tax211 reviewer/lecture

7/23/2019 TAX211 Reviewer/Lecture

http://slidepdf.com/reader/full/tax211-reviewerlecture 1/20

ASSOCIATION OF TAXATION AND LAW STUDENTS

ACADEMICS DEPARTMENT http://www.facebook.com/atlas.ue

0!"#!0$00 % 00"#&!0!&'"

Note: No Copyright Intented

Sources: Income Taxation, Omar Erasmo G. Ampongan; Transer and !usiness Taxes, Ed"in #a$encia;

%e&ie" Schoo$ o Accountancy notes

INTRODUCTION TO TRANSFER TAXES AND ESTATE TAX:

TRANSFER TAX - tax imposed upon the gratuitous transfer of property ownership. It is also a

privilege tax imposed on the act of passing ownership of property.

ESTATE TAX - tax on the right of the deceased person to transmit his/her estate to his or her

lawful heirs and beneficiaries at the time of death. levied upon the transfer of the net estate of a decedent to his heirs

an excise tax because it is imposed on the exercise of the right to transfer ownership

over the property accrues at the moment of death of the decedent

ELEMENTS OF SUCCESSION

Decedent- a person who dies and left a property Estate- refers to the property, rights and obligations left by the decedent

Heirs- beneficiary of the estate

KINDS OF SUCCESSION

TESTAE!TA"# S$%%ESSI&!'designation of heirs( executed through a last will

and testament )E*A) &" I!TESTATE' transmission of properties where there is no will, or if there

is a will, the same is void or nobody succeeds in the will I+E' transmission of properties which is affected partly by will and partly by

operation of law.

KINDS OF SUCCESSORS

)E*ATEE - an heir to a particular personal property given by virtue of a will

EISEE - an heir to a particular real property given by virtue of a will

EXTRAJUDICIAL SETTLEMENT ' the heirs themselves settled the distribution of the property

without using the rule of legitime

ATLAS 2012-2013 TAXATION



COMPULSOR HEIRS

)egitimate children and descendants with respect to their legitimate parents and

ascendants In default of the foregoing, legitimate parents and ascendants, with respect to

legitimate children and descendants

Spouse Illegitimate childrenchild of unmarried couple0

RULE OF LE!ITIME

The share of legitimate child is 123 of the estate.

The share of wife is 413 or 5 of the entire hereditary estate. 413'free portion' can

be distribute through last will and testament or proportionately to forced heirs0 The share of the wife is e6uivalent to the share of legitimate child. If several children0

The share of one illegitimate child is 7 of the share of a legitimate child

THE !ROSS ESTATE:

The gross estate, also 8nown as 9:"&;ATE :"&:E"T#<, consists of all property owned by a

decedent at the time of death, including stoc8s, bonds, real estate, mortgages and any other property that legally belonged to him.

If the decedent is married, the gross estate shall also include all common properties con=ugal or

community0 of the spouses.

The gross estate of a resident "r citi#en of the :hilippines consists of the following, regardless

of location>

"eal property

Tangible personal property

Intangible personal property

The gross estate of a n"n-resident$ %&" at t&e ti'e "( &is deat& %as n"t a citi#en "( t&e

P&i)i**ines, consists of real estate located in the :hilippines, tangible personal property in the

:hilippines, and as a general rule or when the reciprocity rule does not apply, intangible personalproperty in the :hilippines.

The following among others, are intangible personal property located in the :hilippines statutory

enumeration0>

?ranchise which must be exercised in the :hilippines.




Shares, obligations or bonds issued by any corporation or sociedad anonima

organi@ed or constituted in the :hilippines in accordance with its laws.

Shares, obligations or bonds issued by any foreign corporation eighty'five

percent 130 of the business of which is located in the :hilippines.

Shares, obligations or bonds issued by any foreign corporation, if such shares,obligations or bonds have ac6uired a business situs in the :hilippines.

Shares or right in any partnership, business or industry in the :hilippines.

RECIPROCIT RULE applies in any of the following instances>

If the decedent at the time of his death was a citi@en and resident of a foreign

country which at the time of death does not impose a transfer or death tax of any

character in respect of intangible personal property of citi@ens of the :hilippinesnot residing in that foreign country

If the laws of the foreign country of which the decedent was a citi@en and resident

at the time of death allows similar exception from transfer taxes or death taxes of every character in respect of intangible personal property owned by citi@ens of the :hilippines not residing in that foreign country.

S$A"# &? :"&:E"TIES I!%)$E I! TBE *"&SS ESTATE>

INCLUDED IN THE !ROSS

ESTATE

RESIDENT+FI

LIPINO

NON-

RESIDENT

ALIEN

,RECIPROCI

T RULE

DOES NOT

APPL

NON-

RESIDE

NT

ALIEN

,RECIP

ROCIT

RULE

APPLIE

S

1. Real or immovable

property situated:

a.0 in the :hilippines




b.0 outside the :hilippines

2. Tangible personal

property acquired:



3. Intangible personal

property with situs:



?ranchise exercised in the

:hilippines

Shares, obligations or

bonds issued by foreigncorporations organi@ed under :hil.

laws


bonds issued by foreigncorporations 13 of businesslocated in the :hil.0





bonds issued by any foreigncorporation ac6uired businesssitus in the :hilippines.

Shares or rights in

partnership business or industryestablished in the :hilippines

NOTE: Intangible personal property located within the :hilippines of a non'resident alien is sub=ect to

the rule of reciprocity. If there is reciprocity, it is not sub=ect to estate tax in the :hilippines.

!otes or other claims held by the decedent should be included in the gross estate even though

they are cancelled by the decedentCs will.

Accrued interest and rents, dividends declared to stoc8holders of record on or before the date of

decedentCs death are to be included in his estate although they are not collected until after hisdeath.

arious statutory provisions which exempt bonds, notes, bills and the certificates of indebtedness

of the government from taxation are not applicable to the estate tax since this tax is an excise taxon the rights to transfer properties and not on the property transferred.

As a general rule, the situs of a property is the d"'ici)e "r residence "( t&e "%ner . Bowever,

such general rule is not applicable when a property has a situs other than the domicile or residence of the owner, or when the rule is not consistent with the express provisions of theestate. ?or example, bonds, mortgages and certificates of stoc8 are taxable at the place wherethey are physically located.

.ALUATION OF THE !ROSS ESTATE:

The gross estate of the decedent shall be appraised or valued at the time of his death.

"ules in the valuation of the *ross Estate>

In general, the gross estate shall be valued at its (air 'ar/et 0a)1e at the time of

decedentCs death.




REAL PROPERTIES: should be valued at the current fair mar8et value ?0 as shown

in the schedule of values fixed by the :rovincial/%ity Assessors, or the fair mar8et asdetermined by the %ommissioner of Internal "evenue, whichever is higher.

PERSONAL PROPERTIES: should be reported t the ac6uisition cost for the recently

ac6uired properties, or the current mar8et price for the previously ac6uired properties.

STOCKS$ 2ONDS$ AND OTHER SECURITIES if listed in the local stoc8 exchange, the

value is the mean between the highest and the lowest 6uoted selling prices on the date of death or the nearest date when there was sale.

If not listed on an exchange, the value should be the boo8 value at the date of death.

D:ar value "etained Earnings0/ &utstanding shares issuedF G the number of sharesincluded in the estate.

$nlisted preferred shares are valued at par value.

ADDITIONS TO THE !ROSS ESTATE:

In addition to the properties and rights that are easily and physically identifiable, there are still

some rights or properties which are not physically found in the estate at the time of death, but arestill to be included as part of the gross estate of the decedent. In general, the gross estateconsists of the following>

H. Taxable Transfers> Transfers during the lifetime of the decedent0

a. "evocable transfers

b. Transfers in contemplation of death

c. :roperty passing under general power of appointment

d. Transfers for insufficient consideration

4. &thers>

a. ecedentCs interest accrued at the date of death

b. :roceeds of life insurance with revocable beneficiary

c. %laims against insolvent persons

d. Amount received by heirs under ".A. !o. JHK

RE.OCA2LE TRANSFER

It is a transfer where the terms of en=oyment of the property may be altered,

amended, revo8ed or terminated by the decedent. It is sufficient that t&e




decedent &ad t&e *"%er t" re0"/e, though he did not exercise the power torevo8e.

The donor retains the option to relin6uish such power in contemplation of death.

"evocable transfer cover the following properties>

a. Transfer with retention of interest to income or with right to designatepersons who will en=oy income or property.

b. onation mortis'causa even without retention of interest while thedecedent still lives.

c. %onditional transfers that if the transferee predeceased the transferor,the property shall return to the transferor.

Exceptions>

a. Lhen a transferor of a corporate stoc8 in trust for his children reservesthe right to vote the shares during his lifetime aid his children to graduallyassume financial responsibilities.

b. If the decedentCs power could be exercised only with the consent of allparties having an interest in the transferred property, and if the power does not affect the rights of all parties.

c. Lhere the decedent has been completely stripped of the power at thetime of his death.

d. Lhere the exercise of the power by the decedent was sub=ect to acontingency beyond the decedentCs control, which did not occur beforehis death.

TRANSFER IN CONTEMPLATION OF DEATH

It is a transfer '"ti0ated 34 t&e t&"15&t "( deat&, although death may not be

imminent. These properties are not physically available in the estate at the timeof death because the decedent transferred them during his lifetime in anticipationof his death.

9eath must be contemplated, and the thought of death, as distinguished from

purposes associated with life, must be the impelling cause of transfer.<

The main reason behind this provision is to reach schemes to evade the estate

tax liability, by the use of other forms of conveyances rather than by successionor transfer mortis causa.




Lhere a donation was made concurrently with the execution of will, or where the

time between the ma8ing of a gift and the death of the donor was relatively close,the transfer were held to be in contemplation of death.

There is a transfer in contemplation of death when>

a. The decedent transferred the possession or en=oyment of his property toanother, but this transfer was intended to ta8e effect only upon his death.

b. The decedent transferred title to the property but retained for his lifetimethe right to possess or en=oy the property or the income therefrom, or therights to designate whom shall possess or en=oy the same.

PROPERT PASSIN! UNDER !ENERAL PO6ER OF APPOINTMENT

A *"%er "( a**"int'ent is a right to designate by will or deed the person or

persons who are to receive certain property from the estate of a prior decedent.

A power of appointment may be general or limited special0>

a. SPECIAL *"%er "( a**"int'ent - is one that authori@es the donee of holder of the power to appoint only among a restricted class or designated class of persons other than himself.

b. !ENERAL *"%er "( a**"int'ent - the decedent must have had apower to exercisable in favour of himself, his estate, or creditors of hisestate.

"e6uisites for inclusion of property passing under a general power of appointment>

a. Existence of a general power of appointment.

b. An exercise of such power by the decedent by will or by deed in certaincases

c. The passing of the property by virtue of such exercise.

If the power to consume, or appropriate property and/or income for the benefit of

the decedent is limited to an ascertainable standard of living pertinent to hishealth, education support or maintenance, such favour is not general power of appointment but if a power to use property for the comfort, welfare, or happinessof the holder of the power is not considered limited by an ascertainable standardad therefore, constitutes a general power of appointment.

TRANSFER FOR INSUFFICIENT CONSIDERATION




A property is transferred for insufficient consideration if dis*"sed ("r )ess t&an

it7s ade81ate and (1)) c"nsiderati"n.

If an inter'vivos transfer of the decedent is proven to be fictitious, the total value

of the property at the time of death shall be included in the gross estate.

The value to be included in the gross estate shall be determined under thefollowing rules>

a. If the transfer was in the nature of a bona'fide sale for an ade6uate andfull consideration in money or moneyCs worth, no value shall be includedin the gross estate.

b. If the consideration received is less than ade6uate and full consideration,the value to be included in the gross estate shall be the excess of the fair mar8et value of the property at the time of the decedentCs death over theconsideration received.

c. If there was no consideration received on the transfer as in donationmortis'causa0, the value to be included in the gross estate shall be thefair mar8et value of the property at the time of the decedentCs death.

d. If the transfer is not shown to have been made in contemplation of deathor to ta8e effect upon the decedentCs death, the donor is sub=ect toonorCs Tax under Section J of the !I"%.

DECEDENT7S INTEREST

In general, decedentCs interest is commonly thought of as a personCs estate, the

wealth that he would have *"ssessed$ en9"4ed and dis*"sed$ &ad &e )i0ed.

It also refers to the value of any interest in *r"*ert4 "r ri5&ts accr1ed in (a0"r "(

t&e decedent "n "r 3e("re &is deat& which have been received only after his deathsuch as>

a. ividends declared on or before the death of the stoc8holder, and receivedby the estate after said stoc8holderCs death.

b. :artnershipCs profit earned prior to death of the partner, received by theestate after the partnerCs death.

c. Accrued interest and rents on or before the time of death, but collected untilafter death.

d. :roceeds of life insurance policy payable to a revocable beneficiary.

e. "ights of usufruct if transferable to the heirs.

As a rule, the interest to be included as part of the gross estate must exist at the time

of the decedentCs death. It is not sufficient that the decedent at some time during his




life had an interest. It is not sufficient that an interest might be transferred to thedecedentCs estate after his death.

PROCEEDS OF LIFE INSURANCE 6ITH RE.OCAL2E 2ENEFICIAR

:roceeds of life insurance under policies ta8en out by the decedent upon his life shall

constitute part of the gross estate if the beneficiary is>

a. The estate of the decedent, his executor or administrator

b. A third person ex. person other than estate, executor, or administrator0, andthe designation of the beneficiary is revocable.

$nder the Insurance %ode of the :hilippines, a designation of beneficiary is

revocable, unless stated expressly by the insured, and indicated in the policy, that thedesignation is irrevocable.

The proceeds of life insurance payable to the personCs estate, on which the

premiums were paid by the con=ugal partnership, constitute con=ugal property, andthe other half pertains to the surviving spouse.

If the premiums were paid partly with paraphernal and partly con=ugal funds, the

proceeds are in li8e portion paraphernal in part and con=ugal part.

Lhere the insured transfers a life insurance policy in contemplation of death, the

amount included in the gross estate is the face value of the policy and not the cashsurrender value.

"ule on taxability or non'taxability of life insurance proceeds>

Pr"ceeds "( Li(e

Ins1rance

Re0"ca3)e

Desi5nati"n

Irre0"ca3)e

Desi5nati"n

?rom life

insurance with the

estate,

administrator,executor as

beneficiary

Taxable Taxable




?rom life

insurance with

wife as beneficiary

Taxable !ot Taxable

?rom SSS or

*SIS with wife as

beneficiary

!ot Taxable !ot Taxable

?rom group

insurance with heir

as beneficiary

!ot Taxable !ot Taxable

Case P")ic4 2ene(iciar4

H "evocable #es

4 "evocable !o

M Irrevocable #es

Irrevocable !o

1 Silent !o

CLAIMS A!AINST INSOL.ENT PERSON

These refer to recei0a3)es )e(t 34 t&e decedent but the court c"nse81ent)4 ("1nd t&e

re)ated de3t"r ins")0ent;

A claim against insolvent person must be reported as part of the gross estate in the full

amount of the receivable. The fact it is uncollectible in whole or in part will be recogni@edas a deduction from the gross estate for uncollectible portion.

This should be reported as exclusive or con=ugal property depending on whether the

claim is derived from an exclusive or con=ugal property.




AMOUNT RECEI.ED 2 HEIRS UNDER R;A; N"; <=>?

The amount recei0ed 34 t&e &eirs (r"' t&e decedent7s e'*)"4er as a conse6uence of

the death of the decedent'employee shall be included in the gross estate of the

decedent. This amount is also allowed as a deduction from gross estate.

The following items refer to the amount received by the heirs which are not sub=ect to any

tax under ".A.JHK>

a. "etirement benefits received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit planmaintained by the employer. :rovided that>

The retiring officials or employee has been in the service of the same

employer for at least H2 yrs. and not less than 12 yrs. at the time of hisretirement.

The benefits granted under ".A.JHK shall availed of an official or

employee only once.

b. ;enefits granted in case of separation of official or employee from the service of the employer due to death, sic8ness or other physical disability or of any causebeyond the control of the said official or employee.

EXEMPTIONS FROM ESTATE TAX:

"efers to the properties, rights or transfers that are specifically declared by the law as ?"EE from

the burden of the estate tax. As a rule, properties or transfers exempt from estate tax by law, are !&T considered in the

determination of the amount of the gross estate.

!I"% Sec. K. E+E:TI&!S &? %E"TAI! A%N$ISIT&!S A! T"A!SISSI&!S. - the

following shall not be taxed> The 'er5er "( 1s1(r1ct in t&e "%ner "( t&e na/ed tit)e(

a. Lhen the same person becomes a usufructuary and owner of the na8ed title, it

ma8es him/her the a3s")1te "%ner of the propertyb. USUFRUCT - the legal right to use and en=oy the benefits and profits of

something belonging to another.c. Two persons involved in usufruct>

USUFRUCTUAR - the person who has the right of en=oying the use

and the fruits of the property belonging to another.

O6NER OF THE NAKED TITLE - the person who is vested the

ownership, dominion, or title of the property under the usufruct

agreement. Be is !&T the absolute owner of the property with respect to

the right of the usufructuary.

The transmission or delivery of the inheritance or legacy of the fiduciary heir or legatee to the

fideicommissary(a. The transfers from fiduciary heir to the fedeicommissary




b. LE!AC - a gift or be6uest by LI)) of a person.c. DE.ISE - a TESTAE!TA"# disposition of real estate.d. LE!ATEE - the person to whom a legacy in a will is given.e. FIDUCIAR HEIR - the ?I"ST BEI" of the property.f. FIDEICOMMISSAR - the SE%&! BEI" whose relationship to the fiduciary

heir must be one degree of generation a parent and a child0

The transmission from the first heir , legatee or done in favor of another beneficiary, inaccordance with the desire of the predecessor(

The sec"nd trans(er as desired by the predecessor

There is only "ne trans(er from the testator

All be6uests, devise, legacies or transfers to social welfare, cultural, and charitable

institutions provided>a. !o part of the income of such institution inures to the benefit of any

individualb. !ot more than M23 of said be6uests, devises, legacies or transfers shall

be used by the such institutions for administration purposes. ;e6uests to be used actually, directly and exclusively for educational purposes.

EXEMPTIONS UNDER SPECIAL LA6S:

;enefits received from SSS or *SIS(

;enefits received from $.S.eterans Administration(

Lar benefits given by the :hilippine government and $.S. government due to damages

suffered during the war( and *rants and donations to the Intramuros Administration.

A net estate with a value of :422, 222 or less( and a capital of the surviving spouse which refers

to the SE:A"ATE :"&:E"T# of the surviving spouse is also exempted from estate tax.

DEDUCTIONS FROM ESTATE TAX:

ORDINAR DEDUCTIONS

Expenses, loses indebtedness and taxes E)IT0

a. FUNERAL EXPENSES - the amount deductible shall be whichever isthe lowest among the following( the actual funeral expenses incurred, 13of gross estate, and the :422,222.

b. JUDICIAL EXPENSES - It includes those actually and necessarilyincurred during settlement of the state but not beyond six O0 months, or the extension thereof for the filing of the estate tax return. Expenses notessential the proper settlement of the estate but not incurred for theindividual benefit of the heirs legatees, or devisees are not allowed asdeductions.

c. CLAIMS A!AINST THE ESTATE - this represents personal obligation of the deceased existing at the time of his death except unpaid funeralexpenses and unpaid medical expenses. The claims may arise out of contract, tort or operation of law. The re6uisites for deductibility are the

following>• ust have been contracted in good faith and for an

ade6uate and full consideration in money or moneyCs worth(

• The debt instrument must be duly notari@ed except loans

granted by financial institutions where notari@ation is not partof the business practice/policy of the financial institution'lender(

• It must not have been condoned by the creditor(




• The action to collect from the decedent must not have been

prescribed.d. UNPAID MORT!A!ES – upon the properly left by the decedent. The

re6uisites for deductibility are the following>

• The mortgage indebtedness was contracted in good faith

and for an ade6uate and full consideration in money or

moneyCs worth( and• The fair mar8et value of the property mortgaged without

deducting the mortgage indebtedness has been includedin the gross estate.

e. CLAIM A!AINST INSOL.ENT PERSONS ,2AD DE2T; - "eceivableof the decedent which are uncollectible due to insolvency of the debtor.Its re6uisites for deductibility are as follows>

• The value of the decedentCs interest therein must be

included in the gross estate.

• The debtorCs insolvency / incapacity are proven and not

merely alleged.

f. UNPAID INCOME AND PROPERT TAXES which accrued as of thedecedent which were unpaid as of the time of death.

g. LOSSES - re6uisites>

• The loss must arise during the settlement of the estate

but not beyond the deadline for the payment of theestate tax.

• It must arise from fire, storms, shipwrec8 or other

casualties or from robbery, theft of embe@@lement.

• Such losses have not been claimed as deduction for

income tax purposes.

• ust not be compensated by insurance or otherwise.

!ote> If the decedent is a nonresident alien, pro'rate the above expenses as follows>

:hilippine *ross EstateTotal *ross Estate

Transfers for public purpose.

The amount of all be6uests, legacies devisees or transfers to or for the

use of the *overnment of the :hilippines or any political subdivision thereof, for

exclusively public purposes.

anishing deductions>

"e6uisites for deductibility>

• The property is situated in the :hilippines(

• The property must have been ac6uired thru inheritance

or donation within five 10 years before death of present

decedent(• Such property can be identified as the one received from

prior decedent or donor which can be identified ashaving ac6uired in exchange for property so received.

• :rior gift tax or estate tax has been paid

• The property is included in the gross estate or gross gift

of prior decedent/ donor.

.ANISHIN! RATES:


×



ore than !ot ore than :ercentages

H year H223

H year 4 years 23

4 years M years O23

M years years 23

years 1 years 423

1 years GG 23

SPECIAL DEDUCTIONS

AMOUNTS RECEI.ED 2 HEIRS FROM EMPLOER UNDER RA <=>? - Amounts

received by the heirs from the decedentCs employer as a conse6uence of the death of

the decedent'employee. Provided , that such amount is included in the gross estate of the decedent.

MEDICAL EXPENSES - This includes cost of medicines, hospital bills, doctorCs fees,

etc. incurred whether paid or unpaid at the time of death of the decedent. "e6uisites> a. Incurred by the decedent within one H0 year prior to his death.

b. aximum amount deductible is :122, 222.

c. uly substantiated with receipts.

SHARE OF SUR.I.IN! SPOUSE IN THE NET CONJU!AL OR COMMUNIT

PROPERT FAMIL HOME - the dwelling house including the land on which it is situated, where

the husband and wife, or a head of the family and members of their family reside, ascertified by barangay captain and locality. The deductible amount is the higher between the assessed value, ? or @onal value, but not exceeding :H,222,222. The

total value, however, must be included as part of the gross estate of the decedent. STANDARD DEDUCTION of : H,222,222.

COMPUTATION OF ESTATE TAX:

TA+ TA;)E E??E%TIE PA!$A"# H, HJJ $: T& :"ESE!T0

O.ER 2UT NOT

O.ER

THE TAX

SHALL 2E

PL

US

OF THE

EXCESS

O.ER

: 422,22.22 Exempt

:422,222.22 122,222.22 2 13 : 422,222.22

122,222.22 4,222,222.22 : H1,222.22 3 122,222.22




4,222,222.22 1,222,222.22 HM1,222.22 HH

3

4,222,222.22

1,222,222.22 H2,222,222.2

2

O1,222.22 H1

3

1,222,222.22

H2,222,222.2

2

H,4H1,222.2

2

42

3

H2,222,222.2

2

IF THE DECEDENT IS SIN!LE:*ross estate xx)ess> eductions

&rdinary xxSpecial xx xx

!et taxable estate xx+ applicable rate xxEstate tax due xx

IF THE DECEDENT IS MARRIED:

%on=ugal property xxExclusive property xx*ross estate xx

)ess> exclusive property xx*ross con=ugal property xx)ess> con=ugal deductions xx&rdinary0!et con=ugal property xx)ess>H/4 share of surviving spouse xx!et share from con=ugal property xx

Add> exclusive property xx)ess>exclusive deduction xx xx

!et property xx)ess> special deductions>

?amily homeH/40 xxedical exp xx"A JHK xxStandard deduction xx xx

!et taxable estate xx

SIMILARITIES 2ET6EEN THE RE!IMES OF THE CONJU!AL PARTNERSHIP AND

A2SOLUTE COMMUNIT:

PROPERT CONJU!AL A2SOLUTE




PARTNERSHIP COMMUNIT

:roperty ac6uired duringmarriageother than

inheritance0

%&!P$*A) %&$!IT#

:roperty ac6uired fromlabor, industry,wor8 or

profession of the spouse

%&!P$*A) %&$!IT#

?ruits received during themarriage coming from the

common property

%&!P$*A) %&$!IT#

:roperty inherited or donated during the

marriage

E+%)$SIE E+%)$SIE

DIFFERENCES 2ET6EEN THE SSTEM OF CONJU!AL PARTNERSHIP AND A2SOLUTE

COMMUNIT OF PROPERT

PROPERT CONJU!ALPARTNERSHIP

A2SOLUTECOMMUNIT

:roperty ac6uired beforemarriage

E+%)$SIE %&$!IT#

?ruits received duringthe marriage fromexclusive property

%&!P$*A) E+%)$SIE

ESTATE TAX ADMINITRATI.E PRO.ISIONS:

NOTICE OF DEATH TO 2E FILED

In all cases of transfers sub=ect to tax, or where, though exempt from tax, the gross value of the

estate exceeds t%ent4 t&"1sand *es"s ,P@$ $ the executor, administrator or any of the legal heirs,

as the case may be, within two 40 months after the decedentQs death, or within a li8e period after

6ualifying as such executor or administrator, shall give a written notice thereof to the %ommissioner.

ESTATE TAX RETURNS

"EN$I"EE!TS>




In all cases of transfers sub=ect to the tax imposed herein, or where, though

exempt from tax, the gross value of the estate exceeds t%" &1ndred t&"1sand *es"s

,P@$$ or regardless of the gross value of the estate, where the said estate consists

of registered or registrable property such as real property, motor vehicle, shares of stoc8

or other similar property for which a clearance from the ;ureau of Internal "evenue is

re6uired as a condition precedent for the transfer of ownership thereof in the name of the

transferee, the executor, or the administrator, or any of the legal heirs, as the case may

be, shall file a return under oath in duplicate, setting forth>

a. The value of the gross estate of the decedent at the time of his

death, or in case of a nonresident, not a citi@en of the :hilippines, of that part of

his gross estate situated in the :hilippines(

b. The deductions allowed from gross estate in determining the

estate as defined in Section O( and

c. Such part of such information as may at the time be

ascertainable and such supplemental data as may be necessary to establish the

correct taxes.

:rovided, however, That estate tax returns showing a gross value eceedin5 T%"

'i))i"n *es"s ,P@$$ shall be supported with a statement duly certified to by a%ertified :ublic Accountant containing the following>

a; Ite'i#ed assets of the decedent with their corresponding gross

value at the time of his death, or in the case of a nonresident, not a citi@en of the

:hilippines, of that part of his gross estate situated in the :hilippines(

3; Ite'i#ed ded1cti"ns from gross estate allowed in Section O(

and

c; T&e a'"1nt "( ta d1e whether paid or still due and

outstanding.

TIE ?&" ?I)I!*>

?or the purpose of determining the estate tax provided for in Section of this

%ode, the estate tax return re6uired under the preceding Subsection A0 shall be (i)ed

%it&in si ,B '"nt&s from the decedentQs death. A certified copy of the schedule of partition and the order of the court approving

the same shall be furnished the %ommissioner %it&in t&irt4 , da4s after the

promulgation of such order.

E+TE!SI&! &? TIE>

The %ommissioner shall have authority to grant, in meritorious cases, a

reas"na3)e etensi"n n"t eceedin5 t&irt4 , da4s for filing the return.

:)A%E &? ?I)I!*>

Except in cases where the %ommissioner otherwise permits, the return re6uired

under Subsection A0 shall be filed with an authori@ed agent ban8, or "evenue istrict

&fficer, %ollection &fficer, or duly authori@ed Treasurer of the city or municipality in which

the decedent %as d"'ici)ed at t&e ti'e "( &is deat& or if there be no legal residence

in the :hilippines, with the &ffice of the %ommissioner ;

PAMENT OF TAX

TIE &? :A#E!T

The estate tax imposed by Section shall 3e *aid at t&e ti'e t&e ret1rn is

(i)ed by the executor, administrator or the heirs.

E+TE!SI&! &? TIE




Lhen the %ommissioner finds that the payment on the due date of the estate tax

or of any part thereof would impose undue hardship upon the estate or any of the heirs,

he may extend the time for payment of such tax or any part thereof n"t t" eceed (i0e

, 4ears, in case the estate is settled through the courts, or two 40 years in case the

estate is settled extra=udicially. In such case, the amount in respect of which the

extension is granted shall be *aid "n "r 3e("re t&e date "( t&e e*irati"n of the *eri"d

"( t&e etensi"n, and the running of the Statute of )imitations for assessment as

provided in Section 42M of this %ode shall be suspended for the period of any such

extension.

Lhere the taxes are assessed by reason of negligence, intentional disregard of

rules and regulations, or fraud on the part of the taxpayer, no extension will be granted by

the %ommissioner.

If an extension is granted, the %ommissioner may re6uire the executor, or

administrator, or beneficiary, as the case may be, to furnish a bond in such amount, not

exceeding double the amount of the tax and with such sureties as the %ommissioner

deems necessary, conditioned upon the payment of the said tax in accordance with the

terms of the extension.

)IA;I)IT# ?&" :A#E!TThe estate tax imposed by Section shall be *aid 34 t&e eec1t"r "r

ad'inistrat"r 3e("re de)i0er4 t" an4 3ene(iciar4 "( &is distri31ti0e s&are "( t&e

estate. Such beneficiary shall to the extent of his distributive share of the estate, be

subsidiarily liable for the payment of such portion of the estate tax as his distributive

share bears to the value of the total net estate.

DISCHAR!E OF EXECUTOR OR ADMINISTRATOR FROM PERSONAL LIA2ILIT

If the executor or administrator ma8es a written application to the %ommissioner for

determination of the amount of the estate tax and discharge from personal liability therefore, the

%ommissioner as soon as possible, and in an4 e0ent %it&in "ne ,> 4ear a(ter t&e 'a/in5 "( s1c&

a**)icati"n, or if the application is made before the return is filed, then %it&in "ne ,> 4ear after the

return is filed, but n"t a(ter t&e e*irati"n "( t&e *eri"d *rescri3ed for the assessment of the tax inSection 42M shall not notify the executor or administrator of the amount of the tax. The executor or

administrator, upon payment of the amount of which he is notified, shall be discharged from personal

liability for any deficiency in the tax thereafter found to be due and shall be entitled to a receipt or

writing showing such discharge.

PAMENT OF ESTATE TAX 2 INSTALLMENT:

:rovides, that in case the available cash estate is not sufficient to pay its total estate tax

obligation, the estate to pay estate tax by installment and clearance shall be released only with

respect to the property corresponding to the computed tax on which has been paid. There shall, be

therefore, be as many clearances as there as many properties released because they have been paid

for by the installment payments of the estate tax. The computation of the estate tax, however, shall

always be on cumulative amount of the net taxable estate. Any amount paid after the statutory due

date of the tax shall be imposed the corresponding penalty thereto. Bowever, if the payment of the tax

after the due date is approved by the %I" of his duly authori@ed representative, the imposable penalty

thereon shall only be the interest.

S1rc&ar5es

S$"%BA"*E &? 413>




There shall be imposed, in addition to the tax re6uired o be paid. A penalty of surcharge

e81i0a)ent t" @ of the amount due, in any of the following>

a; ?ailure to file any tax return and pay the tax due thereon as re6uired on the dateprescribed.

3; $nless otherwise authori@ed by the ;I" %ommissioner, filing a tax return with an

internal revenue officer other than those with whom the return is re6uired to befiled.

c; ?ailure to pay the deficiency tax within the time prescribed for its payment in thenotice of assessment and demand.

d; ?ailure to pay the full or part of the amount of tax shown on any tax returnre6uired to be filed on the full amount of tax due for which no tax return iere6uired to be filed on or before the date prescribed for its payments

S$"%BA"*E &? 123>

There shall be imposed in addition to the tax re6uired to be paid, a penalty and surcharge

e81i0a)ent t" of the amount due in any of the following cases>

a; In case of willful neglect to file the tax return within the period prescribes by lawand regulations.

3; In case a false or fraudulent tax return is willfully made interest of 423.

c; In *eneral - There shall be assessed and collected on any unpaid amount of taxinterest of 423 per annum or such higher rate as may be prescribed by rules andregulation from the date prescribed for payment until the amount is fully paid.

DEFICIENC INTEREST

Any deficiency in tax due, as the term I defined in the !I"%, shall be sub=ect to the interest

therein prescribed, which interest shall assessed and collected from the date prescribed for its

payment until the full payment thereof.

E)I!N$E!%# I!TE"ESTThere shall be assessed and collected on the unpaid amount of taxes interest at the

rate prescribed hereof until the amount is fully paid which interest shall form part of the tax.

I!TE"EST E+TE!E :A#E!T

There shall be assessed and collected interest at the rate herein above prescribed on

the tax or deficiency tax or any par thereof unpaid from the date of notice and demand until it

is paid in the following cases.

If the person elects to pay the estate tax on installment payments but fails to pay the

re6uired tax to the payment date.

Lhere the commissioner has authori@ed a taxpayer an extension of time within which to

pay tax or a deficiency tax or any part thereof, but fails to pay said tax within theprescribed extension periods.


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