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XIX.

CMI School, Inc., a non-stock, non-profit corporation, donated its three parcels of idle land
situated in the Municipality of Cuyapo, Nueva Ecija to SLC University, another non-stock, non-
profit corporation, in recognition of the latter’s contribution to and participation in the spiritual
and educational development of the former.

a. Is CMI School, Inc., liable for the payment of donor’s tax? Explain your answer. (2.5%)

b. If SLC University later sells the three parcels of idle land to Puregold Supermarket, Inc., a
stock corporation, will SLC University be liable for capital gains tax? Explain your answer. (3%)

c. If SLC University donates the three parcels of idle land in favor of the Municipality of
Cuyapo, Nueva Ecija, will SLC University be liable for donor’s tax? Explain your answer.
(2.5%)

Suggested Answer:
a. CMI is liable for payment of donor’s tax. However, in order that donations to non-stock, non-
profit educational institution may be exempt from donor’s tax, it is required that not more than
30% of the said gifts shall be used by the donee-institution for administration purposes (Sec
101[A][3], NIRC).

b. Yes, SLC University is liable for capital gains tax. The three parcels of idle lands sold by SLC
University is a capital asset as it is not used for its trade and/or business. Further, any sale of a
non-stock non-profit corporation of its real property is subject to capital gains tax based on the
gross selling price or current fair market value as determined in accordance with Section 6(E) of
the Tax Code, whichever is higher, of such land and/or buildings pursuant to Section 27(D)(5) of
the same Code.

c. No, SLC University will not be liable for donor’s tax. Under Section 101[2] of the NIRC, SLC
University is exempt from the donor’s tax because it qualifies as a gift to or for the use of any
political subdivision of the National Government.