DONORS TAX

Compilation of Case Digest

1. PIROVANO v CIR
FACTS:
Enrico Pirovano as General Manager and President of De la Rama Steamship Co. was given a life insurance
by the latter. The initial beneficiary was the company but it later on renounced it rights and ceded it in
favor of Pirovanos heirs.
Because of this, the CIR classified such transaction as a donation and subjected it Donors Tax. The heirs
of Pirovano contended that the grant does not come within the purview of Donors tax because such was
a remuneratory donation given in consideration of Pirovanos past services.
ISSUE:
WON the donation was a simple donation or a remuneratory? And as such is it subject to Donors Tax?
HELD:
There is nothing on record to show that when the late Enrico Pirovano rendered services as President
and General Manager of the De la Rama Steamship Co. he was not fully compensated for such services, or
that, because they were "largely responsible for the rapid and very successful development of the
activities of the company" (Res. of July 10, 1946). Pirovano expected or was promised further
compensation over and in addition to his regular emoluments as President and General Manager. The
fact that his services contributed in a large measure to the success of the company did not give rise to a
recoverable debt, and the conveyances made by the company to his heirs remain a gift or donation. This
is emphasized by the directors' Resolution of January 6, 1947, that "out of gratitude" the company
decided to renounce in favor of Pirovano's heirs the proceeds of the life insurance policies in question.
The true consideration for the donation was, therefore, the company's gratitude for his services, and not
the services themselves.
Therefore, the donation is a simple one and must be subjected to Donors tax.
2. LLADOC v CIR
FACTS:
Sometime in 1957, Rev. Fr. Crispin Ruiz, as parish priest of Victorias Negros Occidental, received a 10,000
Php donation from M.B. Estate Inc. The amount was intended for the construction of a new Catholic
Church and such was used for the said purpose.
In 1958 M.B. Estate filed for donors gift tax return which triggered the CIR to issue an assessment for
Donors gift tax against Catholic Parish of Victorias Negros of which Lladoc was now the Parish priest.

Rev. Lladoc, protested against such assessment arguing that: 1. He should not be proceeded against for
the tax deficiency since he was not the recipient of such donation and did not benefit from it; and 2. That
the Church is constitutionally exempt from taxation.
ISSUE:
WON the tax deficiency can be collected from Lladoc who was not yet the Parish Priest at that time.
WON the church is exempt from Donors Tax?
HELD:
It is determined that it is not Rev. Lladoc who is personally liable but the Head of the Diocese to whom
the liability for payment of Donors tax pertains.
As to exemption from Donors Tax, the phrase "exempt from taxation" as employed in Section 22(3),
Article VI of the Constitution of the Philippines, should not be interpreted to mean exemption from all
kinds of taxes. Statutes exempting charitable and religious property from taxation should be construed
fairly though strictly and in such manner as to give effect to the main intent of the lawmakers.
In the present case, what the Collector assessed was a donee's gift tax; the assessment was not on the
properties themselves. It did not rest upon general ownership; it was an excise upon the use made of the
properties, upon the exercise of the privilege of receiving the properties (Phipps vs. Com. of Int. Rec. 91 F
2d 627). Manifestly, gift tax is not within the exempting provisions of the section just mentioned. A gift
tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos,
the imposition of which on property used exclusively for religious purposes, does not constitute an
impairment of the Constitution. As well observed by the learned respondent Court, the phrase "exempt
from taxation," as employed in the Constitution (supra) should not be interpreted to mean exemption
from all kinds of taxes. And there being no clear, positive or express grant of such privilege by law, in
favor of petitioner, the exemption herein must be denied.
3. GESTOPA V CA
FACTS:
Spouses Diego and Catalina Danlag executed a donation mortis causa covering several parcels of land in
favor of Mercedes Danlag-Pilapil. Subsequently, the Spouses executed a new Deed of Danotion which is
now intervivos with certain stipulations such as: (1) the Danlag spouses shall continue to enjoy the fruits
of the land during their lifetime, and that (2) the donee cannot sell or dispose of the land during the
lifetime of the said spouses, without their prior consent and approval.
In 1979, the spouses sold some parcels of land to the Gestopas and revoked the donation inter vivos in
favor of Mercedes.
Mercedes filed a petition for quieting of title stating among other things that she has accepted the
donation in the same instrument, openly and publicly exercised rights of ownership over the donated

properties, and caused the transfer of the tax declarations to her name. According to her she had
complied with all of them; that she had not been guilty of any act of ingratitude; and that respondent
Diego had no legal basis in revoking the subject donation and then in selling the two parcels of land to the
Gestopas.
ISSUE:
WON the donation was inter vivos or mortis causa?
WON the donation being inter vivos can be subsequently revoked?
HELD:
The granting clause shows that Diego donated the properties out of love and affection for the donee. This
is a mark of a donation inter vivos.
Second, the reservation of lifetime usufruct indicates that the donor intended to transfer the naked
ownership over the properties. As correctly posed by the Court of Appeals, what was the need for such
reservation if the donor and his spouse remained the owners of the properties?
Third, the donor reserved sufficient properties for his maintenance in accordance with his standing in
society, indicating that the donor intended to part with the six parcels of land.
Lastly, the donee accepted the donation. In the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we
said that an acceptance clause is a mark that the donation is inter vivos. Acceptance is a requirement for
donations inter vivos. Donations mortis causa, being in the form of a will, are not required to be accepted
by the donees during the donors' lifetime.
A valid donation, once accepted, becomes irrevocable, except on account of officiousness, failure by the
donee to comply with the charges imposed in the donation, or ingratitude. Furthermore, the records do
not show that the donor-spouses instituted any action to revoke the donation in accordance with Article
769 of the Civil Code. Consequently, the supposed revocation on September 29, 1979, had no legal effect.
4. Tang Ho vs. The Board of Tax Appeals, 97 Phil. 889, Nov. 19, 1955
FACTS:
Petitioners Li Seng Giap and his wife Tang Ho and their thirteen children appear to be the stockholder of
two close family corporations. In 1951, examiners of the BIR made an examination of the books of the
two corporation and found that each of Li Seng Giap's 13 children had a total investment therein of
approximately P63,195.00, in shares issued to them by their father Li Seng Giap, the manager and
controlling stockholder of the two corporations, in the years 1940, 1942 and 1948 to1950.
The Collector of Internal Revenue regarded these transfers as undeclared gifts and assessed against Li
Seng Giap and his children donor's and donee's taxes in the total amount of P76,995.31, including
penalties, surcharges, interests, and compromise fee due to the delayed payment of the taxes. The

petitioners paid the sum of P53,434.50, representing the amount of the basic taxes, and put up a surety
bond to guarantee payment of the balance demanded.
They requested the Collector of Internal Revenue for a revision of their tax assessments, and submitted
donor's and donee's gift tax returns. They admit that these gifts were not reported; but contend that as
the cash donated came from the conjugal funds, they constituted individual donations by each of the
spouses Li Seng Giap and Tang Ho of one half of the amount received by the donees in each instance.
Claiming the benefit of gift tax and appellants' aggregate tax liability, according to their returns, would
only be P4,599.94 for the year 1949, and P228,28 for the year 1950, or a total of P4,838.22. The Collector
refused to revise his original assessments; and the petitioners appealed to the Board of Tax Appeals
which upheld the previous decision.
ISSUE: W/N the donations made by petitioner Li Seng Giap to his children from the conjugal property
should be taxed against the husband alone, or against husband and wife. (Is a donation of community
property by the father alone equivalent in law to a donation of one-half of its value by the father and onehalf by the mother?)
RULING:
Under the old Civil Code, a donation by the husband alone does not become in law a donation by both
spouses merely because it involves property of the conjugal partnership; and that such a donation of
property belonging to the conjugal partnership, made during its existence, by the husband alone in favor
of the common children, is taxable to him exclusively as sole donor.
Under the Spanish Civil Code of 1889, governing law in the years involved. The determinative rule is that
of Arts. 1409 and 1415, reading as follows:
Art. 1409. The conjugal partnership shall also be chargeable with anything which may have been given or
promised by the husband to the children born of the marriage solely in order to obtain employment for
them or give them a profession, or by both spouses by common consent, should they not have stipulated
that such expenditures should be borne in whole or in part by the separate property of one of them.
ART. 1415, p. 1. The husband may dispose of the property of the conjugal partnership for the purposes
mentioned in Art. 1409.
These Articles clearly refute the appellants' theory that because the property donated is community
property, the donations should be viewed as made by both spouses. First, because the law clearly
differentiates the donations of such property "by the husband" from the "donations by both spouses by
common consent".
It indicates that the lawful donations by the husband to the common children are valid and are
chargeable to the community property, irrespective of whether the wife agrees or objects thereof.
Obviously, should the wife object to the donation, she can not be regarded as a donor at all.
Even more: Suppose that the husband should make a donation of some community property to a
concubine or paramour. Undeniably, the wife cannot be regarded as joining in any such donation. Yet

under the old Civil Code, the donation would stand, with the only limitation that the wife should not be
prejudiced in the division of the profits after the conjugal partnership affairs are liquidated. So that if the
value of the donation should be found to fit within the limits of the husband's ultimate share in the
conjugal partnership profits, the donation by the husband would remain unassailable, over and against
the non-participation of the wife therein. In Baello vs. Villanueva:
According to article 1413 of the Civil Code, any transfer or agreement upon conjugal property made
by the husband in contravention of its provisions, shall not prejudice his wife or her heirs. As the
conjugal property belongs equally to husband and wife, the donation of this property made by the
husband prejudices the wife in so far as it includes a part or the whole of the wife's half, and is to that
extent invalid. Hence article 1419, in providing for the liquidation of the conjugal partnership, directs
that all illegal donations made by the husband be charged against his estates and deducted from his
capital. But it is only then, when the conjugal partnership is in the process of liquidation, that it can be
discovered whether or not an illegal donation made by the husband prejudices the wife. And
inasmuch as these gifts are only to be held invalid in so far as they prejudice the wife, their nullity
cannot be decided until after the liquidation of the conjugal partnership and it is found that they
encroach upon the wife's portion.
Appellants herein are therefore in error when they contend that it is enough that the property
donated should belong to the conjugal partnership in order that the donation be considered and
taxed as a donation of both husband and wife, even if the husband should appear as the sole donor.
There is no blinking the fact that, under the old Civil Code, to be a donation by both spouses, taxable
to both, the wife must expressly join the husband in making the gift; her participation therein cannot
be implied.
In Gibbs vs. Government of the Philippines, this Court ruled that "the wife, upon acquisition of any
conjugal property, becomes immediately vested with an interest and title equal to that of the
husband"; but this Court was careful to immediately add, "subject to the power of management and
disposition which the law vests on the husband." As has been shown, this power of disposition may,
within the legal limits, override the objections of the wife and render the donation of the husband
fully effective without need of the wife's joining therein.
The consequence of the husband's legal power to donate community property is that, where made
by the husband alone, the donation is taxable as his own exclusive act. Hence, only one exemption or
deduction can be claimed for every such gift, and not two, as claimed by appellants herein. The Board
of Tax Appeals committed no error.
5. Abello et al. vs. CIR, G.R. No. 120721, Feb. 23, 2005
FACTS:
During the 1987 national elections, petitioners, who are members of the ACCRA law firm, contributed
Php 882,661.31 each to the campaign funds of Senator Angara, then running for the Senate. In
letters, the BIR assessed each of the petitioners Php 263,032.66 for their contributions. Petitioners
questioned the assessment. They claimed that political or electoral contributions are not considered
gifts under the NIRC, and that therefore, they are not liable for donors tax. The claim for exemptions
was denied.

CTA decided in favor of petitioners and ordered the Commissioner to desist from collecting donors
taxes from them. CA reversed and set aside the CTA decision ordering petitioners to pay donors
taxes amounting to Php 263,032.66 each.
ISSUE:

W/N political contributions are taxable gifts.

RULING:
Yes. Section 91 (Imposition of Tax) of the NIRC reads:
(A) There shall be levied, assessed, collected and paid upon the transfer by any person, resident
or nonresident, of the property by gift, a tax, computed as provided in Section 92. (B) The tax shall
apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether
the property is real or personal, tangible or intangible.
The NIRC does not define transfer of property by gift. However, Article 18 of the Civil Code, states
that deficiency shall be supplied by the provisions of the Code.
Thus, reference may be made to the definition of a donation in the Civil Code. Article 725 defines
donation as an act of liberality whereby a person disposes gratuitously of a thing or right in favor of
another who accepts it.
Donation has the following elements: (a) the reduction of the patrimony of the donor; (b) the
increase in the patrimony of the donee; and, (c) the intent to do an act of liberality or animus
donandi.
The present case falls squarely within the definition of a donation. Petitioners each gave P882,661.31
to the campaign funds of Senator Angara, without any material consideration. All three elements of a
donation are present. The patrimony of the four petitioners were reduced by P882,661.31 each.
Senator Angaras patrimony correspondingly increased by P3,530,645.24 . There was intent to do an
act of liberality or animus donandi was present since each of the petitioners gave their contributions
without any consideration.
Also, the fact that their purpose for donating was to aid in the election of the donee does not negate
the presence of donative intent.
6. The Christian and Missionary Alliance Churches of the Phils. vs. Collector, CTA Case No. 668, August
21, 1964
FACTS:
The petitioner is a religious corporation. In 1954 and 1956, petitioner received by way of donation
from the Christian and Missionary Alliance, also a religious corporation, and the Philippine Mission of
said corporation, a total of twelve parcels of land and the improvements thereon. The properties,
subject matter of the donations, were already devoted to religious purposes prior to the donations

and continued to be used by the petitioner-donee for the same purposes to which they had been
employed by the donor prior to the donations.
Petitioner applied with the BIR for tax clearance certificates for the donations, as donations exempt
from taxation, for the purpose of registering the deeds of donation with the RD and effecting the
TCTs of the properties in favor of the petitioner. The respondent, instead, assessed against and
demanded from the petitioner the amounts of Php 16,153.80 and Php 7,158.90 as donees gift taxes,
or the total sum of Php 23, 312.70.
Petitioner protested against said assessments and requested for the reconsideration and cancellation
of the same. Respondent denied the request and insisted on the payment of petitioner.
ISSUE: W/N donations of real properties devoted exclusively to religious purposes, by a religious
corporation, for the purpose of devoting said properties exclusively to the same religious purposes
that it had been devoted to, are subject to the payment of gift taxes. (Is the petitioner liable for the
donees gift taxes assessed?)
RULING:
No. One of the essential elements of a taxable gift is that there must be a clear and unmistakable
intent on the part of the donor to make the gift. The donative intent must be present in the transfer
of property in order that the gift taxes can be assessed and collected. In the case at bar, the donative
intent is wanting. The cause or consideration is neither fondness, liberality, admiration, generosity,
gratitude nor pity.
In the deeds of donation, the donor did not transfer by gift within the purview of the Gift Tax Law the
properties in the contract. Taxwise, it did not perform an act of liberality whereby it disposed
gratuitously the properties in favor of the donee. The petitioner did not receive a thing or a right
under the deeds of donation. On the contrary, it assumed an obligation to administer the properties
for religious purposes only. The petitioner received nothing of material value which could possibly
received by gift taxation.
The properties in the donations have no fair market value as that term is used in Section 113 of the
NIRC. The transfers of said properties were in name only, and merely to enable the latter to better
perform its obligations to administer the properties in question for religious purposes only, and
accomplish its mission in the Philippines.
The petitioner is just a Philippine arm of the donor. In effect, from the eyes of the Gift Tax Law, it is
just a transfer from the right hand to the left hand. Therefore, there should be excluded from the
category of donations all those acts which though grant benefits without compensation do not
require any corresponding patrimonial loss; there must exist the animus donandi, that is, the
intention to give benefit or enrichment to the donee. Such kinds of transfers of properties are not
subject to gift taxes.

7. BIR Ruling No. DA-625, October 27, 2009

8. BIR Ruling No. 65-092, August 20, 1965
FACTS:
Percy Young Lee, the surviving spouse of the late Concepcion Ko Lee, is a compulsory heir to the latters
paraphernal property. The 7 children of Concepcion entered into an extra judicial partition of the
properties left by her wherein they adjudicated their individual shares or inheritance in favor of Percy,
their father.
ISSUE: Whether or not the children who renounced their inheritance in favor of their father are subject to
inheritance and gift taxes
HELD:
NO. The portion of the inheritance renounced by the children in favor of their father is an additional
inheritance of the latter and not a donation from the former. The children did not donate their property
because such never became theirs having renounced the same. Accretion took place in Percys favor and
whatever property the decedents children had renounced were added to the fathers share. The children
are also not subject to inheritance tax.