• Liberality relates to the free will or voluntary nature of the donor’s act which means that there might have not been employed a violence, intimidation, mistake, fraud, or undue influence.
• Donor can be a natural or a juridical person who must have the capacity to enter into the contract and effect a valid transfer of a thing or a right. He must be the owner of the property at the time of donation also in line with the Latin maxim “nemo dat gud num habet”, one cannot donate what he does not own.
• Gratuitous means without consideration or free of charge and nothing is given in return for the thing or a right. A thing or a right that is transferred for an insufficient consideration is likewise considered as a donation for tax purposes to the extend of the difference.
• Thing or a right that may become an object of donation refers to those properties or rights over those properties that may become subject to the commerce of men. It must be capable of pecuniary estimation. Thus, a gift of love is not taxable but a gift of a diamond ring by reason of love is subject to tax.
• Donee like a donor maybe a natural or a juridical person. However, it is not required that it must be capacitated to enter into contracts. A minor or an unborn child can be donees in a valid donation but their parents or guardians are the ones who will accept the said donations for and in their behalf.

From the above, the following summarizes the FORMAL requisites of a VALID donation: (DCAD)

a. Donative intent or the intention to transfer a property to another gratuitously so the latter will enjoy the benefits of ownership over the property. In indirect gifts however, like in transfers for insufficient consideration, donative intent is not required because of the refutable presumption that there is a donation.

b. Capacity of the donor which relates to the capability of the donor under the law to dispose of such properties.

c. Acceptance of the donee which simply means the concurrence on the donation that is made known or communicated to the donor.

d. Delivery of the the gift which refers to the specific mode of transferring ownership of the property. Personal properties may be made orally or in writing and delivered. It must be in writing however, if amount involved is more that PhP5,000.00 including the acceptance. Real properties or rights thereto, on the other hand, must be donated through a public instrument without regard to the value, like a Deed of Donation notarized by a lawyer or a proper person authorized to administer oath.

As to effectivity, donations may be classified as (a) inter vivos or effective during the lifetime of the donor, or (b) mortis causa that is effective upon death of the donor. Letter (a) is subject to donor’s tax, while letter (b) is subject to estate tax.

For tax purposes, a donation to be taxable, should be VALID one. It follows that a VOID or invalid donations are not taxable. Examples of void donations by express provision of the law are as follows:

a. Those made between person’s GUILTY of ADULTERY or CONCUBINAGE;
b. Those found GUILTY of the same criminal offense, as consideration thereof;
c. Those made to a PUBLIC officer, or his wife, descendants and ascendants, by reason of office;

Other void donations may relate to those which lacks the formal requirements stated above.