In 2011, Solar Computer Corporation (Solar) purchased a proprietary membership share covered by Membership Certificate No. 8 from the Mabuhay Golf Club, Inc. for P500,000.00. On December 27, 2012, it transferred the same to David, its American consultant, to enable him to avail of the facilities of the Club. David executed a Deed of Declaration of Trust and Assignment of Shares wherein he acknowledged the absolute ownership of Solar over the share; that the assignment was without any consideration; and that the share was placed in his name because the Club required it to be done. In 2013, the value of the share increased to P800,000.00.
Is the said assignment a “gift” and, therefore, subject to gift tax? Explain. (5%)
Suggested answer only. Not an official answer and not legal advice.
No, the assignment is not a gift and is therefore not subject to gift tax. Under Section 98 of the NIRC, donor's tax applies only to completed gratuitous transfers where there is
Unlock the full Commercial and Tax Law answers365 days of full access. GCash, Maya and card accepted.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
What is an essential requisite for a transfer of property to be subject to donor's tax under Section 98 of the NIRC?
Donor's tax requires donative intent and an actual divestment of ownership by the donor.
What is the legal effect of executing a Deed of Declaration of Trust over a golf club share placed in a consultant's name?
A declaration of trust establishes that legal title is held merely in trust while beneficial ownership remains with the corporation.
Why is a corporate assignment of a golf share to a consultant without consideration exempt from donor's tax when held in trust?
Nominal transfers without donative intent or divestment of beneficial ownership are exempt from donor's tax.
Under the principle of substance over form, how are tax liabilities evaluated regarding property title assignments?
Choices available with full access.
Which statutory provision imposes donor's tax on the transfer of property by gift in the Philippines?
Choices available with full access.
Learn more about these topics
1. Donative Intent
Under Section 98 of the National Internal Revenue Code, donor's tax is levied upon the transfer by any person, resident or nonresident, of property by gift. An essential requisite of a taxable gift is donative intent, or animus donandi, on the part of the donor. Donative intent requires a clear, voluntary intention to relinquish ownership, control, and beneficial interest in property in favor of another without consideration. Where a transfer lacks donative intent, no taxable gift exists for donor's tax purposes.
2. Declaration of Trust
A declaration of trust creates a fiduciary relationship wherein legal title to property is placed in the name of a trustee while equitable and beneficial ownership remains with the trustor. When a corporation registers a golf membership share in a nominee consultant's name solely to comply with club rules, execution of a deed of trust disproves any completed transfer of beneficial ownership. Because the nominee holds title merely in trust without acquiring beneficial enjoyment, the assignment constitutes a nominal transfer rather than a taxable gift.
3. Substance Over Form
Taxation looks to the economic substance of a transaction rather than its mere legal form. A nominal assignment of corporate property to an agent or consultant for functional utility within a club does not divest the corporation of its actual ownership rights. Because the corporation retains absolute ownership, power of disposition, and economic control over the asset, the transaction generates no taxable gratuitous transfer. Without actual divestment of property control, the imposition of donor's tax is legally unwarranted.