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Course Outline

Taxation Law II
Polytechnic University of the Philippines College of Law
Prepared by: Arlan P. Cruz

I. Estate Taxation (Title III – Transfer Taxes)

a. Basic Concepts
 Transfers of property; Modes of Acquiring Ownership
(Article 712, Civil Code[CC]);
 Death (Article 42, CC);
 Succession (Article 774, 777, CC);
 Decedent/Testator (Article 775, CC);
 Inheritance (Article 776, CC);
b. Nature, Object, Purpose;
c. Classification of Decedent (Sections 84, 104, NIRC, as
d. Gross Estate vs. Net Estate (Sections 84, 86 in relation to
104 of the NIRC, as amended by TRAIN);
e. Determination of Gross and Net Estate (Ibid.);
 Inclusions in a gross estate (Section 85, NIRC, as
1. Transfers in Contemplation of Death;
a. Roces vs. Posadas, G.R. No. L-34397, March 13,
b. Dison vs. Posadas, G.R. No. L-36770, November 4,
2. Revocable Transfers;
3. Property Passing under a General Power of
4. Proceeds of Life Insurance;
5. Capital of Surviving Spouse;
6. Transfer for Insufficient Consideration;
 Exclusions from the gross estate (Section 87, NIRC, as
amended, Article 863, CC);
 Deductions in the gross estate (Section 86, NIRC, as
amended, Section 23, TRAIN);
a. Citizens or Residents;
b. Non-Resident Aliens;
 Valuation of property for purposes of estate tax (Section
88(B), NIRC, as amended);
1. Lorenzo vs. Posadas, G.R. No. L-43082, June 18, 1937
 Estate Tax Returns; Requirements; When filed; Period of
filing (Section 90, NIRC, as amended by Section 25,
 Estate Tax Payment; Period to pay; extension of time to
pay; installment payments; Who are primarily and
secondarily liable? (Section 91, NIRC, as amended by
Section 26, TRAIN);
 Payment of Tax before delivery of property may be
allowed by probate court (Section 94, NIRC, as amended
in relation to Rule 89, Section 1, Rules of Court);
1. Marcos II vs. Court of Appeals, G.R. No. 120880, June
5, 1997;
 Payment of Tax before transfer of shares, bonds, rights;
withdrawal of money deposits of decedent on the bank
by beneficiaries (Section 97, NIRC, as amended by
Section 28, TRAIN);

II. Donor’s Tax (Title III Transfer Taxes)

1. Transfers of Property; Modes of Acquiring Ownership

(Article 712, CC);
2. Time and Transfer of Properties
 Inter Vivos (Article 729, CC); or
 Mortis Causa (article 732, CC);
3. Donation/Gift (Article 725, 726 CC, Sections 98 and
99, as amended by TRAIN in relation to Section
32(B)(3), NIRC, as amended);
 Abello, et al. vs. Commissioner of Internal Revenue, G.R.
No. 120721, February 23, 2005.
4. Donor’s Tax – Nature, Object, Purpose
5. What are included/excluded from gross gifts? (Section
104, NIRC, as amended);
6. Valuation of Donation/Gifts in Property (Section 102
in relation to Section 88(B), NIRC, as amended);
7. Requisites of a valid donation; Relate to Section 100
in relation to Section 24(D) NIRC, as amended by
 Abello, et al. vs. Commissioner of Internal Revenue, G.R.
No. 120721, February 23, 2005.
 The Philippine American Life and General Insurance
Company vs. The Secretary of Finance, G.R. No. 210987,
November 24, 2014.
8. Void Donations (Articles 739, 745 in relation to 1878,
748, and 749, CC);
9. Exemptions from Donor’s Tax (Sections 99 and 101,
NIRC, as amended by TRAIN)
10. Who pays? When filed? When paid (Section 103,
NIRC, as amended)