Mr. L owned several parcels of land and he donated a parcel each to his two children. Mr. L acquired both parcels of land in 1975 for ll200,000.00. At the time of donation, the fair market value of the two parcels of land, as determined by the CIR, was 112,300,000.00; while the fair market value of the same properties as shown in the schedule of values prepared by the City Assessors was 112,500,000.00. What is the proper valuation of Mr. L’s gifts to his children for purposes of computing donor’s tax? (3%)
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The proper valuation of Mr. L's gifts to his children is P2,500,000.00. Under Section 102 in relation to Section 88(B) of the NIRC, if a gift is made in real property, it shall be appraised at its fair market
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Quick check
How is real property appraised for donor tax purposes under Section 102 of the NIRC?
Real property donated as a gift is valued at whichever is higher between the CIR zonal value and the Assessor's fair market value.
In the donation of land where the City Assessor's value is higher than the CIR zonal value, which value governs?
The higher valuation fixed by the City Assessor governs when it exceeds the CIR zonal value.
What is the current donor tax rate under the National Internal Revenue Code as amended by the TRAIN Law?
Under the TRAIN Law, donor tax is assessed at a flat rate of six percent on net gifts exceeding ₱250,000.00.
Why is the historical acquisition cost of real property disregarded when computing donor tax on a donation?
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If donated land has a CIR zonal value of ₱2,300,000.00 and a City Assessor value of ₱2,500,000.00, what is the gross gift value?
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Learn more about these topics
1. Real Property Valuation
Under Section 102 in relation to Section 88(B) of the National Internal Revenue Code, real property given as a gift is appraised for donor tax purposes at its fair market value at the time of donation. The law prescribes that fair market value shall be whichever is higher between the value determined by the Commissioner of Internal Revenue, known as the zonal value, and the fair market value shown in the schedule of values fixed by the Provincial or City Assessors. The historical acquisition cost of the property is completely irrelevant for donor tax valuation.
2. Zonal Versus Assessor
When determining the tax base for donor tax on real estate, the statutory rule requires a direct comparison between the Commissioner's zonal valuation and the local assessor's tax declaration value. Whichever figure reflects a higher monetary valuation prevails as the gross gift value. If the City Assessor's schedule of values specifies a higher amount than the zonal value published by the Bureau of Internal Revenue, the assessment fixed by the City Assessor governs the computation of the applicable donor tax liability.
3. Donor Tax Rate
Following the amendments introduced by the TRAIN Law, donor tax is assessed at a flat rate of six percent on total net gifts made during the calendar year in excess of two hundred fifty thousand pesos. For real property donations, determining the correct gross gift valuation is essential prior to applying statutory deductions and the six percent tax rate. Accurately applying the higher fair market value prevents tax deficiency assessments and ensures proper compliance with Philippine gift tax regulations.