BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 40

SUGGESTED ANSWERS
Chapter 6: DONORS TAX


CHAPTER 6
DONORS TAX

Problem 6-1
1. False during the lifetime of the donor.
2. True
3. True
4. False there is no consideration in donation.
5. True
6. False It is enough that the duly representative of the incapacitated donee to receive
the donation.
7. True
8. False Real property donation must be put in writing regardless of value.
9. True
10. False The value of donated personal property must exceed P5,000.
11. True
12. True
13. False not gifts.
14. False constitutes dividend income.
15. True

Problem 6-2
1. False dowry is not allowed to nonresident alien donor.
2. False the donees identity is not material to make the donation valid. The donor can
make donation to an unborn child.
3. True
4. True
5. False If resident alien donates, he shall be subject to donors tax in the Philippines for his
properties within and outside the Philippines
6. True
7. True
8. True
9. False only one-half of the share is donated.
10. False only if the gift is on account of marriage.
11. False only the first P100,000 is exempt.
12. False may be subject to business tax such as VAT, custom duties, or excise tax.
13. False - When the donee is a stranger, the tax rate is 30%.
14. True
15. False - excise tax the tax is imposed on the act to transfer property by way of gift inter vivos.

Problem 6-3 Problem 6-4 Problem 6-5
1. B 1. A 1. C
2. D 2. C 2. D
3. A 3. D 3. A
4. D 4. C & A 4. B
5. A 5. A 5. A
6. A 6. C 6. D
7. C 7. D 7. A
8. B 8. A 8. A
9. B 9. A 9. C
10. A 10. D 10. A
11. C 11. C 11. C
12. A 12. D 12. D

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 41
SUGGESTED ANSWERS
Chapter 6: DONORS TAX
Problem 6-6 D
Donation to his unborn grandchild P200,000
Problem 6-7 A
Zero, because the renunciation is a general renunciation.
Problem 6-8 C
Father Mother

Gross estate P5,500,000 P5,500,000
Less: Standard deduction 1,000,000 1,000,000
Net estate P4,500,000 P4,500,000
Estate tax on P2,000,000 P 135,000 P 135,000
Excess (P2,500,000 x 11%) 275,000 275,000
Estate tax P 410,000 P 410,000
Distributable estate (P11,000,000 P820,000) P10,180,000
Divided by number of heirs 4
Share of each heir P 2,545,000
Donors tax on P1,000,000 P 44,000
Donors tax on excess (P1,545,000 x 8%) 123,600
Donors tax P167,600

Note: There is donors tax on the renunciation of inheritance because the renunciation is not a
general renunciation.

Problem 6-9 B
Husband Wife
Gross gifts (P3,500,000/2) P1,750,000 P1,750,000
Less: Mortgage assumed by done (P1,000,000/2) (500,000) (500,000)
Dowry ( 10,000) ( 10,000)

Net gifts P1,240,000 P1,240,000

Problem 610 A
Wedding gift (P500,000 P10,000) P490,000
Casual gift car 500,000
Total gift subject to tax P990,000
Donors tax on P500,000 P14,000
Excess (P490,000 x 6%) 29,400
Total donors tax in the Philippines P43,400
Problem 611 A
Donations: Mr. Salonga Mrs. Salonga
Vacation house conjugal (P500,000/2) P250,000 P250,000
Car conjugal (P240,000/2) 120,000 120,000
Jewelry exclusive of Mrs. Salonga 20,000
Dowry ( 10,000) ( 10,000)
Net gift P360,000 P380,000
Donors tax on P200,000 P2,000 P2,000
Excess (P160,000 x 4%) 6,400
(P180,000 x 4%) 7,200
Total donors taxes, respectively P8,400 P9,200

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 42
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

Problem 612 D
Donation to girlfriend is a donation to non-relative; hence subject to donors tax the entire
amount of P250,000.

Problem 613 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 614 D
Donation between spouses during marriage time is void; hence, not subject to donors tax.
Problem 615 D
Wedding gift P110,000
Less: Dowry 10,000
Net gift first P100,000 donors tax exempt P100,000
Net gift taxable is P - 0 -

Problem 616 D
2005 gift house and lot P300,000
Less: Dowry (P10,000 P6,000) 4,000
Net gift P296,000
Donors tax on P200,000 P2,000
Excess (P96,000 x 4%) 3,840
Donors tax 2005 P5,840

Problem 617 C
Donors tax (P50,000 x 2%) P1,000
Problem 618 D
P60,000 or 30% of P200,000. A 2nd cousin is a stranger for donors tax purposes. It is the
6
th
degree of the collateral line.

Problem 619
1. Letter C
Gross gifts, as of August 15, 200A (P150,000 x 2 lots) P300,000
Less: Deductions 0
Net gifts, August 15, 200A P300,000
Donors tax on P200,000 P 2,000
Tax on excess (P300,000 P200,000) x 4% 4,000
Total donors tax P 6,000
2. Letter D

Wedding gifts, as of November 15, 200A P150,000
Less: Deductions - dowry 10,000
Net gifts, November 15, 200A P140,000
Add: Previous, net gifts 300,000
Total net gifts P440,000
Donors tax on P200,000 P 2,000
Tax on excess (P440,000 P200,000) x 4% 9,600
Total donors tax P 11,600
Less: Donors tax August 15, 200A 6,000
Donors tax payable November 15, 200A P 5,600

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 43
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

Problem 620 C
P30,000 or P100,000 x 30%. Daughter-in-law is not a relative by blood within the 4
th

collateral line for donors tax purposes.

Problem 621 D
Donors tax (P8,000,000 x 30%) P2,400,000
Problem 6-22 D
Value of
First donation: Donation Donors tax
Donated value of P200,000 P200,000 P 2,000
Excess donation (4% x P290,000) 290,000 11,600
Dowry deducted 10,000 .

Total value of first donation P500,000 P13,600
Second donation:
First donation total value P500,000 P14,000
Excess donation (6% x 400,000) 400,000 24,000
Total after dowry deducted P900,000 P38,000
Add: Dowry deducted in two donations (P10,000 x 2) 20,000

Total P920,000
Less: First donation 500,000
Value of second donation P420,000
Problem 623 D
No deduction is allowed for donations on account of birthday.
Problem 624 B
Gross gift (FMV at time of donation) P200,000
Problem 625 B
Donors tax (P200,000 x 30%) P60,000
Problem 626 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 627 A
Donors tax P100,000
Surcharge (P100,000 x 25%) 25,000
Interest (P100,000 x 20% x 6/12) 10,000
Total amount due P135,000

Problem 628 D
No reciprocity With reciprocity
Taxable gift in the Philippines P3,000,000 P - 0 -
Donors tax on P3,000,000 P 204,000 P - 0 -
No dowry deduction is allowed for nonresident alien donor.





BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 44
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

Problem 628
1. Letter C
Philippine donors tax P404,000
Actual donors tax - foreign P120,000
Tax credit, limit (P404,000 x 500,000/5,000,000) - lower P40,400 P40,400
2. Letter B
Philippine donors tax:
Relative (P500,000) P 14,000
Stranger (P5,000,000 P500,000) x 30% 1,350,000 P1,364,000
Less: Tax credit
Actual donors tax foreign (lower) P120,000 120,000
Tax credit, limit (P1,364,000 x 500,000/5,000,000) 136,400
Donors tax still due and payable P1,244,000
Problem 630 D
Estate tax Donors tax
Gross amount of asset P5,000,000 P5,000,000
Less: Standard deduction 1,000,000 .
Net amount subject to tax P4,000,000 P5,000,000
Estate tax on P2,000,000 P135,000
Excess (P2,000,000 x 11%) 220,000
Donors tax on P5,000,000 . P404,000
Total P355,000 P404,000
Tax savings if estate tax is paid (P404,000 P355,000) P 49,000
Problem 631
Gross gifts made:
To L, on account of marriage P500,000
To M, on account of marriage 200,000
Total gross gifts P700,000
Less: Deductions:
Dowry for L, on account of marriage P10,000
Dowry for M, on account of marriage 10,000
Mortgage assumed by L on property donated 100,000 120,000
Net gifts P580,000
Problem 632
1. Donors tax for relatives:
Mar. 1 - To his son on account of marriage P 600,000
Oct. 1 - To his daughter on account of graduation 500,000
Total P1,100,000
Less: Dowry 10,000
Net taxable gifts P1,090,000
Donors tax on P1,000,000 P 44,000
Excess (P90,000 x 8%) 7,200
Total donors tax for donations to relatives P 51,200


BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 45
SUGGESTED ANSWERS
Chapter 6: DONORS TAX
2. Donors tax for strangers:
Dec. 25- To his god-children P400,000
Dec. 31- To his neighbor 100,000
Total P500,000
Multiplied by donors tax rate 30%

Donors tax for donations to strangers P150,000
Problem 633
Mr. Dinero Mrs. Dinero
March 30, 200B (P500,000/2) P250,000 P250,000
June 28, 200B (P2,000,000/2) P10,000 990,000 990,000

Net taxable gifts P1,240,000 P1,240,000
Donors tax on P1,000,000 P44,000 P44,000
Excess (P240,000 x 8%) 19,200 19,200
Total P63,200 P63,200
Donors tax paid on March 30, 200B
Donors tax on P200,000 ( 2,000) ( 2,000)
Excess (P50,000 x 4%) ( 2,000) ( 2,000)
Donors tax for donation on June 28, 200B P59,200 P59,200
Problem 634
Cash his son for wedding held during the year P 200,000
Problem 635
To his son on account of marriage during the year P 500,000
To his daughter on account of her birthday 500,000
To Garci, his brother, as renunciation of inheritance 400,000
Net gift subject to donors tax P1,400,000
Note: No dowry is allowed for nonresident alien.
Problem 636
Taxable inadequate consideration - Personal properties (P500,000 P50,000) P 450,000
Donors tax on P200,000 P 2,000
Excess (P250,000 x 4%) 10,000
Donors tax for inadequate consideration P 12,000

The inadequate consideration in the sale of real property will not be subject to donors tax
because the sale is subject to 6% final tax based on the selling price or fair market value,
whichever is higher.

Problem 637
1. December 25, 200A:
Average value per share (P500 + P450)/ 2 P 475
Multiply by number of shares 1,000
Taxable base of the gift P475,000
2. The same answer with number 1.






BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 46
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

Problem 638
There is no donors tax because the donations are donation mortis causa, void donation and
tax-exempt donation. Specific principles:

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 639
Car consequently destroyed after delivery to his son P 500,000
Donors tax P14,000
Problem 640
Donations to relatives:
200B:
January 31 Car to Uncle P300,000
Less: Encumbrances assumed by the donee 50,000
Net taxable gift January 31, 2002 P250,000
Donors tax on P200,000 P 2,000
Tax on excess (P250,000 P200,000) x 4% 2,000
Donors tax for January 31 donation P 4,000
November 30 House and lot to his son on account of marriage P600,000
Less: Dowry exemption (weeding was held beyond one year) - 0 -
Net gifts P600,000
Add: Previous net gifts during the year 250,000
Aggregate taxable gift P850,000
Donors tax on P500,000 P 14,000
Tax on excess (P840,000 P500,000) x 6% 21,000
Total P 35,000
Less: Donors tax for previous gifts during the year 4,000
Donors tax for November 30 donation P 31,000
Donations to strangers:
200B:
June 30 Cash to Miss Rosal, a radio manager P100,000
Less: Diminution of gift (P100,000 x 60%) 60,000
Net taxable gift P 40,000
Donors tax for June 30 donation (P40,000 x 30%) P 12,000

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 47
SUGGESTED ANSWERS
Chapter 6: DONORS TAX

August 31 Land to National Government P500,000
Less: Deduction (total amount) 500,000
Net taxable gift P - 0 -
Donors tax for August 31 donation None
October 31 Cash to non-profit organization 40% Administrative P400,000
Less: Deduction - 0 -

Net taxable gift P400,000
Donors tax for October 31 donation (P400,000 x 30%) P120,000
Total donors tax during 200B:
Total donors tax to relatives (P30,400 + P4,000) P 35,000
Total donors tax to stranger (P12,000 + P120,000) 132,000
Total donors tax for the year 200B P167,000
Problem 641
Donors tax on gift to stranger (P10,000 x 30%) P 3,000
Net gift to daughter on account of marriage (P50,000 P10,000) P 40,000
Add: Previous net gifts:
April 1 Gift to mother P50,000
June 10 Wedding gift to son (P50,000 P10,000) 40,000 90,000
Total net gift during the year P130,000
Donors tax on P100,000 Tax exempt
Donors tax on excess P30,000 x 2% = donors tax payable
Oct. 31, 200A P 600
Problem 642
1. January 29, 200B
2. June 1, 200A gift Nilo Co Nila Co
Gift on account of their daughters marriage P250,000 P250,000
Less: Dowry 10,000 10,000
Net gift P240,000 P240,000
Tax on P200,000 P 2,000 P 2,000
Tax on excess P40,000 x 4% 1,600 1,600
Total P 3,600 P 3,600 P 7,200
Surcharges (P7,200 x 50%) 3,600
Interest (P7,200 x 20% x 11/12) 1,320
P12,120
December 30, 200A gift Nilo Co Nila Co
Christmas gift to son P100,000 P100,000
Previous gift June 1, 200A 240,000 240,000
Total net gift during 200A P340,000 P340,000
Tax on P200,000 P 2,000 P 2,000
Tax on excess P140,000 x 4% 5,600 5,600
Total P 7,600 P 7,600
Less: Tax on previous gift 3,600 3,600

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 48
SUGGESTED ANSWERS
Chapter 6: DONORS TAX
Donors tax on current gift P 4,000 P 4,000 P 8,000
Surcharge (P8,000 x 50%) 4,000
Interest (P8,000 x 20% x 4/12) 533
P12,533
Total amount to be paid on June 1, 200B P24,120

Note: The surcharge is willful neglect (50%) because Mr and Mrs. Co donated twice already in
200A, 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 643
Relative Stranger Total
Donors tax on property located in Japan, P1,000,000 P44,000 P 44,000
Donors tax on property located in the Philippines
(P2,000,000 x 30%) P600,000 600,000
Total donors tax in the Philippines P644,000
Computation of donors tax still due and payable:
Total donors tax in the Philippines P644,000
Less: Allowable tax credit: - Actual lower than limit 70,000
Limit (P1,000,000/ P3,000,000) x P644,000 P214,667
Donors tax still due and payable P574,000

Problems 644
Gift to
Property donated: Relatives Strangers Total

To son - House and lot ($500,000 x P50) P10,000 P24,990,000
Carabaw FX to brother-in-law P 500,000
. .
Taxable base P24,990,000 P 500,000
Philippine donors tax:

First P10,000,000 P 1,004,000
Tax on excess (P14,990,000,000 x 15%) 2,248,500
Total P 3,252,500
Less: Tax credit allowed ($20,000 x P50/$1) 1,000,000
Donors tax rate for donation made to strangers . 30% .
Net donor's tax P 2,252,500 P 150,000 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 ($20,000 x P50/$1)

P1,000,000















BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 49
SUGGESTED ANSWERS
Chapter 6: DONORS TAX
Problems 645
Assume donations are made to strangers:
Total net gifts P10,000,000
Philippine donors tax (P10,000,000 x 30%) P3,000,000
Tax credit:
Limit (P3,000,000 x 5/10) P1,500,000
Actual lower ( 400,000)
Donors tax payable P2,600,000
Assume donations are made to relatives:
Philippine donors tax P1,004,000
Tax credit:
Limit (P1,004,000 x 5/10) P502,000
Actual lower ( 400,000)
Donors tax payable P 604,000
Problems 646
1. Gross gifts subject to donors tax Don Dona
a. No donation
b. Donation to stranger daughter-in-law (P2,000,000/2) P1,000,000 P1,000,000
c. Donation to son on account of marriage relative
(P5,000,000/2) 2,500,000 2,500,000
d. Donation to Philippine government not subject to
Donors tax
e. Donation to religious group considered stranger
(P1,000,000/2) 500,000 500,000

f. Donation mortis causa not subject to donors tax

g. Donation to NGOs generally not subject to donors tax

h. Donation to political party not subject to donors tax

Exclusive donations by Don:
a. Donation to secretary stranger 100,000
b. Donation to wife null and void
c. Donation to relative father 200,000 .
Total amount of gross gifts subject to donors tax P4,300,000 P4,000,000
2. Donors tax
Donation to relatives:
Donation to son on account of marriage relative
(P5,000,000/2) P10,000 P2,490,000 P2,490,000
Donation to relative father 200,000
Total net gifts P2,690,000
Tax on P1,000,000 P 44,000 P 44,000
Tax on excess (P1,690,000 x 8%): (P1,490,000 x 8%) 135,200 119,200
Total donors tax due donation to relatives P179,200 P163,200


BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 50
SUGGESTED ANSWERS
Chapter 6: DONORS TAX
Donation to strangers:
Donation to stranger daughter-in-law (P2,000,000/2) P1,000,000 P1,000,000
Donation to religious group considered stranger
(P1,000,000/2) 500,000 500,000
Donation to secretary stranger 100,000 .
Total amount donation to strangers P1,600,000 P1,500,000
Multiplied by donors tax rate to strangers 30% 30%
Total donors tax due donation to strangers P 480,000 P 450,000
Total amount of donors tax P 659,200 P 613,200
Problems 647
Donors tax Don Dona
1. Dec. 30, 200A:
Relative - on account of sons marriage
(P300,000/2) P10,000) P140,000 P140,000
Tax on P100,000 Exempt Exempt
Tax on excess (P40,000 x 2%) donors tax due P800 P800
Stranger daughter-in-law (P100,000/2) P50,000 P50,000
Multiplied by applicable donors tax rate 30% 30%
Donors tax due P15,000 P15,000
2. Jan. 1, 200B:
Stranger Chinese government (P200,000/2) P100,000 P100,000
Multiplied by applicable donors tax rate 30% 30%
Donors tax due P 30,000 P 30,000
3. March 31, 200B:
Relatives nephew (P50,000/2) P25,000 P25,000
Donors tax Exempt Exempt
Stranger god son (P100,000/2) P 50,000 P 50,000
Church (P200,000/2) 100,000 100,000
Total P150,000 P150,000
Multiplied by applicable donors tax rate 30% 30%
Donors tax due P 45,000 P 45,000

4. June 30, 200B:
Relative son on account of marriage (dowry already taken)
(P2,000,000 P400,000)/2 P800,000 P800,000
Add: Previous net gifts to relatives Mar. 31, 200B 25,000 25,000
Total net gifts P825,000 P825,000
Tax on P500,000 P14,000 P14,000
Tax on excess (P325,000 x 6%) 19,500 19,500
Total donors tax payable June 30, 200B P33,500 P33,500
5. Oct. 30, 200B:
Void donation husband and wife
6. Dec. 30, 200B:
Relatives:
Son (P500,000/2) P250,000 P250,000
Daughter (P500,000/2) 250,000 250,000
Total net gifts to relatives Dec. 30, 200B P500,000 P500,000
Add: Previous net gifts to relatives during 200B:

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 51
SUGGESTED ANSWERS
Chapter 6: DONORS TAX
March 31, 200B: Relatives nephew (P50,000/2) 25,000 25,000
June 30, 200B:
Relative son on account of marriage (dowry already taken)
(P2,000,000 P400,000)/2 800,000 800,000
Total net gifts to relatives as of Dec. 30, 200B P1,325,000 P1,325,000
Tax on P1,000,000 P44,000 P44,000
Tax on excess (P325,000 x 8%) 26,000 26,000
Total P70,000 P70,000
Less: Donors tax previously paid 200B (Relatives)-June 30, 200B P33,500 P33,500
Donors tax payable as of Dec. 30, 200B relatives P36,500 P36,500
Stranger daughter-in-law (P100,000/2) P50,000 P50,000
Multiplied by applicable donors tax rate 30% 30%
Donors tax due P 15,000 P 15,000