estate tax return - 25% of tax due per returna) July 1, 1939 to December 31, 1972 - Discretionary or

maybe waived if:(a) The return is voluntarily filed without notice from the

Commissioner(b) The failure to file the return on time was due to a

reasonable cause.2) Late payment of tax:

a. July 1, 1939 to August 1, 1980 - 5%b. August 1, 1980 to December 31, 1985 (PD 1705)10%c. January 1, 1986 to present (PD 1994) 25%

D. Interest:

1) July 1, 1939 to September 1, 1969 (CA 466)a. Tax per return 12%b. Deficiency tax 6%

2) September 1, 1969 to December 31, 1972(RA 6110, 8/4/69)----------------------12%

3) January 1, 1973 to January 16, 1981(PD 69, 11/24/72)----------------------14%


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4) January 16, 1981 to present (PD 1773(1/16/81)------------------------------20%

Donor's Tax Info 2

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