What is Otelo's tax liability for his cash gift of P80,000 to his son in 2020?

In the context of donor's tax, cash gifts below a certain threshold can often be exempt from taxation, depending on the tax laws in place at the time of the gift. In this scenario, Otelo's cash gift of P80,000 to his son qualifies for the exemption because it falls below the exclusion limit set by tax regulations.

Typically, tax systems allow for individuals to gift a certain amount each year to recipients without incurring any tax liability, commonly referred to as the annual exclusion limit. This is designed to encourage gifting and minimize the administrative burden on both the donor and the tax agency.

Since the cash gift of P80,000 does not exceed the exemption threshold, Otelo is exempted from paying donor's tax on this amount. This exemption applies specifically to gifts made from one individual to another, particularly among family members, where tax rules often provide more favorable treatment.

This understanding of donor's tax exemptions is crucial for taxpayers to ensure compliance while maximizing their ability to gift financial support to family members without incurring a tax burden.