May 28, 1998

BIR RULING NO. 081-98

78-000-00-081-98
Atty. Amalia Yvonne Cario
508 Katarungan Street
Mandaluyong City
Madam:
This refers to your letter dated July 22, 1996 requesting for exemption from
the payment of gift tax under Section 91 of the Tax Code, as amended, (now Section
98 of the Tax Code of 1997) for the donation mortis causa you executed in favor of
your sister, Marijo B. Cario.
cdrep

The Deed of Donation Mortis Causa made and executed by and between you,
as the Donor, and Marijo B. Cario, as the Donee, provides that for and in
consideration of the love and affection and because of the uncertainty of life and the
inevitableness of death and the desire to give something to the latter, you thereby
give, transfer and convey, by way of donation to said Donee, your property covered
by Transfer Certificate of Title No. 8610 and the one-third (1/3) undivided share in
the property covered by Transfer Certificate of Title No. 8613, including
improvements thereon; that the same is subject to the following conditions, viz:
"1. That this donation shall produce effects only by and because of the
death of the Donor, the properties herein donated to pass title after the Donor's
death."
"2. That the Donor reserves the right to amend or cancel this donation
at any time during her lifetime."

and that the Donee received and accepted the gift and donation made in her favor
subject to the above-cited conditions, and thereby expressing her appreciation and
gratefulness for your kindness and generosity.

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CD Technologies Asia, Inc.

Taxation 2005

In reply, please be informed that pursuant to Section 78 of the Tax Code, as

amended (now Section 85 of the Tax Code of 1997), viz, all property, real or
personal, . . . (b) to the extent of any interest therein of which the decedent has at any
time made a transfer, by trust or otherwise, in contemplation of or intended to take
effect in possession or enjoyment at or after his death, . . . or (c) to the extent of any
interest therein, of which the decedent has at any time made transfer (except in case
of bona fide sale . . .) by trust or otherwise, where the enjoyment thereof was subject
at the date of his death to any change through the exercise of power by the decedent
alone . . . to alter, amend, revoke or terminate, or where any such power is
relinquished in contemplation of the decedent's death . . .", are included in
determining the value of the gross estate of the decedent. (Emphasis supplied.)
Parallel to the above provision is Article 728 of the New Civil Code stating
that donations which are to take effect upon the death of the donor partake of the
nature of testamentary provisions.
LexLib

Accordingly, the donations/gifts made by you in favor of your sister, Marijo B.

Cario, which are "intended to take effect upon the death of the donor" partake of the
nature of testamentary provisions and the same shall remain part of the donor
decedent's gross estate at the time of his/her death even if the same have been donated
in favor of the donee. Therefore, the aforestated provisions relative to the imposition
of estate tax on transfers in contemplation of death shall apply in this case.
Such being the case, the instant donation/gifts are exempt from the donor's
(gift) tax imposed under Section 91 of the Tax Code, as amended, (Section 98 of the
Tax Code of 1997) hence, your request for exemption is hereby granted.
It is however, emphasized that since a donation mortis causa takes effect only
upon the death of the donor, the real properties subject of the donation cannot be
transferred in the name of the donee and shall thereby remain the properties of the
donor during his/her lifetime. Meanwhile, the said "Donation Mortis Causa" can be
properly annotated at the back of the Transfer Certificates of Title (TCT) by the
concerned Register of Deeds in order not to prejudice the right of any person that may
be affected by the said donation, including that of both the Donor and the Donee.
This ruling is being issued on the basis of the foregoing facts as represented.
However, if upon investigation it will be disclosed that the facts are different, then
this ruling shall be considered null and void.
Cdpr

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CD Technologies Asia, Inc.

Taxation 2005

Very truly yours,

(SGD.) LIWAYWAY VINZONS-CHATO
Commissioner of Internal Revenue

Copyright 1994-2006

CD Technologies Asia, Inc.

Taxation 2005