11/25/20085:29 PM
Atty. Dan Macatangay
Tax II – Estate & Donor’s Tax [Apr 2008]
Assigns:
Read the following:
Estate Tax and Donor’s Tax will be discussed in two meetings each, or 4 meetings combined.
1. Estate Tax (Sec. 84 to 97 and Sec 104) [two meetings]
2. Articles 725, 728, 729, 734, 777, 863 to 866 of the Civil Code of the Philippines
3. Rev. Reg. No. 2-2003
4. Donor’s Tax (Sec. 98 to 104) [two meetings]
5. Hector De Leon NIRC Annotation, vol. 1 [Estate and Donor’s Tax]
5.a SOME REVIEW QUESTIONS
1. How would youclassify Estate taxand Donor’s taxaccording to their nature?
They are excise taxes, meaning taxes imposed on the privilege of transmitting properties gratuitously,either during the lifetime of the transferor or upon his death.
1.a Distinctionbetween estate taxand donor’s tax
ET – transfer takes effect upon death of transferor
DT – takes effect during the lifetime of transferor, except TCD
ET – taxpayer is the estate of transferor/decedent
DT – tax payer is the donor
ET – Tax is based on net estate
DT – Tax is based on net gift
ET – First P200K exempt; top rate 20%
DT – First P100K exempt; top rate 15%; 30% - donation to stranger
ET – Return filed w/in 6 months from death
DT – within 30 days from donation
1.b. Whose Estateis subject to Estatetax?
Resident & non-resident Filipino & resident alien
NoresAli2. What doesGross Estateinclude?
a.
Decedent’s interest at the time of death (capital, conjugal or community properties)
b.
Transfers inter vivos
a.
Transfer in contemplation of death (sale or donation)
b.
Revocable transfers
c.
Property passing under general power of attorney
d.
Transfer for insufficient consideration
c.
Proceeds of Life insurance, subject to certain exceptions
3. Class of Propertiesincluded?
Real & personal
Sa4. Class of personalproperties?
Tangible & intangible Sa5. Samples of tangible personal?
Car, furniture, jewelries, etc.
Sa6. Intangibles?
Cash, stocks, interest in partnership, insurance,
Sa7. Samples of realproperties?
Land, building, and interest therein
Sa8. Wheresituated?
Within and without the Philippines
Phi9. What is TCDunder the TaxCode?
a.
transfers to take in possession or enjoyment at or after death
b.
transfers but retain right for life or period to end at his death possession, enjoyment or income,or alone or with other right to designate a person to so enjoy. (see
Guillermo Cruz vs. CA, etal, GR No. 156894, Dec 2, 2005 and
Laureta v. Mata and Magno
ating that one whodonates with a term, such as the donation effecting at one’s death, but without reservation,already disposes of the thing donated and cannot again dispose of the thing in favor of another.[
N
o. 19740, 22 March 1923, 44 Phil. 668, 674.)
c.
except bona fide sale for a full and adequate consideration in money or in money’s worth
d.
it does not refer to general expectation of death but death is the controlling motive to maketransfers to avoid taxes; it is a question of fact.
9.a Whatcircumstances aretaken into accountin determining if TCD exists?
d.
Age and state of health, length of time between gift and death, concurrence of making will or short time between will making and transfer. (see Vidal de Roces vs. Posadas 58 Phil 108)
10. What is arevocable transfer?
e.
Transfers, where enjoyment is subject to change by exercise of power by decedent or other person to alter, etc.
f.
Or where such power is relinquished in contemplation of death
11. What isproperty passingunder generalPower of Appointment?
a.
Exercised by decedent by (1) will, (2) deed executed in contemplation of death, or whereenjoyment or possession to take effect at or after his death or (3) deed retaining for life or period not ascertainable without reference to his death enjoyment, possession or income, or designate other to enjoy, etc. alone or with other
b.
except bonafide sale
c.
it is general if it authorizes donee (decedent) to designate any persons (including thedecedent) who shall enjoy the property from estate of prior decedent. It is special if he cannotappoint himself. To be included in the gross estate, it must be general, exercised by will or deed and passing of property by the exercise of power.
12. Proceeds of Life Insurance
a.
insurance on decedents life with estate, executor or adm is beneficiary, whether designation isrevocable or not
b.if beneficiary is other than above, if designation is revocable, include, if not, exclude.13. What is prior interest?
These rules apply to transfers, estates, trusts, rights, powers and relinquishment made or donebefore or after effectivity of the Tax Code.
14. What istransfer for insufficientconsideration? Arethere anyexception?
There is consideration in money or money’s worth but not a bonafide sale for an adequate or fullconsideration, short is to be included in the gross estate. Note that the transfer for insufficientconsideration must be in contemplation of death, otherwise, it could be subject to donor’s tax,except when the property involved is a capital asset subject to final income tax.15. How to treatcapital of SurvivingSpouse?
It is excluded from gross estate.
16. How areconjugal andcommunityproperties treatedfor estate taxpurposes?
They are included as part of GE but ½ of SS share is deducted before exemptions
Neof defroestdibyoblchtosh17. How are estateproperties valued?
a.
The estate is valued at FMV at time of death, but real property shall be valued at the higher of FMV per CIR or of FMV fixed by Prov or City Assessor
b.
Usufruct valued using latest Basic Std Mortality Table approved by DF
18. How is estatetax computed?(See below for computations)
Gross estate (exclusive conjugal/community)
Less: Allow deductions (ordinary & special)
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