MARIA CARLA PIROVANO, et al. vs.

CIR

FACTS:

Enrico Pirovano was the father of the herein petitioners. In 1941, De la Rama
Steamship Co. insured the life of Enrico, who was then its President and General
Manager with various insurance companies for a P1M, making itself as beneficiary.
WWII came, the Company was unable to pay the PH premiums. Hence the PH
policies lapsed, while the US policies issued were kept subsisting, the New York
office having continued paying. Enrico died in 1944.

Board of Directors of De la Rama Steamship Co. granted and set aside, out of the
proceeds expected to be collected, the sum of P400k for equal division among the
4 minor children, said money to be convertible into 1,000 shares for each child.
Shortly, Company received the total sum of P643,000.00 as proceeds of the said
life insurance policies obtained from US insurers.

Upon receipt of the money, the Board modified, the first resolution by renouncing
all its rights, title, and interest to the said amount of P643,000.00 in favor of the
minor children of the deceased, subject to the express condition that said amount
should be retained by the Company in the nature of a loan, drawing interest at the
rate of 5% per annum, and payable to the Pirovano children after the Company shall
have settled in full the balance of its remaining indebtedness in approximately
P5M. This latter resolution was carried out in a Memorandum Agreement, executed
by the Company and Mrs. Estefania Pirovano, the latter acting in her capacity as
guardian of her children.

The Board further modified the resolution stating that it shall pay the proceeds of
said policies to the heirs of Enrico after the Company shall have settled in full the
balance of its present remaining indebtedness, but the annual interests accruing on
the principal shall be paid to the heirs, or their duly appointed representative,
whenever the Company is in a position to meet said obligation.

Estefania Pirovano, in behalf of her children, executed a public document formally

accepting the donation; the Company through its Board, took official notice of this
formal acceptance.
Stockholders of the Company ratified the resolutions with modifications that
payment of the donation shall not be effected until the Company shall have first
duly liquidated its present bonded indebtedness in the amount of P3,260,855.77
with the National Development Company; and that any and all taxes, legal fees, and
expenses shall be chargeable and deducted from its proceeds.

Majority stockholders voted to revoke the approval of donation in favor of the

Pirovano children.

As a consequence, petitioners represented by their guardian, Estefania, brought an

action for the recovery of sum of money, plus interest and damages against De la
Rama Steamship Co.

PROCEDURAL HISTORY:

CFI of Rizal - donation was valid and remunerative in nature; donation in favor of
the children is valid and binding on the defendant corporation.

CIR - assessed donees' gift tax against each of the petitioners, and
donor's gift tax against De la Rama Steamship Co.

Petitioners contested respondent’s assessment and imposition of the donees' gift

taxes and donor's gift tax. Respondent Commissioner overruled petitioners' claims.
Hence, case on CTA.

CTA - donor's gift tax was erroneously assessed and collected, hence,
petitioners are entitled to the refund; donees' gift taxes were
correctly assessed.

ISSUE:

WON Pirovano should pay the donees' gift tax

RULING: YES.
The Court ruled that a donation made by the corporation to the heirs of a
deceased officer out of gratitude for his past services is subject to the
donees’ gift tax.

It further held that the petitioners were wrong in saying that the donation was
remuneratory and not simple and it was made for a full and adequate compensation
for the valuable services by decedent to the Company, hence, the donation does
not constitute a taxable gift.

The Court stated that it is a donation; that the consideration for the donation was,
therefore, the company's gratitude for his services, and not the services
themselves and whether the donation was simple or remuneratory, it was still a gift
taxable under the law.

Love and affection are not considerations of value they are not estimable in terms
of value. Nor
are sentiments of gratitude for gratuitous part favors or kindnesses; nor are
obligations which are
merely moral. It has been well said that if a moral obligation were alone sufficient
it would remove
the necessity for any consideration at all, since the fact of making a promise
impose, the moral
obligation to perform it.
Love and affection are not considerations of value they are not estimable in terms
of value. Nor
are sentiments of gratitude for gratuitous part favors or kindnesses; nor are
obligations which are
merely moral. It has been well said that if a moral obligation were alone sufficient
it would remove
the necessity for any consideration at all, since the fact of making a promise
impose, the moral
obligation to perform it.
Love and affection are not considerations of value since they are not estimable in
terms of value. Nor are sentiments of gratitude for gratuitous part favors or
kindnesses; nor are obligations which are merely moral. It has been well said that if
a moral obligation were alone sufficient it would remove the necessity for any
consideration at all, since the fact of making a promise impose, the moral obligation
to perform it.
 ALEJANDRO v. GERALDEZ

FACTS:

The bone of contention is the Lolomboy Friar Lands Estate in Sta. Maria Bulacan.

Sps. Gavino Diaz and Severa Mendoza executed a Deed of Donation in favor of
their children, Olimpia, Angel, Andrea, and daughter-in-law Regina Fernando. In the
deed of donation, the Sps. donated 8 lots, with reservations on certain lots, to
their children and daughters-in-law and with conditions that they are not allowed
to alienate the same to 3rd persons while the couple are still alive and that they
shall continue to administer the same until their death. The donees manifested
their acceptance in the same deed of donation. When Gavino died, Severa executed
a deed of donation in favor of Angel and Andrea, giving the siblings each ½ portion.

When Severa died, Andrea sued her brother Angel for partition of lots. Teodorico
Alejandro, the surviving spouse of Olimpia, moved to intervene claiming 1/3 portion.

In his answer, Angel alleged that he had been occupying his share for more than 20
years. The intervenors claimed that the 1949 donation was a void mortis causa
disposition.

CFI ruled that the donation was a donation mortis causa because the ownership of
the properties donated did not pass to the donees during the donor’s lifetime but
was transmitted to the donees only upon the death of the donors. Both parties
appealed to the SC, Geraldez contending that it is a donation inter vivos while
Alejandro contending it to be mortis causa.

ISSUE:

WON donation is inter vivos (subject to donor’s tax) or mortis causa (subject to
estate tax)

HELD: Donation inter vivos (hence, subject to donor’s tax)

Upon examination of the warranty, acceptance, and reservation clauses of the

deed, particularly as regards the acceptance clause, the Court held that “The
acceptance clause is another indication that the donation is inter vivos .
Donations mortis cause, being in the form of a will, are never accepted by the
donees during the donor’s lifetime. Acceptance is a requirement for donations
inter vivos.

The limited right to dispose of the donated lots, which the deed gives to the
donees, implies that ownership had passed to them by means of the donation and
that, therefore, the donation was already effective during the donors’ lifetime.
That is a characteristic of a donation inter vivos. The donation, as shown in the
habendum clause, was already effective during their lifetime and was not made in
contemplation of their death because the deed transferred to the donees the
naked ownership of the donated properties. That conclusion is further supported
by the fact that in the deed of donation, out of the 8 lots owned by the donors,
only 5 were donated.
 BONSATO vs. CA

FACTS:

Case was initiated in CFI of Pangasinan, by respondents Josefa Utea and other
heirs of Domingo Bonsato and his wife Andrea Nacario, both deceased. Their
complaint (for annulment and damages) charged that on the first day of December
1949, Domingo Bonsato, then already a widower, had been induced and deceived
into signing two notarial deeds of donations in favor of his brother Juan Bonsato
and of his nephew Felipe Bonsato, respectively, transferring to them several
parcels of land in the municipalities of Mabini and Burgos, Pangasinan, both
donations having been duly accepted in the same act and documents.

Plaintiffs likewise charged that the donations were mortis causa and void for lack
of the requisite formalities. The defendants, Juan Bonsato and Felipe Bonsato,
answered averring that the donations made in their favor were voluntarily
executed in consideration of past services rendered by them to the late Domingo
Bonsato; that the same were executed freely without the use of force and
violence, misrepresentation or intimidation; and prayed for the dismissal of the
case.

PROCEDURAL HISTORY:

CFI - donations were valid because they were executed by the donor while
the latter was of sound mind, without pressure or intimidation; that
the deeds were of donation inter vivos without any condition making
their validity or efficacy dependent upon the death of the donor; but
as the properties donated were presumptively conjugal, having been
acquired during the coverture of Domingo Bonsato and his wife
Andrea Nacario, the donations were only valid as to an undivided one-
half share in the three parcels of land described therein.

CA - it was mortis causa, therefore invalid for not following the required
formalities.
ISSUE:

WON donation is inter vivos (subject to donor’s tax) or mortis causa (subject to
estate tax)

RULING: INTER VIVOS (hence subject to donor’s tax).

If the donation is made in contemplation of the donor’s death, meaning that

the full or naked ownership of the donated properties will pass to the donee
only because of the donor’s death, then it is at that time that the donation
takes effect, and it is a donation mortis causa which should be embodied in a
last will and testament. But if the donation takes effect during the lifetime of
the donor or independently of the donor’s death, meaning that the full naked
ownership of the donated properties passes to the donee during the donor’s
lifetime, not by reason of his death but because of the deed of donation,
then the donation is inter vivos.

If it was a donation mortis causa, then the documents should reveal any or all of
the following characteristics:

(1) Convey no title or ownership to the transferee before the death of the
transferor; or, what amounts to the same thing, that the transferor should
retain the ownership (full or naked) and control of the property while alive
(Vidal vs. Posadas);

(2) That before his death, the transfer should be revocable by the
transferor at will, ad nutum; but revocability may be provided for indirectly by
means of a reserved power in the donor to dispose of the properties conveyed
(Bautista vs. Sabiniano);

(3) That the transfer should be void if the transferor should survive the
transferee.

None of these is discernible in the deeds of donation executed by the late Domingo
Bonsato. The donor only reserved for himself, during his lifetime, the owner’s
share of the fruits or produce, a reservation that would be unnecessary if the
ownership of the donated property remained with the donor. Most significant is
the absence of stipulation that the donor could revoke the donations; on the
contrary, the deeds expressly declare them to be “irrevocable”, a quality
absolutely incompatible with the idea of conveyances mortis causa where
revocability is of the essence of the act, to the extent that a testator cannot
lawfully waive or restrict his right of revocation.

It is true that the last paragraph contains the phrase “that after the death of the
donor the aforesaid donation shall become effective”. But, said expression must be
construed together with the rest of the paragraph, and thus, its meaning clearly
appears to be that after the donor’s death, the donation will take effect so as to
make the donees the absolute owners of the donated property, free from all liens
and encumbrances; for it must be remembered that the donor reserved for
himself a share of the fruits of the land donated. Such reservation constituted a
charge or encumbrance that would disappear upon the donor’s death, when full title
would become vested in the donees.
 FELICIANO A. CASTRO v. CA

FACTS:

Alejandra Austria, the widow of the decease Antonio Ventenilla filed for
registration and confirmation of title on 1948 covering 10 parcels of land situated
in Pangasinan

Socorro A. Castro submitted an opposition, alleging that the lands applied for had
been donated to her by the applicant in 1939.

On March 2, 1950 the Court rendered judgment finding that Alejandra Austria had
been in possession of the lands in concept of owner since 1894, and consequently,
by virtue of the donation, ordered the registration thereof in the name of the
donee, Socorro A. Castro, subject only to the usufruct reserved by the donor in
herself for the rest of her lifetime.

In the same testate proceeding, a number of persons claiming to be the heirs of

Ventenilla filed a petition to set aside the decision and the order of general
default previously entered in the case of Austria vs. Heirs of Antonio Ventenilla,
and to have their opposition to the application admitted. Meanwhile, Alejandra
Austria died and Socorro A. Castro was substituted in her place.

The trial court, in its decision rendered on April 4, 1959, rejected both the claims
of Socorro A. Castro and of the oppositors without deciding the question of title
for purposes of registration.

Furthermore, the Court of Appeals affirmed the trial courts ruling that the
donation of all the ten parcels, executed by Alejandra Austria in favor of Socorro
A. Castro was mortis causa  and consequently void because it did not follow the
formalities required of a will, pursuant to Article 620 of the old Civil Code,   the law
in force when the donation was made on September 22, 1939.

ISSUE: WON the donation is mortis causa

HELD: NO.

Whether a donation is inter vivos  or mortis causa  depends upon the nature of the
disposition made. "Did the donor intend to transfer the ownership of the property
donated upon the execution of the donation ? If this is so, as reflected from the
provisions contained: in the donation, then it is inter vivos; otherwise, it is
merely mortis causa, or made to take effect after death." 5 Sometimes the nature
of the donation becomes controversial when the donee's enjoyment of the
property donated is postponed until after the donor's death. Manresa comments on
this situation as follows:

When the time fixed for the commencement of the enjoyment of the
property donated be at the death of the donor, or when the suspensive
condition is related to his death, confusion might arise. To avoid it we must
distinguish between the actual donation and the execution thereof. That the
donation is to have effect during the lifetime of the donor or at his death
does not mean the delivery of the property must be made during his life or
after his death. From the moment that the donor disposes freely of his
property and such disposal is accepted by the donee, the donation exists,
perfectly and irrevocably (articles 618 and 623). Until the day arrives or
until the condition is fulfilled, the donation, although valid when made,
cannot be realized. Thus, he who makes the donation effective upon a
certain date, even though to take place at his death, disposes of that which
he donated and he cannot afterwards revoke the donation nor dispose of the
said property in favor of another.lawphi1.nêt

It is quite clear from the terms of the donation that the donor intended to and did
dispose of her properties irrevocably in favor of the donee, subject only to the
conditions therein expressed, one of which was that the latter would have no right
to the products during the donor's lifetime. This merely indicates a reservation in
herself of the usufruct over said properties, which usufruct would be consolidated
with the naked ownership of the donee upon the former's death.

GRUBA:
 AUSTRIA-MAGAT v. HON. COURT OF APPEALS
G.R. No. 106755 February 1, 2002

Basilisa Comerciante is a mother of five (5) children, namely, Rosario Austria,

Consolacion Austria, herein petitioner Apolinaria Austria-Magat,
Leonardo(deceased), and one of herein respondents, Florentino Lumubos. In 1953,
Basilisa bought a parcel of residential land together with the improvement thereon
covered and described in Transfer Certificate of Title No. RT-4036 (T-3268). On
1975, Basilisa executed a document designated as Kasulatan sa Kaloobpala
(Donation). The said document which was notarized by Atty. Carlos Viniegra, reads
as follows:

“Na ako, si BASELISA COMERCIANTE, may sapat na gulang,

Filipina, balo, at naninirahan sa blg. 809 L. Javier Bagong Pook,
San Antonio, Lungsod ng Kabite, Filipinas, sa pamamagitan ng
kasulatang itoy. xxx Na alang-alang sa mabuting paglilingkod
at pagtingin na iniukol sa akin ng apat kong mga tunay na anak
na sila: Kusang loob na ibinibigay ko at ipinagkakaloob ng ganap
at hindi na mababawi sa naulit ng apat na anak ko at sa
kanilang mga tagamagmana (sic), ang aking isang lupang
residential o tirahan sampu ng aking bahay nahan ng nakatirik
doon na nasa Bagong Pook din, San Antonio, Lungsod ng
Kabite, at nakikilala bilang Lote no. 7, xxx Na ang Kaloob
palang ito ay magkakabisa lamang simula sa araw na akoy
pumanaw sa mundo, at sa ilalim ng kondision na: Magbubuhat o
babawasin sa halaga ng nasabing lupa at bahay ang anumang
magugul o gastos sa aking libing at nicho at ang anumang
matitira ay hahatiin ng APAT na parte, parepareho isang
parte sa bawat anak kong nasasabi sa itaas nito upang
maliwanang (sic) at walang makkalamang sinoman sa kanila; At
kaming apat na anak na naakalagda o nakadiit sa kasulatang ito
ay TINATANGGAP NAMIN ang kaloob-palang ito ng aming
magulang na si Basilisa Comerciante, at tuloy pinasasalamatan
namin siya ng taos sa (sic) puso dahil sa kagandahan look (sic)
niyang ito sa amin.”
Basilisa and her said children likewise executed another notarized document
denominated as Kasulatan which is attached to the deed of donation. On 1979,
Basilisa executed a Deed of Absolute Sale of the subject house and lot in favor of
herein petitioner Apolinaria Austria-Magat for Five Thousand Pesos (P5,000.00).
As the result of the registration of that sale, TCT No. RT-4036 in the name of the
donor was cancelled and in lieu thereof TCT No. T-10434 was issued in favor of
petitioner Apolinaria Austria-Magat on February 8, 1979.

On 1983, herein respondents (representing their deceased mother Consolacion

Austria), Ricardo, Mamerto and Segunda, all surnamed Sumpelo (representing their
deceased mother Rosario Austria) and Florentino Lumubos filed before the
Regional Trial Court of Cavite an action against the petitioner for annulment of
TCT No. T-10434 and other relevant documents, and for reconveyance
and damages.

ISSUE: WON the donation was intervivos.

HELD: YES. The decisive proof that the deed is a donation inter vivos is in the
provision that : Ibinibigay ko at ipinagkakaloob ng ganap at hindi mababawi sa naulit
na apat na anak ko at sa kanilang mga tagapagmana, ang aking lupang residential o
tirahan sampu ng aking bahay nakatirik doon xxx. This is a clear expression of the
irrevocability of the conveyance. The irrevocability of the donation is a
characteristic of a donation inter vivos. By the words hindi mababawi, the donor
expressly renounced the right to freely dispose of the house and lot in question.
The right to dispose of a property is a right essential to full ownership. Hence,
ownership of the house and lot was already with the donees even during the donors
lifetime. 

Furthermore, it also appeared that the provision in the deed of donation regarding
the prohibition to alienate the subject property is couched in general terms such
that even the donor is deemed included in the said prohibition (Gayon din ang
nasabing Titulo ay hindi mapapasangla o maipagbibili ang lupa habang maybuhay ang
nasabing Basilisa Comerciante). Both the donor and the donees were prohibited
from alienating and encumbering the property during the lifetime of the donor. If
the donor intended to maintain full ownership over the said property until her
death, she could have expressly stated therein a reservation of her right to
dispose of the same. The prohibition on the donor to alienate the said property
during her lifetime is proof that naked ownership over the property has been
transferred to the donees. It also supports the irrevocable nature of the
donation considering that the donor has already divested herself of the right to
dispose of the donated property. On the other hand, the prohibition on the donees
only meant that they may not mortgage or dispose the donated property while the
donor enjoys and possesses the property during her lifetime. However, it
is clear that the donees were already the owners of the subject property due to
the irrevocable character of the donation.

GRUBA:
Del Rosario vs Ferrer

GR No. 187056

FACTS:

 Spouses Leopoldo and Guadalupe Gonzales executed a document entitled

“Donation Mortis Causa” in favor of their two children, Asuncion and Emiliano,
and their granddaughter, Jarabini del Rosario for a parcel of land.
 Said donation Mortis Causa contained a provision that it shall be irrevocable and
shall be respected by the surviving spouse.
 It also contained an acceptance clause wherein the donees signified their
acceptance n the face of the document.
 When Guadalupe, the donor wife, died the surviving donor husband, Leopoldo,
assigned his rights over the subject property to his daughter, Asuncion.
Leopoldo later died.
 After the death of both of the donors, Jarabini filed a petition for probate
before the RTC of Manila. Asuncion opposed such petition and invoked that his
father had assigned his rights and interests to her.
 RTC ruled in favor of Jarabini saying that the intention of the donors is to
transfer the ownership and title to Jarabini during their lifetime, thus it is
donation inter vivos.
 The CA reversed the RTC.

ISSUE: Wheter the donation was inter vivos or mortis causa

RULING: Donation was inter vivos. The designation that it is a “Donation Mortis
Causa” on the document is not controlling. If a donation by its terms is inter vivos,
this character is not altered by the fact that the donor styles it mortis causa.

Gruba:

The Supreme Court ruled that although the deed was denominated as “Donation
Mortis Causa,” “irrevocability” is a quality absolutely incompatible with the idea of
conveyances mortis causa., where “revocability” is precisely the essence of the act.
“Given that the donation in this case is irrevocable or one given inter vivos, the
husband’s subsequent assignment of his rights and interests in the property to
Asuncion should be regarded as void, by then, he had no mere rights to assign. He
could not give what he no longer had. Nemo dat quod non habet.
Puig vs. Peñaflorida

G.R. No. L-15939

FACTS:

 Carmen Ubalde Vda. de Parcon died in the City of Iloilo, without forced heirs,
leaving certain properties in the City and province of Iloilo.
 She left a will and was survived by nephews and nieces.
 It also appears besides her will that she executed two notarial deeds of
donation, one of which containing a reservation that the donee shall not cause
the registration of the deed until after the donor’s death.
 One was entitled Donacion Mortis Causa, in favor of her niece Estella Magbanua,
purporting to convey two parcels of land and another one entitled Escritura de
Donacion Mortis Causa in favor of the same donee.
 Both donations were recorded in the corresponding Registry of Deeds after the
death of the donor.
 During the testate proceedings of the will executed by the decedent, her
nephews and nieces filed a suit against Magbanua, seeking to have the two
deeds of donation set aside for lack of testamentary formalities.
 The lower court declared the deeds invalid except for one disposition mortis
causa which was validated by the last will of Carmen Ubalde.
 Both parties appealed.
 The SC ruled that the first deed of donation was valid and effective by way of
donation inter vivos.
 A motion for reconsideration was filed.

ISSUE: Is the donation inter vivos or mortis causa?

RULING:

The donation is mortis causa. Where the donor provided for a reservation of her
right of disposition, the donation is mortis causa and not inter vivos. Nothing in the
deed itself indicated that any right, title or interest in the properties described
was meant to be transferred to Magbanua prior to the death of Carmen Ubalde
Vda. de Parcon.

It being thus clear that the disposition is an act mortis causa, such act must
appear with the solemnities required of a will in order to be legally valid.
Gruba:

Doña Carmen Ubalde expressly and consistently declared her conveyance to be one
ofdonation mortis causa and further forbade the registration of the deed until
after her death. The Supreme Court held that “[a]all these features concordantly
indicated that the conveyance was not intended to produce any definitive effects,
not to finally pass any interest to the grantee, except from and after the death of
the grantor.”
BIR Ruling No. 089-2011 dated March 21, 2011

FACTS:
 Eugenia Siasoco Perey died on September 11, 2009. She is survived by her
only daughter, MaryAnn P. Bueta, and her grandchildren by the said
daughter, Gregorio Rafael, Genevieve Eugenie, Marla Dianne and Pierre
Eusebius. In the course of settling the estate of the decedent, the sole heir
MaryAnn intimated that she does not want to own or handle the only
remaining property of the decedent, a property in Cubao, Quezon City,
thereby renouncing her share in the estate of the deceased. To Finally
settle the estate, MaryAnn and the four grandchildren executed an
extrajudicial settlement of the estate whereby MaryAnn unconditionally
renounced her share in the said estate, and the grandchildren, being the
heirs next in line, effectively became the heirs who received the inheritance
and who had the duty to settle the estate.

ISSUE: W/N donor’s tax is due on the above transaction.

HELD: NO
 The Cubao property will be transferred from the estate of Eugenia S. Perey
directly to the grandchildren, pro indiviso. It is incorrect to construe that
MaryAnn acquired the property from the estate and subsequently donated
the same to her children. There can be no donation as the property was
never transferred to MaryAnn. Since there is no donation, no donor's
tax may be assessed on the transaction.
BIR Ruling No. 109-2011 dated April 7, 2011
FACTS:
 LBP was qualified by the BSP as a Financial Institution (FI) with assets
qualified as a Non-Performing Assets (NPA) and likewise approved the
transfer/sale of the Non-Performing Assets to Philippine Distressed Asset
Asia Pacific (SPV-AMC) 2, Inc. ("PDAP2-SPV").
 Subsequently, a Deed of Absolute Sale was executed between PDAP2-SPV
and MACFARLANE COMPANY, INC. covering a parcel of land including the
improvements registered under the name of PDAP2-SPV in consideration of
the amount of Php3,760,000.00.
 MacFarlane Company, Inc. now seeks the ruling of the BIR to declare the
transfer/sale be exempted from the payment of the appropriate transfer
taxes pursuant to SPV Act and its IRR.
ISSUE: W/N the transfer/sale of the subject properties is exempt from transfer
taxes.
HELD: YES.
 With the enactment of RA 9182 (SPV Law), transactions involving the
transfer of a Real and Other Properties Owned or Acquired (ROPOA) by an
SPV to a third-party as well as those transfers qualified under the SPV law
have been granted tax exemptions. Since the subject parcels of land are
ROPOAs certified by the BSP as contained in the issued Certificate of
Eligibility, such transfer is exempt from the internal revenue taxes.
 SPV Rule 15 provides that in case of…(d) transfer of the ROPOA by the FI
to an individual, when the NPA of the FI is transferred to the SPV or an
individual for less than an adequate and full consideration in money's worth,
then the amount by which the fair market value of the property exceeded
the value of the consideration shall not be considered as a gift.
 Accordingly, if PDAP2-SPV acquired a ROPOA from Landbank for a
consideration which is less than the book value of such ROPOA, the above
SPV Rule provides that the same shall not be subject to donor's tax. If
PDAP2-SPV subsequently sells that ROPOA at a price which is more than its
acquisition cost, but less than the book value thereof in the books of the FI,
the difference between such book value and the selling price of PDAP2-SPV
should likewise not be considered as a gift under the Tax Code and hence,
not subject to donor's tax (BIR Ruling No. DA-483-05 dated November 25,
2005). **ROPOA shall refer to real and other properties owned or acquired
by an FI in settlement of its loans and receivables.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. B.F. GOODRICH
PHILS., INC. (now SIME DARBY INTERNATIONAL TIRE CO., INC.) and
THE COURT OF APPEALS, respondents.
G.R. No. 104171 | 1999-02-24

Facts:

 This is a case of B.F. Goodrich to Siltown Realty of a rubber plantation (

a plantation is a condition for approving the manufacture of tires and
other rubber products, and bought under Public Land Act and the Parity
Amendment to the 1935 Constitution which will expire that caused the
sale of the property) requirement in Basilan for a price less than its
declared fair market value.
 The BIR wanted to assess BF Goodrich for deficiency donor’s tax
representing the difference between the fair market value and the actual
purchase price of the property. The BIR also contended that BF
Goodrich filed a “false” income tax return
   The BIR commissioner issued against private respondent on October 10,
1980, an assessment for deficiency in donor's tax in the amount of
P1,020,850, in relation to the previously mentioned sale of its Basilan
landholdings to Siltown. Apparently, the BIR deemed the consideration for
the sale insufficient, and the difference between the fair market value and
the actual purchase price a taxable donation.
 private respondent contested this assessment, but received another
increased assessment to P1,092,949 the amount demanded for the alleged
deficiency donor's tax, surcharge, interest and compromise penalty
 Private respondent appealed the correctness and the legality of these last
two assessments to the CTA. After trial in due course, the CTA rendered its
Decision assessing the petitioner deficiency on gift tax
 Court of Appeals reversed the CTA

Issue: Whether or not the herein deficiency donor's tax assessment for 1974 is
valid and in accordance with law"

Ruling:
* (G Notes) The Supreme Court said that real property may be sold for less than
adequate consideration for a bona fide purpose and that in such event, the sale
remains an “arm’s length” transaction. On the issue of falsity of the return filed,
the Supreme Court ruled that although donor’s tax is different from capital
gains tax (as reported in the income tax return), the 1974 income tax return
was sufficient compliance with the legal requirement to file a donor’s tax
return. “In other words, the fact that the sale transaction may have partly
resulted in a donation does not change the fact that [BF Goodrich] already
reported its income for 1974 by filing an income tax return.”
 Petitioner insists that private respondent committed “falsity” when it sold
the property for a price lesser than its declared fair market value. This fact
alone did not constitute a false return which contains wrong information due
to mistake, carelessness or ignorance. It is possible that real property may
be sold for less than adequate consideration for a bona fide business
purpose; in such event, the sale remains an “arm’s length” transaction. In the
present case, the private respondent was compelled to sell the property even
at a price less than its market value, because it would have lost all ownership
rights over it upon the expiration of the parity amendment. In other words,
private respondent was attempting to minimize its losses. At the same time,
it was able to lease the property for 25 years, renewable for another 25.
This can be regarded as another consideration on the price.
 The fact that private respondent sold its real property for a price less than
its declared fair market value did not by itself justify a finding of false
return.
 even though a donor’s tax, which is defined as “a tax on the privilege of
transmitting one’s property or property rights to another or others without
adequate and full valuable consideration,” is different from capital gains tax,
a tax on the gain from the sale of the taxpayer’s property forming part of
capital assets, the tax return filed by private respondent to report its
income for the year 1974 was sufficient compliance with the legal
requirement to file a return. In other words, the fact that the sale
transaction may have partly resulted in a donation does not change the fact
that private respondent already reported its income for 1974 by filing an
income tax return.
BIR Ruling No. 124-2011 dated April 12, 2011

FACTS:
 Diamond Cement and Industrial Corporation – Ayala Corporation (DCIC-AC)
asked the BIR to rule on the exemption from payment of donor’s tax relative
to the transfer of properties to relocatees of DOTC’s Laguindingan
International Airport Project in Misamis Oriental.

ISSUE: W/N the donation is exempt from donor’s tax.

HELD: NO.
 The donation must fall under the exemptions enumerated in Sec. 101 of the
Tax Code. A cursory examination of the provision shows that DCIC-AC's
donation of lots to relocatees is not included among those donations exempt
from donor's tax. Section 101 exempts from donor's tax dowries, donation
to the national government, and donations to educational, charitable,
religious, cultural or social welfare corporations.
 Undoubtedly, the transfer of property by DCIC-AC to relocatees is not
within the ambit of Sec. 101.
BIR Ruling No. 128-2013 dated April 4, 2013

FACTS:
 Fr. Jerome P. Mesina (donor) donated 4 parcels of land located in Cebu to
Prior Provincial of the Augustinian Province of Sto. Nino de Cebu –
Philippines, Inc. (donee), a non-stock, non-profit religious corporation sole.
 While the above properties are registered in the name of the donor, the
true and beneficial owner thereof is the donee, hence, the deed of donation
to formalize the ownership of the said properties.
 The donor seeks the ruling of the BIR regarding the exemption of the
transaction.

ISSUE: W/N the donation is exempt from donor’s tax.

HELD: YES.
 Since the donee is a religious corporation sole, any donation to it is exempt
from the payment of donor's tax pursuant to the above provisions of the
Tax Code subject to the condition that not more than thirty percent (30%)
of said donation shall be used by the donee for administration purposes.
(Basis: Section 101 (A)(3), NIRC)

***AS CITED IN GRUBA***

 If Prior Provincial of the Augustinian Province of Santo Niño de Cebu-

Philippines, Inc. donates the same property donated to it to a nonexempt
donee, it shall be liable for donor's tax pursuant to Section 98 of the Tax
Code of 1997, as amended.
MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA,
AVELINO V. CRUZ, Petitioners, versus COMMISSIONER OF INTERNAL
REVENUE and COURT OF APPEALS, Respondents.
G.R. No. 120721 | 2005-02-23

Facts:

 During the 1987 national elections, petitioners, who are partners in the
Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm, contributed
P882,661.31 each to the campaign funds of Senator Edgardo Angara, then
running for the Senate.
 The BIR assessed each of the petitioners P263,032.66 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 exemption was denied by the Commissioner.
 petitioners filed a petition for review with the CTA, which was decided on
October 7, 1991 in favor of the petitioners.  As aforestated, the CTA
ordered the Commissioner to desist from collecting donor’s taxes from the
petitioners
 the Court of Appeals reversed and set aside the CTA decision
 CA reasoned that the transfer of property by gift, 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, is subject to donor’s
or gift tax.
 The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988,
which reads:
Political Contributions. – For internal revenue purposes, political
contributions in the Philippines are considered taxable gift rather
than taxable income. This is so, because a political contribution is
indubitably not intended by the giver or contributor as a return of
value or made because of any intent to repay another what is his due,
but bestowed only because of motives of philanthropy or charity. His
purpose is to give and to bolster the morals, the winning chance of the
candidate and/or his party, and not to employ or buy. On the other
hand, the recipient-donee does not regard himself as exchanging his
 services or his product for the money contributed. But more
importantly he receives financial advantages gratuitously.
 Petitioners filed a motion for reconsideration, which the Court of Appeals
which was denied. Hence this petition.

Issue: whether such political contributions were subject to donor’s tax

Ruling:
 (GNotes) The Supreme Court found that all the elements of donation were
present, namely: (1) the reduction of the patrimony of the donor; (2) the
increase in the patrimony of the donee; and (3) the intent to do an act of
liberality or animus donandi. Hence, the political or electoral contributions
were subject to donor’s tax.
o Since animus donandi or the intention to do an act of liberality is an
essential element of a donation, petitioners argue that it is important
to look into the intention of the giver to determine if a political
contribution is a gift. Petitioners’ argument is not tenable. First of all,
donative intent is a creature of the mind. It cannot be perceived
except by the material and tangible acts which manifest its presence.
This being the case, donative intent is presumed present when one
gives a part of one’s patrimony to another without consideration.
Second, donative intent is not negated when the person donating has
other intentions, motives or purposes which do not contradict donative
intent. This Court is not convinced that since the purpose of the
contribution was to help elect a candidate, there was no donative
intent. Petitioners’ contribution of money without any material
consideration evinces animus donandi. The fact that their purpose for
donating was to aid in the election of the donee does not negate the
presence of donative intent.
o Since the purpose of an electoral contribution is to influence the
results of the election, petitioners again claim that donative intent is
not present. Petitioners attempt to place the barrier of mutual
exclusivity between donative intent and the purpose of political
contributions. This Court reiterates that donative intent is not
negated by the presence of other intentions, motives or purposes
which do not contradict donative intent.
CIR vs BFGoodrich

Facts:

 Private Respondent BF Goodrich Phils., Inc. (now Sime Darby International

Tire Co, Inc.), was an American-owned and controlled corporation previous to
July 3, 1974. As a condition for approving the manufacture by private
respondent of tires and other rubber products, the Central Bank of the
Philippines required that it should develop a rubber plantation. In compliance
with this requirement, private respondent purchased from the Philippine
government in 1961, under the Public Land Act and the Parity Amendment to
the 1935 Constitution, certain parcels of land located in Tumajubong,
Basilan, and there developed a rubber plantation.
 Private respondent sold to Siltown Realty Philippines, Inc. on January 21,
1974, its Basilan landholding for P500,000 payable in installments.
 1974- declared the sale in its return submitted to BIR.
 BIR commissioner issued against private respondent on October 10, 1980, an
assessment for deficiency in donor's tax in the amount of P1,020,850, in
relation to the previously mentioned sale of its Basilan landholdings to
Siltown. Apparently, the BIR deemed the consideration for the sale
insufficient, and the difference between the fair market value and the
actual purchase price a taxable donation.
 CTA: decision of the Commissioner of Internal Revenue assessing petitioner
deficiency gift tax is MODIFIED land petitioner is ordered to pay the
amount of P1,311,179.01 plus 10% surcharge and 20% annual interest from
March 16, 1981 until fully paid provided that the maximum amount that may
be collected as interest on delinquency shall in no case exceed an amount
corresponding to a period of three years. CA reversed the judgement/

Issue: Whether or not the filing of income tax including the sale of the
subject land is enough not to pay the donor’s tax.

Whether or not petitioner's right to assess herein deficiency donor's tax has
indeed prescribed as ruled by public respondent Court of Appeals

Held:
Sec. 331 of the National Internal Revenue Code provides: Sec. 331. Period of
limitation upon assessment and collection. — Except as provided in the succeeding
section, internal-revenue taxes shall be assessed within five years after the return
was filed, and no proceeding in court without assessment for the collection of such
taxes shall be begun after expiration of such period. For the purposes of this
section, a return filed before the last day prescribed by law for the filing thereof
shall be considered as filed on such last day: Provided, That this limitation shall not
apply to cases already investigated prior to the approval of this Code.

Applying this provision of law to the facts at hand, it is clear that the October 16,
1980 and the March 1981 assessments were issued by the BIR beyond the five-
year statute of limitations. The Court has thoroughly studied the records of this
case and found no basis to disregard the five-year period of prescription.

For the purpose of safeguarding taxpayers from any unreasonable examination,

investigation or assessment, our tax law provides a statute of limitations in the
collection of taxes. Thus, the law on prescription, being a remedial measure, should
be liberally construed in order to afford such protection. 12 As a corollary, the
exceptions to the law on prescription should perforce be strictly construed.
Sumipat vs Banga

Facts:

 Placida Tabo-tabo and Lauro Sumipat, who contracted marriage on July 20,
1939, acquired three parcels of land (childless). Lauro Sumipat, however,
sired five illegitimate children out of an extra-marital affair with Pedra
Dacola, namely: herein defendants-appellees Lydia, Laurito, Alicia, Alejandro
and Lirafe, all surnamed Sumipat.
 Lauro Sumipat executed a document denominated "DEED OF ABSOLUTE
TRANSFER AND/OR QUIT-CLAIM OVER REAL PROPERTIES" (the assailed
document) in favor of defendants-appellees covering the three parcels of
land (the properties). On the document appears the signature of his wife
Placida which indicates that she gave her marital consent thereto.
 It appears that on January 5, 1983 when the assailed document was
executed, Lauro Sumipat was already very sick and bedridden; that upon
defendant-appellee Lydia’s request, their neighbor Benjamin Rivera lifted
the body of Lauro Sumipat whereupon Lydia guided his (Lauro Sumipat’s)
hand in affixing his signature on the assailed document which she had
brought; that Lydia thereafter left but later returned on the same day and
requested Lauro’s unlettered wife Placida to sign on the assailed document,
as she did in haste, even without the latter getting a responsive answer to
her query on what it was all about.
 After Lauro Sumipat’s death on January 30, 1984, his wife Placida,
hereinafter referred to as plaintiff-appellant, and defendants-appellees
jointly administered the properties 50% of the produce of which went to
plaintiff-appellant. As plaintiff-appellant’s share in the produce of the
properties dwindled until she no longer received any and learning that the
titles to the properties in question were already transferred/made in favor
of the defendants-appellees, she filed a complaint for declaration of nullity
of titles, contracts, partition, recovery of ownership now the subject of the
present appeal.
 RTC ruled in favor of defendant. CA to Placida.

Issue:

whether the questioned deed by its terms or under the surrounding circumstances
has validly transferred title to the disputed properties to the petitioners.
Held:Acceptance is not manifest, so null and void.

The Supreme Court found that the deed was actually a deed of donation, but
it was patently void for non-compliance with certain requirements. There was
also no proof of filing of donor’s tax return and payment of donor’s tax, which
the Supreme Court considered “mandatory. In fact, the Registrar of Deeds is
mandated not to register the registry of property any document transferring
real property by way of gifts inter vivos unless a certification that the taxes
fixed and actually due on the transfer has been paid or that the transaction
is exempt from the Commissioner of internal Revenue, in either case, is
presented.”

Title to immovable property does not pass from the donor to the donee by virtue
of a deed of donation until and unless it has been accepted in a public instrument
and the donor duly notified thereof. The acceptance may be made in the very same
instrument of donation. If the acceptance does not appear in the same document,
it must be made in another. Where the deed of donation fails to show the
acceptance, or where the formal notice of the acceptance, made in a separate
instrument, is either not given to the donor or else not noted in the deed of
donation and in the separate acceptance, the donation is null and void. 20

In this case, the donees’ acceptance of the donation is not manifested either in
the deed itself or in a separate document. Hence, the deed as an instrument of
donation is patently void.

We also note the absence of any proof of filing of the necessary return, payment
of donor’s taxes on the transfer, or exemption from payment thereof. Under the
National Internal Revenue Code of 1977, the tax code in force at the time of the
execution of the deed, an individual who makes any transfer by gift shall make a
return and file the same within 30 days after the date the gift is made with the
Revenue District Officer, Collection Agent or duly authorized Treasurer of the
municipality in which the donor was domiciled at the time of the transfer. 21  The
filing of the return and payment of donor’s taxes are mandatory. In fact, the
registrar of deeds is mandated not to register in the registry of property any
document transferring real property by way of gifts  inter vivos  unless a
certification that the taxes fixed and actually due on the transfer had been paid
or that the transaction is tax exempt from the Commissioner of Internal Revenue,
in either case, is presented.