Taxation, 2019 Bar — Question A.4

QUESTION

Due to rising liquidity problems and pressure from its concerned suppliers, P Corp. instituted a flash auction sale of its shares of stock. P Corp. was then able to sell its treasury shares to Z, Inc., an unrelated corporation, for P1,000,000.00, which was only a little below the valuation of P Corp.'s shares based on its latest audited financial statements. In connection therewith, P Corp. sought a Bureau of Internal Revenue ruling to confirm that, notwithstanding the price difference between the selling price of the shares and their book value, the said transaction falls under one of the recognized exemptions to donor's tax under the Tax Code. (a) Cite the instances under the Tax Code where gifts made are exempt from donor's tax. (3%) (b) Does the above transaction fall under any of the exemptions? Explain. (2%)

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