DONORS TAX:

1. Eduarte vs. CA, GR No:105944, Feb 9, 1996

Doctrine: All crimes which offend the donor show ingratitude and are causes for revocation.
The value of the opinion of a handwriting expert depends not upon his mere statements of whether a
writing is genuine or false, but upon the assistance he may afford in pointing out distinguishing marks,
characteristics and discrepancies in and between genuine and false specimens of writing which would
ordinarily escape notice or detection from an unpracticed observer.
The rule is well-settled that mere possession cannot defeat the title of a holder of a registered torrens
title to real property. Although generally a forged or fraudulent deed is a nullity and conveys no title,
however there are instances when such a fraudulent document may become the root of a valid title.
One such instance is where the certificate of title was already transferred from the name of the true
owner to the forger, and while it remained that way, the land was subsequently sold to an innocent
purchaser. For then, the vendee had the right to rely upon what appeared in the certificate.
The fact that the vendor’s title was fraudulently secured cannot prejudice the rights of the purchasers
absent any showing that they had knowledge or participation in such irregularity. Thus, they cannot be
obliged to look beyond the certificate of title which appears to be valid on its face and absent any
annotation or notice of private respondents’ adverse claim.
The established rule is that the rights of an innocent purchaser for value must be respected and
protected notwithstanding the fraud employed by the seller in securing his title.
Remedies of the owner of a parcel of land who was prejudiced and fraudulently dispossessed of his
property is to bring an action for damages against those who caused or employed the fraud, and if the
latter are insolvent, an action against the Treasurer of the Philippines may be filed for recovery of
damages against the Assurance Fund.
The relevant doctrine discussed in this case pertains to the definition of donation which is an act of
liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.
On the part of the donor, it is an exercise of one's generosity. This notwithstanding, a donation may
be revoked in the case of the donor ending up as a victim of greed and ingratitude of the donee.
Facts: Pedro Calapine was the registered owner of a parcel of land covered by an OCT. Later, he
executed a donation inter vivos ceding one-half portion thereof to his niece Helen S. Doria.
Thereafter, another deed identically entitled was purportedly executed by the same donor ceding unto
Helen the whole of the parcel of land covered by the same OCT. So instead of half, naging whole.
On the basis of this second deed, the original certificate was canceled and a TCT was issued in
Helen’s name of the whole of the parcel of land.
Helen then donated a portion of the land in favor of Calauan Christian Reformed Church.
Helen also sold, transferred and conveyed unto the spouses Eduarte the remaining portion of that
parcel of land save the portion on which the vendor's house had been erected. The corresponding
TCTs were issued in said transactions.
The problem arose when Pedro Calapine claimed that his signature to the second deed of donation
was a forgery. Pedro also argued that this act of Helen in forging the same made her unworthy of his
liberality. Hence, Pedro Calapine brought suit against Helen S. Doria, the Calauan Christian
Reformed Church, Inc. and the Spouses Eduarte to revoke the donation made in favor of Helen(yung
original), to declare null and void the deeds of donation and sale that Helen executed and to cancel
the corresponding TCTs that were issued.
Spouses Eduarte: The spouses denied having knowledge of the first deed of donation and that the
plaintiff's purported signature in the second deed of donation was his own, hence genuine. They
prayed that the complaint against them be dismissed; that upon their counterclaim, the plaintiff be
ordered to pay them moral and exemplary damages and attorney's fees; and that upon their cross-
claim that Helen be ordered to reimburse them the purchase price of P110,000 and to pay them moral
and exemplary damages and attorney's fees.
Calauan Christian Reformed Church, Inc.: The defendant Calauan Christian Reformed Church, Inc.
manifested in its answer the willingness to reconvey to the plaintiff that part of the property donated to
it by Helen.
Helen and the ROC did not file their answers.
RTC: Thereafter, the RTC rendered judgment revoking the donations made by Pedro in favor of
Helen and annulling the subsequent sale and donation made by Helen. Helen was then ordered to
pay the Spouses Eduarte the amount they paid as purchase price for the parcel of land.
The defendants Eduarte spouses took an appeal claiming that the trial court erred in annulling the
deed of absolute sale executed by and between Spouses Eduartes and Helen Doria and in declaring
them buyers in bad faith.
CA: In its decision, the CA dismissed petitioners' appeal and affirmed the decision of the trial court.
Hence, this petition. In adjudging petitioners as buyers in bad faith, respondent Court of Appeals
affirmed the trial court's finding that the attendant circumstances, that is, the presence of other
occupants as well as houses built of strong materials and fruit bearing trees in the subject land,
should have aroused the suspicion of petitioners and impelled them to exercise due diligence in
verifying the true ownership of the property being sold.
Hence, this petition.
Petitioner’s Contention: The petitioners submit that paragraph (1) of Article 765 of the Civil Code
does not apply in this case because the acts of ingratitude which can revoke a donation pertain to
offenses committed by the donee against the person or property of the donor. Petitioners argue that
as the offense imputed to Helen Doria, the falsification of a public document - is neither a crime
against the person nor property of the donor, the same is not a ground for revocation.
As to the argument that they are buyers in good faith, the petitioners also argued that although there
were other occupants in the subject property, no adverse claim was made by the latter as they were
mere tenants therein, thus, petitioners were not obliged to make any further inquiry because the
property being sold was covered by a certificate of title under Helen Doria's name.
Issue: Whether the revocation of the donation due to acts of ingratitude by Helen proper?
Held: YES. The Court said that the Civil Code provides that crimes which offend the donor show
ingratitude and are causes for revocation and is not limited to crimes against the person nor property
of the donor. Hence, the Court ruled that the revocation was proper.
Issue: Whether or not the Spouses Eduarte are buyers in good faith and therefore the sale in their
favor should not be annulled?
Held: YES. The Court said that the rule is well-settled that mere possession cannot defeat the title of
a holder of a registered torrens title to real property. Moreover, although a forged or fraudulent deed is
a nullity and conveys no title, however there are instances when such a fraudulent document may
become the root of a valid title. One such instance is where the certificate of title was already
transferred from the name of the true owner to the forger, and while it remained that way, the land
was subsequently sold to an innocent purchaser. For then, the vendee had the right to rely upon what
appeared in the certificate.
Where there was nothing in the certificate of title to indicate any cloud or vice in the ownership of the
property, or any encumbrance thereon, the purchaser is not required to explore further than what the
Torrens Title upon its face indicates. If the rule were otherwise, the efficacy and conclusiveness of the
certificate of title which the Torrens System seeks to insure would entirely be futile and nugatory.
When herein petitioners purchased the subject property from Helen Doria, the same was already
covered by a TCT under the latter's name. And although Helen Doria's title was fraudulently secured,
such fact cannot prejudice the rights of herein petitioners absent any showing that they had any
knowledge or participation in such irregularity. Thus, they cannot be obliged to look beyond the
certificate of title which appeared to be valid on its fade and sans any annotation or notice of private
respondents' adverse claim. Hence, petitioners are purchasers in good faith.Consequently, the deed
of sale in favor of the spouses must be respected.
In this regard, it has been held that the proper recourse of the true owner of the property who was
prejudiced and fraudulently dispossessed of the same is to bring an action for damages against those
who caused or employed the fraud, and if the latter are insolvent, an action against the Treasurer of
the Philippines may be filed for recovery of damages against the Assurance Fund.

2. Republic vs. Guzman, GR. No132964, Feb 18, 2000

Doctrine: This case was included in the case list because here, the three Essential Elements of a
Donation were enumerated and illustrated. Here, the Court also ruled that a deed of quitclaim is not a
donation inter vivos.
There are three (3) essential elements of a donation: (a) the reduction of the patrimony of the donor;
(b) the increase in the patrimony of the donee; and, (c) the intent to do an act of liberality or animus
donandi. When applied to a donation of an immovable property, the law further requires that the
donation be made in a public document and that there should be an acceptance thereof made in the
same deed of donation or in a separate public document. In cases where the acceptance is made in a
separate instrument, it is mandated that the donor should be notified thereof in an authentic form, to
be noted in both instruments.
When the deed of donation is recorded in the registry of property the document that evidences the
acceptance should also be recorded.
It is well-settled that if the notification and notation are not complied with, the donation is void.
Facts: Simeon died leaving to his wife and son Helen and David as sole heirs of an estate consisting
of several parcels of land located in Bulacan. Simeon was a naturalized American citizen while David
and Helen were American citizens.
Helen and David then executed a Deed of Extrajudicial Settlement of the Estate of Simeon Guzman.
This was then registered. The parcels of land were then accordingly registered in the name of Helen
Meyers Guzman and David Rey Guzman in undivided equal shares.
Thereafter, Helen executed a Quitclaim Deed conveying to her son David all her property in the
Philippines including the parcels of land subject matter of the Deed of Extrajudicial Settlement.
David then executed a Special Power of Attorney where he acknowledged that he became the owner
of the parcels of land subject to the Deed of Quitclaim and empowering Atty. Abela to sell the lots.
Atty. Abela paid donor's taxes to facilitate the registry of the parcels of land in the name of David.
A letter was then written to the OSG showing that David's ownership of the one-half (1/2) of the estate
of Simeon Guzman was defective. On the basis thereof, the Government filed before the RTC of
Malolos Bulacan a Petition for Escheat praying that one-half (1/2) of David's interest in each of the
subject parcels of land be forfeited in its favor.
RTC: The RTC then dismissed the petition and ruled that the deeds of quitclaim executed by
Helen Meyers Guzman had no legal force and effect so that the ownership of the property subject
thereof remained with her.
CA: The Government then appealed the dismissal of the petition but the appellate court affirmed the
court a quo.
Hence, this petition anchoring its argument on Art. XII of the Constitution which provides —Sec. 7.
Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain. Sec.
8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines
who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations
provided by law. The petitioner said that as a rule, only a Filipino citizen can acquire private lands in
the Philippines. The only instances when a foreigner can acquire private lands in the Philippines are
by hereditary succession and if he was formerly a natural-born Filipino citizen who lost his Philippine
citizenship.
Petitioner’s Contention: Petitioner therefore contends that the acquisition of the parcels of land by
David does not fall under any of these exceptions. It asserts that David being an American citizen
could not validly acquire one-half (1/2) interest in each of the subject parcels of land by way of deeds
of quitclaim as they are in reality donations inter vivos. It also reasons out that the elements of
donation are present in the conveyance made by Helen in favor of David: first, Helen consented to the
execution of the documents; second, the dispositions were made in public documents; third, David
manifested his acceptance of the donation in the Special Power of Attorney he executed in favor of
Atty. Lolita G. Abela; fourth, the deeds were executed with the intention of benefiting David; and lastly,
there was a resultant decrease in the assets or patrimony of Helen, being the donor. Petitioner further
argues that the payment of donor's taxes on the property proved that Helen intended the transfer to
be a gift or donation inter vivos.
Guzman’s Contention: David maintains, on the other hand, that he acquired the property by right of
accretion and not by way of donation, with the deeds of quitclaim merely declaring Helen's intention to
renounce her share in the property and not an intention to donate. He further argues that, assuming
there was indeed a donation, it never took effect since the Special Power of Attorney he executed
does not indicate acceptance of the alleged donation. There are three (3) essential elements of a
donation: (a) the reduction of the patrimony of the donor; (b) the increase in the patrimony of the
donee; and, (c) the intent to do an act of liberality or animus donandi. When applied to a donation of
an immovable property, the law further requires that the donation be made in a public document and
that there should be an acceptance thereof made in the same deed of donation or in a separate public
document.7 In cases where the acceptance is made in a separate instrument, it is mandated that the
donor should be notified thereof in an authentic form, to be noted in both instruments.
Issue: Whether or not the deed of quitclaim in favor of David was a donation inter vivos?
Held: NO. The Court ruled that there was no donation because ot all the elements of a donation of an
immovable property are present in the instant case. The transfer of the property by virtue of the Deed
of Quitclaim executed by Helen resulted in the reduction of her patrimony as donor and the
consequent increase in the patrimony of David as donee. However, Helen's intention to perform an
act of liberality in favor of David was not sufficiently established. The language of the deed of
quitclaim is clear that Helen merely contemplated a waiver of her rights, title and interest over the
lands in favor of David, and not a donation. It appears that foremost in Helen's mind was the
preservation of the Bulacan realty within the bloodline of Simeon from where they originated, over and
above the benefit that would accrue to David by reason of her renunciation. The element of animus
donandi therefore was missing.
Likewise, the two (2) deeds of quitclaim executed by Helen may have been in the nature of a public
document but they lack the essential element of acceptance in the proper form required by law to
make the donation valid. The Special Power of Attorney imputed upon merely acknowledges that
David owns the property referred to and that he authorizes Atty. Abela to sell the same in his name
and we cannot look beyond the language of the document to make a contrary construction.
Moreover, it is mandated that if an acceptance is made in a separate public writing the notice of the
acceptance must be noted not only in the document containing the acceptance but also in the deed of
donation. It is necessary that formal notice thereof be given to the donor, and the fact that due notice
has been given must be noted in both instruments. Then and only then is the donation perfected.
These requisites, definitely prescribed by law, have not been complied with, and no proof of
compliance appears in the record. Therefore, the provisions of the law not having been complied with,
there was no effective conveyance of the parcels of land by way of donation inter vivos.
What happened to the property? The Court said that the inexistence of a donation does not render
the repudiation made by Helen in favor of David valid. There is no valid repudiation of inheritance as
Helen had already accepted her share of the inheritance when she, together with David, executed a
Deed of Extrajudicial Settlement of the Estate of Simeon Guzman. Pursuant to this, Helen cannot
belatedly execute an instrument which has the effect of revoking or impugning her previous
acceptance. Hence, the two (2) quitclaim have no legal force and effect. Nevertheless, the nullity of
the repudiation does not ipso facto operate to convert the parcels of land into res nullius to be
escheated in favor of the Government. The repudiation being of no effect whatsoever the parcels of
land should revert to their private owner, Helen, who, although being an American citizen, is qualified
by hereditary succession to own the property subject of the litigation.
WHEREFORE, the Decision of the Court of Appeals dismissing the petition for escheat is AFFIRMED.
No costs.
3. Lladoc vs. CIR; GR No:L19201 June 16, 1965
Doctrine: The Court in this case emphasized that the exemption as granted by the Constitution to
religious organizations is only from the payment of taxes assessed on the enumerated properties, as
property taxes, as contra-distinguished from excise taxes. The Court also clarified that a gift tax is not
a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the
imposition of which on property used exclusively for religious purposes, does not constitute an
impairment of the Constitution.
Facts: The M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev. Fr.Ruiz, then
parish priest of Victorias, Negros Occidental, and predecessor of herein petitioner, for the construction
of a new Catholic Church in the locality. The total amount was actually spent for the purpose intended.
Thereafter, the donor filed the donor's gift tax return. As a result, the respondent CIR issued an
assessment for donee's gift tax against the Catholic Parish of Victorias, Negros Occidental, of which
petitioner was the priest. The tax amounted to P1,370.00.
Petitioner lodged a protest to the assessment and requested the withdrawal to the Commissioner of
Internal Revenue but were denied. The petitioner appealed to the Court of Tax Appeals. The
petitioner claimed, among others, that at the time of the donation, he was not the parish priest in
Victorias; that there is no legal entity or juridical person known as the "Catholic Parish Priest of
Victorias," and, therefore, he should not be liable for the donee's gift tax. It was also asserted that the
assessment of the gift tax, even against the Roman Catholic Church, would not be valid, for such
would be a clear violation of the provisions of the Constitution.
CTA: After hearing, the CTA rendered judgment, said that the tax imposed upon the petitioner was
not in clear violation of the Constitution, as the Constitution only exempts religious institutions from
payment of property tax and it does not include exemption from gift tax. The phrase "exempt from
taxation: therefore should not be interpreted to mean exemption from all kinds of taxes. Wherefore,
the Court affirmed the decision of the CIR appealed from.
Issue: Whether or not petitioner should be liable for the assessed donee's gift tax on the P10,000.00
donated for the construction of the Victorias Parish Church?
Held: YES. The Constitution of the Philippines, exempts from taxation cemeteries, churches and
parsonages or convents, appurtenant thereto, and all lands, buildings, and improvements used
exclusively for religious purposes. The exemption is only from the payment of taxes assessed on such
properties enumerated, as property taxes, as contra distinguished from excise taxes. In the present
case, what the Collector assessed was a donee's gift tax; the assessment was not on the properties
themselves. It was an excise upon the use made of the properties, upon the exercise of the privilege
of receiving the properties. Manifestly, gift tax is not within the exempting provisions of the section just
mentioned.
A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift
inter vivos, the imposition of which on property used exclusively for religious purposes, does not
constitute an impairment of the Constitution. The phrase "exempt from taxation," as employed in the
Constitution (supra) should not be interpreted to mean exemption from all kinds of taxes. And there
being no clear, positive or express grant of such privilege by law, in favor of petitioner, the exemption
herein must be denied.
Issue: Who should be called upon to pay the gift tax? The head of Diocese
Petitioner’s Contention: Petitioner postulates that he should not be liable, because at the time of
the donation he was not the priest of Victorias.
The Court ruled that the decision appealed is modified, in the sense that petitioner herein is not
personally liable for the said gift tax, and that the Head of the Diocese, herein substitute petitioner,
should pay, as he is presently ordered to pay, the said gift tax.

4. PhilAm Life vs. Sec of Finance GR No: 210987, Nov 24, 2014
Doctrine: The absence of donative intent does not exempt the sales of stock transaction from donor’s
tax since Sec. 100 of the National Internal Revenue Code (NIRC) categorically states that the amount
by which the fair market value of the property exceeded the value of the consideration shall be
deemed a gift.
Facts: Philamlife used to own 498,590 Class A shares in PhilamCare. Thereafter, the petitioner,
offered to sell its shareholdings in PhilamCare through competitive bidding. The petitioner's Class A
shares were then sold for PhP 104,259,330 based on the prevailing exchange rate at the time of the
sale. STI Investments, Inc., then emerged as the highest bidder.
After the sale was completed, Philamlife filed an application for a certificate authorizing registration/tax
clearance with the BIR to facilitate the transfer of the shares. Months later, petitioner was informed
that it needed to secure a BIR ruling in connection with its application due to potential donor’s tax
liability. In compliance, petitioner, requested a ruling pointing out, in its request, the following: that the
transaction cannot attract donor’s tax liability since there was no donative intent and,ergo, no taxable
donation; that the shares were sold at their actual fair market value and at arm’s length; that as long
as the transaction conducted is at arm’s length, a sale for less than an adequate consideration is not
subject to donor’s tax; and that donor’s tax does not apply to sale of shares sold in an open bidding
process.
The CIR however denied Philamlife’s request. The Commission said that the selling price of the
shares thus sold was lower than their book value based on the financial statements of PhilamCare.
As such, the Commissioner held, donor’s tax became imposable on the price difference pursuant to
Sec. 100 of the NIRC which is implemented by Revenue Regulation 6-2008 (RR 6-2008). In the case
of shares of stock not listed and traded in the local stock exchanges, the book value of the shares of
stock as shown in the financial statements nearest to the date of sale shall be the fair market value.
In view of the foregoing, the Commissioner ruled that the difference between the book value and the
selling price in the sales transaction is taxable donation subject to a 30% donor’s tax.
Aggrieved, petitioner requested respondent Secretary of Finance (Secretary) to review BIR Ruling
No. 015-12, but it only affirmed the Commissioner’s assailed ruling in its entirety. Hence, the petitioner
appealed to the CA.
CA: The CA dismissed the petition. In disposing the petition, the appellate court ratiocinated that it is
the Court of Tax Appeals which has jurisdiction over the issues raised. The CA also said that the BIR
Ruling No. 015-12 was issued in the exercise of the Commissioner’s power to interpret the NIRC and
other tax laws. Consequently, requesting for its review can be categorized as "other matters arising
under the NIRC or other laws administered by the BIR," which is under the jurisdiction of the CTA, not
the CA.
Hence, the instant recourse.
Issues: Whether or not the price difference in petitioner’s adverted sale of shares in PhilamCare
attracts donor’s tax?
Ruling: YES. The Court ruled that the price difference is subject to donor's tax. The Court then said
that the absence of donative intent, as contended by the petitioner, does not exempt the sales of
stock transaction from donor's tax since Sec. 100 of the NIRC categorically states that the amount by
which the fair market value of the property exceeded the value of the consideration shall be deemed a
gift. Thus, even if there is no actual donation, the difference in price is considered a donation by fiction
of law.
Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the
parameters for determining the "fair market value" of a sale of stocks. Such issuance was made
pursuant to the Commissioner's power to interpret tax laws and to promulgate rules and regulations
for their implementation.
Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being
applied retroactively in contravention to Sec. 246 of the NIRC. Instead, it merely called for the strict
application of Sec. 100, which was already in force the moment the NIRC was enacted.
WHEREFORE, the petition is hereby DISMISSED.
5. Tang Ho vs. Board of Assessment Appeals & CIR; 97 Phil 890
Doctrine: Under the Civil Code of 1889, a donation by the husband alone does not become in law a
donation by both spouses merely because it involves property of the conjugal partnership. In this
case, it was also discussed that a donation of property belonging to the conjugal partnership, made
during its existence by the husband alone in favor of the common children, is taxable to him
exclusively as sole donor.
Facts: Petitioners Li Seng Giap and his wife Tang Ho and their thirteen children appear to be the
stockholder of two close family corporations named Li Seng Giap & Sons, Inc. and Li Seng Giap &
Co.
The problem arose when the examiners of the BIR made an examination of the books of the two
corporation and found that each of Li Seng Giap's 13 children had a total investment therein of
approximately P63,195.00, in shares issued to them by their father Li Seng Giap.
The CIR regarded these transfers as undeclared gifts and assessed against Li Seng Giap and his
children donor's and donee's taxes in the total amount of P76,995.31. The petitioners paid the sum of
P53,434.50, representing the amount of the basic taxes, and put up a surety bond to guarantee
payment of the balance demanded.
They then requested the CIR for a revision of their tax assessments, and submitted donor's and
donee's gift tax returns. Appellants admit that these gifts were not reported; but contend that as the
cash donated came from the conjugal funds, they constituted individual donations by each of the
spouses Li Seng Giap and Tang Ho of one half of the amount received by the donees in each
instance, up to a total of P31,505 to each of the thirteen children from each parent. They further
alleged that the children's stockholding in the two family corporations were purchased by them with
savings from the ash donations received from their parents.
They then claimed the benefit of gift tax exemptions but the Collector refused to revise his original
assessments; and the petitioners appealed to the then Board of Tax Appeals.
Petitioner’s Contention: Petitioner insisted that the entries in the books of the corporation do not
prove donations; that the true amount and date of the donation were those appearing in their tax
returns.
BTA: The Board of Tax Appeals upheld the decision of the respondent Collector of Internal Revenue;
hence, this petition for review.
Issue:
1. Whether or not the dates and amounts of the donations taxable against petitioners were as
found by the Collector of Internal Revenue from the books of the corporations Li Seng Giap &
Sons, Inc. and Li Seng Giap & Co., or as set forth in petitioners' gift tax returns;
2. Whether or not the donations made by petitioner Li Seng Giap to his children from the
conjugal property should be taxed against the husband alone, or against husband and wife;
and
3. Whether or not petitioners should be allowed the tax deduction claimed by them.
On the first question, which is of fact the appellants take the preliminary stand that because of
Collector failed to specifically deny the allegation of their petition in the Tax Board he must be deemed
to have admitted the annual and propter nuptias donations alleged by them, and that he is estopped
from denying their existence. As the proceedings before the Tax Board were administrative in
character, not governed by the Rules of Court (see Sec. 10, Executive Order 401-A),and as the
Collector actually submitted his own version of the transactions, we do not consider that the
Collector's failure to make specific denials should be given the same binding effect as in strict court
pleadings.
Issue: Whether the stock transfers from Li Seng Giap to his children were donations?
Held: Yes. The Court said that the stock transfers from Li Seng Giap to his children were donations
based on the following circumstances: (1) That the transferor Li Seng Giap had in fact conveyed
shares to stock to his 13 children; (2) That none of the transferees appeared to possess adequate
independent means to buy the shares; (3) That the total of the alleged cash donations to each child is
practically identical to the value of the shares supposedly purchased by each donee; (4) That there is
no evidence other than the belated sworn gift tax returns to support their contention that the shares
were acquired by purchase. No contracts of sale or other documents were presented, nor any
witnesses introduced; not even the claimants themselves have testified.
The Court also said that for a parent to donate cash to enable the donee to buy from him shares of
equivalent value is, for all intents and purposes, a donation of such shares to the purchaser donee.
Any other view would leave the collection of taxes at the mercy of explanations concocted ex post
facto by evading taxpayers.
Issue: Whether or not the donation of property belonging to the conjugal partnership, made during its
existence by the husband alone in favor of the common children, is taxable to him exclusively?
Petitioner’s Contention: inasmuch as the property donated was community property owned by the
spouses, the total amount of the gifts made in each year should be divided between the father and the
mother, as separate donors, and should be taxed separately to each one of them.
Held: YES. The Court said that the petitioners, in the case at bar, failed to prove that the donations
were actually made by both spouses. This is also contrary to what appears from their own evidence.
In the original claim for tax refund, filed with the CIR, the father, Li Seng Giap, describes himself as
"the undersigned donor" without in any way mentioning his wife as a co-participant in the donation.
Further, the Old Civil Code provides that the conjugal partnership shall also be chargeable with
anything which may have been given by the husband to the children born of the marriage solely in
order to obtain employment for them or give them a profession, or by both spouses by common
consent, should they not have stipulated that such expenditures should be borne in whole or in part by
the separate property of one of them. In effect, these Articles clearly refute the appellants' theory that
because the property donated is community property, the donations should be viewed as made by
both spouses. First, because the law clearly differentiates the donations of such property "by the
husband" from the "donations by both spouses by common consent."
Further, as the conjugal property belongs equally to husband and wife, the donation of property made
by the husband prejudices the wife in so far as it includes a part or the whole of the wife's half, and is
to that extent invalid. Hence, during liquidation of the conjugal partnership, the Old Civil Code directs
that all illegal donations made by the husband be charged against his estates and deducted from his
capital.
Appellants herein are therefore in error when they contend that it is enough that the property donated
should belong to the conjugal partnership in order that the donation be considered and taxed as a
donation of both husband and wife, even if the husband should appear as the sole donor. There is no
blinking the fact that, under the old Civil Code, to be a donation by both spouses, taxable to
both, the wife must expressly join the husband in making the gift; her participation therein
cannot be implied.
The consequence of the husband's legal power to donate community property is that, where
made by the husband alone, the donation is taxable as his own exclusive act. Hence, only one
exemption or deduction can be claimed for every such gift, and not two, as claimed by
appellants herein. In thus holding, the Board of Tax Appeals committed no error.
Wherefore, the decision appealed from is affirmed.