Chapter 8

EXEMPTIONS OF CERTAIN GIFTS AND

OTHER DEDUCTIONS FROM GROSS GIFTS
On{y tfiose wfio wi[[ risf(goinlJ too far
can possi6fyfindout fioafarone can go. -T.S. C£[{iot

Multiple Choice: Choose the best possible answer .

., 1. Dowries or gifts made on account of marriage of children shall be

exempt from donor's tax if given by parents:
I - before its celebration.
II - within one year thereafter.
a. Both I and II are correct c. Only I is correct
b. Neither I nor II is correct d. Only II is correct

Answer: A
Reference: Section 101 (A) (1), NIRC, as amended

2. The amount of the exempt dowry is to the extent of the first:

a. P32,000. c. P20,000.
b. p 25,000. d. p] 0,000.

Answer: D
Reference: Section 101 (A) (1), NIRC, as amended

3. One of the following is an incorrect statement regarding dowry.

a. The donor must be the natural or adopting parent of the
child.
b. The donee must be a legitimate, recognized natural or legally
adopted child of the donor.
c. The dowry or gift on account of marriage must be given before
the celebration of the marriage or within two (2) years
thereafter.
d. The exemption allowed is to the extent of the first PlO,OOO.

Answer: C ,

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r Chapter 8: Exemptions of Certain Gifts and Other Deductions from Gross Gifts

.4. One of the following will not entitle the donor-parent to a PlO,OOO
dowry exemption.
a. Legitimate child
b. Recognized natural child
c. Adopted child
d. None of the choices

Answer: D
Reference: Section 101 (A) (1), NIRC, as amended
1:he
law classified children into: ---------~
a. Legitimate- Those conceived and born during the marriage of I
1 parents who are lawfully married. Or. those who are I
conceived before the marriage but born during the marn·age. 1

b. lllegitimate -- Those conceived and born outside of valid

marriage {Art 165, The Family Code ofthe Philippines). I 1

c. Legitimated~ Those conceived of parents who at the time of

1

conception were not disqualified by any impediment to marry I

each other and who are later considered legitimate by reason I
of subsequent marriage of their parents {Arts. 177 and 178,
The Family Code of the Philippines).
d. Adopted. ~ Those who whether related by blood or not to the
adopter. by fiction of law, are made legitimate children of the 1
latter. _j

5. A married couple donated a conjugal property to their son who is

getting married. Which of the following statements is incorrect in
connection with the donation?
a. The husband is the proper claimant of the dowry, being head
of the familv.
b. The husband and wife shall file two separate donor's tax
returns.
c. The husband and the wife can claim PlO,OOO dowry each.
d. The gross gift of the husband shall be one-half of the value of
the donated conjugal property.

Answer: A

6. A donation on account of marriage will give the donor a deduction

from the gross gifts made if the donee is:
a. a legitimate child.
b. a stepchild.
c. the son of the donor's second cousin.
d. the legitimate father of the donor.

Answer: A

I
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 Chapter 8: Exemptions of Certain Gifts and Other Deductions from Gross Gifts

~ 7. Which of the following gifts or donations shall be exempt from donor's

tax?
I - Those made to or for the use of the National Government or any
entity created by its agencies which is not conducted for profit
II - Those made to any political subdivision of the Government
a. I only c. Both I and II
b. II only d. Neither I nor II

Answer: C
Reference: Section 101 (A) (2}, NIRC, as amended

8. First statement: Transfers inter vivos in favor of non-profit

educational institutions are exempt from donor's tax.
Second statement: Transfers mortis causa in favor of non-profit
educational institutions are exempt from estate tax.
a. True, Tr.ue c. True, False
b. False. False d. False, True

Answer: C
Reference: Section 101 (A) (3}, NIRC, as amend_e'-d'-'-----
~ection 101. Exemption of Certain Gifts.- Thefollowing gifts or I
1 donations shall be exempt from the tax prouidedfor in this I
! Chapter. I
I A) !n the Case of Gifts !\!fade by a Resident I
(3) Gifts infauor of an educational and/or charitable, religious, I
cultural or social welfare corporation, institution, accredited non- i
gouemment organization. trust or philanthropic organization or /
research institution or organization: Provided, howeuer, That not ·
more .Uwn thirty percent (JO"o} of said gifts shall be used by such
donee for administration purposes.
For the purpose ofthe exemption, a ·non-profit educational and/or
charitable corporation, institution, accredited non-government
organization, tru.st or philanthropic organization and/ or research
institution or organization· is a school, college or uniuersity and/ or
charitable corporation, accredited non-government organization.
trust or philanthropic organization and/ or research institution or
orgnnization,JrJcmporated as a non-stock entitlf. paying no
diuidend2,_ gouern~d blLJJl.Jstees who receiue no compensation,
i and QfiJOting all its income, whether student.< fees or gifts.
· dorwti__on, subsidies or other [onns o[philonthroJ!y. to the
arcomJ!lishment and_J;!IQmotion o[the purpo~es enumerated in its
1
Articles o[Incorporution. [Section 70 7 (A) {3), N!RC as wnendeclj.
Transfers mortis causa to non-profit educotionnl institutions an~
i not exef!lpt frorn'!'stc~!e to;c__f:!;_~~-§ection §_?_j_D).'_ji/_[_RC, aS_!3!!_U::!_1clf!'_cij._~-

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 Chapter 8: Exemptions of Certain Gifts and Other Deductions from Gross Gifts

·.,.. 9. Mr. J. Cruz donated P200,000 to a religious institution.· During the

year, the total receipts from donations of the religious institution was
P5,000,000. Its total administrative expenses amounted to
P2,000,000. Hm~V· much was the exempt gift to the religious
institution?
a. Zero c. PlOO,OOO
b. PlO,OOO d. P200,000

Answer: A
The gift was not exempted because the administmtive expenses~
the donee-institution exceed 30% ofthe total expenses
(P2, 000,000/ P5, 000,000 = 40°i,).

10. Since donation to a charitable institution has no ceiling as a

deduction for donor's tax purposes,
]st statement: The net gift will be zero, so that in computing the
donor's tax, the donation may be omitted in gross gifts if it is
likewise omitted in deductions.
2"d statement: The gross gifts shall be reported and the deduction
shall be claimed.
a. Both statements are true
b. Both statements are false
c. First statement is true while second statement is false
d. First statement is false while second statement i.s true

Answer: D

:k 11. One of the following is not an exempt gift or a deduction from the
gross gift of a non-resident alien donor.
a. Dowries or gifts made on account of marriage
b. Gifts made to or for the use of the National Government or to
any of its political subdivision
c. Gifts in favor of an educational and/ or charitable, religious,
cultural or social welfare corporation, institution, accredited
non-government organization, trust or philanthropic
organization or research institution or organization
d. Encumbrance on the property donated, if assumed by the
donee

Answer: A
Reference: Section 101 (B), NIRC, as amended

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 Chapter 8: Exemptions of Certain Gifts and Other Deductions from Gross Gifts

- 12. A married non-resident alien donates shares of stock valued at

P300,000 to his son who is getting married to a Filipina in the
Philippines. Assuming there is reciprocity, how much is the gross gift
and the exempt dowry?
Gross Gift Dowrv
a. P 300,000 p 10,000
b. p 300,000 Zero
c. p 150,000 Zero
d. Zero Zero

Answer: D
! Tf;-gro~s~g-iji::-t-is-z;;,.o for Philippine donor's tax purposes becau~
i the donor is a non-resident alien and the property donated is an [
· intangible personalproperty situated in the Philippines. When I
there is reciprocity, donations of intangible personal property 1

situated in the PhilljJpines hy a non-resident alien donor are not I

i subject to donor's tax. 1

Lf2owry e~emption ~-?._not allowed to non-resident aj_~n donors. ~-__j

13. Which of the following is not a deduction from the gross gifts?
a. Unpaid mortgage on the donated property assumed by the
donee
b. Unpaid real estate tax on the propertY donated assumed by
the donee
c. Diminution on the donated propert,· specifically provided by
the donor
d. Unpaid donor's tax on the donated property assumed by the
donee

,-
Answer: D
- --------~----~~~---------~--------,

i The follou•ing are not found in the Tcvc Code but are nevertheless
'
1 allowed as deductions from gross gifts:
1a. Encumbrance on the property donated if assumed by the donee;
[b. Those specljlcaily provided by the donor as a diminution from 1

~~ the_p_roperty d0/}:9__f!!E__ ~-------------------- --~----'

14. Which of the following is a taxable gift?

a. Donations to the Intramuros Administration
b. Donations to the Communitv Chest
c. Donations to the Philippine Institute of Certified Public
Accountants
d. Donations to International Rice ResFarch Institute

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 Chapter 8: Exemptions of Certain Gifts and Other Deductions from Gross Gifts

Answer: C

I The following are exempted from donor's tax wi~er special!~~~=-~

I 1. Donations to the Philippine Government for scientzfic, i
1 engineering, and technological research, invention and I
' development (R.A. No. 7606).
2. Donations to social welfare, cultural and chmitable
institutions (P.D. No. 50 7, see R.A. I'-lo. 1916).
3. Donations to the International Rice Research Institute
(R.A. No. 2 70 7, P.D. No. 1620).
4. Donations to the Ramon Magsaysay Awards Foundation
(R.A. No. 3076).
5. Donations to the National Museum, the National Library, and
the archives ofthe Notional Historical Institute (P.D. No. 373).
6. Donations to the Southern Philippines Development
Administratzon (P.D. No. 690).
7. Irrevocable donations of American-owned private lands
acquired under the Laurel- Langley Agreement in favor of the
National Government or any entity created by any of its
agencies which is not conducted for profit or to any politica.l
subdivision of the said Government, or any charitable or
scientific organization with a nationwide scope of activities
and widely recognized as such as the Philippine National Red
Cross, Community Chest, Boy Scouts of the Philippines and
the Philippine Heart Foundation (P.D. No. 762).
8. Donations to the Museum of Philippine Costumes
(P.D. No. 1349, as amended by P.D. No. 1388).
9. Donations to the lntramuros Administraton (.P.D. No. 1616).

15. (Phil. CPA) The following are exempt from the donor's tax. Which is
the exception?
a. P200,000 cash given by a non-resident alien donor to his
legitimate son who is getting married in the Philippines to a
Filipina.
b. PlO,OOO cash given by a resident alien to his legitimate son
who is getting married in the Philippines.
c. Donation of a condominium in Hongkong to a Filipina by a
British national not residing in the Philippines.
d. P 150,000 donation to a non-profit school.

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 Chapter 8: Exemptions of Certain Gifts and Other Deductions from Gross Gifts

Answer: A
1 Letter a is the answer because non-resident aliens are not allowed

~ dowry exemption, hence, the donation of cash on account of

I marriage of his legitimate son is subject to Philippine donor's tax.
I Letter b is an exempt dowry.
I Letter cis not taxable in the Philippines because non-resident
aliens are subject to Philippine donor's tax only when the
donated property is situated in the Philippines.
Letter dis one of the exemptions under Section 101 (A) (3) and (B)
~)of the Tax Code. "'·'·J '! ,. _:, . ·.. _· . . • ~· ••· · .

' 16. A resident citizen of the Philippines made the following donations on
one date:
Donations on account of marriage:
To legitimate son p 100,000
To a legitimate daughter and her
husband-to-be, on account of marriage 15,000
To a recognized natural son 30,000
To an adopted child 60,000
To an illegitimate daughter 40,000
To a sister 12,000
To a charitable institution 20,000
The deductions from gross estate is:
a. P67,500. c. P57,500.
b. P60,000. d. P30,000.

Answer: C
Legitimate son (dmny) p 10,000
'i< Legitimate daughter and her husband-to-be (dowry)
(1 /2 X Pl5.000) 7,500*
Recognized natural son (dowry) 10,000
Adopted child (dowry) 10,000
D9nation to charitable institution 20 000
H· ···-· . ·. t-"-; .·._, J •
,'l· _:~· ,_ . _._,
f'_ ; ~
--- ••

Total deductions ·

Stranger Relative
Gross ;;ift p 7,500 p 7,500
Less: Dowry ( _ ___,_7-'-"5=0-'CO)*
Taxable net gift p 7 500 _,__P_ _ _ __

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 Chapter 8: Exemptions of Certain Gifts and Other Deductions from Gross Gifts

------------ ---,
I
Summary of Exemptions of Certain Gifts/ .
1·

Deductions from Gross Gifts

I 1. Found in the Tax Code

~~---- ]R~-;i~f~-n-t___,- Non- ·~1
1

Ji or Citizen Resi.dent
i
1 Donor Ahen
1 1

! 1
1 ~ Donor I
I a. Dowries oc g;fts made on account I Allo"·ed-~-- Not ~
~ of marnage - u-------L- allo~~9~
1 b. Gifts made to or for the use of the I 1

National Government or any 1 !

1
entity created by any of its ·
agencies which is not conducted I Allowed Allowed
for profit, or to any political I
subdivision of the said I
Government ------- --------------+--
c. Gifts in favor of an educational ·1
and I or charitable, religious, I

cultural or social welfare I

corporation, institution, /
accredited non-government Allowed ! Allowed
organization, trust or 1

philanthropic organization or 1 ,

/ research institution or 1 1 i
L orgarnzat10n_ _ ____ _______L _______ ~I__________ j

a. Ceiling of . ~-~ase of gifts made to certain i~~titutio;~~-l

administration ! (~o. 1 c above), in order to be exempt, not !
expenses I more than 30% of said gifts shall be used I
bv such donee for administration purposes.~
b. Definition of 1,A non-stock educational and/ or charitable
non-stock corporation, institution, accredited non-
1
educational , government organization, etc. (no.l c above)
and/or is a school, college or university andjor
charitable charitable corporation, accredited non- 1

corporation, etc government organization, etc. (no. 1 c above)!

a) incorporated as a non-stock entity, I
b) paying no dividends,
c) governed by trustees who receive no
compensation, and
d) devoting all its income to the
accomplishment and promotion of the
purpose enumerated in its Articles of
I
_j__lncorpora tio_n_._______ _j ':
c . __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
J

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 Chapter 8: Exemptions of Certain Gifts and Other Deductions from Gross Gifts

2. Other deductions
Resident or Non-
Citizen Resident
Donor Alien Donor
a. Encumbrance on the
property donated if AllmYed Allowed
assumed by the donee
b. Those specifically provided
by the donor as a
diminution from the Allowed Allowed
roperty donated

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