A Practical Legal Article in the Philippine Context

Donor’s tax in the Philippines is the tax imposed on a gratuitous transfer of property between living persons. In plain terms, it applies when a person gives money, real property, shares, or other property to another without adequate consideration. The transfer is called a donation or gift, and the person making it is the donor. The person receiving it is the donee.

In Philippine law, donor’s tax is governed mainly by the National Internal Revenue Code of 1997, as amended, especially as revised by the TRAIN Law, together with relevant Civil Code rules on donations and Bureau of Internal Revenue rules and forms.

This article explains the rates, scope, exemptions, filing rules, documentary requirements, valuation rules, common issues, and practical consequences of donor’s tax in the Philippines.

1. What is donor’s tax

Donor’s tax is an excise tax on the privilege of transferring property by way of gift during the donor’s lifetime. It is different from estate tax, which applies when property is transferred upon death.

A donation may involve:

cash
checks or bank transfers
real property such as land, condominium units, or houses
shares of stock
motor vehicles
jewelry, artworks, or other personal property
condonation of debt
assignment or renunciation of rights in favor of a specific person
transfers for less than full and adequate consideration

A transfer need not be labeled “donation” for donor’s tax to apply. If its substance is a gift, donor’s tax may attach.

2. Current donor’s tax rate in the Philippines

Under the TRAIN regime, the donor’s tax rate is generally:

6% of total gifts in excess of PHP 250,000 made by the donor during the calendar year

This is a flat rate.

Key points about the rate

The PHP 250,000 threshold is an annual exemption. It is not applied per donee, but per donor per calendar year.

That means:

all taxable gifts made by one donor from January 1 to December 31 are aggregated
the first PHP 250,000 of total gifts during that year is exempt
the excess is taxed at 6%

Example

A donor gives:

PHP 200,000 to Child A in March
PHP 300,000 to Child B in July

Total gifts during the year: PHP 500,000 Less annual exemption: PHP 250,000 Taxable amount: PHP 250,000 Donor’s tax: PHP 15,000

3. Who pays donor’s tax

The donor, not the donee, is primarily liable for donor’s tax.

Even if the donee agrees to shoulder the tax, the tax is still legally tied to the donation by the donor. If the donee pays the donor’s tax for the donor, that payment itself can create further donor’s tax implications because it may be treated as an additional gift.

4. Who is subject to Philippine donor’s tax

The tax treatment depends on the donor’s status.

A. Citizen or resident donor

A citizen or resident of the Philippines is generally taxed on donations of:

real property and tangible personal property located in the Philippines
real property and tangible personal property located abroad
intangible personal property, whether in or outside the Philippines, subject to reciprocity rules where applicable

B. Non-resident alien donor

A non-resident alien is generally taxed only on gifts of property situated in the Philippines.

This distinction matters especially for foreign donors and overseas Filipinos, depending on residence and citizenship status.

5. What property is covered

Donor’s tax may apply to both real and personal property.

Real property

Includes:

land
buildings
condominium units
house and lot
other immovable property

Personal property

Includes:

cash
deposits
shares of stock
bonds
vehicles
jewelry
equipment
receivables
rights and interests
other movable or intangible property

6. When a transfer becomes a taxable donation

A transfer becomes subject to donor’s tax when there is:

donative intent, or legal treatment equivalent to a gift
capacity of the donor
acceptance by the donee, where required under civil law
delivery or constructive transfer
no full and adequate consideration in money or money’s worth

A transaction may be taxable even if dressed as a sale when the consideration is only nominal or substantially below fair value.

7. Transfers for less than full and adequate consideration

One of the most important rules is this:

When property is transferred for less than full and adequate consideration, the difference between the property’s fair market value and the consideration paid may be treated as a gift, subject to donor’s tax.

Example

A parent sells land worth PHP 5,000,000 to a child for PHP 1,000,000.

Difference: PHP 4,000,000

That PHP 4,000,000 may be treated as a donation, subject to donor’s tax, less the PHP 250,000 annual exemption if still available.

This is a common issue in intra-family transactions.

8. Donations between spouses and within the family

Donor’s tax applies even if the donee is:

a spouse
child
parent
sibling
relative

There is no broad family exemption simply because the transfer is among relatives.

A donation from one spouse to another may be legally and tax-wise sensitive because Philippine family property rules, the absolute community or conjugal partnership regime, and prohibitions or limitations on certain transfers between spouses can affect the characterization of the property and the validity of the transaction. Still, a valid gratuitous transfer between spouses can trigger donor’s tax if it qualifies as a donation under law.

9. Annual exemption of PHP 250,000

The donor is entitled to an annual exemption of PHP 250,000 for total gifts made during the calendar year.

Important features

applies to the aggregate gifts of the donor during the year
not per transaction
not per donee
one donor has one PHP 250,000 annual exemption for all gifts combined

Example

A donor makes these gifts in one year:

PHP 100,000 to nephew
PHP 100,000 to friend
PHP 100,000 to sibling

Total gifts: PHP 300,000 Less exemption: PHP 250,000 Taxable gifts: PHP 50,000 Tax due: PHP 3,000

10. Gifts exempt from donor’s tax

Not all donations are taxable.

A. Dowries or gifts on account of marriage

There is a special exemption for gifts made on account of marriage by parents to legitimate, recognized natural, or adopted children, within the amount allowed by law, and subject to timing requirements around the marriage.

Traditionally, this exemption is limited and technical. It should not be confused with a blanket exemption for wedding gifts. It also does not erase documentary and timing issues. Because this area depends heavily on the exact statutory text and how the transfer is structured, it should be handled carefully in actual practice.

B. Gifts to the National Government and certain entities

Donations made to:

the National Government
its agencies not conducted for profit
political subdivisions
certain educational, charitable, religious, cultural, or social welfare corporations, institutions, accredited non-government organizations, trusts, or philanthropic organizations

may be exempt, provided statutory conditions are met.

C. Encumbrances assumed by the donee

For donor’s tax purposes, in some cases the net gift is considered after deducting charges, encumbrances, or obligations assumed by the donee, if legally allowable and properly documented.

D. Certain intangible personal property under reciprocity

Some gifts of intangible personal property by a non-resident not a citizen of the Philippines may be exempt under reciprocity rules, depending on the foreign country’s tax treatment.

11. Donations to charities, NGOs, religious and educational institutions

This is a heavily used but often misunderstood area.

A donation may be exempt from donor’s tax if made to a qualified donee institution, such as certain:

charitable institutions
religious organizations
educational institutions
social welfare institutions
accredited NGOs
government entities

But conditions usually matter

Typically, the organization must be one that qualifies under law, and the donation must be used for the purposes for which the exemption is granted. There may be limits on administrative use and documentary proof requirements, depending on the type of institution and the nature of the donation.

Common practice point

A donor should not assume that any church, foundation, school, or NGO automatically qualifies. In practice, supporting documents proving the donee’s legal status, tax-exempt or accredited status where required, and acceptance of the donation are important.

12. Philippine situs rules: when property is considered located in the Philippines

For non-resident donors especially, situs rules determine taxability.

Real property

Real property is located where the property physically lies.

Tangible personal property

Generally taxed where physically located.

Intangible personal property

This includes items such as:

shares of stock
bonds
credits
franchise rights
similar incorporeal assets

Special rules determine whether intangible property is considered situated in the Philippines. Shares in domestic corporations are commonly treated as Philippine-situs intangible property.

13. Reciprocity rule for intangible personal property

A well-known exception applies to certain gifts of intangible personal property by a non-resident not a citizen of the Philippines.

The transfer may be exempt if there is reciprocity, meaning either:

the foreign country of which the donor was a citizen and resident at the time of donation does not impose donor’s tax on similar intangible property of Filipinos not residing there, or
it allows a similar exemption

This rule is technical and document-heavy. It often requires proof of foreign law, sometimes through official certifications, legal opinions, or authenticated documents.

14. Donation of conjugal or community property

When donated property belongs to the spouses as community or conjugal property, donor’s tax analysis must identify:

who owns the property
what share each spouse owns
whether both spouses are making the donation
whether both consented

Where property is owned in common by spouses, a donation of the whole property may effectively be treated as a donation by both spouses as to their respective shares, subject to separate computations as applicable.

This matters because the PHP 250,000 exemption is per donor. If both spouses are legally donors of their respective halves, each may have a separate exemption based on their separate taxable gifts.

15. Donations by corporations

The donor’s tax rules primarily contemplate transfers by persons, but corporate donations raise additional issues because corporate transfers may be governed not only by donor’s tax principles but also by corporate law, improper distribution concerns, and income tax or deductibility rules. Whether a corporate transfer is a donation, a business expense, a dividend substitute, or another kind of transaction depends on the facts.

Corporate donations to qualified donees often raise a stronger issue under deductibility and exemption rules rather than ordinary family-style donor’s tax analysis.

16. Donation versus loan

A loan is not a donation if there is a genuine obligation to repay.

But these situations may be recharacterized:

“loan” with no intention to collect
repeated advances with no terms
condonation or forgiveness of debt
zero-interest arrangements used to transfer value without documentation
cancellation of obligation without consideration

A forgiveness of debt can be treated as a gift if motivated by liberality rather than compensation for services or other business purpose.

17. Donation versus support

Amounts given for legal support obligations may not always be treated the same way as pure donations. For example, where a parent provides support required by family law, the tax characterization may differ from a discretionary gift. Still, not every transfer to a child or relative is automatically “support” in the legal sense. Documentation and circumstances matter.

18. Donation versus trust arrangement

A transfer into trust may be subject to donor’s tax if beneficial ownership is transferred gratuitously. The tax incidence depends on whether the trust is revocable or irrevocable, whether the transfer is complete, and who enjoys the beneficial interest.

19. When donor’s tax accrues

Donor’s tax is generally imposed upon the completion of the donation. A promise to donate in the future, without completion under civil law, may not yet trigger the tax. But once the donation becomes effective and accepted as required, the tax arises.

20. Civil law requirements for a valid donation

Tax treatment often depends on whether the donation is legally effective.

Under the Civil Code, the form of a donation matters.

Donation of personal property

may be made orally if the value is within the legal threshold and simultaneous delivery occurs
if above the threshold, donation and acceptance generally must be in writing

Donation of immovable property

A donation of real property must be in a public instrument, and the acceptance must also be in a public instrument or in the same deed, with notification requirements if acceptance is in a separate instrument.

If the donation is defective in form, civil law validity may be affected. Tax authorities, however, will often look at the substance of completed transfers. Invalid or incomplete documents can create both civil and tax problems.

21. Valuation rules for donor’s tax

The tax is based on the fair market value at the time of the gift.

A. Real property

For real property, the value is generally the higher of:

the zonal value as determined by the BIR, or
the fair market value shown in the schedule of values of the provincial or city assessor

This is the standard rule used in transfer taxes as well.

B. Shares of stock

Listed shares

Usually valued based on the applicable market quotation.

Unlisted common shares

Usually valued based on book value.

Unlisted preferred shares

Usually valued at par value, unless special rules apply.

Because share valuation can be technical, supporting financial statements, latest audited reports, and corporate certifications are often needed.

C. Personal property other than shares

Valued at fair market value at the date of donation.

D. Foreign currency donations

Should be converted to Philippine peso at the appropriate exchange rate for tax reporting purposes.

22. Net gifts and deductions

The donor’s tax is imposed on the net gift, not always the gross value transferred.

Amounts that may affect net gift computation include:

consideration received by the donor
encumbrances assumed by the donee, if allowable
mortgages or liens attached to the property, depending on who bears them
exclusions or exemptions provided by law

Documentation is crucial. A claimed deduction unsupported by records may be disallowed.

23. Filing of donor’s tax return

The donor must file a donor’s tax return using the prescribed BIR form.

The return is generally filed when a taxable donation is made, including cases where tax is zero because the transfer falls within exemptions but reporting may still be prudent depending on the transaction. For significant donations, documentation should always be organized.

24. Deadline for filing and payment

The donor’s tax return and payment are generally due within 30 days after the date the gift is made.

This 30-day period is critical.

If multiple donations are made during the year

Each donation may require filing within 30 days from the date of gift, while the annual aggregation rule still applies for determining total taxable gifts within the year.

That means later gifts may require recomputation based on earlier gifts already made during the same calendar year.

Example

January gift: PHP 200,000 No donor’s tax due yet because within annual exemption, but filing treatment should still be checked in practice based on the transaction.
June gift: PHP 400,000 Total annual gifts now: PHP 600,000 Less exemption: PHP 250,000 Taxable gifts: PHP 350,000 Tax due: PHP 21,000

The June filing must reflect the cumulative annual gifts.

25. Where to file

The return is typically filed with the appropriate Revenue District Office, authorized agent bank, or through BIR electronic channels where available and required, depending on the applicable rules in force and the taxpayer’s registration profile.

In practice, real property donations often require coordination with the RDO having jurisdiction over the property or the donor’s registration, depending on the tax and transfer documentation involved.

26. Documentary requirements

The exact documentary requirements vary with the type of property donated, but common requirements include the following.

General documents

duly accomplished donor’s tax return
taxpayer identification numbers of donor and donee
proof of transfer or deed of donation
acceptance by donee
valid IDs
proof of relationship, when relevant
documents supporting exemptions, if claimed

For real property donations

Usually includes:

notarized deed of donation
tax declaration
certified true copy of title
certificate of no improvement or improvement details, where applicable
latest tax clearance or real property tax receipt
zonal value information
assessor’s fair market value
location sketch or property identification documents
transfer tax and Registry of Deeds requirements, as applicable

For shares of stock

Often includes:

deed of donation
stock certificates
certificate of secretary or corporate secretary
latest audited financial statements
sworn statement of book value, if required
proof of listed share prices if publicly traded
BIR clearances needed for transfer

For cash donations

Typically:

deed or written evidence of donation
bank transfer proof, check, deposit slip, or acknowledgment receipt
proof of donor and donee identities
acceptance or acknowledgment

For donations to exempt institutions

Often includes:

certificate of registration of donee
certificate showing qualification or accreditation, if relevant
board resolution accepting donation
deed of donation
proof of actual use or intended use
other documents proving entitlement to exemption

27. Certificate Authorizing Registration and transfer documents

For donations involving real property or certain shares, tax compliance is not the end of the process. A transfer usually cannot be registered without revenue clearance, commonly involving a Certificate Authorizing Registration or related BIR clearance process.

Without tax clearance and payment, the Registry of Deeds or corporate transfer books may not process the transfer.

28. Donor’s tax on real property donations

Real property donations trigger several layers of compliance:

donor’s tax
documentary stamp tax implications, if any, depending on the instrument and transaction
local transfer and registration processes
Registry of Deeds transfer
updated tax declaration with assessor’s office

Although donor’s tax is central, the transaction often stalls if these parallel requirements are ignored.

29. Donor’s tax on cash gifts

Cash gifts are among the most commonly overlooked taxable transfers.

Examples:

parents transferring large sums to adult children
one sibling financing another’s property purchase without repayment
business owner giving a large “gift” to a relative
overseas remittances intended as pure gifts

Not every family transfer is taxed in practice, but legally, once a transfer is a completed gratuitous gift above the annual threshold, donor’s tax issues arise.

30. Donations of shares of stock

Donating shares can be tax-efficient in some succession planning structures, but it is document-intensive.

Issues commonly encountered include:

whether the shares are listed or unlisted
proper valuation
restrictions in the articles, by-laws, or shareholders’ agreements
transfer book requirements
need for BIR clearance before transfer
whether the donation was in fact a disguised sale

31. Split gifts and multiple donees

A donor cannot avoid donor’s tax by splitting a large donation among many donees within the same year, because the exemption is per donor per year, not per donee.

Example

A donor gives PHP 100,000 each to five persons in one year.

Total gifts: PHP 500,000 Less annual exemption: PHP 250,000 Taxable gifts: PHP 250,000 Tax due: PHP 15,000

32. Successive gifts over several years

Timing can affect donor’s tax because the exemption resets every calendar year.

Example

December 2026 donation: PHP 250,000
January 2027 donation: PHP 250,000

Each year has its own exemption. In principle, both may fall within the annual exemption if there are no other gifts in those respective years.

This makes year-end planning relevant.

33. Renunciation of inheritance and donor’s tax

This area is often misunderstood.

General renunciation in favor of all co-heirs

A general renunciation of hereditary rights, before acceptance and without identifying a specific beneficiary, may not be treated as a donation.

Renunciation in favor of a specific heir or person

If an heir renounces in favor of a particular person, that may be treated as a taxable donation from the renouncing heir to that person.

This is a common trap in estate settlements.

34. Donation of bare ownership or usufruct

A donor may transfer:

naked ownership, retaining usufruct
usufruct only
life interest
use and enjoyment rights

These partial interests can still be taxable donations. Valuation then becomes more technical, because less than full ownership is being transferred.

35. Revocable versus irrevocable transfers

If a donor retains extensive power to revoke or recover the property, the tax consequences may differ from those of a completed irrevocable donation. The decisive issue is whether a completed transfer of beneficial ownership has already occurred.

36. Is a deed of donation enough by itself

No. A deed of donation is only part of the legal and tax picture.

One must still consider:

acceptance
proper form
valuation
filing and payment of donor’s tax
transfer documentation
registration and annotation on title, if real property
BIR clearance, if needed

A deed without tax compliance may not complete the administrative transfer process.

37. Penalties for late filing or non-payment

Failure to file or pay donor’s tax on time may result in:

surcharge
interest
compromise penalties
difficulty in registering or transferring property later
possible audit exposure

These amounts can become significant, especially when the transfer is discovered years later during sale, estate settlement, title verification, or corporate due diligence.

38. Can BIR discover an old donation later

Yes.

A donation may surface through:

land transfer applications
title annotation requests
bank inquiries or financial audits
estate settlement
sale of previously donated property
stock transfer review
family disputes and civil litigation
anti-money laundering or source-of-funds documentation

Unreported family transfers often become visible only when the property is later sold or inherited.

39. Interaction with estate planning

Donations are often used in estate planning to transfer property during life and reduce future estate administration issues. But donors should compare:

donor’s tax cost now
estate tax consequences later
capital gains and other transfer taxes if structured as sale instead of gift
control over the property after transfer
risk of family disputes
legitime and collation issues under succession law

A donation is not always the best tool merely because the donor’s tax rate is low.

40. Interaction with family law and legitime

A donation to one compulsory heir may have implications for:

collation
inofficious donations
reduction of donations that impair legitime
disputes among heirs after death

So even if a donation is tax-compliant, it may still be challenged in succession proceedings if it prejudices compulsory heirs.

41. Donation of property subject to mortgage

If donated property is mortgaged, donor’s tax treatment often looks at whether:

the donee assumes the mortgage
the donor remains liable
the mortgage reduces the net value of the gift

The mere existence of a mortgage does not automatically eliminate donor’s tax. The legal assumption of the obligation and the net benefit transferred must be examined.

42. Donation by parent to child for property purchase

This is extremely common in the Philippines.

Example:

A parent transfers PHP 3,000,000 to a child to buy a condo.

Unless the amount is truly a loan or support under circumstances legally characterizable as such, this is ordinarily a taxable gift, less the annual exemption.

Tax: PHP 3,000,000 - PHP 250,000 = PHP 2,750,000 6% = PHP 165,000

43. Wedding gifts and donor’s tax

Wedding-related gifts can create donor’s tax issues.

There is a special statutory exemption for certain gifts on account of marriage, but it is narrow and should not be casually assumed to apply to all wedding transfers. Large transfers by parents to a marrying child are often structured with this provision in mind, but exact legal requirements must be met.

Ordinary cash gifts by friends or relatives on the occasion of a wedding are usually not scrutinized individually in the same way, but from a strict tax law standpoint, gratuitous transfers may still fall within donor’s tax rules unless exempt or below the threshold.

44. OFW and foreign-source gifts

If the donor is a Filipino citizen or Philippine resident, gifts of property abroad may still fall within Philippine donor’s tax coverage.

If the donor is a non-resident alien, only Philippine-situs property is usually taxed, subject to special rules.

For overseas family transfers, one must determine:

citizenship
residence
location or situs of the property
whether the transfer is cash, shares, land, or another asset
whether reciprocity may apply for intangibles

45. Is there donor’s tax on support for education or medical needs

There is no general blanket rule that every payment for tuition, living expenses, or hospital bills is exempt from donor’s tax. Some transfers may be legally support; others are gifts. The exact characterization depends on:

legal obligation of support
relationship
age and status of recipient
whether the payment is discretionary
whether the payment is direct or through reimbursement
documentation

This is one of the grayest areas in practice.

46. Distinguishing donor’s tax from income tax

A donation is not generally treated as taxable income to the donee in the same way as compensation or business income. Instead, the transfer is generally addressed through donor’s tax on the donor side. But if the payment is in truth compensation, commission, hidden dividend, or business income, calling it a “gift” will not control.

47. Distinguishing donor’s tax from capital gains tax

A genuine donation of real property is not the same as a taxable sale subject to capital gains tax. But a purported sale for nominal value may involve both transfer-tax analysis and recharacterization issues. The form chosen should match reality.

48. Common mistakes in Philippine practice

The most frequent errors are these:

1. Believing gifts to family are automatically exempt

They are not.

2. Believing the PHP 250,000 exemption applies per donee

It does not.

3. Ignoring cash donations

Cash gifts are covered.

4. Using an unrealistically low sale price to avoid donor’s tax

The undervalued portion may be treated as a gift.

5. Not aggregating all gifts in one calendar year

Aggregation is required.

6. Forgetting the 30-day deadline

Late filing triggers penalties.

7. Assuming a charity is automatically exempt

Qualification and documentation matter.

8. Failing to document acceptance and valuation

This creates both civil and tax defects.

9. Ignoring donor’s tax in estate settlements

Renunciation in favor of a specific person may be taxable.

10. Transferring property first, fixing taxes later

This often causes delays and penalties.

49. Basic computation guide

Step 1: Determine if the transfer is gratuitous

Is there a gift, or a transfer for less than full consideration?

Step 2: Determine the donor’s tax status

Is the donor a citizen, resident, or non-resident alien?

Step 3: Identify the property and situs

Is it real, tangible, or intangible property? Where is it located?

Step 4: Determine fair market value

Use proper valuation rules.

Step 5: Deduct allowable reductions

If there are encumbrances or consideration.

Step 6: Aggregate all gifts made by the donor during the calendar year

Step 7: Subtract the PHP 250,000 annual exemption

Step 8: Apply 6% donor’s tax

Step 9: File and pay within 30 days from the gift

Step 10: Secure transfer clearances and registration documents

50. Sample computations

A. Cash donation to child

Gift: PHP 1,000,000 Other gifts in same year: none

Less annual exemption: PHP 250,000 Taxable gift: PHP 750,000 Donor’s tax: PHP 45,000

B. Donation of land

Fair market value under assessor: PHP 2,800,000 BIR zonal value: PHP 3,200,000

Use higher amount: PHP 3,200,000 Less exemption: PHP 250,000 Taxable gift: PHP 2,950,000 Donor’s tax: PHP 177,000

C. Sale below market to sibling

Fair market value: PHP 4,000,000 Selling price: PHP 2,500,000 Deemed gift: PHP 1,500,000 Less exemption: PHP 250,000 Taxable gift: PHP 1,250,000 Donor’s tax: PHP 75,000

D. Several gifts in one year

March: PHP 100,000 June: PHP 300,000 September: PHP 500,000

Total gifts: PHP 900,000 Less exemption: PHP 250,000 Taxable gift: PHP 650,000 Donor’s tax: PHP 39,000

51. Documents commonly needed for actual compliance checklist

For practical filing, a donor typically prepares:

TIN of donor and donee
donor’s tax return
deed of donation or proof of transfer
written acceptance where required
proof of fair market value
proof of relationship where relevant
IDs and authority documents
title or stock certificates if applicable
tax declarations and assessor’s certification for real property
latest audited financial statements for unlisted shares
proof of exemption, if claimed
proof of payment
follow-up documents for registration or annotation

52. Important legal and practical observations

Philippine donor’s tax today is simpler in rate than before because of the flat 6% structure, but the simplicity of the rate does not mean the law is simple in application. The difficult parts are usually:

identifying whether a transaction is really a gift
valuing the property correctly
proving exemption
handling family property regimes
meeting the 30-day filing deadline
coordinating with title or stock transfer processes

In practice, donor’s tax issues often arise not at the time of giving, but years later when the property is sold, inherited, audited, or disputed. That is why documentation at the time of donation matters just as much as tax payment.

53. Bottom line

In the Philippines, donor’s tax generally works this way:

a donation or gift made during life may be subject to donor’s tax
the donor pays the tax
the rate is generally 6%
it applies to total gifts in excess of PHP 250,000 per donor per calendar year
gifts to family members are not automatically exempt
transfers for less than fair value may create a deemed donation
donations must generally be filed and paid within 30 days from the date of gift
real property, cash, shares, and other property can all be covered
exemptions exist, but they are specific and conditional
late or undocumented donations can create serious problems later

A careful donor’s tax analysis always asks four questions first: What was transferred, by whom, to whom, and for how much relative to fair market value. Those four points usually determine the rest of the tax treatment.