Computation of the Donor's (Gift) Tax

January 6, 1981 BIR RULING NO. 002-81 123-a 000-00 002-81 The Intramuros Administration Puerta del Parian, Intramuros M a n i l a Attention: Mr . Jaime C . Laya Action Officer Gentlemen : This refers to your letter dated September 3, 1979 stating that as an agency of the government under the Ministry of Human Settlements created under P.D. 1616, you are contemplating to accept a donation inter vivos from a private individual of antique statuary composed of three retables, four side panels, ten pillars, and other items for the altar valued at P400,000.00, and that the donor shall donate the above items, subject to the condition that he will avail himself of the tax exemption provided under P.D. 1616 and other applicable existing tax laws on staggered basis, in whole or in part, for a certain period until the whole monetary equivalent of the donation is exhausted, but not to go beyond five (5) years from the date of the donation. cd You would like to be informed of the legal feasibility of the above-described proposed donation and the proper valuation of the objects thereof, in accordance with Section 16 of P.D. No. 1616. In reply, I have the honor to inform you that the donor's (gift) tax, which is levied, assessed, collected and paid upon the transfer by any person, resident or non-resident of a property by gift shall, for each calendar year be computed on the basis of the total net gifts made during that calendar year. (Section 120(a) and 121, Tax Code of 1977, as amended). The present law on the imposition of donor's (gift) tax, as amended by Presidential Decree No. 69 which abolished the practice of cumulating the donor's tax, is quite emphatic in the sense that the collection or payment of the donor's (gift) tax for any or all gifts made within a taxable calendar year must be done during the same year. aisadc Exemption from donor's (gift) tax or the deductibility of the full amount/value of the donation from gross income in computing net income, if allowed, must necessarily be availed of by the donor, all at once, in filing his income tax return for that particular taxable year. Accordingly, the prospective donor in your letter cannot deduct the entire monetary equivalent of his donation on an equally amortized, yearly sum on installment or staggered basis for a period of five years from the date of the donation. Please be further informed that pursuant to Section 4 of Batas Pambansa Blg. 45, Section 16 of Presidential Decree No. 1616, stating that "all grants and donations to you shall be exempt from donor's and other taxes and shall be fully deductible over and above what is ordinarily allowable under the National Internal Revenue Code", has been modified by Section 30(h) of the Tax Code, as amended by said Batas Pambansa. Accordingly, the abovestated proposed donation shall be deductible in full from the gross income of the donor for income tax purposes, if said donation is given exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture and in economic development according to a national priority plan to be determined by the NEDA. If such donation is not in accordance with the said annual priority plan, the same shall be subject to the 3% limitation prescribed in Section 30(h)(1) of the Tax Code. (Section 30(h)(1)(A) of the Tax Code of 1977, as amended by Batas Pambansa Blg. 45). As regards the valuation of the items to be donated, please be informed that the value/amount of the donation shall be the fair market value thereof at the time it is made. Very truly yours, RUBEN B. ANCHETA Acting Commissioner