Donation is an act of gratuitously transferring property or rights

motivated by the liberality of the giver (donor) in favor of the

receiver (donee) who accepts it. (Art. 725, New Civil Code)

Nature of A donation is a gift – a voluntary transfer of property or right from

one person to another for free.
Donation
The transfer of property or rights includes not only the transfer of
ownership or title but also the passage of control over the economic
benefits of the property.
 Donation may be classified as:
1. Mortis causa (subject to Estate Tax) – The donation takes effect
Kinds of upon the death of the donor. It is governed by the formalities of
testamentary disposition which shall be observed based on the
Donation law of succession, and to be imposed with estate tax.
2. Inter-vivos (subject to Donor’s Tax) – The donation takes effect
during the lifetime of the donor.
 In order that a donation will be valid, the following elements must
be present:
Essential 1. Capacity of the donor
Elements of 2. Donative intent
Donation 3. Delivery of the gift
4. Acceptance of the donee
 Art. 735: All persons who may contract and dispose of their property
may make a donation.
1. Capacity of Art. 736: Guardians and trustees cannot donate the property
entrusted to them.
the Donor
Art. 737: The donor’s capacity shall be determined as of the time of
the making of the donation.
 Art. 739: The following donations shall be void:
(1) Those made between persons who are guilty of adultery or
concubinage at the time of donation;
(2) Those made between persons found guilty of the same criminal
offense, in consideration thereof;
(3) Those made to a public officer or his wife, descendants and
Void ascendants, by reason of his office;
Donations (4) (As amended by Family Code, Art. 87) Those made between the
spouses during the marriage, except moderate gifts which the
spouses may give each other on the occasion of any family
rejoicing. The prohibition shall also apply to persons living
together as husband and wife without a valid marriage.
(5) Art: 743: Those made to incapacitated, though simulated under
the guise of another contract or through a person who is
interposed.
 Donative intent refers to the proper declaration of the legal owner
of a property or right to transfer ownership to another without
2. Donative consideration. Such intent followed by a donative act is essential to
constitute a gift especially in cases of direct donation.
Intent The intention to donate is known by observing the forms required
by law to make it valid.
 Art. 748: The donation of a movable may be made orally or in
writing.
An oral donation requires the simultaneous delivery of the thing or
of the document representing the right donated.
If the value of the personal property donated exceeds P5,000, the
Required donation and the acceptance shall be made in writing, otherwise,
the donation shall be void.
Forms to Art. 749: In order that the donation of an immovable may be
valid, it must be made in a public document, specifying therein
Effect the property donated and the value of the charges which the donee
must satisfy.
Donation The acceptance may be made in the same deed of donation or in a
separate public document, but it shall not take effect unless it is
done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall
be notified thereon in an authentic form, and this step shall be
noted in both instruments.
 Donative intent is required only in a direct gift, except for transfer
When for less than adequate and full consideration.
Donative Section 100, NIRC: Where property x x x is transferred for less than
an adequate and full consideration in money or money’s worth, then
Intent is Not the amount by which the fair market value of the property exceeded
the value of the consideration shall, for the purpose of tax x x x shall
Necessary be deemed a gift x x x
 The object of donation could be a real property, personal property
or even rights. The delivery of the object of donation may be actual
or constructive. The delivery may be made to a trustee.

3. Delivery of The completion of a gift requires physical delivery of the subject

matter of the gift, or, if physical delivery of the subject matter is not
the Gift possible, delivery of the instrument of assignment or deed.
As a rule, the donor’s tax does not apply unless and until there is a
completed gift, whereby the donor does not reserve or retains
power over the gift.
 A gift that is incomplete due to reserved powers becomes complete
when either:
3. Delivery of 1. The donor renounces the power; or
the Gift 2. His right to exercise ceases because of the happening of some
event or contingency or the fulfilment of some condition, other
than because of donor’s death.
 An incomplete gift in trust also becomes complete to the extent
that payments are actually made to the beneficiaries.
3. Delivery of
the Gift A donation is not incomplete merely because the donee’s identity
cannot be ascertained at the time of the transfer.
 “The donation is perfected from the
4. Acceptance moment the donor knows of the
of the Donee acceptance by the donee.”
Article 734, New Civil Code
 Art. 745: The donee must accept the donation personally, or through
an authorized person with a special power for the purpose, or with a
4. Acceptance general and sufficient power; otherwise, the donation shall be void.
of the Donee Art. 746: Acceptance must be made during the lifetime of the donor
and of the donee.
 Art. 738: All those who are not specially disqualified by law therefor
may accept donations.
Art. 741: Minors and others who cannot enter into a contract may
Capacity of become donees but acceptance shall be done through their parents
of legal representatives.
Donee
Art. 742: Donations made to conceived and unborn children may be
accepted by those persons who would legally represent them if they
were already born.
 1. Cancellation of Indebtedness
Condonation or remission of debt where the debtor did not render
service in favor of the creditor is a donation.
Other There is no donation in the following cases:
Regulations on a. If the cancellation of indebtedness is due to the rendition of
service, the transaction has the effect of payment of
Donation compensation. Hence, the debtor earned income which is
subject to income tax.
b. If a corporation forgives the debt of its stockholder, that
transaction has the effect of payment of dividend.
Other 2. Compromises on Will Disputes

Regulations on Compromises and settlements of will contests and other disputes

are not gifts. However, payments made to a dissatisfied heir who
Donation has no legally enforceable rights may constitute donation.
 3. Beneficiaries of Trust
Other Where a gift is made to a trustee for the benefit of one or more
beneficiaries, and not the trustee, are the donees of the gift.
Regulations on
The transfer of a bare legal title to a trustee is not, by itself, a gift.
Donation Hence, a transfer from on trust to another is not a gift if the
beneficiaries of the two trusts are the same.
 4. Corporation’s Shares of Stock
Other
A donation by a foreign corporation of its own shares of stock to
Regulations on resident employees is not subject to the gift tax but if the donation
was given in consideration of the latter’s services the value of the
Donation shares can constitute taxable income.
 5. Court Ordered Payments
Court ordered transfer generally are not gifts. These include
Other payment in which a party is held to be obliged to make for goods or
services received or damages for breach of contract or for torts.
Regulations on
However, court-ordered payments out of the estate of an
Donation incompetent or a minor for the benefit of relatives whom the
incompetent or minor is not legally obligated to support have been
held to be gifts.