Tax2 Donalvo 2018 TSN First Exam

TAXATION
2- 1st exam
FROM THE LECTURES OF ATTY. DONALVO 2018-2019
Campaner, Castro, Gido, Isidor, Lagat, Lim, Olamit, Singanon, Tan, Viola – compiled by del Rosario

Tax 2 is more or less okay compared to Tax 1. We will have an exam Capital gains tax but the rate depends on the
before the Christmas break. The coverage of that exam is Transfer type of capital asset involved (there are three):
Taxes – Estate and Donor’s Tax. a. Real property classified as a capital
asset situated in the Ph – subject to
After the Transfer Tax, the next topic is Business Tax – VAT, CGT of 6% based on gross selling
Percentage Tax and Excise Tax. Also included in the 2nd exam is the price
DST (Documentary Stamp Tax). b. Stocks listed in the local stock
exchange – 6/10 of 1% of gross
For the 3rd exam, we will cover the Tax Remedies for the NIRC, that selling price
would involve the Protests, Refunds, Compromise Agreements, c. Stocks not traded – 15% of the net
also the Government Remedies. We will also discuss the basic local capital gains.
taxes. Exempt from the exam are your local property taxes.
(Tax 1 exam answers comment: Some of you are confused already.
Finally, for the 4th exam we will just cover Real Property Taxes Life insurance premium. I was asking for the proceeds. On the part
including remedies, the Customs and Tariff Laws (basics and of employer- what is the tax implication of the life insurance
remedies), and the Court of Tax Appeals. In the CTA, it will be a procured. I am talking about the life proceeds. Some of you would
review of all the remedies that we will be discussing from the NIRC answering in the context of the proceeds of the life insurance
to the Local Government Code and Customs and Tariff Laws. received by the beneficiaries. Wherein the question referred to the
employer- it is an expense. Ang proceeds tinatanggap, what is paid
TRANSFER TAXES is the premium.)

How do you define a transfer tax? Domestic Stocks if it is listed or not listed in the local stock
If there is a transfer of property from one person to another, is it exchange.
automatically subject to transfer tax? • If listed- 6/10 of 1% of GSP
• If not traded- 15% (TRAIN Law); before 5% and 10%
TRANSFER TAX is the tax imposed upon the privilege of
passing ownership of property without any valuable It really depends if it is really for business purposes or in relation
consideration. Which is why when we say transfer tax, we to the business or it is considered as capital asset.
are talking about gratuitous transfer of properties.
2 KINDS OF TRANSFER TAXES:
How do we transfer gratuitously? 1. Estate Tax
(1) Succession, 2. Donors Tax
(2) Donation.
(BTW, this is the coverage of your Prelims)
So basically, under the NIRC there are TWO TYPES OF TRANSFER
TAXES: With respect to the governing law, you have to remember this basic
1. Estate Tax principle that:
2. Donor’s Tax ® TRANSFER TAXES ARE GOVERNED BY THE LAW
EXISTING AT THE TIME THAT THE TRANSFER TAKES
What is the nature of transfer tax? PLACE.

It is an excise tax. It is a tax on the privilege of transferring Maraming nadadali jan or marami naman ang gusto mag bayad ng
property without any valuable consideration. estate tax ngayon and namatay yung decedent nung 1989 pa. Ay
sabi nila 6% nalang daw. – NO, that is actually FALSE.
It is similar to income tax in a sense; they are the same in
that what is being taxed is the privilege. It is not a property What is actually applicable when the decedent died way back in
tax because we are not taxing the property that is being 1989, you apply the old NIRC. Because the controlling law is the
transferred. Rather, the privilege, the mode of transfer time the transfer has taken place.
that is being taxed.
Pag ESTATE kailan namatay. Pag DONOR’S when was it donated.
If it is an onerous transfer, do you subject it to transfer taxes?
If the PROPERTY IS GIVEN GRATUITOUSLY we call it as donations.
GR: NO. Transfer taxes only applies to transfers. When you
say “transfers” it’s just a transfer of ownership without But under Succession Law, there are 2 types of donation:
valuable consideration. 1. Donation Mortis Causa (DMC) - takes effect only at the
time of the death of the donor. You should apply the
If the transfer is onerous, what are the possibilities? rules on Succession.
1. It will be subjected to business taxes 2. Donation Inter Vivos (DIV) – takes effect during the
2. (if not subject to business tax) like when you lifetime of the donor.
transfer a property classified as capital asset?
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TAXATION 2- 1st exam

Same with Tax, pagsinabi natin DIV you will apply the rule on pinapanganak dito sa Pilipinas.
donor’s taxes. But even if the document is executed during the
lifetime of the donor but will only take effect at the time of his 4. The only method of collecting the share which is  
(donor) death then you apply the provisions in estate taxation. properly due to the State as a “partner” in the
Wala kang babayaran na donor’s tax. You just have to pay the accumulation of the property on account of the
estate taxes when the donor dies. protection given by the State.
- This is one way of giving back to the government
ESTATE TAXATION because the government is really a partner when
it comes to the property we accumulate during
ESTATE - is the mass of properties of whatever nature, left behind our lifetime.
by the person after his death. It is synonymous to inheritance,
which is defined under the Civil Code:
What is the PURPOSE of levying estate tax?
ARTICLE 776. The inheritance includes all the property, rights
and obligations of a person which are not extinguished by his Usually authors will mention only two(2):
death. 1. More equitable distribution of wealth;
2. It is the most appropriate and and effective method of
WHAT HAPPENS TO THE ESTATE WHEN THE PERSON DIES? Of taxing the privilege which the decedent enjoys of
course he will leave behind these properties and by reason of his controlling the dispositions at death of properties
death, the ownership thereof will be automatically transferred to accumulated during his lifetime.
the heirs. > There is no other way in taxing that
privilege except thru estate taxation
WHAT ABOUT THE REGISTRATION? Take note that the transfer of
ownership by reason of law is different from registration. Other authors:
1. Additional revenue for the government
Hindi mo pwede malipat ang pangalan from the former owner 2. It is the only method of collecting the share which is
(decedent) to the new owner (heirs) unless you pay your estate tax. properly due to the state as a partner in the
But with respect to ownership, pwede niyo na yang ibenta. The accumulation of the property which is made possible by
heirs can actually sell it. Problema lang sa buyer is how is he the protection given by the state
supposed to transfer the property to his estate if the estate taxes
are not yet paid. Is estate tax same with inheritance tax?
ESTATE TAX INHERITANCE TAX
WHEN WILL THE TRANSFER OCCUR? It only occurs AFTER the Estate tax is a tax on the When we say inheritance tax,
death. privilege of transferring it’s a tax on the privilege of
properties (even when you’re receiving property by reason
WHAT IS THE NATURE OF ESTATE TAX? dead). of succession.
1. Excise Tax – it’s a tax for the privilege of transferring
property Right now ‘wala tayo nyan, dati meron’. There is no provision in the
2. Object of Estate Tax- to tax the shifting of the economic NIRC which provides for inheritance tax.
benefits and enjoyment of the property left behind by
the decedent to the heirs. Is net estate same with gross estate?
When we say net estate this is our tax base on our estate taxation.
It is not a tax against the property or tax on the property. Because Everything will boil down to that net estate, we will always go back
then again what is taxed here is the privilege of transferring the to that net estate.
property. The privilege of controlling the transfer of the property
even if you are already dead. Let us go back to income taxation:
Gross Income
WHAT IS THE PURPOSE OF REVENUE ESTATE TAX? - Exclusions
1. For the equitable distribution of wealth; - Deductions
---------------------
2. It is the most appropriate and effective method for Net Taxable Income
taxing the privilege, which the decedent enjoys of
controlling the disposition upon his death of the Estate Taxation:
properties he accumulated during his lifetime. Gross Estate
- There is no other way in taxing that privilege - Final Deductions
except through estate taxation. Share of the Surviving Spouse (Counterpart ng
Exclusion)
3. To generate additional revenue for the government -------------------------------
- This is only a small chunk in our internal revenue Net Taxable Estate
taxes kasi konti lang namamaty. Mas marami
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*The problem now is not the determination of how much is the Net managed by the executors, and proceeds thereof to be given to
Estate Tax but what is included in the Gross Estate, what is included my nephew, Matthew Hanley, at Castlemore, Ballaghaderine,
in the deduction and how do you determine the “SS” (share of the County of Rosecommon, Ireland, and that he be directed that
surviving spouse). the same be used only for the education of my brother's
children and their descendants. 6. I direct that ten (10) years
When you say deductions this is further expanded into three(3) the after my death my property be given to the above mentioned
third one would already be the share of the surviving spouse Matthew Hanley to be disposed of in the way he thinks most
1. Ordinary deductions advantageous. The defendant Collector of Internal Revenue,
2. Special deductions assessed against the estate an inheritance tax in the total
3. SS amount of P2,052.74. The plaintiff paid said amount under
protest, notifying the defendant at the same time that unless
the amount was promptly refunded suit would be brought for
BASIC CONSIDERATIONS IN ESTATE TAXATION its recovery. The defendant overruled the plaintiff's protest and
refused to refund the said amount, plaintiff went to court.
Let’s go now to the Basic Considerations in Estate Taxation.
ISSUE: (b) Should the inheritance tax be computed on the basis
There’s this principle. of the value of the estate at the time of the testator's death, or
on its value ten years later?
If you remember last time sa income tax, di ba accrual?
HELD: (b) The plaintiff contends that the estate of Thomas
1. ACCRUAL OF ESTATE TAX Hanley, in so far as the real properties are concerned, did not
and could not legally pass to the instituted heir, Matthew
When does the Estate Tax accrue? Hanley, until after the expiration of ten years from the death of
The estate tax accrues AT THE TIME OF DEATH. the testator on May 27, 1922 and, that the inheritance tax
should be based on the value of the estate in 1932, or ten years
Pag sinabing mong accrual, it’s just the starting point when after the testator's death. The plaintiff introduced evidence
the obligation to pay the tax begins. Pag merong namatay, tending to show that in 1932 the real properties in question had
automatic na merong corresponding estate tax obligation. a reasonable value of only P5,787. This amount added to the
The estate tax accrues at the time of death that means na value of the personal property left by the deceased, which the
when someone dies there will already be a corresponding plaintiff admits is P1,465, would generate an inheritance tax
obligation to pay the Estate Taxes. which, excluding deductions, interest and surcharge, would
amount only to about P169.52. If death is the generating source
But it does not necessarily mean that when someone dies, from which the power of the estate to impose inheritance taxes
you have to pay automatically your estate tax. takes its being and if, upon the death of the decedent,
succession takes place and the right of the estate to tax vests
WHY? Because accrual of the tax is different from the obligation instantly, the tax should be measured by the vlaue of the estate
to pay the same. Accrual is just the starting point. You already as it stood at the time of the decedent's death, regardless of any
have the obligation to pay the tax. subsequent contingency value of any subsequent increase or
decrease in value. "The right of the state to an inheritance tax
WHEN? You’re going to pay it if it is a matter of law. accrues at the moment of death, and hence is ordinarily
measured as to any beneficiary by the value at that time of such
Going back, that principle that the estate tax accrues at the time property as passes to him. Subsequent appreciation or
of death and that the accrual is different from the obligation to depriciation is immaterial."
pay is enunciated in the case of Lorenzo vs Posadas.
Our attention is directed to the statement of the rule in
LORENZO VS POSADAS (From 2015 TSN) Cyclopedia of Law of and Procedure (vol. 37, pp. 1574, 1575)
G.R. No. L-43082 June 18, 1937 that, in the case of contingent remainders, taxation is
postponed until the estate vests in possession or the
PABLO LORENZO, as trustee of the estate of Thomas Hanley, contingency is settled. This rule was formerly followed in New
deceased, plaintiff-appellant, vs. JUAN POSADAS, JR., Collector York and has been adopted in Illinois, Minnesota,
of Internal Revenue, defendant-appellant. Massachusetts, Ohio, Pennsylvania and Wisconsin. This rule,
horever, is by no means entirely satisfactory either to the estate
FACTS: On May 27, 1922, Thomas Hanley died, leaving a will and or to those interested in the property.
considerable amount of real and personal properties. The will
was admitted to probate. Said will provides, among other Realizing, perhaps, the defects of its anterior system, we find
things, as follows: upon examination of cases and authorities that New York has
varied and now requires the immediate appraisal of the
5. I direct that all real estate owned by me at the time of my postponed estate at its clear market value and the payment
death be not sold or otherwise disposed of for a period of (10) forthwith of the tax on its out of the corpus of the estate
years after my death, and that the same be handled and transferred. But whatever may be the rule in other jurisdictions,
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we hold that a transmission by inheritance is taxable at the time
of the predecessor's death, notwithstanding the postponement Where the taxes are assessed by reason of negligence,
of the actual possession or enjoyment of the estate by the intentional disregard of rules and regulations, or fraud on the
beneficiary, and the tax measured by the value of the property part of the taxpayer, no extension will be granted by the
transmitted at that time regardless of its appreciation or Commissioner.
depreciation.
If an extension is granted, the Commissioner may require the
executor, or administrator, or beneficiary, as the case may be,
The SC said here that the accrual of the inheritance tax is distinct to furnish a bond in such amount, not exceeding double the
from the obligation to pay the same. From the facts, however that amount of the tax and with such sureties as the Commissioner
Thomas Hanley died in May 27, 1922, it does not follow that the deems necessary, conditioned upon the payment of the said tax
obligation to pay the tax arose as of that date. The time of payment in accordance with the terms of the extension. x x x
of the inheritance tax is provided by law. Although this case talks
about the inheritance tax, you can still apply that principle in estate
taxation. Take note ha, magkaiba ang estate tax magkaiba rin ang So, it means that we still apply the “PAY-AS-YOU-FILE-SYSTEM”.
inheritance tax.
Time For Filing
Now, sabi natin the obligation to pay the Estate tax arises on a Take note of the changes, dati 6 months lang yan. Bakit kaya
different date. Hindi ba pwedeng magsabay? Normally, when hinabaan? I don’t know. Probably, the reason behind that, is some
someone dies, di ba it’s so painful. Wala di ka makagalaw. :( So, people usually pag may namatay. They cannot settle the estate
anyway, if you’re talking about the payment of tax, you refer to agad. Lalo na pag may nasa abroad.
Sections 90 and 91 of the NIRC.
2. NATIONALITY AND RESIDENCE

Payment Of Tax Then you also have the NATIONALITY AND THE RESIDENCE.

TRAIN LAW The next consideration that you hake to think of in estate
SEC. 90. Estate Tax Returns. x x x taxation, in Transfer Taxes in general are the Nationality and
Residence of the Decedent.
(B) Time for Filing. For the purpose of determining the estate
tax provided for in Section 84 of this Code, the estate tax return It’s important because it’s pretty much the same with your
required under the preceding Subsection (A) shall be filed income taxation. The nationality and the residence of the
within 1 year from the decedent's death. A certified copy of the decedent has or will have an impact on Estate tax treatment of
schedule of partition and the order of the court approving the the assets left behind by the decedent together with the location
same shall be furnished the Commissioner within 30 after the of the property or the situs of the propertie/s left behind by the
promulgation of such order. decedent. Those three will have an impact on the estate tax
treatment of whatever is left behind by the decedent.
(C) Extension of Time. The Commissioner shall have authority
to grant, in meritorious cases, a reasonable extension not Other considerations:
exceeding 30 days for filing the return. x x x 1. Nationality
2. Residence
3. Situs of the property
SEC. 91. Payment of Tax.
(A) Time of Payment. The estate tax imposed by Section 84 shall
be paid at the time the return is filed by the executor, 3. SITUS
administrator or the heirs.
So, talking about the situs of the properties. So, it’s pretty much
(B) Extension of Time. When the Commissioner finds that the the same as to what you have learned in your income taxation,
payment on the due date of the estate tax or of any part thereof real properties where the properties are located.
would impose undue hardship upon the estate or any of the
heirs, he may extend the time for payment of such tax or any l TANGIBLE PROPERTY
part thereof not to exceed 5 years, in case the estate is settled
through the courts, or 2 years in case the estate is settled What about the TANGIBLES?
extrajudicially.
Most books would say, movables follow the owner, db?
In such case, the amount in respect of which the extension is
granted shall be paid on or before the date of the expiration of But if that personal property is located or placed
the period of the extension, and the running of the Statute of permanently here, then we can say that that personal
Limitations for assessment as provided in Section 203 of this property will acquire the situs as within the Philippines.
Code shall be suspended for the period of any such extension.
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l INTANGIBLE PROPERTY
One case that I found relative to intangible properties, is the case
For Intangibles, we also apply the General Rule. of BPI v POSADAS, this is a very old case; it involves the inheritance
tax.
GR: The thing follows the owner for the location for the BPI VS. POSADAS
property. GR 34583, 22 OCT. 1931

But if you look at Section 104 of the NIRC. The decedent here is a non-resident alien. Hindi siya nakatira
dito, pero palagi siyang pabalik-balik sa Pilipinas; maybe for
SEC. 104. Definitions. x x x Provided, further, That franchise business purposes. He keeps on coming back in the Philippines.
which must be exercised in the Philippines; shares, obligations And one day, he married a Filipina and continued coming here.
or bonds issued by any corporation or sociedad anonima He kept coming back from germany here to Philippines until he
organized or constituted in the Philippines in accordance with died.
its laws; shares, obligations or bonds by any foreign corporation
85% of the business of which is located in the Philippines; One of the assets left behind by the decedent is an insurance
shares, obligations or bonds issued by any foreign corporation policy from SunLife. Pagkamatay niya, syempre magbayad ang
if such shares, obligations or bonds have acquired a business SunLife. The Insurance policy is from SunLife; saan ba ang situs
situs in the Philippines; shares or rights in any partnership, ng SunLife? Diba Canada man yan?
business or industry established in the Philippines, shall be The premiums were made in SunLife Manila branch office; doon
considered as situated in the Philippines x x x binabayaran ang insurance. Ang policy is located in Canada
Office.
There are rules that you have to follow with respect to some
intangible properties. Let’s see. When he died, the proceeds of the insurance policy were
deposited in BPI. One of the issues tackled here, by the Supreme
Under section 104 of the NIRC, what are those intangibles which Court is: What is the situs of the insurance policy, and also the
are considered to be within the Philippines? proceeds? Because it has something to do with inheritance tax;
the proceeds has acquired a situs here. Then, definitely, ano ang
1. Philippine Franchises; rule natin sa mga non-residents decedents who are not
citizens? They are only taxed on grosses, or the properties left
- Just to be simple about it, franchises exercised behind within the Philippines.
here in the Philippines.
The Supreme Court said, since the insurance proceeds were
2. Shares, obligations or bonds issued by any corporation or delivered to BPI for administration and distribution, it has
entities; somehow, more or less, acquired a situs here in the Philippines.
So even if the policy is abroad, even if it’s coming from a foreign
- For short, domestic stocks/shares. corporation not covered, doing business in the Philippines, by
the mere fact that it has acquired a situs here in the Philippines,
Numbers 3 and 4 refers to Foreign Corporation: they form part of the gross estate of the decedent and will be
subjected to the inheritance tax.
3.
A.) Shares, obligations or banks of foreign corporation, 85%
of the business of which is located in the Philippines;
Let’s now go to the
- Sir, what if kung 85 sakto?
- Kung sakto 85% naman young business nya here in 4. VALUE OF THE PROPERTIES
the Philippines, it will be considered as having its Now, pagdating natin sa value ng properties, as a general rule, the
situs here in the Philippines. properties will be valued at fair market value. Wala tayong sales
price dito ha; because wala itong benta.
B.) Shares, obligations or bonds issued by any foreign
corporation if such shares, obligations or bonds have GR: Properties will be valued at fair market value at the time of
acquired a business situs in the Philippines; death.

For REAL PROPERTIES, there are specific rules to follow to
4. Shares or rights in any partnership, business or industry determine the value. Wala tayong paki-alam sa appraisers, private
established in the Philippines. appraisers or even government appraisers.
What is important is:
1) The Zonal Value of the Property - as determined by the
• OTHER INTANGIBLE PROPERTIES: APPLY THE GENERAL RULE CIR

- The thing follows the owner.
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2) the Fair Market value as shown by the schedule fixed by
the City Assessors - meaning the Assessed Value of the Basically, one of the questions here was on actually on the part
property. of the deductions. Ang nangyari kasi, you know account payable
right? Na discuss natin yan sa Income Taxation (on Bad Debts).
ESTATE TAXES AND USUFRUCT Itong si Jose Fernandez, meron siyang mga utang; he has unpaid
With respect to USUFRUCT, the right to use. That is an asset liabilities during his lifetime, and when he died, ang ginawa ng
itself. And most often than not, when you say usufruct, the administrator, ini-isa isa niya ang utang ni Mr. Fernandez,
right to usufruct, its valuable asset is intangible. Intangible probably naluoy dahil patay na nga. Most of compromised to a
siya, pero valuable. That’s why the right to the usufruct is lesser amount, and then, some of the obligations were actually
included in the gross estate. condoned; sige, patay na bitaw ang tao, mapuslan pa ba na niya.

But how do you value it? Sabi ng batas, there shall begin to What BIR said, since na condone na pala siya, you should not
account the probable life of the beneficiary in accordance to deduct it from the gross estate; because it has already been
the basic standard of mortality. That’s it. condoned.

The question here is the deductibility of that obligation which
Next, what about PERSONAL PROPERTIES, was condoned or compromised.

CAR The Supreme Court said “no”, those liabilities of the testator
The BIR will just require the heirs or the administrator of the estate (decedent) can still be deducted from the gross estate. Why?
to submit proof of the value of the personal property left behind by Because with respect to the assets and with respect to the
the decedent. But there are specific rules in the BIR regulations that liabilities of the decedent, they are to be valued at the time of
must be followed for specific personal properties. Like for example, his death. The reckoning point is always the date of death.
shares of stock, that is under RR-12-2018. (Sir recommends that we Meaning, the post-mortem developments will not be
read it). considered because there is no law providing for that. Okay.

SHARES OF STOCK Always ang reckoning point is kailan siya namatay. Look at the
Now, for shares of stock, the FMV will depend whether or not is value of the properties at the time that he died, and that’s it.
listed in the local stock exchange; Phil. Stock Exchange pa din.
There is also this case of Lorenzo vs Posadas. Ito mas klaro to eh.
Unlisted common shares, meaning, shares not listed in the
LSE, are based on their book value. Situation:
The situation is like this: Sabihin natin A died. Before A died, he
Preferred shares are also based on their par value. Magkaiba somehow transferred properties mortis causa to his nephew.
ang valuation nyan. But sabi niya, before mo ito matanggap, ipagamit ko muna ito
kay letter B. Pagamit muna kay B, after ten years, the property
For those listed in the LSE, the FMV is the “arithmetic mean will be transferred to the nephew.
between the highest and the lowest quotation at the time of
death or at the date nearest to the day of death if there is The question is, bayad lahat ang estate tax, the BIR used the
none available on such date. value of the property after it was transferred to the nephew.
Since several years had gone by, ang laki na nang value ng
property.
When is the reckoning point of the valuation of the property?
Kailan yang FMV na yan, as to what day? What did the Supreme Court say here, what should be the
valuation of the property?
Now, when it comes to valuation of the property you apply the
DATE-OF-DEATH VALUATION RULE. It’s simple, you value the property at the time of the
decedent’s death. Because upon his death, there was already a
As enunciated and explained in DIZON v CIR. What is the case of transferred that happened; a transmission by inheritance at the
DIZON v CIR? Ano ang nangyari dito? time of the predecessor’s death, notwithstanding the actual
possession or enjoyment of the estate of the beneficiary.
DIZON VS. CIR
GR 140944, 30 April, 2008 Now, lastly, may nakalagay sa inyo “Right of the decedent over such
properties”
Sino si DIZON? Hindi siya ang decedent. The person here who
died is named Jose Fernandez. He died, his properties were One primary requirement so that the properties left behind will
probated, his estate tax return were paid. They were failed and form part of the gross estate is the extent of rights: Whatever right
the estate taxes were paid. the decedent have had over that property. Pagwala na siyang right
But then, the BIR audited the assets and made an assessment. diyan sa property because he sold it to someone else or probably
The assessment was for estate tax deficiencies.
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donated it to someone else. Then, the property, you will exclude any such power is relinquished in contemplation of the
from the gross estate. decedent's death.

(2) For the purpose of this Subsection, the power to alter,
amend or revoke shall be considered to exist on the

date of the decedent's death even though the exercise

of the power is subject to a precedent giving of notice
GROSS ESTATE
or even though the alteration, amendment or
revocation takes effect only on the expiration of a
Q: What is the primary requirement so that the properties left
stated period after the exercise of the power, whether
behind will form part of the gross estate?
or not on or before the date of the decedent's death
A: The extent of whatever rights the decedent may have over the
notice has been given or the power has been exercised.
property. Kapag wala na siyang right diyan sa property na yan In such cases, proper adjustment shall be made
because it is already owned by someone else (donated to
representing the interests which would have been
someone else), then that property will be excluded from the
excluded from the power if the decedent had lived, and
gross estate.
for such purpose if the notice has not been given or the
power has not been exercised on or before the date of
SEC. 85. Gross Estate. - the value of the gross estate of the his death, such notice shall be considered to have been
decedent shall be determined by including the value at the time given, or the power exercised, on the date of death.
of his death of all property, real or personal, tangible or
intangible, wherever situated: Provided, however, that in the
case of a nonresident decedent who at the time of his death (D) Property Passing Under General Power of Appointment. -
was not a citizen of the Philippines, only that part of the entire To the extent of any property passing under a general
gross estate which is situated in the Philippines shall be included power of appointment exercised by the decedent: (1) by
in his taxable estate. will, or (2) by deed executed in contemplation of, or
intended to take effect in possession or enjoyment at, or
after his death, or (3) by deed under which he has retained
(A) Decedent's Interest. - To the extent of the interest therein for his life or any period not ascertainable without reference
of the decedent at the time of his death; to his death or for any period which does not in fact end
before his death (a) the possession or enjoyment of, or the
(B) Transfer in Contemplation of Death. - To the extent of any right to the income from, the property, or (b) the right,
interest therein of which the decedent has at any time either alone or in conjunction with any person, to designate
made a transfer, by trust or otherwise, in contemplation of the persons who shall possess or enjoy the property or the
or intended to take effect in possession or enjoyment at or income therefrom; except in case of a bona fide sale for an
after death, or of which he has at any time made a transfer, adequate and full consideration in money or money's
by trust or otherwise, under which he has retained for his worth.
life or for any period which does not in fact end before his
death (1) the possession or enjoyment of, or the right to the (E) Proceeds of Life Insurance. - To the extent of the amount
income from the property, or (2) the right, either alone or receivable by the estate of the deceased, his executor, or
in conjunction with any person, to designate the person administrator, as insurance under policies taken out by the
who shall possess or enjoy the property or the income
decedent upon his own life, irrespective of whether or not
therefrom; except in case of a bona fide sale for an the insured retained the power of revocation, or to the
adequate and full consideration in money or money's extent of the amount receivable by any beneficiary
worth. designated in the policy of insurance, except when it is
expressly stipulated that the designation of the beneficiary
(C) Revocable Transfer. - is irrevocable.
(1) To the extent of any interest therein, of which the (F) Prior Interests. - Except as otherwise specifically provided
decedent has at any time made a transfer (except in therein, Subsections (B), (C) and (E) of this Section shall
case of a bona fide sale for an adequate and full apply to the transfers, trusts, estates, interests, rights,
consideration in money or money's worth) by trust or powers and relinquishment of powers, as severally
otherwise, where the enjoyment thereof was subject at enumerated and described therein, whether made,
the date of his death to any change through the created, arising, existing, exercised or relinquished before
exercise of a power (in whatever capacity exercisable) or after the effectivity of this Code.
by the decedent alone or by the decedent in
conjunction with any other person (without regard to
(G) Transfers for Insufficient Consideration. - If any one of the
when or from what source the decedent acquired such transfers, trusts, interests, rights or powers enumerated
power), to alter, amend, revoke, or terminate, or where and described in Subsections (B), (C) and (D) of this Section
is made, created, exercised or relinquished for a
7


consideration in money or money's worth, but is not a bona 1. I am the owner of the property ; or
fide sale for an adequate and full consideration in money or 2. There must be a beneficial interest quantifiable in
money's worth, there shall be included in the gross estate money such as a usufruct.
only the excess of the fair market value, at the time of
death, of the property otherwise to be included on account
(B) Transfer in Contemplation of Death. - To the extent of any
of such transaction, over the value of the consideration interest therein of which the decedent has at any time
received therefor by the decedent. made a transfer, by trust or otherwise, in contemplation of
or intended to take effect in possession or enjoyment at or
(H) Capital of the Surviving Spouse. - The capital of the after death, or of which he has at any time made a transfer,
surviving spouse of a decedent shall not, for the purpose of by trust or otherwise, under which he has retained for his
this Chapter, be deemed a part of his or her gross estate. life or for any period which does not in fact end before his
death (1) the possession or enjoyment of, or the right to the
COMPOSITION OF GROSS ESTATE income from the property, or (2) the right, either alone or
Q: What is this gross estate all about? What are the things that in conjunction with any person, to designate the person
are usually part of the gross estate? who shall possess or enjoy the property or the income
A: SEC. 85. Gross Estate. - the value of the gross estate of the therefrom; except in case of a bona fide sale for an
decedent shall be determined by including the value at the time adequate and full consideration in money or money's
of his death of all property, real or personal, tangible or worth.
intangible, wherever situated: Provided, however, that in the
case of a nonresident decedent who at the time of his death was THREE SCENARIOS BASED ON SECTION 85 (B)
not a citizen of the Philippines, only that part of the entire gross 1. The decedent has at any time made a transfer, by trust
estate which is situated in the Philippines shall be included in his or otherwise, in contemplation of or intended to take
taxable estate. effect in possession or enjoyment at or after death.

The same with your income taxation, the first few things you have
Otherwise known as, transfers taking effect after death.
to consider is you should know the classification of the decedent.
Example: I have a cellphone and I’m giving it to you after I die.
The same with your general principles of income taxation, may
2. The decedent has at any time made a transfer, by trust
resident citizen, non-resident citizen, and so on.
or otherwise which he has at any time made a transfer,
Q: What is the rule that you should follow in estate taxation? by trust or otherwise, under which he has retained for
A: In estate taxation, it is somehow different from your income his life or for any period which does not in fact end
taxation because as a general rule, all properties of the decedent, before his death the possession or enjoyment of or the
wherever situated, will form part of the gross estate. right to the income from the property.

GR: All properties of the decedent, wherever situated will Otherwise known as, transfers with the right to retain possession.
form part of the gross estate. Example: I will give you this land, but for the meantime, I will use
Exception: Non-resident alien decedent. With respect to
it. I will give you the ownership of the property, but for the
non-resident alien decedent, their gross estate will include meantime, I will retain possession of it because it is income-
only those situated in the Philippines. generating.
3. The decedent has at anytime made a transfer, by trust
Diba sa income taxation parang baliktad because only the resident
or otherwise, under which he has retained for his life or
citizen will be taxed in all income within the Philippines, all others
are taxed for those earned only within. for any period which does not in fact end before his
death the right, either alone or in conjunction with any
Q: What is the composition of the gross estate? person, to designate the person who shall possess or
A: There are seven items provided for by Section 85 of the NIRC. enjoy the property or the income therefrom.

(A) Decedent's Interest. - To the extent of the interest therein Otherwise known as, the right to designate the person who will
of the decedent at the time of his death. take the property.

It is required that the decedent must have some sort of interest in Q: What do you mean by “in contemplation of death?”
the property. A: In contemplation of death is taught in Succession laws. Case in
point is Ganuelas vs. Caweed.
Q: What if ginapagamit lang ang sasakyan, will I have a right over URSULINA GANUELAS, et al. v. HON. ROBERT T. CAWED, et al.
it?
A: No, because I am limited only to the usage of it. It must be
something which is more than the normal usage of a property, Donation inter vivos differs from donation mortis causa in that
which is of pecuniary value. in the former, the act is immediately operative even if the actual
It must be either: execution may be deferred until the death of the donor, while in
8


the latter, nothing is conveyed to or acquired by the donee until such purpose if the notice has not been given or the power
the death of the donor-testator. has not been exercised on or before the date of his death,
such notice shall be considered to have been given, or the
power exercised, on the date of death.
The distinguishing characteristics of a donation
mortis causa are the following:
1. It conveys no title or ownership to the transferee before the This provision refers to revocable transfers. It pertains to those
death of the transferor; or, what amounts to the same thing, transfers which the transferor has reserved the right to alter,
that the transferor should retain the ownership (full or naked) change, modify or to revoke the transfer, in whole or in part.
and control of the property while alive;
Q: Does it matter if the right to revoke is in conjuction with some
2. That before his death, the transfer should be revocable by the other person?
transferor at will, ad nutum; but revocability may be provided A: No. As long as the right to revoke exists and the decedent (while
for indirectly by means of a reserved power in the donor to in whole or in part) has the right to revoke that property or that
dispose of the properties conveyed; transfer, then it shall be considered as irrevocable transfer.

Please take note that pretty much the same with the previous
3. That the transfer should be void if the transferor should
provision, a transfer under a bona fide sale for a full or adequate
survive the transferee.
consideration in money’s worth is excluded therein.

In the donation subject of the present case, there is nothing Kala ko example natin na revocable transfer, pero sale siya. Pwede
therein which indicates that any right, title or interest in the ba ‘yan? You sell something, then you revoked it?
donated properties was to be transferred to Ursulina prior to
the death of Celestina. The phrase ―to become effective upon The closest thing that I can think of is a pacto de retro sale. Diba,
the death of the DONOR‖ admits of no other interpretation but you can buy back the property. Essentially revocation. Binenta ko
that Celestina intended to transfer the ownership of the siya ngayon pero pwede ko syang bilhin sayo later on. Diba? So if
properties to Ursulina on her death, not during her lifetime. it’s for a valuable consideration naman, then you take it out from
the gross estates. Okay.
More importantly, the provision in the deed stating that if the
donee should die before the donor, the donation shall be PROPERTY PASSING UNDER GENERAL POWER OF APPOINTMENT
deemed rescinded and of no further force and effect shows that Third. Property passing under a general power of appointment.
the donation is a postmortem disposition.
Sec. 85. (D) Property Passing Under General Power of
(C) Revocable Transfer. - Appointment. - To the extent of any property passing under a
general power of appointment exercised by the decedent: (1)
by will, or (2) by deed executed in contemplation of, or intended
(1) To the extent of any interest therein, of which the decedent to take effect in possession or enjoyment at, or after his death,
has at any time made a transfer (except in case of a bona or (3) by deed under which he has retained for his life or any
fide sale for an adequate and full consideration in money or period not ascertainable without reference to his death or for
money's worth) by trust or otherwise, where the enjoyment any period which does not in fact end before his death (a) the
thereof was subject at the date of his death to any change possession or enjoyment of, or the right to the income from,
through the exercise of a power (in whatever capacity the property, or (b) the right, either alone or in conjunction with
exercisable) by the decedent alone or by the decedent in any person, to designate the persons who shall possess or enjoy
conjunction with any other person (without regard to when the property or the income therefrom; except in case of a bona
or from what source the decedent acquired such power), to fide sale for an adequate and full consideration in money or
alter, amend, revoke, or terminate, or where any such money's worth.
power is relinquished in contemplation of the decedent's
death. What is a power of appointment?
This is the problem with the NIRC wherein the Congress just copy
(2) For the purpose of this Subsection, the power to alter, the provisions in the US tax law. Kinopya man gud nila to word for
amend or revoke shall be considered to exist on the date of word. Ang power of appointment kasi natin dito sa Philippines is
the decedent's death even though the exercise of the power just an SPA, right? You appoint someone to act for and in your
is subject to a precedent giving of notice or even though the behalf. But with respect to estate taxation, when you say power of
alteration, amendment or revocation takes effect only on appointment, it’s almost the same. Power to designate. But what is
the expiration of a stated period after the exercise of the the extent of this power?
power, whether or not on or before the date of the
decedent's death notice has been given or the power has The power to designate by will or by deed, the person who shall
been exercised. In such cases, proper adjustment shall be enjoy the use of the property upon the decedent’s death.
made representing the interests which would have been
excluded from the power if the decedent had lived, and for
9


So anong scenario nito? Ano ang power to appoint na ‘yan? It does (2) by deed, or
not refer to the property you transferred ha. It does not also refer (3) by deed under which he has retained for his life. (Sec.
to the property left behind the person giving the power to appoint. 85(D).
It refers to the property that is left behind by the appointee. So ang
scenario ganito. Take note again, these principles in the power of appointment are
not applicable if it is in the form of a bona fide sale. Okay.
Situation:
Next you have
A -> B -> C PROCEEDS OF LIFE INSURANCE

A said to B that if he dies, B he shall have the property (ex. House) We are talking about not the policy but we are talking about the
upon the condition that if B will die, he would have to transfer the proceeds. Pag may mamatay, merong may makakatanggap. Wala
ownership to C. na tayong pakialam sa premiums dito.

Q: Will this (house) form part of the gross estate of A? Please lang guys ha. I felt bad kasi many of you guys, sadly, pag
sinabing life insurance, malito na agad. Dalawa kasi ang aspect
Eh andyan pa kasi meron naman siyang (A) right dito. A is the niyan pag dating sa income taxation. Meron tayong premiums,
former owner of this property. So part of the gross estate if he meron tayong proceeds.
dies.

Q: What about B, will this property form part of the property of Sec. 85 (E) Proceeds of Life Insurance. - To the extent of the
B? amount receivable by the estate of the deceased, his executor,
or administrator, as insurance under policies taken out by the
Ang tawag dito, ang may power of appointment dito si A. decedent upon his own life, irrespective of whether or not the
Properties transferred under a power of appointment. So to insured retained the power of revocation, or to the extent of
answer that question, whether or not we will include this the amount receivable by any beneficiary designated in the
house from the gross estate of B, we must determine first the policy of insurance, except when it is expressly stipulated that
nature of that power of appointment. the designation of the beneficiary is irrevocable.

If the power of appointment given to B is general, then this
property forms part of the gross estate of B. Klaro? Wala The rule in life insurance here is different from that of income
naman tayong issue kay A. Kay B lang man. taxation. Ano ba yung isinulat sa income taxation natin? Pagdating
sa life insurance proceeds, ano ang rule natin? Meron tayong Dead
Q: So how do you determine if the power of appointment is or Alive Rule, kung part siya sa gross income or hindi. You just
general in nature? follow the Dead or Alive Rule. Alam niyo na yun.

The power of appointment is general if there is no specific But with respect to the revocability of the life insurance policy, it
person designated to the power of appointment. does not matter. As long as merong pera, we follow the Dead or
Alive Rule.
You can give this property. Pagkamatay mo you can give this
property. Yun lang. So essentially, B becomes the owner of the But when it comes to estate taxation, revocability becomes an
property right? So in essence, siya ang may-ari nito kasi essential thing.
pagkamatay niya, pwede niyang ibigay kahit kanino. He is not
bound by any restrictions. Let’s trim down the rules here on estate taxation.
The first few things we have to put on mind are these:
But when the power of appointment is specific in nature, then
this property is not part of the estate of B. Because B does not 1. It refers to a life insurance policy and also its
really own this property. He is merely an intermediary. He is proceeds.
just a conduit. Temporarily, nandito ito (house) sa akin but 2. This life insurance proceeds was procured by the
eventually, this will be given to C. Meron na ba tayong ganitong decedent upon his own life.
set-up sa Pilipinas? Meron. Diba, Succession pa din.
Fideicommissary Substitution. The determination whether or not these insurance proceeds
should form part of the gross estate would depend on two
(*Sir Percy reminds the class not to take for granted Succession.) things:

Going back. Now, how should the property pass under a general 1. Who receives the proceeds
power of appointment? 2. You have to look into the revocability of the
designation of the beneficiary
So it’s either
(1) by will,
10


There are two possible beneficiaries – two possible persons 2. Revocable transfers
who will receive the insurance proceeds. It’s either the: 3. Property passing under a general power of appointment

1. Estate, executor, administrator; or Second thing to consider is that this provision refers to all kinds of
2. Any other person other than the estate, executor, or transfers enumerated therein but are not bona fide sale for an
administrator adequate or full consideration.

Now, if the beneficiary is: Because there are some decedents who para maka save daw
kunuhay sa tax hindi na lang sinasali sa estate tax return, deed of
1. The estate, or the administrator, or the executor sale na lang. So instead of 1M he sells it for 100,000 na lang.

o the proceeds will always from part of the gross If the transaction is not a bona fide sale, you have to include in the
estate. The revocability of the life insurance policy gross estate the difference between the FMV of the property and
is immaterial. the consideration that was paid.

2. Any person other than the estate, executor, or Again, if it involves these transfers and the transfer seemingly is a
administrator sale but it is not a bona fide sale for an adequate or full
consideration, you have to include that portion, the difference
o the revocability matters between the FMV of the property and the inadequate
consideration paid for by the buyer.
ü If the designation of beneficiary is
revocable – the proceeds will form part of This provision was enacted to avoid or to prevent any tax evasion
the gross estate scheme that may be employed by the decedent.

ü If the designation is already irrevocable –
the life insurance proceeds are excluded CAPITAL OF THE SURVIVING SPOUSE
from the gross estate
The last item in Sec. 84 is the Capital of the Surviving Spouse.

(H) Capital of the Surviving Spouse. - The capital of the
PRIOR INTERESTS surviving spouse of a decedent shall not, for the purpose of this
Chapter, be deemed a part of his or her gross estate.
(F) Prior Interests. - Except as otherwise specifically provided
therein, Subsections (B), (C) and (E) of this Section shall apply to This is only but natural because that share of the surviving spouse
the transfers, trusts, estates, interests, rights, powers and is not owned by the decedent. But it does not mean that in
relinquishment of powers, as severally enumerated and determining the estate taxation later on, you automatically remove
described therein, whether made, created, arising, existing, that portion which pertains to the capital share of the wife or
exercised or relinquished before or after the effectivity of this conjugal share of the wife.
Code.
Why?
Just read that.
In determining the gross estate, you include all the properties
TRANSFERS OF INSUFFICIENT CONSIDERATION including the properties of the wife because the wife will also have
to share in the obligations of the deceased.
(G) Transfers of Insufficient Consideration. - If any one of the
transfers, trusts, interests, rights or powers enumerated and It is not merely limited to the assets involved, it also involves the
described in Subsections (B), (C) and (D) of this Section is made, obligations of the decedent which may be conjugal in nature.
created, exercised or relinquished for a consideration in money
or money's worth, but is not a bona fide sale for an adequate So again, the capital share of the spouse is excluded from the gross
and full consideration in money or money's worth, there shall estate, but for purposes of determining the gross estate of the
be included in the gross estate only the excess of the fair market deceased and in determining the net estate later on for purposes
value, at the time of death, of the property otherwise to be of estate taxation, everything must have to be included.
included on account of such transaction, over the value of the
consideration received therefor by the decedent. One thing that you also have to look into in determining the estate
tax of the decedent is the fact of whether he is married or single
First thing: What are those in Subsections B, C and D? because it has an impact.

Those are referring to the following transfers: Because when it comes to the persona obligations of the decedent,
you can only deduct it against the exclusive properties of the
1. Transfers in contemplation of death decedent.
11


Acquisition Cost (AC) P 400,000.00
Pretty much the same if the liabilities or the deductions are Fair Market Value (FMV)
conjugal in nature. You have to deduct it on the conjugal property at death 200,000.00
of the spouses which may be included in the gross estate.
Problems:
How do you distinguish conjugal properties from community 1. How much is the exclusive property if:
properties? a. Conjugal Partnership of Gains (CPG)
b. Absolute Community of Property (ACOP)
Just in case makalimutan niyo, I have this little trick.
2. Compute the Gross Estate under:
COMMUNITY PROPERTY CONJUGAL PARTNERSHIP OF a. Conjugal Partnership of Gains (CPG)
GAINS
b. Absolute Community of Property (ACOP)
– it’s property ko, property the common property usually
mo, property natin is only the gains.
Before proceeding to compute, you must first determine the

following:
But please read also the provisions of the Civil Code so you can
1. The citizenship of the decedent;
familiarize.
2. Whether he is married or not; and
And lastly, you have the Valuation. 3. If married, what is the decedents property regime
whether it is Conjugal Partnership of Gains (CPG) or
VALUATION Absolute Community of Property (ACOP)

SEC. 88. Determination of the Value of the Estate. Solution to the illustration above:

(A) Usufruct. To determine the value of the right of usufruct, 1. Under Conjugal Partnership of Gains:
use or habitation, as well as that of annuity, there shall be Exclusive Property is P 1,000,000.00
taken into account the probable life of the beneficiary in Gross Estate is 2,400,000.00
accordance with the latest Basic Standard Mortality Table, to
be approved by the Secretary of Finance, upon
recommendation of the Insurance Commissioner. EXCLUSIVE CPG TOTAL
Residential 1,000,000 - 1,000,000
(B) Properties. - The estate shall be appraised at its fair market Lot
value as of the time of death. However, the appraised value of Residential - 1,200,000 1,200,000
real property as of the time of death shall be, whichever is House
higher of – Personal - 200,000 200,000

Property
(1) The fair market value as determined by the Commissioner,
TOTAL 1,000,000 1,400,000 2,400,000
or

(2) The fair market value as shown in the schedule of values
Explanation:
fixed by the Provincial and City Assessors.
i. The residential lot inherited during the marriage is part

of your gross estate and is an exclusive property:

The value is the acquisition cost

or the Fair Market Value (FMV) whichever is
Illustration:
higher
AAA who is a resident citizen was married to BBB in 1986.
In this case it is the assessed value
However, in 2018 AAA died at the United States and left the P 1, 000,000.00
following properties:
ii. The residential house built during the marriage is part
a. Residential Lot inherited from AAA’s father during of your gross estate and a conjugal property.
marriage: The value must be the Fair
Acquisition Cost (AC) P 300,000.00 Market Value (FMV) which is = zonal value or
Fair Market Value (FMV) 1,000,000.00 assessed value whichever is higher
In this case do not mind the book
b. Residential house built during marriage: value and appraiser’s value, the amount
Book Value P 1,000,000.00 should be the assessed value P 1, 200,000.00
Appraiser’s Value 1,300,000.00
Assessed Value 1,200,000.00 iii. Personal Properties acquired during the marriage is
part of your gross estate and a conjugal property
c. Personal Properties acquired during marriage:
12


The value is the acquisition cost C) The transmission from the first heir, legatee or donee in favor
or the Fair Market Value (FMV) whichever is of another beneficiary, in accordance with the desire of the
higher predecessor; and
In this case it is the FMV at death D) All bequests, devises, legacies or transfers to social welfare,
of P 200,000.00 cultural and charitable institutions, no part of the net income
of which insures to the benefit of any individual: Provided,
B. Under Absolute Community of Property (ACOP): however, That not more than thirty percent (30%) of the said
bequests, devises, legacies or transfers shall be used by such
It’s just the same institutions for administration purposes.
EXCLUSIVE CPG TOTAL
Residential 1,000,000 - 1,000,000 These exclusions are applicable to all types of decedents. These are
Lot exempted transfers even if they occurred after the death of the
Residential - 1,200,000 1,200,000 decedent.
House
Personal - 200,000 200,000 (A) The merger of usufruct in the owner of the naked title
Property Sometimes you have to retain the possession and when you die,
TOTAL 1,000,000 1,400,000 2,400,000 the possession goes back to the naked owner—that is possible.

Let’s modify the given: (B) The transmission or delivery of the inheritance or legacy by the
a. Residential Lot inherited from AAA’s father before the fiduciary heir or legatee to the fideicommissary
marriage: This is under succession law. This is pretty much similar to special
Acquisition Cost (AC) P 300,000.00 power of attorney. We said that transfers from A to B, that the
Fair Market Value (FMV) 1,000,000.00 property will form part of the gross estate of A, but with respect to
the transfer from B to C it’s a special power of attorney and is an
Solution: excluded transfer.
B. Under Absolute Community of Property (ACOP):
(C) The transmission from the first heir, legatee or donee in favor
Exclusive Property is P 0 of another beneficiary, in accordance with the desire of the
Gross Estate is 2,400,000.00 predecessor

EXCLUSIVE ACOP TOTAL (D) All bequests, devises, legacies or transfers to social welfare,
Residential - 1,000,000 1,000,000 cultural and charitable institutions, no part of the net income of
Lot which insures to the benefit of any individual
Residential - 1,200,000 1,200,000 Transfers to specific persons. Take note of the requirements and
House conditions for exemption of such rights and transfers.
Personal - 200,000 200,000
Property 1. With respect to the recipient institutions;
2. No part of the institution’s net income inures to the
TOTAL 0 1,400,000 2,400,000
benefit of any individual;

3. Not more than thirty percent (30%) of the said bequests,
Explanation:
devises, legacies or transfers shall be used by such
i. The residential lot inherited BEFORE the marriage is
institutions for administration purposes.
part of your gross estate and is a community property;
-They can use it for paying wages of employees

ii. The residential house built during the marriage is part
The listing here is not exclusive.
of your gross estate and a community property.

Other exclusions:
iii. Personal Properties acquired during the marriage is
1. Insurance Policy
part of your gross estate and a community property.
2. Group life Insurance Policies taken out by the ER for his EE

3. GSIS and SSS death benefits

4. Those amounts received from the Philippine and US

government for damages suffered during World War II
TRANSMISSIONS EXEMPTED FROM ESTATE TAXATION
5. Those received from the US Veterans Administration

6. Those properties held in trust by the decedent – of course
Section 87. Exemption of Certain Acquisitions and Transmissions. the decedent has no interest over the property that was
- The following shall not be taxed: given to him only in trust.
A) The merger of usufruct in the owner of the naked title; 7. Transfers of bona fide sales
B) The transmission or delivery of the inheritance or legacy by the 8. Share of the surviving spouse and;
fiduciary heir or legatee to the fideicommissary; 9. The capital or the paraphernal property of the surviving
spouse.
13


DEDUCTIONS (a) For actual funeral expenses or in an amount equal to 5% of the
gross estate, whichever is lower, but in no case to exceed P200,000;
The provisions of deductions have been extensively overhauled by
the TRAIN Law. (b) For judicial expenses of the testamentary or intestate
proceedings;
What are the principles that are applicable here?
It’s pretty much the same in income taxation—it partakes the
Previously, there are 2 types of expenses deductible:
nature of a tax exemption; meaning the taxpayer must be able to
prove that he is allowed of such deduction and he is required to
prove that the requirements for deductibility have been fully 1. Funeral expenses
complied with.
2. Judicial expenses
There is also this principle in estate taxation that follows the ONE
CLASSIFICATION RULE.

Atty D: I don’t know of this is still applicable right now because FUNERAL EXPENSES
there are matters or deductions which are revoked by the train law.
How much is allowed as deduction as Funeral Expenses?
Before they had funeral expenses and medical expenses, so the one 1. the actual amount of the funeral expense; or
classification rule states that if you can claim it under funeral 2. 5% of the gross estate; or
expenses, you can no longer claim the excess of the amount 3. a maximum amount of P200,000, whichever is lower.
allowed as part of the medical expenses.
What do you mean by “actual funeral expense”?

Kinds of Deductions applicable to Estate Taxation: Those expenses which are actually incurred in connection
with the interment, or the burial of the deceased, this
1. Ordinary deductions includes the expenses of the wake. Burial lot is also
2. Special deductions included as well as the “lapida”.
3. Share of the surviving spouse (SS)–not really considered as a
special deduction because it is a matter of gross estate. Funeral expenses do not include the medical expenses
incurred prior to the death of the deceased.
Ordinary Deductions
Previously, ordinary deductions have the mnemonics: ELIT MTV If we look at the Revenue Regulations (RR 2-2003, Sec. 6 (A)(1)):
Expenses SEC. 6. COMPUTATION OF THE NET ESTATE OF A DECEDENT
Losses WHO IS EITHER A CITIZEN OR RESIDENT OF THE PHILIPPINES. -
Indebtedness The value of the net estate of a citizen or resident alien of the
Taxes Philippines shall be determined by deducting from the value of
Mortgage unpaid the gross estate the following items of deduction:
Transfers for public use
Vanishing deductions (A) Expenses, losses, indebtedness, and taxes- Such
amounts for:
But right now, because of the TRAIN Law, it’s just LIT MTV –
basically beginning 2018, we do not anymore have the concept of (1) Actual funeral expenses (whether paid or unpaid)
expenses: judicial expenses and funeral expenses. up to the time of interment, or an amount equal to five percent
(5%) of the gross estate, whichever is lower, but in no case to
But we still need to study these, probably not for your bar exams exceed P200,000.
but for practical reasons we’ll still discuss because only a few
people have died since the start of 2018 and most tax cases that Any amount of funeral expenses in excess of the
are now pending or will be pending after 2018 pertains to those P200,000 threshold, whether the same had actually been paid
who died before 2018 and the law applicable is the one prior to the or still payable, shall not be allowed as a deduction under this
TRAIN law because the law applicable is the law in effect on the Subsection. Neither shall the unpaid portion of the funeral
date of death. expenses incurred which is in excess of the P200,000 threshold
be allowed to be claimed as a deduction under “claims against
EXPENSES (Under the old law) the estate” provided under Subsection (C) hereof.
SEC. 86. Computation of Net Estate.
The term "FUNERAL EXPENSES" is not confined to its
(A) Deductions Allowed to the Estate of Citizen or a Resident: ordinary or usual meaning. They include:

(1) Expenses, Losses, Indebtedness, and taxes. Such amounts:
14


(a) The mourning apparel of the surviving spouse and (f) Clerk hire;
unmarried minor children of the deceased bought and (g) Costs of preserving and distributing the estate;
used on the occasion of the burial; (h) Costs of storing or maintaining property of the
(b) Expenses for the deceased’s wake, including food and estate; and
drinks; (i) Brokerage fees for selling property of the estate.
(c) Publication charges for death notices; Any unpaid amount for the aforementioned
(d) Telecommunication expenses incurred in informing cost and expenses claimed under “Judicial Expenses”
relatives of the deceased; should be supported by a sworn statement of account
(e) Cost of burial plot, tombstones, monument or issued and signed by the creditor.
mausoleum but not their upkeep. In case the deceased
owns a family estate or several burial lots, only the value
corresponding to the plot where he is buried is NOTE: This is not limited to estates settled judicially. This
deductible; pertains to all the necessary expenses to prepare the estate for the
(f) Interment and/or cremation fees and charges; and distribution to the heirs. That’s why all of those are included. It’s
(g) All other expenses incurred for the performance of the easy to imagine if there is a case pending (judicial settlement) and
rites and ceremonies incident to interment. a lawyer is needed. But there are also instances (such as in
extrajudicial settlement) where one may need to expend for
Expenses incurred after the interment, such as for attorney’s fees as well – and take note, this is expensive too,
prayers, masses, entertainment, or the like are not deductible. around 10% of the value of the estate.
Any portion of the funeral and burial expenses borne or
defrayed by relatives and friends of the deceased are not
deductible. CIR vs CA (Taken from 2016 TSN)
FACTS: There was this person who was a World War II veteran.
Medical expenses as of the last illness will not form He survived the war and became old and he became insane.
part of funeral expenses but should be claimed under
subsection (F) of this section. During his lifetime, his property was placed under the
guardianship of the Philippine National Bank. Eventually,
Actual funeral expenses shall mean those which are he died. But after his death, the PNB did not file an estate
actually incurred in connection with the interment or burial of tax return but instead required the heirs to execute an
the deceased. The expenses must be duly supported by receipts extrajudicial settlement of the estate. Her sister became the
or invoices or other evidence to show that they were actually administratix of his property. Nagbigay ang BIR ng deficiency
incurred. estate tax. Her sister paid the tax but thereafter she filed an
action to claim a refund of the taxes that she has paid.
NOTE: Decided to remove Sir’s discussion because it’s just a mere According to her, all the taxes she has paid or a portion of it
reiteration (if not a mere reading) of the above provision. In fact, should be returned to the estate of the deceased.
you’re better off with the provision cos’ it’s complete J
There were two items in contention - (1) notarial fees and (2)
attorney's fees paid. Saan kinuha yung notarial fees? Saan
JUDICIAL EXPENSES binayad? Sa lawyer ng PNB for the extrajudicial settlement of
the estate. What about the attorney's fees? It was for the
What are judicial expenses for purposes of estate taxation? guardianship proceedings instituted by the PNB.

Under the Revenue Regulations (RR 2-2003, Sec. 6 (A)(2)), ISSUE: The question here is, are these expenses deductible?
(2) Judicial expenses of the testamentary or intestate
proceedings. - Expenses allowed as deduction under With respect to the notarial fees, the BIR said it should not be
this category are those incurred in the inventory-taking deducted because there are no judicial proceedings to begin
of assets comprising the gross estate, their with. Walang kaso so walang judicial expense.
administration, the payment of debts of the estate, as
well as the distribution of the estate among the heirs. RULING 1: This is an allowable deduction. The notarial fees are
In short, these deductible items are expenses incurred part of the judicial expenses because according to the SC, the
during the settlement of the estate but not beyond the expense is a necessary contribution for the settlement of the
last day prescribed by law, or the extension thereof, for estate.
the filing of the estate tax return. Judicial expenses
may include: There is no need for a case to be filed, it is enough that you
spend something for the distribution or the administration of
(a) Fees of executor or administrator; the estate or the settlement of the estate.
(b) Attorney’s fees;
(c) Court fees; What about the attorney's fees? Ang sabi ng BIR, the attorney's
(d) Accountant’s fees; fees should not be deducted. Why? When did the guardianship
(e) Appraiser’s fees; proceedings begin in the first place? It
15


began when the deceased was still alive. than the last day for the payment of the estate tax
as prescribed in Subsection (A) of Section 91.
RULING 2: The SC said here you are allowed to deduct
the attorney's fees even if it was spent or incurred when he was REQUIREMENTS FOR THE DEDUCTIBILITY OF CASUALTY LOSSES:
still alive because anyway, the purpose of that 1. Losses must be incurred during the estate settlement
guardianship proceeding is to distribute the properties later on. - This is one of the allowable deductions in gross
Still it is a necessary expense because it contributed to the estate wherein what is considered is a POST-
settlement of the estate. This ruling of the SC with regard to the MORTEM event. Kasi ang losses daw nangyari
attorney's fees is weird mainly because it was filed before the during the settlement of the estate and yet the law
deceased actually died. allows you to deduct such post-mortem
developments.
So, in your quiz, in deduction, not all of them are actually supposed
to be incurred before the death. 2. The losses arose from casualties
- Fire, storm, shipwreck etc. including robbery,
DE GUZMAN vs CARILLO theft, embezzlement
This refers to the deductible repair of the property and then the
fencing of the property. The SC said it can be claimed as a 3. The losses are not compensated by insurance or
deduction as part of the judicial expenses. otherwise
- What if there is a partial coverage of insurance?
2016 TSN: That’s alright. That portion which is not covered by
The SC here said that, those expenses spent for the preservation the insurance will still be allowed as a deduction
of the property is part of the judicial expenses. The from the gross estate.
administrator has the duty to maintain in tenantable repair the
houses and other structures and fences belonging to the estate, 4. The losses must not have been claimed as a deduction
and deliver the same in such repair to the heirs or devises when from the gross income for income tax purposes
directed to do so by the court. It is a necessary expense for the - Because you can claim casualty losses as part of
administration of the estate. your allowable deductions in income taxation

5. Such losses were not incurred later than the last day of
December 4 payment for the estate tax
- Before 6 months; NOW it is already 1 year
Part 1 – Castro

LOSSES CLAIMS AGAINST INSOLVENTS
Losses are still existing in the TRAIN Law.
2 Types of Losses Section 86 (A) (3) (TRAIN Law)
1. Casualty losses
2. Claims against insolvents Sec. 86 Computation of Net Estate- For the purpose of the tax
imposed in this Chapter, the value of the net estate shall be
CASUALTY LOSSES determined:
Section 86 A (4) (TRAIN LAW)
Sec. 86 Computation of Net Estate- For the purpose of the tax (3) For claims of the deceased against insolvent persons where
imposed in this Chapter, the value of the net estate shall be the value of decedent’s interest therein is included in the value
determined: of the gross estate.

(A) Deductions Allowed to the Estate of a Citizen or a
Resident.- In the case of a citizen or resident of the What is a claim against an insolvent?
Philippines, by deducting from the value of the gross This claims against an insolvent is an account receivable on the part
estate – of the decedent. Dawatonon niya and yet it can no longer be
collected because the debtor can no longer pay for he is insolvent.
(4) x x x There shall also be deducted losses incurred
during the settlement of the estate arising from The law says that the decedent’s interest must be included in the
fires, storms, shipwreck, or other casualties, or from gross estate. Ang value of the decedent’s interest is magkano ang
robbery, theft or embezzlement, when such losses utang niya.
are not compensated for by insurance or otherwise,
and if at the time of the filing of the return such Why is it that the value of that debt is included in the gross estate?
losses have not been claimed as a deduction for the Take note you also include intangible properties as part of the gross
income tax purposes in an income tax return and estate. And an account receivable from someone is also an asset. It
provided that such losses were incurred not later is a property in itself. That’s why it is required for you to include in
the gross estate the value of the debt of an insolvent. That is one
16


requirement for it to be allowed as a deduction from the gross 4. Statement under oath executed by the administrator or
estate. Ilagay mo muna sa GE bago mo i-deduct. executor of the estate reflecting the disposition of the
proceeds of the loan if said loan was contracted within
REQUIREMENTS FOR DEDUCTIBILITY: 3 years prior to the death of the decedent

1. The value of the uncollectible must be included in the All of those must be complied with so that the estate will be able
gross estate to claim this as an allowable deductions. These are in the Revenue
2. It must be shown that the debtor is already incapable of Regulations wala ito sa Tax Code.
paying their indebtedness
- Sabi ditto is insolvent. Is it necessary that the For purchase of goods or services, iba naman kailangan niya. Refer
debtor secure a court order declaring him/her/it to the Revenue Regulation.
as bankrupt? Under the Tax Law, I don’t think so.
As long as you can prove to the BIR that the debt Take note also when it comes to the claims against the estate or
can no longer be collected then you can based it indebtedness, please take note that they also follow the Date of
or claim it as part of your ordinary deductions Death Valuation Rule as enunciated in the case of Dizon vs. CIR:
from your gross estate.

INDEBTEDNESS (CLAIMS AGAINST THE ESTATE) From 2017 TSN
DIZON vs. CIR
Kung yung kanina claims against the insolvent. Creditor ang estate.
This time this would refer to the liabilities of the estate or the FACTS: A person died and left a debt not yet paid. This is what
liabilities when he was still alive and he was not able to pay it during we call a “Claim Against the Estate”. It is supposed to be a
his lifetime. deduction to the estate. But after his death, the creditors
executed a compromise agreement wherein some debts were
Section 86 (A) (2) (TRAIN Law) condoned.

Sec. 86 Computation of Net Estate- For the purpose of the tax BIR said that the said condoned amounts should not be included
imposed in this Chapter, the value of the net estate shall be in the “Claims Against the Estate”.
determined:
RULING: NO. Those are already post-mortem developments.
(2) For claims against the estate: Provided, That at the time the Post-death developments are not included. Again, for the value
indebtedness was incurred the debt instrument was duly of the estate, you reckon it at the time of death in line with the
notarized and, if the loan was contracted within three (3) years “Date of Death Valuation Rule”. Any post-mortem
before the death of the decedent, the administrator or executor developments are not considered in the valuation of the estate.
shall submit a statement showing the disposition of the proceed
of the loan. What is involved here is actually the liabilities of the decedent
during his lifetime and he died and was not able to pay and the
REQUIREMENTS OF DEDUCTIBILITY: creditors after his death basically condoned of the obligations of
the decedent.
1. It is the personal obligation of the decedent
2. Contracted in good faith and for adequate and full The question: Is the condonation of the debt affect the deductions?
consideration in money’s worth NO. Post-mortem developments are not considered. When it
3. The debt must be valid and enforceable comes to the indebtedness or claims against the estate, even if it is
4. The debt must not be condoned by the creditor condoned afterwards but at the time of his death it is still claimable
5. It must not have prescribed as part of the allowable deductions.

On top of the general requirements of deductibility, if you look at
the RR 12-2018 deals with the Estate and Donor’s Taxes. There are TAXES
substantiation rules that must be followed, depende kung ano ang
utang ng estate. This is quiet peculiar kasi pahapyaw lang siya sinabi sa codal. This is
not explicitly stated in the codal but there is this portion in Section
Examples: (see RR 12-2018) 86 (A) (4) that somehow says that taxes can be allowed as a
deduction from the gross estate.
1. In case of a simple loan, the debt has been notarized.
Except for those granted by financial institutions where Section 86 (A) (4) (TRAIN Law)
notarization is not part of the normal course business.
2. Notarized certification from the creditor as to the Sec. 86 Computation of Net Estate- For the purpose of the tax
unpaid balance of the debt imposed in this Chapter, the value of the net estate shall be
3. There must be proof of financial capacity of the creditor determined:
to lend the money
17


(4) For unpaid mortgages upon, or any indebtedness in respect money or money’s worth. There shall also be deducted losses
to, property where the value of decedent’s interest therein, incurred during the settlement of the estate arising from fires,
undiminished by such mortgage or indebtedness, is included in storms, shipwreck, or other casualties, or from robbery, theft or
the value of the gross estate, but not including any income tax embezzlement, when such losses are not compensated for by
upon income received after the death of the decedent, or insurance or otherwise, and if at the time of the filing of the return
property taxes not accrued before his death, or any estate tax. such losses have not been claimed as a deduction for the income
tax purposes in an income tax return, and provided that such losses
Last portion of the provision: What are the taxes that are not were incurred not later than the last day for the payment of the
deductible from the gross estate? estate tax as prescribed in Subsection (A) of Section 91.

1. income tax upon income received after the death of the
decedent What are requirements of deductibility?
- these refer to a post-mortem development; these 1. The unpaid mortgage property should be included in the
was earned already after the death gross value of the estate; (This is only natural because
you should include in the gross estate the interest of the
What would be the tax consequence of this income tax receipt? decedent to such property.)
2. The deduction is related to the extent that they
Part 2 – Gido contracted bona fide and for an adequate or full
consideration in money or money's worth ;
Take note that estates, the income taxation is considered as 3. Incase of mortgage payable is made by the real estate
individual which is why I told you the last semester that estates are verification must be made as to who was the beneficiary
treated as if they are individuals especially when the estate is an of the loan proceeds;
income generating estate. It can be considered as a person for 4. In all instances the mortgage property to the extent of
purposes of income tax. the decedent’s interest therein should form part of the
estate.

2. Property tax not approved before his death - again we are talking
about property taxes which came up only after his death TRANSFERS FOR PUBLIC USE
These will only happen if there is a will executed by the decedent .
in that will the decedent transfers a part of his property or a specific
3. Estate taxes that are not allowed property for government purposes - for public use.

Conversely what are the taxes that are allowed to be deducted Section 86 A
from your gross estate? (6) Transfers for Public Use.— The amount of all bequests,
1. Income taxes on income received before the legacies, devises or transfers to or for the use of the
decedent’s death; Government of the Republic of the Philippines, or any political
2. Property taxes approved before the decedent’s death subdivision thereof for exclusively public purposes.
(ex. You can see that these are taxes paid taxes at the Pretty much the same as what you had in your income taxation. If
time of the decedent’s death you may claim as an you remember, Donations for public purposes may also be allowed
allowable deduction. This is part of the obligation of the as deduction on the gross income, these are called charitable
decedent . “ma consider nyo na rin ya as part of the deductions. We all know that charitable deductions is limited to
indebtedness” ) 10% or 5% and entirely depends to whom you gave it. If to the
government you can claim full deduction if it was given to a NEDA
Also part of the indebtedness is the mortgage unpaid, meaning that certified priority.
the decedent has a mortgage obligation which was unpaid at the
time of his death. This found in Section 86 of letter A No. 4 of your
National Internal Revenue Code as amended by TRAIN. Requirements for deductibility
1. The disposition is in a last will and testaments
Sec. 2. It is made in favor of the government or any of its
“For unpaid mortgages upon, or any indebtedness in respect to, political subdivisions;
property where the value of decedent’s interest therein, 3. Exclusively for public use;
undiminished by such mortgage or indebtedness, is included in the 4. The value of the property that was transfered be
value of the gross estate, but not including any income tax upon included in the gross estate.
income received after the death of the decedent, or property taxes
not accrued before his death, or any estate tax. The deduction Part 3 – Isidor
herein allowed in the case of claims against the estate, unpaid
mortgages or any indebtedness shall, when founded upon a 5. The vanishing deduction on the property must not have
promise or agreement, be limited to the extent that they were been claimed by the previous estate involving the
contracted bona fide and for an adequate and full consideration in same property.
18


FIRST: If the property is received within 1 year prior to the death,
- Meaning in the immediately previous transfer, no the taxpayer is allowed to deduct, 100% OF THE VALUE OF THE
vanishing deduction was obtained by the prior PROPERTY AS DETERMINED BY LAW.
decedent.
RATIONALE FOR THE VALUE:
VANISHING DEDUCTIONS
Because the value of the property, entails a complicated
Another term for this is property previously transferred it is now in computation. Just to give an idea, the first thing is to determine the
section 86 letter A No. 5 value that you should take.
The essence of this vanishing deduction is through time, “naga
paliit ng paliit ang deduction natin” mainly because this property 1. The starting point or the starting value for the deduction and it’s
was previously transferred to the decedent through gratuitous usually the:
transfer. It’s a diminishing deduction allowed from the gross estate a. FAIR MARKET VALUE OF THE PROPERTY AT THE
which the decedent previously acquired gratuitously either by TIME OF DEATH; OR
succession or donation. b. THE FAIR MARKET VALUE OF THE PROPERTY AT
THE TIME OF THE PREVIOUS TRANSFER
How do we know the level of deduction that we can claim from the WHICHEVER IS LOWER.
gross estate?
And then,
It is based on the length of period that the decedent has the
property counted from the date of the previous transfer “by year 2. There will be an apportionment of deductions in relation to the
yan” The only period here is the maximum of 5 years “per year naga gross estate of the deceased.
increase ang holding period, naga liit ang deduction mo.” for
example the decedent held the property for a period of one year So magcompute pa yan.
the vanishing deduction is 100% of the value of the property. If the
decedent has held the property for more than four (4) years “mag And then,
minus 20 minus 20 ka lang” it is a twenty percent (20%) per year of
the amount allowed as deduction from the gross estate. 3. After considering the portion of the deduction, you deduct the
portion of the deduction from the value of the property as initially
What us the reason behind this vanishing deduction? determined and that is the end point and that is the value that you
should consider for your vanishing deduction.
The main reason for the vanishing deduction is to
mitigate the harshness of successive taxation. It is possible “na So, mahaba sa masyado. YOU DON’T HAVE TO EXPLAIN THAT. You
dinonate ung property pagkatapos namatay agad yung donee” it’s just have to say, if the property is received within 1 year prior to
a successive transfer taxes to be paid to the government “kawawa the death, the allowable deduction is 100% of the value of the
ang tax payer” property continuously transferred as may be determined by law.

Salient points of the Vanishing Deductions SECOND: More than 1 year but not exceeding 2 years is only 80%
of the value as determined by law.
1. For the vanishing deduction to work - the property must
be situated here in the Philippines; THIRD: More than 2 years but not exceeding 3 years is 60% of the
2. The property must have been transferred from a prior value.
decedent/donor to the present decedent (either by
succession or by donation); FOURTH: More than 3 years but not exceeding 4 years is 40% of the
3. The second decedent must have died within five (5) value.
years from receipt of the property (“kung bakit 5 years”
it has something to do with the amount of allowable FIFTH: More than 4 years but not more than 5 years is 20% of the
deductions of the gross estate under the property value.
previously transferred);
4. The property must have formed part of the gross estate If the property was held by the present decedent for more than 5
of the prior decedent and the corresponding transfer years, you do not talk about vanishing deductions anymore.
taxes must have been paid.

So, if these 5 requirements or points are complied with, then you EXPENSES (REPEALED BY THE TRAIN LAW)
apply the VANISHING DEDUCTION.
Take note, wala na tayong EXPENSES.
VALUE/AMOUNT TO BE DEDUCTED
I was just discussing last time about expenses because some of you
Question: How much ang pwede nating ideduct jan? might encounter cases wherein the old tax code would apply.

19


NON-RESIDENT ALIENS: ALLOWABLE DEDUCTION Also, previously, if you talk about medical expenses, it does not
refer to the medical expenses incurred for the last illness of the
What about the Non-resident Aliens? decedent.

What are the allowable deductions allowed for non-resident aliens. STANDARD DEDUCTIONS
Kasi magkaiba.
For non-resident aliens, you have section 86 (b). Sec. 86. Computation of Net Estate.— For the purpose of the tax
imposed in this Chapter, the value of the net estate shall be
determined:
SEC. 86. Computation of Net Estate. For the purpose of the tax “(A) Deductions Allowed to the Estate of a Citizen or a Resident.—
imposed in this Chapter, the value of the net estate shall be In the case of a citizen or resident of the Philippines, by deducting
determined: from the value of the gross estate—
“(1) Standard Deduction.— An amount equivalent to Five million
(B) Deductions Allowed to Nonresident Estates. - pesos (₱5,000,000).

(B) Deductions Allowed to Nonresident Estates.— In the case of a - 5 million na sya ngayon, dati 1 million lang yan. That 5
nonresident not a citizen of the Philippines, by deducting from the million pesos, it think will be more than enough to
value of that part of his gross estate which at the time of his death compensate the removal of the expenses(Funeral and
is situated in the Philippines: Judicial and also the Medical Expenses). That is the first
“(1) Standard Deduction.— An amount equivalent to Five hundred special deduction, Standard deduction of 5 million, THIS
thousand pesos (₱500,000); IS AN AUTOMATIC DEDUCTION, NO QUESTIONS ASKED.
“(2) That proportion of the deductions specified in paragraphs (2),
(3), and (4) of Subsection (A) of this Section which the value of such “(8) Amount Received by Heirs Under Republic Act No. 4917.—
part bears to the value of his entire gross estate wherever situated; Any amount received by the heirs from the decedent’s employee
“(3) Property Previously Taxed.— x x x as a consequence of the death of the decedent-employee in
“(4) Transfers for Public Use.— The amount of all bequests, accordance with Republic Act No. 4917: Provided, That such
legacies, devises or transfers to or for the use of the Government amount is included in the gross estate of the decedent.”
of the Republic of the Philippines or any political subdivision
thereof, for exclusively public purposes. In other words, this the law providing for death benefits. It is
required that before you are allowed to have this special
If we summarize these, the non-resident alien are likewise allowed deduction, the amount received or the death benefits
to have the L-I-T-M-T-V as part of its ordinary deductions. It’s received under this law, must be included as part of the gross
practically the same. estate.

SPECIAL DEDUCTIONS “(7) The Family Home.— An amount equivalent to the current fair
market value of the decedent’s family home: Provided, however,
Let’s go now to the Special Deductions. Pagdating natin sa Special That if the said current fair market value exceeds Ten million
Deductions, dati, S-Me-R-F yan. Meron tayong Standard pesos (₱10,000,000), the excess shall be subject to estate tax.
deductions, Medical expenses, RA 4917 otherwise known as the
death benefits, and then you have the Family home. But ngayon This has also been changed under the TRAIN LAW.
wala na tayong Medical Expenses. It has been removed under the
TRAIN LAW. Previously the maximum amount that we take as a family home is
just 1 million. But right now it’s already 10 million. So dako na kaayo
sya. Now, one of the changes here, under the TRAIN LAW is
MEDICAL EXPENSES tinanggal tong provision na ito:
(1) Expenses, Losses, Indebtedness, and taxes. Such amounts: (6)
Medical Expenses incurred by the decedent within 1 year prior to “As a sine qua non condition for the exemption or deduction, said
his death which shall be duly substantiated with receipts: Provided, family home must have been the decedent's family home as
That in no case shall the deductible medical expenses exceed certified by the barangay captain of the locality.”
P500,000.
Now, basically, it would seem that the requirement of barangay
Requisites for deductibility: certification has already been removed.
1. The actual medical expenses must have been incurred 1 year
prior to the death of the decedent
REVENUE REGULATION 12-2018
2. the amount must not exceed P500,000 (Allowable)
Family home must be defined the one the same under the family
3. The expenses must be supported by receipts and other
code. It is the house including the land in which situated the
documentary requirements

20


husband and the wife or the head of the family and members of the share of the surviving spouse would also include the conjugal
the family as certified by the barangay captain of the locality. or community obligations).*

So, under the RR, it’s practically the same with the definition under Formula:
the family code. That’s why for you to claim as special deduction
under the family home, you must secure the certification of the Gross Estate
barangay. —less Deductions (OD/SD,SS)
Net Estate
“(C) Share in the Conjugal Property.— The net share of the
surviving spouse in the conjugal partnership property as
diminished by the obligations properly chargeable to such Now, with respect to the rate of your estate tax, it’s now in Section
property shall, for the purpose of this Section, be deducted from 84, as amended by TRAIN Law.
the net estate of the decedent.
Prior to Train, the computation for the estate tax is like how you
It is because of this provision that all of the properties of the compute your income taxes. There is a table, and you apply yung
decedent including the conjugal properties must be for sa table, and you have your estate tax.   But right now, in estate
computation purposes be included in the gross estate. Because at tax, it is subject to a unitary tax rate of 6% based on your Net
the end, the share to the conjugal property, will be revoked and Taxable Income.
that will also include the community or conjugal obligations of the
spouses. So, because of Train, everything has been simplified by the Train
Law, especially with respect to the computation of the Estate Tax.
SPECIAL DEDUCTION ON NON-RESIDENT ALIENS
They are only allowed 2: There are also changes that was introduced by Train Law. We will
“(B) Deductions Allowed to Nonresident Estates.— In the case of discuss them later as we go along.
a nonresident not a citizen of the Philippines, by deducting from
the value of that part of his gross estate which at the time of his There is this provision on tax credits on foreign estate tax. Foreign
death is situated in the Philippines: taxes paid to a foreign country. This provision is found in Section
“(1) Standard Deduction.— An amount equivalent to Five 86(b) of your NIRC. Now, the provision is quite long. Let us just
hundred thousand pesos (₱500,000); simplify.

- TAKE NOTE OF THE AMOUNT: 500,000 pesos lang. The rule is that estate tax imposed by the Philippines shall be
credited to the amount of the estate tax imposed by the authority
“(C) Share in the Conjugal Property.— The net share of the of a foreign country.
surviving spouse in the conjugal partnership property as
diminished by the obligations properly chargeable to such Kung may babayaran ka na foreign estate tax, any estate tax that
property shall, for the purpose of this Section, be deducted from you or the estate have to pay to a foreign country, as a deduction,
the net estate of the decedent. but please take note, like your Income Taxation, this will be
subjected to limitations: 1) Per-Country Basis and 2) Global or
-That’s all. Wala syang family home, wala syang Death benefits Overall Basis.
under RA 4917.
Okay na yan isulat niyo sa exam, basta simple lang siya. Kung kaya
niyo imemorize ang codal, then go ahead.

December 6

Part 1 -- Lagat ADMINISTRATIVE REQUIREMENTS

We are distinguishing the deductions of the decedents. And we are
Next, let us now proceed to Estate Tax Administrative
also comparing the deductions available to the resident citizens Requirements
and the non-residents. This is found in Sections 88 to 97 of the NIRC.

We are now in Estate Tax. Maraming provisions yan, but they are very easy to understand.
Mostly, codal siya.
Basically, what is the tax base of estate tax?
Your tax base for your estate tax is your net estate. And please take note, get a copy of Revenue Regulations 12-2018.
That involves the regulations under the Train Law for Estate and
To arrive at the net estate, we start from the gross estate less the Donor’s Taxes.
deductions (ordinary and special deductions, and you also have to
consider the share of the surviving spouse. Please take note that Section 89 Notice of Death to be Filed; this is already removed
under the Train Law. Wala na tayong notice of death.
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1) In all transfers subject to estate tax.
Before, under Section 89, it is required that the heirs or executors
or administrators file a notice of death with the BIR. But, right now, Pag mag-compute ka ng estate taxation mo at meron kang
wala na ito. bayaran na estate tax, kailangan mo mag-file ng ETR.

So let’s just have a some sort of preview on how does it go before What if hindi ka subject estate tax? Pag-compute mo, zero
(when the notice of death is still applicable). siya.

When someone will die, a notice of death will be submitted to BIR. 2) When the estate consists of registered or registrable
Again, there is no form with respect to this matter. What is property such as real property, motor vehicle, shares of stock
necessary is to submit a letter to the BIR and attaching there the or other similar property.
birth certificate. (Sir might be referring to the ‘death’ certificate)
So, even if you compute your estate tax, the net estate, there is no
Who files the notice of death?  It’s either the Executor, estate tax payable, the taxpayer or estate, or the executor or heirs,
Administrator or any of the legal heirs of the deceased. must still have to file the ETR if there are properties that are
registered or registrable. This is necessary so that BIR will issue a
Where will the notice of death will be sent? certificate authorising registration. Dati, “CAR” lang yan, ngayon E-
Usually this will be sent at the RDO (Revenue District Office) having CAR na — Electronic Certificate Authorizing Registration
jurisdiction of the residence of the deceased.
Dati kasi, before Train Law, it’s either: 1) in all cases subject to
On top of that, the administrator or executor will have to register estate tax, and 2) exempt from tax; estate exceed 200T or
the estate in accordance with the rules and regulations. Kailangan regardless of the value of the estate, as long there are registrable
nila i-register ang estate and a separate TIN will be provided for the properties
estate. That T-I-N will be for tax purposes only.
Who files the ETR?
Now, is notice of death required in all cases before? According to the law, it’s either the executor or
No need. Di siya kailangan; when the gross estate does not exceed administrator or any of the legal heirs of the estate. They should
200,000, it’s alright not to send a notice of death. file the ETR.

Dati kasi, pag-200K lang ang estate and below, that is actually The Commissioner is also authorized to make a return or amend
exempt from any estate tax. the same if the heirs or any of the executor or administrator fails to
file the return within six months from the date of death or if there
When will the notice of death be given before? is an ETR, if he wilfully files a false or fraudulent return.
The period is two months - it’s either from the date of death or
within 2 months from qualifying as an executor or administrator. What are the basic contents of the estate tax returns?
 Please take NOTE: wala na itong notice of death (under Train Law).  Basically, it is the gross estate, the conjugal, exclusive and total,
and then you have the deductions; the ordinary and special
Let’s us proceed to deductions, the share of the family home, if any, and the share of
the surviving spouse.
Section 90 - Estate Tax Returns
A) Requirements. – In all cases of transfers subject to the tax Now, if the gross estate will exceed five million pesos, it is required
imposed herein, or regardless of the gross value of the that there must be a CPA Certification. Dati, it is necessary if the
estate, where the said estate consists of registered or gross estate is two million pesos. Ngayon, 5 million na siya.
registrable property such as real property, motor vehicle,
shares of stock or other similar property for which a What are the contents of a CPA certification?
clearance from the Bureau of Internal Revenue is It contains the gross estate, the itemised deductions
required as a condition precedent for the transfer of and the estate tax, whether paid or outstanding.
ownership thereof in the name of the transferee, the
executor, or the administrator, or any of the legal heirs, Part 2 – Lim
as the case may be, shall file a return under oath in
duplicate, setting forth:” In other words, it is necessary that a Certified Public Accountant
must “certify” as to the correctness of the values declared in the
estate tax returns.

Basically, this would answer the question: TIME OF FILING
When is it necessary to file an Estate Tax Return?
Section 90. (NIRC as amended by RA 10963)
Again, because of the Train Law, it is simplified.

An estate tax return is required to be filed:
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(B) Time for Filing. - For the purpose of determining the estate time of his death or if there be no legal residence in the
tax provided for in Section 84 of this Code, the estate tax return Philippines, with the Office of the Commissioner.
required under the preceding Subsection (A) shall be filed
within 1 year from the decedent's death.
In practice, it is usually authorized banks ‘pag cities similar to your
income taxation.
Prior to the TRAIN Law, it is a period of 6 months. Now, with TRAIN
Law, it is 1 year from the decedent’s death.
Example: in Davao City, you do not pay your estate taxes in
Q: Can the time for filing the ETR be extended? Magallanes. Normally, magkuha ka lang ng application and mag file
A: Yes, by express provision of the NIRC. Section 90 (C) of the NIRC ka dyan pero you would go to the authorized banks to file it there
says, “(C) Extension of Time. - The Commissioner shall have and pay.
authority to grant, in meritorious cases, a reasonable extension not
exceeding thirty (30) days for filing the return.” For NON-RESIDENTS ALIENS
Naka-lagay dito Commissioner of Internal Revenue, but in practice, File it with the Commissioner of Internal Revenue in Quezon City.
the CIR will just authorize the Regional Revenue Directors of the
Revenue District Offices.
TIME OF PAYMENT
When you file for an extension, there must be an application. Under

Revenue Regulation 12-2018, “The application for the extension of SECTION 91.
time to file the Estate Tax return must be filed with the Revenue
District Office (RDO) where the estate is required to secure its (A)Time of Payment. - The estate tax imposed by Section 84
Taxpayer Identification Number (TIN) and file the tax return of the shall be paid at the time the return is filed by the executor,
estate….” administrator or the heirs.
From RR 12-2018: This means that in estate taxation, the pay-as-you-file system
applies. Kelan bayaran? It is one year from the time of death.
The Estate Tax return shall be filed within one (1) year from the
decedent’s death. The Court approving the project of partition Q: Can there be an extension?
shall furnish the CIR with a certified copy thereof and its order
within thirty (30) days after promulgation of such order. The CIR A: Yes. Kanina we discussed the extension for the filing of the ETR,
or any Revenue Officer authorized by him pursuant to the NIRC ngayon it is extension for the time for payment of estate tax.
shall have authority to grant, in meritorious cases, a reasonable
extension, not exceeding thirty (30) days, for filing the return. (B) Extension of Time. - When the Commissioner finds that
The application for the extension of time to file the Estate Tax the payment on the due date of the estate tax or of any
return must be filed with the Revenue District Office (RDO) part thereof would impose undue hardship upon the
where the estate is required to secure its Taxpayer estate or any of the heirs, he may extend the time for
payment of such tax or any part thereof not to exceed five
Identification Number (TIN) and file the tax return of the estate,
(5) years, in case the estate is settled through the courts,
which RDO, likewise, has jurisdiction over the Estate Tax return
or two (2) years in case the estate is settled extrajudicially.
required to be filed by any party as a result of the distribution
of the assets and liabilities of the decedent. The Estate Tax shall

be paid at the time the return is filed by the executor,
administrator or the heirs.
Note: It depends on how it is settled.
Normally, the RDO of the residence of the decedent at the time

• Judicially: 5 years
when he died.
• Extra-judicially- 2 years
Q: Why is there a disparity for the period of payment?
PLACE OF FILING A: Usually those settle judicially involves lengthy litigation.

(D) Place of Filing. - Except in cases where the Commissioner Q: What is the ground for the extension?
otherwise permits, the return required under Subsection (A) A: When we compare it to the extension for filing, the ground is
shall be filed with an authorized agent bank, or Revenue District meritorious cases. In payment of taxes, the ground for extension is
Officer, Collection Officer, or duly authorized Treasurer of the if the payment on the due date of the estate tax or of any part
city or municipality in which the decedent was domiciled at the thereof would impose undue hardship upon the estate or any of
the heirs.
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Wala siyang surcharge. Yung surcharge natin, pag hindi siya
Example: The estate is not liquid, meaning maraming assets fraudulent, 25% of the basic tax. Masakit ‘yan. ‘Pag meron namang
pero walang cash. Mag bayad ka ng tax mo, cash man yan. If it fraud, its 50% of the basic tax. So meron na tayong pegged at 20%
is not liquid, you sell some of you properties in far-flung areas per annum.
na mahirap i-benta or hindi pa talaga titulado- rights lang. It is
very difficult for the estate or the heirs to pay the estate tax so What are the grounds for the denial of the extension?
they file a petition with the CIR for the extension of payment.
No extension shall be granted where:
Q: When should an extension be filed?
A: It must be paid within one year from the death of the decedent. Where the taxes are assessed by reason of negligence,
It must co-incide with the payment for the ETR. It must be filed intentional disregard of rules and regulations, or fraud on the
within the one year period, otherwise, what would there be to part of the taxpayer, no extension will be granted by the
extend if sobra na sa period. Commissioner.

EFFECTS IN GRANTING THE PERIOD OF EXTENSION OF TIME
On those instances, no extension allowed.

1. The amount of the estate tax liability should be paid on or Now here comes the case of Marcos II vs. CTA.
before the expiration date of the time applied.
The question here is “Is a court approval of the probate court
You go to the BIR and say na I need this period of time to pay for necessary or required before estate taxes can be collected from the
the taxes. estate?”

The SC said that court approval is not necessary. There is nothing in
the NIRC, even in our existing remedial laws, that the probate or
Part 3 – Olamit estate must first be approved by the court before the taxes be
enforced and implemented.
2. The running of the prescriptive period for tax assessment
and collection is suspended. So that means even if the case is pending before the court for the
settlement of the estate, the BIR can already exercise its remedies
Normally, the BIR has three years. Three years from the time of to forcefully collect the taxes from the estate. Okay lang ‘yan. No
filing of the return or the date of deadline, whichever comes later, need for a court approval. In fact, in Sec. 84, the executor and
to make a tax assessment. administrator is prohibited from distributing the properties unless
and until the estate tax have been paid.
Once nag-apply ka ng extension, that prescriptive period, yung
three years na ‘yan, will be suspended. Hindi pwede i-distribute. ‘Yan lang ang prohibition sa executor or
administrator. But with respect to the BIR, they can still collect from
3. The CIR may also require the executor, the administrator, the estate even if the case is still pending before the courts. In other
the heir or beneficiary to furnish the bond not exceeding the words, the pendency or the payment of the estate tax is not
amount of tax and with such sureties conditioned upon the dependent upon any court approval or pendency of any testate or
payment of said tax. intestate case before the court.

Sec. 91. Payment of Tax. – Next is Sec. 91 (C). Payment by Installment. This is something new
(A) xxx that is introduced by the NIRC. Let’s read:
(B) xxx
Sec. 91 (C). Payment by Installment. – In case the available cash
If an extension is granted, the Commissioner may require the of the estate is insufficient to pay the total estate tax due,
executor, or administrator, or beneficiary, as the case may be, payment by installment shall be allowed within two (2) years
to furnish a bond in such amount, not exceeding double the from the statutory date for its payment without civil penalty
amount of the tax and with such sureties as the Commissioner and interest.
deems necessary, conditioned upon the payment of the said tax
in accordance with the terms of the extension.
When it comes to income taxation, pwede naman tayong mg-
installment payment, diba? Ano yung mga requirement nun? Diba
xxx 2 installments? And the amount of tax liabilities is more than
P2,000 ba yun?

Sa income tax lang yun. Before, payment by installment is not
4. The estate shall be liable for interest. allowed under the NIRC. But because of this introduction, okay na
tayong mag-installment payment of estate taxes.

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Q: What are the grounds or what is the ground for installment
payment of estate taxes? The second option naman, sabi natin mag-benta. This means that
the property shall be conveyed with equivalent cash consideration.
“In case the available cash of the estate is insufficient to pay the It’s not a distribution to the heirs. Rather, a portion of the estate
total estate taxes.” This time klaro na siya. Apart from the will be sold to a third party.
extension, one remedy that is available to the executor or
administrator is to request or file an application for installment Pwede ba ang heir ang bibili niyan? It’s not provided under the
payment taxes. Revenue Regulation but I think, for practical reasons and to save
the property, I think the heir should be allowed to purchase the
Q: How long is the allowed installment payment period? property. Diba meron naman niyang mga heir na bulahan. What if
the heir has money? There is no provision under the Revenue
The maximum period is within 2 years from the statutory date of Regulations.
payment. So within 1 year, file ka ng estate tax then bayad ka diba.
Two years from the deadline, you can actually apply, if approved by Okay. The estate tax returns will still have to be filed within 1 year
the BIR, you can pay your taxes within the additional 2 year-period from the decedent’s death. Then the taxpayer will have to make a
from the date of deadline for the payment of tax. written request for partial disposition of the estate. Saan niyo i-file?
Sa BIR pa din. And this will have to be approved by the BIR.
On top of that, maski installment payment ‘yan, there are no civil
penalties or interest. Unlike in income taxation, wala kang civil Q: Now, where should the application for installment payment
penalties, wala kang surcharge, but you have to pay interest. Estate and partial disposition be filed?
taxation, wala.
Generally, sa BIR but if you want to be specific about it, it’s filed
Q: What are the options available to the taxpayer in case that he with the RDO where the estate is required for security again and
will decide to pay the tax on installment? file the ETR (estate tax return).

Essentially, under the Revenue Regulations, he has two choices: Then you have Sec. 91(D). Liability for Payment.

1. Cash installments Sec. 91 (D) Liability for Payment.- The estate tax imposed by
2. Partial disposition of the estate and application of its proceeds Section 84 shall be paid by the executor or administrator before
to the estate tax due. delivery to any beneficiary of his distributive share of the estate.
Such beneficiary shall to the extent of his distributive share of
Meaning niyan, magbenta siya ng property. ‘Pag nabenta niya, the estate, be subsidiarily liable for the payment of such portion
‘yung proceeds, ibayad niya sa BIR. of the estate tax as his distributive share bears to the value of
the total net estate.
Let’s go first to the cash installments. The period is within 2 years
from the date of filing of the ETR. That is under the Revenue So, by this provision, the primary responsibility of making the
Regulations. estate tax payment and also the corresponding obligation to file the
ETR rests with the administrator and executor. Kung walang
That ETR (Estate Tax Return) shall be filed within 1 year from the nabayaran, sila ang hahabulin. Initially, it’s not the heirs. The
decedent’s death. obligation of the heirs or the beneficiary of the estate is only
subsidiary and it cannot exceed the share that he would receive
The frequency deadline and the amount of each installment must from the estate. Okay?
be indicated in the estate tax return and subject to the prior
approval of the BIR. By this revenue regulation provision, it would
seem that the taxpayer should make a proposal to the BIR, Part 4 – Singanon
magkano ang babayaran mo for installment. How often would I
have to pay? Monthly ba ‘to? Quarterly ba ‘to? Yearly ba ‘to? But
just within the 2 year period. Now, what if there are two or more executors or administrators?
All of the executors or administrators are severally liable for the
So you can offer a flexible term of payment but this will be subject payment of payment tax. So this pertains to a solidary obligation.
to the BIR’s consent.
Who pays the estate tax in case of the absence of an executor or
In case that the lapse of 2 years without payment of the entire administrator?
estate tax due, the remaining balance shall become due and It’s any person in actual or constructive possession of any property
demandable subject to the penalties and interest reckoned from of the decedent.
date of deadline for the filing of the ETR and estate tax payment.
Then you have Sec. 92.
Kung hindi ka nagbayad within the 2 year-period, lagot ka. Meron
na ‘yang surcharge of 25% plus interest and it will be reckoned from DISCHARGE OF EXECUTOR OR ADMINISTRATOR FROM PERSONAL
the date of filing of the estate tax return and its payment. LIABILITY
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Let’s go now to Sec. 94.
SEC. 92. Discharge of Executor or Administrator from Personal
Liability. - If the executor or administrator makes a written PAYMENT BEFORE DELIVERY BY EXECUTOR OR ADMINISTRATOR
application to the Commissioner for determination of the SEC. 94. Payment before Delivery by Executor or
amount of the estate tax and discharge from personal liability Administrator. - No judge shall authorize the executor or
therefore, the Commissioner (as soon as possible, and in any judicial administrator to deliver a distributive share to any party
event within one (1) year after the making of such application, interested in the estate unless a certification from the
or if the application is made before the return is filed, then Commissioner that the estate tax has been paid is shown.
within one (1) year after the return is filed, but not after the
expiration of the period prescribed for the assessment of the So importante yan, bayaran mo muna ang estate tax, the judge is
tax in Section 203 shall not notify the executor or administrator without any authority to distribute any of the properties to the
of the amount of the tax. The executor or administrator, upon heirs, so long as the Electronic Certificate Authorizing Transfer is
payment of the amount of which he is notified, shall be presented to the judge.
discharged from personal liability for any deficiency in the tax
thereafter found to be due and shall be entitled to a receipt or Then there is this Sec. 97, which is somehow changed by the TRAIN
writing showing such discharge. Law.

PAYMENT OF TAX ANTECEDENT TO THE TRANSFER OF SHARES,
We have mentioned earlier that the extent of liability of the BONDS OR RIGHTS
executor/administrator is primarily liable for the payment of estate
tax. The extent of his/her liability is personal in nature such that if SEC. 97. Payment of Tax Antecedent to the Transfer of Shares,
the executor or administrator will not pay the estate tax, sila ang Bonds or Rights. –
hahabulin ng BIR. It’s not initially the heirs. There shall not be transferred to any new owner in the books of
any corporation, sociedad anonima, partnership, business, or
So how do you protect yourself if you are an administrator or an industry organized or established in the Philippines any share,
executor? obligation, bond or right by way of gift inter vivos or mortis
First, you must seek for your discharge. causa, legacy or inheritance, unless a certification from the
Commissioner that the taxes fixed in this Title and due thereon
How? have been paid is shown.
That is only upon payment of the estate tax due.
If a bank has knowledge of the death of a person, who
But before you pay, what are you supposed to do? maintained a bank deposit account alone, or jointly with
You must first write the BIR, make a written application to the CIR. another, it shall allow any withdrawal from the said deposit
Therafter, the CIR is given a period within which to inform the account, subject to a final withholding tax of six percent (6%).
executor/administrator how much is the total estate tax liability. For this purpose, all withdrawal slips shall contain a statement
to the effect that all of the joint depositors are still living at the
How long is that period? time of withdrawal by any one of the joint depositors and such
Within one (1) year after the making of such application, or if the statement shall be under oath by the said depositors.
application is made before the return is filed, then within one (1)
year after the return is filed but not after the expiration of the Again, importante masyado ang Electronic Certificate Authorizing
period prescribed for the assessment of the tax. Transfer.

In short, he is given the period of one year after making such The second paragraph pertains to bank deposits. This is new under
application or one year after the filing of the ETR, but that must be the TRAIN Law.
before the expiration of the three (3)-year tax assessment
prescriptive period under Sec. 203 of the NIRC. Previously, if someone will die, and the bank acquires knowledge
of such fact of death of their depositor and it’s either he owns that
The, if the BIR will already notify the executor/administrator, all account solely or jointly with others, the bank will not allow you to
that person has to do is just to file an ETR and pay the taxes due. withdraw. The only exception is that the bank will allow you to
Pag bayad na siya, he can demand for a receipt na nagbayad na siya withdraw, but only up to the amount of P20,000.
based on the information of the CIR.
But right now, the TRAIN Law made it easy for the heirs to withdraw
Take note, pag nagbayad ka na, the BIR is still not precluded from the money. Okay lang mag-withdraw, but each and every
auditing or determining whether or not the correct estate taxes withdrawal will be subjected to a 6% final withholding tax.
have been paid, kasi meron pa man yang period to assess.
So kung mag-withdraw sila, subject to 6% final tax, such final tax is
But this time, even if there are tax deficiency assessments later on, the final and last tax consequence for that tax subject or object.
for estate taxes, the administrator/executor will no longer be liable,
as long as he has in his hands the receipt. In this instance, pag nag-withdraw, nagbayad ng FWT, you can now
exclude that from your gross estate.
26


act of liberality without any or less than adequate consideration
Now, under the Revenue Regulations, there is an additional and without any legal compulsion to give.
limitation for the withdrawal, which provides that:
Donor’s Tax is an EXCISE TAX it is not a tax on the property itself but
“The withdrawal shall only be made within one (1) year from the rather this is a tax on the privilege of giving the property freely
date of death of the decedent.” without any consideration.

So ang sabi ng RR, okay lang mag-withdraw subject to 6% FWT, but What is the scope of Donor’s Taxation?
you have to do it only within the 1-year period. After that, you are It only applies to DONATION INTER VIVOS.
already prohibited from withdrawing any amount from the bank a. The tax implication on donation MORTIS
account. CAUSA you apply the rules on succession
rather than rules on donation.
So paano yan? b. It applies only to complete and perfected
I would like to criticize that provision in the RR, because I think that donation
is already ultra vires. You read the provisions of the NIRC, wala
naman siyang limitation na ganyan. This is pretty much similar to B) The tax shall apply whether the transfer is in trust or otherwise,
what happened in the Fortune Tobacco case where a RR was issued whether the gift is direct or indirect, and whether the property is
providing for a floor, nag-buhat2x ug RR, but eventually the SC real or personal, tangible or intangible.
struck it down.
It does not matter what type of property, so long as it is
I think this is also similar to that. The BIR provided an additional given without any consideration. The law says “whether the
stipulation for the withdrawal of any money from the bank. If you property is real or personal, tangible or intangible”. Basically all
come to think of it, wala naman problema kung mag-withdraw ka, types of properties can be donated as long as it is:
all the bank has to do is to subject such withdrawal to a final 1. Valid;
withholding tax. 2. Capable of pecuniary estimation;
3. It is given out of liberality;
4. Within the commerce of men
Sir, sige kog withdraw, nabayaran na nako, pero ang bangko pag
withdraw nako, gipatakan gihapon ko ug 6%, gipapirma gihapon When does Donor’s Tax apply?
ko. What will I do will no longer charge me of the 6% FWT It will only apply when there is a donation and WHEN
everytime I will make a withdrawal? THERE IS A COMPLETED GIFT. There must be a perfected and
If the estate tax has already been paid, you again secure completed gift.
an eCAR (Electronic Certificate Authorizing Registration). Because
in the payment of estate tax, it is also required that the money in
the bank account must have been declared as part of the gross When is donation deemed perfected?
estate. So kung kasali yan, mag-issue ng eCAR ang BIR, then you Donation becomes perfected upon the KNOWLEDGE OF
show it to the bank. Thereafter, the succeeding withdrawals will no THE DONOR OF THE ACCEPTANCE OF THE DONEE. Dapat makabalo
longer be subjected to the 6% FWT. ang donor na gidawat niya ang regalo.

The rest of the provisions, puro na lang siya codal. Basahin nyo lang When is donation deemed completed?
yan. Let’s start with Donor’s Tax next week. It is completed upon DELIVERY of the thing committed.
It may be either be through actual or constrtuctive delivery,
Kailangan ibigay muna niya ang gamit.

December 11
Part 1 – Tan ELEMENTS OF A VALID DONATION
DONOR’S TAX 1. Capacity of donor to donate
2. Donative intent
SECTION 98. Imposition of Tax. – a. If the donation will take affect after the
(A) There shall be levied, assessed, collected and paid upon the death of the donor, we do not apply the rules
transfer by any person, resident or nonresident, of the property on donor’s taxation but estate taxation.
by gift, a tax, computed as provided in Section 99. 3. Actual or constructive delivery of gift
4. Acceptance by the donee
(B) The tax shall apply whether the transfer is in trust or 5. Formalities must be followed
otherwise, whether the gift is direct or indirect, and whether It will entirely depend on the type of
the property is real or personal, tangible or intangible. property:
a. REAL PROPERTY – it must be in a public
What is Donor’s Tax? instrument for purposes of VALIDITY.
DONOR’S TAX is an excise tax imposed on the privilege b. PERSONAL PROPERTY – GR: Verbal donation
of transferring property by way of a gift inter vivos based on pure is allowed,
27


Provided: It does not exceed P2,000 and There is this new provision that if the sale, exchange or transfer of
there must be a simultaneous delivery of the other properties made in the ordinary course of business, as long
property donated. as the intent of the parties is a bona fide sale, then even if it is
i. EXC: If it exceeds Php2,000, intended for adequate consideration, it will not be subject to
donation must be in writing, donor’s tax.
otherwise it is void.
Requirements for a sale of an ordinary asset to be at “arms
length”:
How about Onerous Donations? 1. The parties are unrelated by blood or by business;
ONEROUS DONATIONS it’s partly with a consideration. 2. They have equal bargaining power;
In other words, there is a transfer of property for less than 3. They are acting in their own self interest.
adequate and full consideration. This is still subject to donor’s tax.

Sale of ordinary asset for less than adequate consideration in
An example of this is a transfer of an inadequate money or money’s worth:
consideration. If we are in the retail business of clothes and it’s the end of season
sale, the discounts would go up to 70% off.
(1) TRANSFERS FOR INADEQUATE CONSIDERATION

SECTION 100. Transfer for Less Than Adequate and full CONDONATION
Consideration. - Where property, other than real property referred Forgiveness of a debt.
to in Section 24(D), is transferred for less than an adequate and full “Don’t pay me anymore, quits na tayo”

consideration in money or money's worth, then the amount by
which the fair market value of the property exceeded the value of Is that subject to Donor’s Tax?
the consideration shall, for the purpose of the tax imposed by this Under normal circumstances, condonation per se without any
Chapter, be deemed a gift, and shall be included in computing the consideration involved is subject to donor’s tax since it is also
considered as a gift. But once the condonation is with consideration
amount of gifts made during the calendar year.
or seems to be in consideration of something, it’s entirely possible

that the condonation is no longer subject to donor’s tax.

Take note of this peculiar provision that the TRAIN Law added:
EX. When I am your ER, you are my EE and you loan a certain

money from me and since you work hard and well, quits nalang
Additional provison: tayo wag mo nalang bayaran utang mo—it’s in consideration
Provided, however, That a sale, exchange, or other transfer of of service and in that case, there’s no donor’s tax implication
property made in the ordinary course of business (a transaction but on the part of the employee, there is an income tax
which is a bona fide, at arm’s length, and free from any donative implication. It really depends on the facts of the case.
intent), will be considered as made for an adequate and full
consideration in money or money’s worth.” What is the intention of the parties? Is it condonation in his
Illustration own free will without any consideration involved; or do they
What if I have a house and lot and sell it for ONLY P 100, 000.00 condone in exchange of something if there is an equivalent
meaning it’s really obvious that it is an inadequate consideration. trade then it is not donation.

What then is the tax implication if I sell a real property as a capital What is important is in each and every transaction subject to
asset situated in the Philippines? donor’s tax, there us a donative intent on the part of the donor.
It is subject to CAPITAL GAINS TAX and it is not part of
your gross income. It is NOT subject to Donor’s Tax
RENUNCIATION OF INHERITANCE
Even if the sale, exchange, or other transfer of property is for an I will renounce it in favor of a particular heir or I will renounce it in
insufficient consideration, the same will still be considered made favor of a specific heir.
for adequate and full consideration provided that such transfer is
made in the ordinary course of business, i.e.: If there is a waiver of an inheritance—usually happens in the cases
• a bona fide transaction; where the wife or husband waives his or her share in the
• at arm’s length; and inheritance of the deceased spouse in favor of their children—this
• free from donative intent. is subject to a donor’s tax.

Take note that what is being waived here is property in itself, along
with the rights involved.
Part 2 – Viola

28


If the renunciation is not in favor of a specific heir but rather the
renunciation is indiscriminate, he just doesn’t want to accept his The fair market value is the zonal value or the assessed value,
inheritance—in that case, there is no donor’s tax involved. whichever is higher.

DONATION PROPTER NUPTIAS Can you donate your right to Usufruct? YES.

Donations by reason of marriage are subject to donor’s tax. It is still a property right, whether tangible or intangible.

How do you compute for the Donor’s Tax? How to you value the right to usufruct? You have to consider the
mortality table.
It’s pretty much the same with the gross estate.
That’s how you compute the gross gift, just look at the location of
Gross Gift — Deductions = Net Gift xx the property, and the classification of the donor—the citizenship,
as well as the residency.

To determine the gross gift, this is pretty much similar with the DEDUCTIONS
determination of the gross estate.
EXEMPTIONS TO DONOR’S TAX
Identify first the classification of the Donor, whether he is:
a. Resident citizen; Under the TRAIN Law, there’s only 2 left:
b. Non-resident citizen;
c. Resident Alien; 1. Donations to the National Government and any of its
d. Non-resident Alien political agencies so long as these agencies are not profit
oriented or not for proprietary purposes;
GR: All gifts will form part of the gross gift.
2. Donations to religious, cultural, social welfare corporation,
If the Donor is a Non-resident Alien they are taxable only for institution, accredited nongovernment organization, trust or
donations made within the Philippines. philanthrophic organization or research institution or
Section 104. Definitions. - For purposes of this Title, the terms organization—in other words, donations to NGOs and
'gross estate' and 'gifts' include real and personal property, qualified entities.
whether tangible or intangible, or mixed, wherever situated:
Provided, however, That where the decedent or donor was a The TRAIN Law removed the provisions on Dowries or gifts made
nonresident alien at the time of his death or donation, as the on account of marriage before it’s celebration or within one year
case may be, his real and personal property so transferred but thereafter by parents to each of their legitimate, recognized
which are situated outside the Philippines shall not be included natural, or adopted children to the extent of the first P10,000.
as part of his 'gross gift' xxx

Part 3 – Campaner
How do you value gross gift? DOWRY
Section 102. Valuation of Gifts Made in Property. - If the gift is
made in property, the fair market value thereof at the time of The TRAIN Law removed the provisions on dowry. The P10,000 for
the gift shall be considered the amount of the gift. In case of dowry is already removed. But what are dowries? Dowries are gifts
real property, the provisions of Section 88(B) shall apply to the made on account of marriage before its celebration or within 1 year
valuation thereof. thereafter by the parents to each of their legitimate, recognized or
adopted children to the extent of the first P10,000.

Same with estate taxation—fair market value of the gift.
DONATIONS TO THE NATIONAL GOVERNMENT
In case of real properties, the provision is Sec 88 (b).
Section 88. Determination of the Value of the Estate. - Section 101. Exemption of Certain Gifts. – The following gifts
(B) Properties. - The estate shall be appraised at its fair market or donations shall be exempt from the tax provided for in this
value as of the time of death. However, the appraised value of Chapter:
real property as of the time of death shall be, whichever is
higher of - (A)In the Case of Gifts Made by a Resident. –
(1) The fair market value as determined by the Commissioner,
or (1) Gifts made to or for the use of the National
(2) The fair market value as shown in the schedule of values Government or any entity created by any of its
fixed by the Provincial and City Assessors.
29


agencies which is not conducted for profit, or to any bringing their minds and hearts under the influence of
political subdivision of the said Government; and education or religion, by assisting them to establish
themselves in life or otherwise lessening the burden of
government.
The only requirement under the Tax Code is that the government
agency (receiving the donation) is not conducted for profit, that’s The test whether an enterprise is charitable is – WON it is
all. maintained for profit, for gain, or for an advantage. Any incidental
profit is immaterial, so long as the main purpose is not for profit,
GIFTS IN FAVOR OF AN EDUCATIONAL AND/OR CHARITABLE, then it’s okay.
RELIGIOUS, ETC..

(2) Gifts in favor of an educational and/or charitable, religious, CIR vs ST. LUKE’S MEDICAL CENTER
cultural or social welfare corporation, institution, accredited
nongovernment organization, trust or philanthropic From the FT:
organization or research institution or organization: Provided,
however, That not more than thirty percent (30%) of said gifts To be a charitable institution, however, an organization must
shall be used by such donee for administration purposes. For meet the substantive test of charity in Lung Center. The issue in
the purpose of this exemption, a ‘non-profit educational Lung Center concerns exemption from real property tax and not
and/or charitable corporation, institution, accredited income tax. However, it provides for the test of charity in our
nongovernment organization, trust or philanthropic jurisdiction. Charity is essentially a gift to an indefinite number
organization and/or research institution or organization’ is a of persons which lessens the burden of government. In other
school, college or university and/or charitable corporation, words, charitable institutions provide for free goods and
accredited nongovernment organization, trust or philanthropic services to the public which would otherwise fall on the
organization and/or research institution or organization, shoulders of government. Thus, as a matter of efficiency, the
incorporated as a nonstock entity, paying no dividends, government forgoes taxes which should have been spent to
governed by trustees who receive no compensation, and address public needs, because certain private entities already
devoting all its income, whether students’ fees or gifts, assume a part of the burden. This is the rationale for the tax
donation, subsidies or other forms of philanthropy, to the exemption of charitable institutions. The loss of taxes by the
accomplishment and promotion of the purposes enumerated in government is compensated by its relief from doing public works
its Articles of Incorporation. which would have been funded by appropriations from the
Treasury
The requirements for a tax-exempt donation here are:
1. Not more than 30% of the said gift shall be used by the There is another tax-exempt gift, found in Sec. 99 (B) in relation to
done for administration purposes; RA 7166
2. The institution is a non-stock, non-profit entity who Section 99. Rate of Tax Payable by Donor. –
receive no compensation and devoting all its income to
the accomplishment of its purposes under its Articles of (B) Any contribution in cash or in kind to any
Incorporation; candidate, political party or coalition of parties for
3. The donation must be used actually, directly, and campaign purposes shall be governed by the Election
exclusively for that purpose; Code, as amended.
4. The done must be a qualified entity to receive the
donor’s tax-exempt donation. The requirement here is that the donation must be reported to the
COMELEC, for it to be exempt from the payment of gift-tax.
Question: what if the non-stock non-profit educational institution
or qualified institution earns profit? Does that take them out or NON-RESIDENT ALIEN DONORS
does it destroy their status as tax-exempt entities?
Section 101. Exemption of Certain Gifts. – The following gifts
Answer: the mere fact that these institutions are earning income or donations shall be exempt from the tax provided for in this
does not automatically destroy their non-profit character. Just Chapter:
because it is a non-profit doesn’t mean that it is not allowed to earn
profits. By all means, it can operate and then result in profit (B) In the Case of Gifts Made by a Non-resident not a Citizen of
afterwards because it is operating for it to survive. The entity the Philippines. –
operates for its own survival and existence and any incidental profit
thereof will not result to the destruction of its characteristic as a (1) Gifts made to or for the use of the National Government or
non-profit entity. For charitable institutions, it is important to look any entity created by any of its agencies which is not conducted
at the TEST OF CHARITY. for profit, or to any political subdivision of the said Government.

What is Charity? In the case of Lung Center of the
(2) Gifts in favor of an educational and/or charitable, religious,
Philippines vs Quezon City: Charity may be defined as a
cultural or social welfare corporation, institution, foundation,
gift, for the benefit of a definite number of persons, either
30


trust or philanthropic organization or research institution or 3. Donations to Cooperatives duly registered with the CDA
organization: Provided, however, That not more than thirty (Cooperative Development Authority) which transacts
percent (30%) of said gifts shall be used by such donee for business only with its members
administration purposes.
TAX CREDIT FOR DONOR'S TAXES PAID TO A FOREIGN COUNTRY

Practically, it’s the same thing as that of a resident individual. SEC. 101. Exemption of Certain Gifts. - The following gifts or
Before TRAIN law, they differ, now it’s just the same. Because donations shall be exempt from the tax provided for in this
before, non-residents are not allowed to claim for the Dowries, Chapter:
now since dowries are removed, they are just the same.
(C) Tax Credit for Donor's Taxes Paid to a Foreign Country. –
Other Exempted Donations, there are still others especially those
provided by treaties. But I will just cite 3: (1) In General. - The tax imposed by this Title upon a donor who
was a citizen or a resident at the time of donation shall be
1. Donations to Athlete’s, Prizes and Awards under Sec.1 credited with the amount of any donor's tax of any character
of RA 7549 and description imposed by the authority of a foreign country.
SECTION 1. All prizes and awards granted to athletes
in local and international sports tournaments and
competitions held in the Philippines or abroad and (2) Limitations on Credit. – The amount of the credit taken
sanctioned by their respective national sports under this Section shall be subject to each of the following
associations shall be exempt from income tax: limitations:
Provided, That such prizes and awards given to said
athletes shall be deductible in full from the gross (a) The amount of the credit in respect to the tax paid to any
income of the donor: Provided, further, That the country shall not exceed the same proportion of the tax against
donors of said prizes and awards shall be exempt which such credit is taken, which the net gifts situated within
from the payment of donor's tax. such country taxable under this Title bears to his entire net gifts;
and
Example, the cash gift given to the woman weight lifter (b) The total amount of the credit shall not exceed the same
of P1M given by a private entity. Under this, it’s a tax- proportion of the tax against which such credit is taken, which
exempt donation. And also, it is not subject to income the donor's net gifts situated outside the Philippines taxable
tax (under Tax 1 lesson) under this Title bears to his entire net gifts.

The requirements:
• The donation must be in the form of prizes In other words, whatever donor’s taxes paid may be claimed as a
and awards tax credit.
• Given to athletes in local or international
sports tournaments The requirements:
• Held either in the Philippines or abroad 1. The donor is a Filipino citizen or a resident alien at the
• Sanctioned by their respective Sports time of donation
Associations (right now it’s the Philippine 2. The donor’s tax is imposed and paid by the authority of
Sports Committee) a foreign country
3. It is subject to liquidation, as provided by law.
2. Adopt-a-School Program under RA 8525
Part 4 – Castro
Section 5. Additional deduction for expenses
incurred for the adoption. – Provisions of existing
laws to the contrary notwithstanding, expenses TAX RATES
incurred by the adopting entity for the "Adopt-A- Under the Old Tax Code it is difficult for you to compute the Donors
Tax because you have to identify the donee, if the donee is a
School Program" shall be allowed an additional
deduction from the gross income equivalent to fifty stranger or not a stranger and you have to look into the tax table.
percent (50%) of such expenses. BUT right now wala na yan. The Donors Tax is now simplified.
Section 99 (TRAIN Law)
Section 99. Rate of Tax Payable by Donor.-
Valuation of assistance other than money shall be
based on the acquisition cost of the property. Such (A) In General.- The tax for each calendar year shall be
valuation shall take into consideration the six percent (6%) computed on the basis of the total
depreciated value of the property in case said gifts in excess of Two hundred fifty thousand pesos
property has already been used. (P250,000) exempt gift made during the calendar
year.
(B) Any contribution in cash or in kind to any candidate,
political party or coalition of parties for campaign
31


purposes shall be governed by the Election Code, as gawin mo? So maghinay-hinay ka donate and avail of the 250K tax
amended. exemption. That’s a perfectly legal way of doing an estate tax
planning.
Donor’s tax while it is paid 30 days after each donation has been
made is an annual tax. Because kung i-compute mo siya for a single Major reaction na ay hindi tayo maka tax planning kasi same rates
year, patak ka lang ng 6% in excess of the P250,000. lang 6% NO! If you read the provision of the law, I think many did
Under the Old law you have to identify the type of donee: not get immediately that there is this 250K tax exempt donation.
1. Given to a STRANGER- donation will be subjected to a Dati kasi it’s just 100K, ngayon 250K na.
different tax rate. It is just a flat rate of 30%.
2. NOT STRANGER- what the donor will use will be the ADMINISTRATIVE MATTERS
Section 103
donor’s tax table; like your income tax table
SEC. 103. Filing of Return and Payment of Tax. -(A)
Who are considered relatives? Requirements.- any individual who makes any transfer by gift
1. Brother or sister (whether full or half blood) (except those which, under Section 101, are exempt from the
2. Spouse tax provided for in this Chapter) shall, for the purpose of the
said tax, make a return under oath in duplicate.
3. Ancestor

4. Lineal descendant
The return shall set forth:
5. Relative by consanguinity in the collateral line within the
(1) Each gift made during the calendar year which is to
4th degree of relationship be included in computing net gifts;
(2) The deductions claimed and allowable;
BUT RIGHT NOW WALA NA YAN, JUST A FLAT RATE OF 6%. What
(3) Any previous net gifts made during the same
is taxable is the EXCESS OF P250,000. This is what makes it different
calendar year;
from Estate Tax. Sa Estate Tax mag compute ka lang gross estate,
(4) The name of the donee; and
ordinary and special deductions, family home etc. Wala tayong tax
(5) Such further information as may be required by rules
exempt na amount sa estate taxation though may standard
and regulations made pursuant to law.
deduction tayo na 5 million; sa Donors tax wala tayong standard

deduction pero meron tayong tax exempt amount na P250,000.
(B) Time and Place of Filing and Payment. - The return of the
Tax Exempt Standard Deduction donor required in this Section shall be filed within thirty (30)
Donor’s Tax 250,000 - days after the date the gift is made and the tax due thereon
Estate Tax - 5 million shall be paid at the time of filing.

Is Gift Splitting still applicable right now? Still applicable. Except in cases where the Commissioner otherwise permits, the
E.g. I have a house and lot. So ano gawin ko? First I will donate the return shall be filed and the tax paid to an authorized agent
land this year para maka avail ako ng 250K. For example the value bank, the Revenue District Officer, Revenue Collection Officer
of the land is 500K. So I can avail of the 250K tax exemption, so or duly authorized Treasurer of the city or municipality where
250K nalang ang taxable ko times 6%. Yan ang babayaran ko for the donor was domiciled at the time of the transfer, or if there
2018. be no legal residence in the Philippines, with the Office of the
Commissioner.
Then on 2019, i-donate ko ang bahay. Let’s say ang assessed value
ng bahay is 700K. So 700K minus 250K times 6%. So you split the In the case of gifts made by a nonresident, the return may be
gift. Is that allowed? The BIR cannot say na tikas man yan because filed with the Philippine Embassy or Consulate in the country
that is a legal loophole allowed that can be availed of by the where he is domiciled at the time of the transfer, or directly
taxpayer. It is a form of tax avoidance. You have the intention of with the Office of the Commissioner.
donating the entire property only that you are only availing a legal
loophole for you to pay lesser taxes. It is perfectly legal. When will the donor file his donor’s tax return? It must be filed
within 30 days after the date the gift is made.
Is the estate plan to the allocation of donations during the life The Pay-as-you-file System is still applicable. Take note, na dili lang
time of the deceased until he died still applicable right now? mag end atong liability sa donor’s taxation, since there is a
Dati kasi, when the rates are still in graduated scales or the document involved (a Deed of Donation), you will have to pay a
graduated rates you can easily imagine to conduct an estate documentary stamp tax.
planning. Because the rates in donation is lesser or lower than the What if there are several gifts given during the taxable year? The
rates in estate taxation. But ngayon parehas na sila, 6% for thing is the donor’s tax is an annual tax. In each donation given you
donation and 6% for estate taxation. So which is which? Is it still have to file your estate donor’s tax return within 30 days and
applicable right now? compute everything because you can avail only the 250K limit once.
That’s for the entire donation for the entire year, that’s 250K. So
For me, it is still applicable even if the tax rates are pegged at 6% mag donate ka ng 1 million ngayon and then for the next tax return
on both the donors and estate taxation. Because of the 250,000 tax you have to include your previous donation. So mag donate ka ng
exemption of donation. If you try to compute, the entire property 1 million ngayon, isali mo yung donation previously. You add them
of the deceased would exceed the 5M standard deduction. Ano
32


up and then less the tax exempt donation and then less also the tax
exempt amount as donation.
The previous donor’s tax paid for the previous declarations shall be
declared as tax credit.
Where do you file your donor’s tax return?
1. Authorized agent bank,
2. The Revenue District Officer,
3. Revenue Collection Officer; or
4. Duly authorized Treasurer of the city or
municipality where the donor was domiciled
at the time of the transfer.
It is not where the property is located; you look at the residence of
the donor.
If the donor is non-residents? File with the Office of the
Commissioner (Quezon City)
Prohibition of transfer or real property until the donor’s tax is paid
Meron na naman tayong eCAR (electronic Certificate Authorizing
Registration). So long as the taxpayer or the donor will not pay the
donors taxes, no eCAR shall be paid and the ROD and the Local City
Assessor or LTO or any government agencies tasked to register
these properties are not allowed to record the transfer. While
donation may be valid but the title to that property will not be
transferred to the donee until and unless the donors taxes have
been paid.
Next year sa next exam natin- VAT, Percentage Tax, Documentary
Stamp Tax, Excise Tax. Business Tax tayo lahat,

END OF FIRST EXAM

“Christmas is a necessity. There has to be at least one
day of the year to remind us that we’re here for
something else besides ourselves.” – Eric Sevareid

Merry Christmas and Happy New Year!
God bless us all.

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When you file for an extension, there must be an application. Under

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