BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 28

SUGGESTED ANSWERS
Chapter 6: DONORS TAX

CHAPTER 6

DONORS TAX
Problem 6-1
1. False there is no consideration in donation.
2. False during the lifetime of the donor.
3. True
4. False It is enough that the duly representative of the incapacitated donee to receive the
donation.
5. True
6. False Real property donation must be put in writing regardless of value.
7. True
8. False The value of donated personal property must exceed P5,000.
9. True
10. True
11. False not gifts.
12. False constitutes dividend income.
13. True
Problem 6-2
1. True
2. False If resident alien donates, he shall be subject to donors tax in the Philippines for his
properties within and outside the Philippines
3. True
4. True
5. True
6. False only one-half of the share is donated.
7. False only if the gift is on account of marriage.
8. False only the first P100,000 is exempt.
9. False may be subject to business tax such as VAT, custom duties, or excise tax.
10. False - When the donee is a stranger, the tax rate is 30%.
11. True
12. False - excise tax transfer of property by way of gift inter vivos.
Problem 6-3
1.

Zero, because the renunciation is a general renunciation.

2.

P30,000 or 30% of P100,000. A third cousin is a stranger for donors tax purposes.

3.

The total amount of donors tax is P62,000, computed as follows:

Relative - P200,000 (See schedular tax table)
Stranger (P200,000 x 30%)

Son
P2,000

Daughter-in-law
P60,000

Note: Daughter-in-law is included as a relative for donors tax purposes.

4.

Zero. Donations between husband and wife are void and not subject to donors tax.

5.

Zero. Donations between a man and a woman living together as husband and wife are void
and not subject to donors tax. (Art 87, Family Code)

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 29
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

6. P30,000 or 30% of P100,000. A gift to a priest or to Church is not exempt from gift tax.
(Lladoc vs. Commissioner of Internal Revenue, L-19201, 14 SCRA, p. 292) assume
donation is made to a church established and operates within the Philippines.

7.

P600,000 or 30% of P2,000,000. There is no blood relationship between corporation, hence

both are stranger from each other.

8.

P40,400
Philippine donors tax

P404,000

Actual donors tax - foreign

P120,000

Tax credit, limit (P404,000 x 500,000/5,000,000) - lower

9.

P40,400

P40,400

P1,244,000
Philippine donors tax:
Relative (P500,000)
Stranger (P5,000,000 P500,000) x 30%
Less: Tax credit
Actual donors tax foreign (lower)
Tax credit, limit (P1,364,000 x 500,000/5,000,000)
Donors tax still due and payable

P
14,000
1,350,000
P120,000
136,400

P1,364,000
120,000
P1,244,00
0

10. P135,000
Donors tax
Surcharge (P100,000 x 25%)
Interest (P100,000 x 20% x 6/12)
Total amount due
Problem 6-4
1. C
2. D
3. C
4. A
5. A
6. A
7. A
8. B
9. B
10. A
Problem 6-7

Problem 6-5
1. D
2. D
3. C
4. C
5. C
6. C
7. B
8. C
9. C
10. A

P100,000
25,000
10,000
P135,000
Problem 6-6
1. C
2. D
3. D
4. No answer. All statements are correct.
5. C
6. B
7. A
8. D

Gross estate
Less: Standard deduction
Net estate

Father
P5,500,000
1,000,000
P4,500,000

Mother
P5,500,000
1,000,000
P4,500,000

Estate tax on P2,000,000

Excess (P2,500,000 x 11%)
Estate tax

P 135,000
275,000
P 410,000

P 135,000
275,000
P 410,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 30
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

Distributable estate (P11,000,000 P820,000)

Divided by number of heirs
Share of each heir

P10,180,000
4
P 2,545,000

Donors tax on P1,000,000

Donors tax on excess (P1,545,000 x 8%)
Donors tax

P 44,000
123,600
P167,600

Note: There is donors tax on the renunciation of inheritance because the renunciation is
specifically for Daw.
Problem 6-8

First donation:
Donated value of P200,000
Excess donation (4% x P290,000)
Dowry deducted
Total value of first donation

Value of
Donation
P200,000
290,000
10,000
P500,000

Second donation:
First donation total value
Excess donation (6% x 400,000)
Total after dowry deducted
Add: Dowry deducted in two donations (P10,000 x 2)
Total
Less: First donation
Value of second donation

P500,000
400,000
P900,000
20,000
P920,000
500,000
P420,000

Donors tax
P 2,000
11,600
.
P13,600
P14,000
24,000
P38,000

Problem 69
A
Wedding gift (P500,000 P10,000)
Casual gift car
Total gift subject to tax

P490,000
500,000
P990,000

Donors tax on P500,000

Excess (P490,000 x 6%)
Total donors tax in the Philippines

P14,000
29,400
P43,400

Problem 610

D
No reciprocity

Taxable gift in the Philippines

P3,000,000

With
reciprocity
P - 0 -

Donors tax on P3,000,000

P 204,000

P - 0 -

Mr. Salonga
P250,000
120,000

Mrs. Salonga
P250,000
120,000
20,000
( 10,000)
P380,000

Problem 611
A
Donations:
Vacation house conjugal (P500,000/2)
Car conjugal (P240,000/2)
Jewelry exclusive of Mrs. Salonga
Dowry
Net gift
Donors tax on P200,000
Excess (P160,000 x 4%)
(P180,000 x 4%)
Total donors taxes, respectively

( 10,000)
P360,000
P2,000
6,400
P8,400

P2,000
7,200
P9,200

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 31
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

Problem 612
A
Donations made between a man and a woman living together as husband and wife are void,
and therefore, not subject to donors tax.
Problem 613
D
Wedding gift
Less: Dowry
Net gift first P100,000 donors tax exempt

P110,000
10,000
P100,000

Problem 614
D
2005 gift house and lot
Less: Dowry (P10,000 P6,000)
Net gift

P300,000
4,000
P296,000

Donors tax on P200,000

Excess (P96,000 x 4%)
Donors tax 2005

P2,000
3,840
P5,840

Problem 615
C
Donors tax (P50,000 x 2%)

P1,000

Problem 616
1.

2.

Gross gifts, as of August 15, 2002 (P150,000 x 2 lots)

Less: Deductions
Net gifts, August 15, 2002

P300,000
0
P300,000

Donors tax on P200,000

Tax on excess (P300,000 P200,000) x 4%
Total donors tax

2,000
4,000
6,000

Wedding gifts, as of November 15, 2002

Less: Deductions - dowry
Net gifts, November 15, 2002
Add: Previous, net gifts
Total net gifts

P150,000
10,000
P140,000
300,000
P440,000

Donors tax on P200,000

Tax on excess (P440,000 P200,000) x 4%
Total donors tax
Less: Donors tax August 15, 2002
Donors tax November 15, 2002

Problem 617
D
Donors tax (P8,000,000 x 30%)
Problem 618

2,000
9,600
P 11,600
6,000
P 5,600
P2,400,000

No deduction is allowed for donations on account of birthday.

Problem 619
B
Gross gift (FMV at time of donation)
Problem 620
B
Donors tax (P200,000 x 30%)

P200,000
P60,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 32
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

Problem 621
A
Donors tax (P10,000,000 x 30%)

P3,000,000

The donation is taxable because more than 30% of it shall be used for administration
purposes.
Problem 622

D
Estate tax
P5,000,000
1,000,000
P4,000,000

Donors tax
P5,000,000
.
P5,000,000

Estate tax on P2,000,000

Excess (P2,000,000 x 11%)
Donors tax on P5,000,000
Total

P135,000
220,000
.
P355,000

P404,000
P404,000

Tax savings if estate tax is paid (P404,000 P355,000)

P 49,000

Gross amount asset

Less: Standard deduction
Net amount subject to tax

Problem 623
1. Donors tax for relatives:
Mar. 1
- To his son on account of marriage
Oct. 1
- To his daughter on account of graduation
Total
Less: Dowry
Net taxable gifts

P 600,000
500,000
P1,100,000
10,000
P1,090,000

Donors tax on P1,000,000

Excess (P90,000 x 8%)
Total donors tax for donations to relatives

P 44,000
7,200
P 51,200

2. Donors tax for strangers:

Dec. 25
- To his god-children
Dec. 31
- To his neighbor
Total
Multiplied by donors tax rate
Donors tax for donations to strangers

P400,000
100,000
P500,000
30%
P150,000

Problem 624
March 30, 2005 (P500,000/2)
June 28, 2005 (P2,000,000/2) P10,000
Net taxable gifts
Donors tax on P1,000,000
Excess (P240,000 x 8%)
Total
Donors tax paid on March 30, 2005
Donors tax on P200,000
Excess (P50,000 x 4%)
Donors tax for donation on June 28, 2005
Problem 625
Cash his son for wedding held during the year

Mr. Dinero
P250,000
990,000
P1,240,000

Mrs. Dinero
P250,000
990,000
P1,240,000

P44,000
19,200
P63,200

P44,000
19,200
P63,200

( 2,000)
( 2,000)
P59,200

( 2,000)
( 2,000)
P59,200
P 200,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 33
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

Problem 626
To his son on account of marriage during the year
To his daughter on account of her birthday
To Garci, his brother, as renunciation of inheritance
Net gift subject to donors tax

P 500,000
500,000
400,000
P1,400,000

Note: No dowry is allowed for nonresident alient.

Problem 627
Real estate (P1,000,000 P100,000)
Personal properties (P500,000 P50,000)
Total taxable gifts (inadequate consideration)
Donors tax on P1,000,000
Excess (P350,000 x 8%)
Donors tax for inadequate consideration

P 900,000
450,000
P1,350,000
P 44,000
28,000
P 72,000

Problem 628
Correction:
The date for requirement No. 2 should be November 5, 2005 instead of November 5, 2002.
1.

2.

December 25, 2005:

Average value per share (P500 + P450)/ 2
Multiply by number of shares
Taxable base of the gift

475
1,000
P475,000

The same answer with number 1.

Problem 629
There is no donors tax because the donations are donation mortis causa, void donation and
tax- exempt donation.
Properties:
a. House and lot
Subject to estate tax because the transfer shall take effect upon
death of the donor (included in the last will and testament).
b.

Parejo car

The value of property donated is P200,000 and it was made

orally. The donation is null and void because personal property
donated with value exceeding P5,000 should be put in writing to
become a valid donation.

c.

Business

Revocable donation is a revocable transfer, hence, subject to

estate tax.

d.

Furniture and fixtures

Donation mortis causa is subject to estate tax.

e.

Time deposit

The amount is P100,000 given to his illegitimate daughter. This

donation is tax exempt because the first P100,000 of donation to
relatives shall not be subjected to donors tax.

Problem 630
Car consequently destroyed after delivery to his son
Donors tax
Problem 631
Donations to relatives:

P 500,000
P14,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 34
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

2006:
January 31

November 30

Car to Uncle
Less: Encumbrances assumed by the donee
Net taxable gift January 31, 2002

P300,000
50,000
P250,000

Donors tax on P200,000

Tax on excess (P250,000 P200,000) x 4%
Donors tax for January 31 donation

House and lot to his son on account of marriage

Less: Dowry exemption (weeding was held beyond one year)
Net gifts
Add: Previous net gifts during the year
Aggregate taxable gift

P600,000
- 0 P600,000
250,000
P850,000

Donors tax on P500,000

Tax on excess (P840,000 P500,000) x 6%
Total
Less: Donors tax for previous gifts during the year
Donors tax for November 30 donation

P 14,000
21,000
P 35,000
4,000
P 31,000

Donations to strangers:
2006:
June 30
Cash to Miss Rosal, a radio manager
Less: Diminution of gift (P100,000 x 60%)
Net taxable gift

August 31

P100,000
60,000
P 40,000

Donors tax for June 30 donation (P40,000 x 30%)

P 12,000

Land to National Government

Less: Deduction (total amount)
Net taxable gift

P500,000
500,000
P - 0 -

Donors tax for August 31 donation

October 31

2,000
2,000
4,000

None

Cash to non-profit organization 40% Administrative

Less: Deduction
Net taxable gift

P400,000
- 0 P400,000

Donors tax for October 31 donation (P400,000 x 30%)

P120,000

Total donors tax during 2006:

Total donors tax to relatives (P30,400 + P4,000)
Total donors tax to stranger (P12,000 + P120,000)
Total donors tax for the year 2006
Problem 632
Net gift to daughter on account of marriage (P50,000
P10,000)
Add: Previous net gifts:

P 35,000
132,000
P167,000
P 40,000
P50,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 35
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

April 1 Gift to mother

June 10 Wedding gift to son (P50,000 P10,000)
Total net gift during the year

40,000

90,000
P130,000
Tax exempt
P
600

Donors tax on P100,000

Donors tax on excess P30,000 x 2%
Donors tax on gift to stranger (P10,000 x 30%)

P 3,000

Problem 633
1.
January 29, 2006
2.

June 1, 2005 gift

Gift on account of their daughters marriage
Less: Dowry
Net gift
Tax on P200,000
Tax on excess P40,000 x 4%
Total
Surcharges (P7,200 x 50%)
Interest (P7,200 x 20% x 11/12)
December 30, 2005 gift
Christmas gift to son
Previous gift June 1, 2005
Total net gift during 2005
Tax on P200,000
Tax on excess P140,000 x 4%
Total
Less: Tax on previous gift
Donors tax on current gift
Surcharge (P8,000 x 50%)
Interest (P8,000 x 20% x 4/12)

Nilo Co
P250,000
10,000
P240,000

Nila Co
P250,000
10,000
P240,000

P 2,000
1,600
P 3,600

P 2,000
1,600
P 3,600

Nilo Co
P100,000
240,000
P340,000

Nila Co
P100,000
240,000
P340,000

P 2,000
5,600
P 7,600
3,600
P 4,000

P 2,000
5,600
P 7,600
3,600
P 4,000

Total amount to be paid on June 1, 2006

P 7,200
3,600
1,320
P12,120

P 8,000
4,000
533
P12,533
P24,120

Note: The surcharge is willful neglect (50%) because Mr and Mrs. Co donated twice already in
2005, yet they did not pay the donors tax within 30 days from the date of donation in both
occasion, hence, habitual and intentional neglect.
Problem 634
Donors tax on property located in Japan, P1,000,000
Donors tax on property located in the Philippines
(P2,000,000 x 30%)
Total donors tax in the Philippines
Computation of donors tax still due and payable:
Total donors tax in the Philippines
Less: Allowable tax credit: - Actual lower than limit
Limit (P1,000,000/ P3,000,000) x P644,000
Donors tax still due and payable

Problems 635

Relative
P44,000

Stranger

Total
P 44,000

P600,000

600,000
P644,000
P644,000
70,000

P214,667
P574,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 36
SUGGESTED ANSWERS
Chapter 6: DONORS TAX
Property donated:
To son - House and lot ($500,000 x P50) P10,000
Carabaw FX to brother-in-law

Gift to
Relatives
P24,990,000

Taxable base

.
P24,990,000

Philippine donors tax:

First P10,000,000
Tax on excess (P14,990,000,000 x 15%)
Total
Less: Tax credit allowed
Donors tax rate for donation made to strangers
Net donor's tax

P 1,004,000
2,248,500
P 3,252,500
1,000,000
.
P 2,252,500

Strangers
P
P

500,000
.
500,000

30%
150,000

Total

.
P 2,402,500

Note: Donation to common-law-wife is void. Hence, no donors tax.

Computation of tax credit allowed:
Limit 1: (P24.990M/ P25.490M) x P2,402,500

P2,335,373

Allowed: Actual, lower amount

P1,000,000