Fundamental Concepts of Donor's Taxation

Donation
- Donation is an act of liberty whereby a person disposes gratuitously of a thing or right in
favor of another, who accepts it (Article 725, Civil Code)

Requisites of Valid Donation

- Capacity or authority of donor;
- Donative intent of donor;
- Delivery of donated poperty;
- Acceptance of donee; and
- Donation is in prescribed forms

Capacity or Authority of Donor

All persons who may contract and dispose of their property may make donation; Determined
at the time of making the donation
- Capacity to contract
Of legal age. Kapag minor = voidable. Kapag parehas minor = Unenforceable
- Capacity to Dispose
Ikaw dapat may ari

Capacity of the Donee

- Capacity of the Donee to enter into a contract is not an element of donation. However, the
doneee must not be specifically disqualified by law.
- Minor and others who cannot enter into a contract may become donees but acceptance
shall be done through their parents or legal representatives.
example:
Grandmother donated a gold reign to a minor child. -> Valid
The child accepted the donation -> Invalid, kasi minor
The parents accepted the donation on behalf of the child -> Valid
The donation is worth 1 million, but the acceptance was maid orally -> Void
(Acceptance of donation more than 5 thousand must be in writing)

Donative Intent
- This refers to the proper declaration of the legal owner of a property or right to transfer
ownership to another without consideration in money or its equivalent. This applies to
direct donation. (libre. insufficient or less than the consideration)

Delivery and Acceptance

The donor's tax shall not apply unless and until
- donor knows of the acceptance by the donee;
kapag may meeting of the minds yun na yung perfection of the contract, donation is a special
kind of contract, so the donor knows of the acceptance by the donee eto na yung tinatawag
natin na cognitive theory, the theory of cognition -> dapat alam ng offeror yung acceptance
ng donee.
- it is completed by the delivery, either actually or constructvely, of the donated property
the donee
completion. donation is a special kind of contract na kailangan present din ang completion
actual delivery - property is moved
constructive delivery - the ownership and control is transferred (public instrument)
When Perfected When Completed
The transfer of property by gift is It is completed by the delivery, either actually
perfected from the moment the donor or constructively, of the donated property to
knows of the acceptance of donee. the donee.

Actual vs. Constructive Delivery

Actual - Connotes physical transfer of property to the donee or his or her authorized
representative.
Constructive - Means that the donor already renounces his or her control or power on the
property because of the occurence of the event which is certain to take place.

Perfection of Donation
example: January 1, 2022 Mr. B, an OFW, sent a diamond ring to Ms. G, a resident of QC,
through a forwarder, J&T.
February 14, 2022 Ms. G received the ring. Unfortunately, Ms. G forgot to inform
Mr. B that she already received the gift.
December 25, 2022 Ms. G informed Mr. B of the receipt of the ring.
- Dec 25, 2022 - Prefection of Donation

Assuming, Ms. G didn't accept the diamond ring.

- contract of deposit, required na ibalik or for the meantime na
na kay Ms. G dapat alagaan at ingatan (safe keeping)

Wala pang perfection until the donor receive an acceptance.

Period of Acceptance
- Acceptance must be made dureing the lifetime of the donor and of the donee (Art. 746,
Civil Code)
example:
The acceptance was made through a letter, the donor wasn't able to read the acceptance until
his death, then Art. 746 is not already applicable. Instead of donor's tax, estate tax na lang.
Donation made to conceived and unborn children may be accepted by those persons who
would legally represent them if they were already born (Art. 742, Civil Code)

Prescribed Form for Personal Property (movable property)

Amount Donation Acceptance
Not exceeding P5,000 Oral/Wrttien Oral/Written
Exceeding P5,000 Written Written
*donation will be void if not written
Prescribed Form for Real Property
Donation Acceptance
In order that the donation of an The acceptance may be made in the same Deed
immovable may be valid, it must be of Donation or in a separate public instrument,
made in a public document specifying but it shall take effect unless it is done during
therein the property donated. the lifetime of the donor.

*public instrument - notarized If the acceptance is made in a separate instrument,

the donor shall be notifies therof in an authentic
form, and this step shall be noted in both
instruments.
Kinds of Donation
Donation Inter Vivos
refers to gift made and intended by donor to take effect during his lifetime. The
gift is subject to donor's tax.

Donation Mortis Causa

refers to gift made during lifetime of donor but is intended by donor to take affect
upon his death. This property transfer partakes the nature of testamentary
disposition and is governed by law on succession; hence this property is subject to
estate tax.

Incomplete Gift
A gift that is incomplete because of reserved power, become complete when either:
- The donor renounced the power; or
- His right to exercise the reserved power ceases because of the happening of some event or
contingency or the fulfillment of some condition, other than because of the donor's death.
example:
I'll donate this to you when you passed your exams.
(pwede pa irevoke unless maka pasa ka ng exam)
donations with condition or donation in a will testament