To qualify as taxable gift the transfer of property

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To qualify as taxable gift, the transfer of property must be genuinely gratuitous, i.e., the donor must receive nothing in terms of money or money’s worth in consideration of the gift. Property received as gift does not create a taxable income to the donee, but any income derived from the property after he becomes the owner is taxable to him, under the income tax law. Transfers and persons subject to donor’s tax 1) The donor’s tax applies whether the transfer is in trust or otherwise, whether the gift is direct or indirect (e.g., X gratuitously pays the indebtedness of Y to Z), and whether the property is real or personal, tangible or intangible. Where property (other than real property classified as capital asset referred to in Sec. 24[D] of the Tax Code) is sold or transferred for less than an adequate and full consideration in money or money’s worth, then the amount (e.g. P300,000) by which the fair market value of the property (e.g. P300,000) by which the fair market value of the property (e.g., P500,000) exceeded the value of the consideration (e.g.P200,000) shall, for the purpose of the tax be deemed a gift where the transaction does not appear to be bona fide and the intent to donate is apparent. The difference shall be included in computing the amount of gifts during the taxable year. 2) Donor’s tax is levied and paid upon the transfer by any person, resident or non-resident, of the property of gift. (Secs. 98, 99, 100) Distinctions between donor’s tax and estate tax They are as follows:
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1) The first is a tax on the privilege to transmit property during life, while the second, on the privilege to transmit property upon one’s death; 2) In the first, the tax rates are lower; 3) In the first, the exemption is only P100,000, while the second, it is P200,000 4) In the first, notice of donation is not required (see Sec. 103 [A]), while in the second, notice of death is required (see Sec. 89); and 5) In the first, extension of payment is not provided, while in the second, an extension may be granted by the CIR (see Sec. 91 [B]) In both, the taxes are paid at the time the returns are filed. Meani ng of net gift Net gift means the total amount of gifts less the allowable deductions and specific exemptions. Tax Imposed on net gift The donor’s tax is computed on the basis of the total net gifts made during the calendar year. Net gifts of the amount of P100,000 or less, however, are exempt. (see Sec. 99 [A]) Note: If the gift is made in property, the fair market value thereof at the time of the gift shall be considered the amount of the gift. The provisions of Section 88 [B] applicable to the determination of the value of the gross estate, shall apply to the valuation of gifts made in real property. (Sec. 102) Exemptions of deductions from gifts Under the heading “Exemption of certain gifts,” Section 101 of the Tax Code enumerates the donations which are exempt from donor’s tax. (as to other exemptions, see Chap. I-F) Although the Tax Code speaks of “exemption,” it is more appreciated to consider them as “deduction” as they are subtracted
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