Submitted by: Group 10

Contawe, Rose Ann B.

Lopez, Jonalie Jan P.
Malicdem, Mariel L.
Molina, Kimberly Ann N.
Rama, Jerrica S.
Chapter8: DONORS TAX
Donors Tax
Is not a property tax, but ne which is imposed in the transfer of property by way of
gift inter vivos.
Nature of Donors Tax
1. Excise Tax- also known as Gift Tax.
- The donors tax is imposed on the transfer, not on the property
transferred.
2. Tax Liability of the Donor- the donors tax is bound to be paid by the
donor.
3. Inter Vivos Transfer Tax- the donors tax shall not apply unless and until
there is a completed and perfected gift during the life- time of the donor and
the done.
4. Ad Valorem Tax- the basis of valuation to compute the donors tax is the fair
market value of the property transferred at the time of donation.
Donors Tax Rate
The applicable rate of donors tax on the gift would depend on the relationship of
the donor to the donee.
Donors Tax on Gifts to Relatives
1. Brother, sister, spouse, ancestor, and lineal descendant; or
Legally adopted children are not strangers.
2. Relative by consanguinity in the collateral line within the fourth degree of
relationship.
Donors Tax on Gifts to Stranger
1. Those that do NOT belong to the definition of relative for donors tax
purposes.
2. Relative by affinity or by virtue of marriage. Except for spouse.
3. Business Organizations.

VALUATION OF DONATION
As a rule, the value of the property/right donated shall be the fair market value
existing at the time when the gift was made.
Timing of Valuation
The law provides that "The value of the donated property shall be fixed as of the
time of the donation."
The reportable value of the gift is its available fair market value upon the delivery
and acceptance of the gift.
In revocable donation, the time to value the subject property shall be made when
the donor relinquished control and transferred absolute ownership to the donee
during their lifetime.
Under donation with suspensive condition, the value of the gift is determined only at
the time when the stipulated condition is fulfilled, subject to the time of delivery and
acceptance of property donated.
Specific Valuation Methods
The Tax Code and other tax regulations provide the specific valuation methods for
the following donations:
1. Usufruct Donation
"The ownership of property may also be doated to one person and the usufruct to
another or others, provided all the donees are living at the time of donation."
The value of donated usufruct is determined by computing the annual value of
usufruct to the extent of its present value based on the number of years of
usufructuary right.
2. Real property donation
The property is valued using the assessed value (City Assessor's Value), or zonal
value (BIR's FMV), whichever is higher.
3. Personal property donation
For personal properties, the following applicable fair market values at the time of
donation shall be used:
1. Current market price (purchased value) - for the recently or newly acquired
personal properties.
2. Second-hand market price (second-hand value) - for the previously
acquired personal and used properties.
3. Grossed-up loan value - for loaned or pawned personal properties.

4. Fair value plus accrued interest - for interest-earning receivable and bank
deposits.
5. Discounted value - for non-interest bearing notes receivables.
6. Face value - for Philippine peso currency
7. Converted Philippine peso value - for foreign currencies.

Stocks, bonds and other securities.

For stocks, bonds and other securities:
1. If listed in the local stock exchange - the FMV is shall be:
* Closing price on the date of donation - preferred valuation method. Or
* Trading price at the date nearest to the date of donation, if none is available on
the date of donation - alternative valuation method
2. If not listed in the local stock exchange - the fair market value of shares of
stock not listed and traded in the local stock exchanges is determined by using the
Adjusted Net Asset Method at the date of donation.
In determining the value of the shares, the Adjusted Net Asset Method shall be used
whereby all assets and liablities are adjusted to fair market values. The net of
adjusted asset minus the adjusted liability value is the indicated value of the equity.
For purposes of this item, the appraised value of real property at the time of sale
shall be the highest among the following:
* The fair market value as determined by the Commissioner;
* The fair market value as shown in the schedule of values fixed by the Provincial
and City Assessors; or
* The fair market value as determined by independent Appraiser.

OTHER VALUATION CONCERNS

The following inter vivos transfers are discussed to clarify the valuation concerns
and applicable tax beset by each issue:
1. Transfer for inadequate consideration
2. Renunciation of inheritance
3. Conjugal donation
4. Several donations with insufficient value
5. Donation to joint and several persons

6. Political contributions
7. Destroyed donations