Tax Consequences of a Donation

March 16, 1995 BIR RULING NO. 058-95 91 000-00 058-95 Philstar Marketing and Development, Inc. 2nd Floor, HGL Building 554 EDSA, Caloocan City Attention: Mr . Alfonso B . Basa C.P . A Gentlemen : This refers to your letter dated October 19, 1994 stating that a donation of real property situated at Tabang, Malolos, Bulacan was consummated between HSL as donor and Meralco as donee; that the corresponding Transfer Certificate of Title (TCT) was registered in the name of the donee; that a clause will be annotated on the TCT which states: reversion of donated property to the donor once the same property is abandoned by the donee or is no longer devoted to the use for which it was devoted (as Meralco Sub-Station); and that the corresponding donor's tax was paid. prll Based on the foregoing representations, you are now requesting for a ruling on the following queries: "1. Can this situation be construed as not a donation that another form of conveyance, such as sale? "2. Is there any ground for this "sale" conclusion? "3. What will be then the other tax liabilities of the donor and/or donee in such a case?" In reply, please be informed that Article 757 of the Civil Code of the Philippines provides as follows: "Art. 757. Reversion may be validly established in favor of only the donor for any case and circumstances, but not in favor of other persons unless they are all living at the time of the donation. Any reversion stipulated by the donor in favor of a third person in violation of what is provided in the preceding paragraph shall be void, but shall not nullify the donation." From the foregoing provisions of Article 757 of the Civil Code of the Philippines, it is clear that a donation with a reversion clause in favor of the donor can be validly established for any case and circumstances. Thus, your query as to whether such a donation with a reversion clause in favor of the donor will be construed by this Office as another form of conveyance such as a sale is answered in the negative. You queries Nos. 2 and 3 are no longer relevant in view of the answer to your first query. cdpr Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue