Donor’s Tax: Transfer for Less than Adequate Consideration  BLC shares were not listed and traded

res were not listed and traded in the local stock exchange. This deprives
CTA Case No. 8318 June 11, 2014 – Metro Pacific Corp v. CIR a clear possibility of determining the stocks' benchmark fair market value/s as
Castaneda Jr, J. traded in the stock market.
- Section 7 of RR No. 6-2008 provides that” In the case of shares of stock not
MPC sold to CHI its common shares in NLC for 158 per share. It was initially assessed to listed and traded in the local stock exchanges, the book value of the shares
be exempt from donor’s tax for being an ordinary business transaction negotiated in good of stock as shown in the financial statements duly certified by an independent
faith. However CIR eventually assessed it to be subject to donor’s tax because there was certified public accountant nearest to the date of sale shall be the fair market
inadequate consideration. SC ruled that the law is clear that when the FMV exceeds the value. (Thus, the book value of BLC shares is same as the fair market value.)
consideration received, the excess shall be deemed as a gift subject to donor’s tax.  The CGT Return filed by MPC indicated that the fair market value was at P332. 78
per share and not the P158 per share selling price. Petitioner is bound by this
declaration under its CGT Return.
DOCTRINE  Considering that the FMV/BV of the unlisted shares exceeds the consideration
In case where property is transferred for less than an adequate and full consideration in received, the excess is subject to donor's tax under Sec. 100 of the 1997 NIRC,
money or money's worth, then the amount by which the fair market value (FMV) of the as amended.
property exceeded the value of the consideration shall be deemed a gift, and shall be
included in computing the amount of gifts made during the calendar year. DISPOSITIVE PORTION
WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED for
lack of merit. Accordingly, petitioner is hereby ORDERED to PAY respondent deficiency
FACTS donor's tax in the amount of P170,229,925.14, inclusive of the 25°/o surcharge
1. Petitioner Metro Pacific Corporation (MPC) sold to Columbus Holdings, Inc. (CHI)
2,597,197 common shares in Bonifacio Land Corporation (BLC) for the amount of OTHER NOTES
P410,357,126.00, or P158.00 per share
2. MPC requested CIR for "confirmation that the sale of BLC shares of stocks owned by
MPC to CHI is not subject to donor's tax as provided in Sec 100 of the Internal Revenue DIGESTER: Sophia Sy
Code as it is an ordinary business transaction negotiated in good faith by unrelated
parties for legitimate business purposes.”
3. MPC filed a Capital Gains Tax Return with the BIR and the DST. The said CGT return
showed that there was no tax due or paid for the transaction.
4. The CIR confirmed that the sales transaction over the BLC shares is not subject to
donor's tax because it is an ordinary commercial transaction negotiated in good faith
between unrelated parties and motivated by legitimate business reasons.
5. Later, MPC received a Notice for Informal Conference (Notice) from respondent
BIR, informing petitioner that the subject transaction is actually subject to
donor's tax. BIR considered the book value of the stocks as their fair market value and
applied Sec. 100 of the NIRC.
6. MPC requested for the re-evaluation of the factual and for the cancellation of the tax
assessment shown in the Notice.
7. MPC received a Final Assessment Notice (FAN), reiterating BIR’s demand for payment
of deficiency donor's tax.
8. MPC filed its formal protest, but was denied by the respondent. Hence this petition for
review.

ISSUE with HOLDING

1. W/N MPC is liable for the deficiency donor's tax assessment? YES.
 Section 100 of the 1997 NIRC, as amended, is clear that in case where property
is transferred for less than an adequate and full consideration in money or money's
worth, then the amount by which the fair market value (FMV) of the property
exceeded the value of the consideration shall be deemed a gift, and shall be
included in computing the amount of gifts made during the calendar year. It is thus,
important to determine the "fair market value" (FMV) of the property sold or
transferred, and whether it exceeded the value of the consideration.
- When the law is clear, it must not be susceptible to interpretation.