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TRANSFER TAXES AND BASIC SUCCESSION Transfer taxes are excise or privilege taxes.

s. Onerous transfer of property - the exchange of property for a monetary consideration or a transfer of goods or services in return for something of equal value like in sales or barter. o Business tax the tax corresponding the transfer made in the normal course of business o E.g. value-added tax, percentage tax, excise tax Gratuitous transfer of property a conveyance of property without any consideration involved in exchange for the property given away. Transfer taxes taxes which are imposed on gratuitous transfer of property o Estate tax Basis: to tax the transfer of economic benefits and enjoyment of property from a decedent person to the heir. Justification Redistribution of wealth theory unequal distribution of wealth; helps distribute some of the economic benefits Benefit-received theory government provides services for the transfer; it is just fair that the government collects its equivalent compensation Privilege or state partnership theory the State is a passive and silent partner Ability to pay theory heir has ability to pay the tax to contribute to the government o Donors tax excise tax imposed on the right to transfer gratuitously, directly or indirectly, real and personal properties, tangible or intangible out of the owners liberality in favor of another that accepts the gift. Purpose: to prevent avoidance of estate tax through lifetime transfers of property Effectivity - Transfer of Properties o From the moment of decedents death (Article 777, CCP) o Determination of the tax on property transferred is traced back to the moment of death. Succession o Defined as a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by will (testate) or by operation of law (intestate) (Article 774, CCP) o Basis: Family Relation (principle of natural law), Implicit Ownership (heirs assumed ownership of property left by decedent), Socio-economic (wealth left by decedent should be actively used to provide economic benefit to the community). Elements of Succession o Decedent (person who died) o Testator (decedent through will) o Estate (property rights of decedent) o Successor (heir) Persons Authorized To Take Chart of the Estate o Executor person or trust company named in the will by testator o Administrator person or trust company appointed by the court Inheritance/Estate properties or the estates of the decedent Successors parties who have legal rights to receive the estate (Article 887, CCP) o Primary compulsory heirs Legitimate children and their legitimate descendants Surviving legitimate spouse Illegitimate children and their descendants o Secondary compulsory heirs Legitimate parents and legitimate ascendants Illegitimate children and their descendants o Absence of compulsory heirs th Decedents relatives up to 5 degree If no relatives to receive, the government inherits the whole estate If theres a will, decedent may name other persons to inherit the free portion Devisee a person to whom a gift of real property is given by virtue of a will (Article 782, CCP) Legatee a person to whom a gift of personal property (bequest) is given by virtue of a will. Brothers and sisters are not compulsory heirs, neither are strangers however it is not contrary to law in giving them a share of the inheritance, if the testator desired called voluntary heirs.