Tax Consequence of a Certain Onerous Donation

September 26, 1996 BIR RULING NO. 102-96 93 00-000 102-96 Dr. Geronimo O. Veneracion, Jr. 33 Victoria Ave., New Manila Quezon City S i r : This refers to your letter dated August 23, 1996 stating that you and your wife are the owners of a parcel of land, situated at Banilad Estate, Cebu City, with an area of 2,335 sq. m., covered by Transfer Certificate of Title No. 125584; and that you and your wife executed a Deed of Onerous Donation covering said property, in favor of your son Rolando S. Veneracion, subject to the onerous condition that he shall pay the donors a monthly support of P20,000.00 for the next ten (10) years. cdt Based on the foregoing, you now in effect request for a ruling on the tax consequence of the said onerous donation. In reply, please be informed that Art. 726 of the Civil Code provides that: "Art. 726. When a person gives to another a thing or right on account of the latters merits or of the services rendered by him to the donor, provided they do not constitute a demandable debt, or when the gift imposes upon the donee a burden which is less than the value of the thing given, there is also a donation." Section 93 of the Tax Code, as amended, likewise provides that the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift for the purpose of the tax. Accordingly, onerous donation shall be subject to the payment of donors tax only to the extent that the value of the property exceeds the amount of the onerous condition imposed on the donee. LLpr Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue