ESTATE TAXES

A. Basic Principles

2. A: The transfer taxes under the NIRC are the estate tax and donor’s tax.

3. Discuss the different theories regarding the purpose of transfer taxes.

A: 1. Benefit-received Theory – the tax is in return for the protection and services rendered by the
State in the accumulation of properties transferred gratuitously.

2. Privilege or State-Partnership Theory (which means that)

3. Ability-to-pay Theory (which means that)

4. Redistribution of Wealth Theory (which means that)

4. Q: What is an estate tax?

A: It is a tax that is levied, assessed, collected and paid upon the privilege of gratuitously transferring the
net estate of a decedent to his heirs (3 Domondon, Taxation p.3).

8. Q: What law governs the imposition

B. Nature

3. Discuss the different theories regarding the purpose of estate tax.

C. Time and transfer of properties

Note: (cite Cabaneiro)

D. Classification of decedent

ANS: The estate of the following individuals are liable to pay estate tax:

F. Determination of gross and net estate

G. Items to be included

1. DELETE

2. Basis for valuation – Move to [F]

11-A Q: When may a transfer in contemplation of death, revocable transfer or property passing under a
General Power of Appointment be excluded in the gross estate?
A: In case of a bona fide sale for an adequate and full consideration in money or money’s worth [Sec.
85(c)(1); 104(B)]

12. Q: When is a transfer considered for insufficient consideration?

A: A property (other than real property referred to [as capital asset] under Sec. 24(D) of NIRC) is
transferred for insufficient consideration if sold or disposed for less than its prevailing market value (3
DOMONDON Taxation, p.133).

NOTE: The formula to be used based on the foregoing is: xxx

13 – delete (misleading)

*See Memaid for the table (example)