TAXATION ESTATE TAX (101) Transfer tax is defined a ia imposed on gratuitous transfer of property, rights and obligat Two General Ways of Transferring Ownership of Property “Onerous transfer is one where as part ofthe transfer process, there Ts a consideration or burden required rom | Bilateral transfers or exchanges, the transteree. This kind of transfer is characterized by the exchange of values between the transferor and | such as sale and barter. These transferee are refered to as “onerous “Gratuitous transfer 1s one where there 1s no burden Tat i Faposed on 7 consideration required om, the eral transfers, sucha recipient or transferee. succession ~ transfer of property upon death and donation. These Kinds of Gratuitous Transfer are referred 0 as “gratuitous 1, Estate Tax ~ Which is a kind of wansfer tax imposed on gratuitous transfer of property which takes | tansfer" effect upon death ofthe transferor. (tax levied upon the transfer ofthe net estate of a decedent to his heits) 2, Donor’s Tax — Which is a kind of transfer tax imposed on gratuitous transfer of property that is completed even during the lifetime of the transferor (On the bass, transfer taxis considered as excise tax. ‘Under current usage, unilateral transfers are simply refered fo as “wansier™ while Bilateral Gansfews ae called “exchanges”. Denelit devived om ‘onerous transactions are “cared or realized" hence subject to income tax. Benefits derived from gratuitous transactions are not realized because of the absenee ofan earning process. Benefits from gratuitous transactions are subject to transfer tax nat income tx. ‘Complex transactions- are partly gratuitous and partly onerous. These transactions are commonly referred to as “ransfer for less ull and adequate consideration”, The gratuitous portion ofthe transaction is subject to transfer ax while the benefit fom the onerous portion is subject fo income tax. PROBLEM Problem 1: (income tax and Transfer ax) Check he box where cach ofthe following Wems is axable Tacome fx Transfer tax Sale of goods Donation of goods Barter of goods Transfer of propariis From a decedent to his heirs upon death Transfer for less than full and adequate consideration I ‘Concept of Succession and Estate Tax Succession ~ is a mode of acquisition by virtue of which the property, rights and obligation tothe extent ofthe value of the inheritance, of @ person are transmitted through his death to another or others ether by wil or by operation of law. (Art 774, Civil Code ofthe Philippines). + WiIL- an act whereby a person is permitted with the formalities prescribed by law, to control fo a certain degree the disposition of his estate, to take effect after his death (Ar. 783,CCP) from the momtent of the death of the decedent, the rights to the succession are ‘ransmitted, and the possession ofthe hereditary property is deemed transmitted to the heit (Art. 777, CCP) Elements of Succession a, Decedent- the person witose property is transmitted through succession, wiether or not he left a will (Art 775, 1b, Heir- the person called tothe succession ether by the provision of a will or by operation of law (Art. 782,CCP) €. _ Estate- refers to all he property, rights and obligations of a person which are not extinguished by his death (Art, 776, CCP) CCP) Requisites of Succession 1. Death of the transferor or decedent 2. Bstate or the mass of properties left by the decedent 3. Successors, beneficiaries, or heirs of the decedent 4 estate succession — | 1, Testamentary. succession which resus from he designation ofa hel, made in @ will executed in the form preseribed is one that takes effect | by law (Art. 779,CCP) by virtwe of a will ‘executed by a person, | While the decedent may dispose of his properties in a last will and testament, he must, however, reserve some for certain Known asthe | persons who are called by law as compulsory ar forced heirs. decodents, in favor of ‘+ Kinds of successors ina testamentary succession another or other 1. Legatee-an heir to a particular personal property piven by virtue of a will beneficiaries (also 2. Devisee-an heir to particular real property given by virtue ofa wil known as heirs) in the ‘+ Executor- is the person nominated by a testator to carry out the directions and request in his will form prescribed by dispose ofhis property according to his testamentary provisions after his death law ‘+ Kinds of compulsory heirs: 1, Primary ~ those wio have precedence over and exclude other compulsory hers (i, legitimate children and descendants) 2, ‘Secondary — those who succeed only in the absence of the primary compulsory heirs (ie. legitimate parents and ascendanis) 5, Concurring — those who succeed together with the primary or secondary compulsory heits (ie illegitimate children and descendants and surviving spouse) ‘+ Under testamentary succession, the mass of propetis left by the decedent may be lassified into: 1 Legitime isthe partion ofthe testator's property which could not be dispased of freely because the low 1. ESTATE TAX Page 1 of 152 Free Portion is that par ofthe whole esate which the (etator could dispose of freely through weiten ill irrespective of his relationship to the recipient Tatestate succession — | 2, Lagal or Tntesfate- ransmission of properties where there is no will, oF If there 1s & Wil, the Same Is VOTE oF Tost Ts is one that is effected | validity, or nobody suecceds in the will by operation of law if the transferor of the | In intestate suecession, the entre estate of the decedent is distributed to the heirs. The compulsory heirs in testamentary property didnot | succession ae also heits in intesta ‘execute a will ‘within the fifth civil degre, andthe state suceession. However, intestate hers include, brothers and sisters, collateral relatives ‘Administrator is @ person appointed by the cour, in accordance with the governing statute, to administer and settle ate estate as no competent executor designated by the testator. Mixed succession = i= one that is. effected partly through will ‘and patly by operation of law 3. Mixed: transmission of properties, which is effected party By will and paily by operation of Taw. Composition of Gross Estate ‘The gross estate is divided ino two main categories for succession purposes, the legitime and fee portion as shown below Decedent's Estate To be inberited by: Legitime ‘Compulsory heirs: compulsory heirs. This portion of the estate is reserved by law specifically to compulsory heirs as provided in Table A, regardless cof whether or not a last will an testament was prepared. Refer also to Table C forthe sharing of leitimes by the Fis porion ‘Compulsory Heirs and/or Voluntary Heirs + As provided in the last will and testament, + Inthe absence ofa will, this portion of the estate shall be distributed to “intestate order of priority as provided in Table B re” based inthe ‘Table A — Compulsory Heirs ‘Compulsory Heir ‘Chastification T._Legitimate children and Wir Tgitnnate descendants Primary Compulsory 2. Surviving spouse Primary Compulsory 3_Ilegitimate children and Wir descendants, legitimate or Megitimats Primary Compulsor “4. Legitimate parents and Legitimate ascendants (Will inherit only in default of number 1) | Secondary Compulsory - Tlegitimate parens (no other descendants) — (Will inherit only in default of number Cand | Secondary Compulsory 3) “Table B— Order of Intestate Succession Legitimate children or descendants | Legitimate parents or ascendanis Surviving sponse | T z x THegitimate children or descendants 4 ‘Brothers and sisters nephows and nicoes & ‘Other collateral relatives within the &™ degree State ‘Table C-Legitimes Survivor | Cagitime | Notes EC. 12 Divide bythe number oF .C, whether they survive alone or wih concuering compulsory hele (CH ie 12 ss va 2 of more | 12 ic Equal to 1 ss. Lc ce ss Ic ‘All the concurring CH get from the half fee partion, the share of the SS havin share may suffer reduction pro-rata because there is no preference among themselves preference over that ofthe I, whowe TPA, ‘Wither they suvive alone or with consurring CH TPA Ic TC succeed in the Yin equal shares TPA ss TPA ss Ic Tc Divide equally among eT SS Ic 1. ESTATE TAX Page 2 of 15Survivor | Cagitime | Notes SS. 72 1/3 if marriage Ts alo mors (atte pout of Ueath) and deceased spouse dies within 5 montis ater the manage TP 12 F TExcTuded | Children iri ia te amounts eblished in ‘Any child 1 ‘Daly the paren oFTC are included, Grandparents and other escendants are excluded ss Collateral Relatives ‘Consanguinity The lation of persons descending from the same sock or common ancestors, These person are known as Blood relatives and ate said tobe related by blood or consanguinity Tineal consanguinity Which may be descending or ascending, is that which subssis Between persons or whom one is devoended lite ine Irom the othe, i z i i 1 In the illustration, Cand D are siblings. Their common parents are A and B. 2. Gis the daughter of C and E; Js the son of D and F, 3. Mis the son of G and K; Nis the daughter of J and L, 4. A,C, G and M, in that order, ae relatives in the descending direct line, another degree 5. N,J,D and B, in tat order, ae relatives inthe ascending direct line 6. C,G and M, ae relatives ofD, J and N inthe collateral line, 7. Gis the nicss of DD is the uncle of G; Js the nephew of C, Cis the aunt of 1 8. Hand Iare first cousins; they are four degrees apart, H to C, Cta AB, AB to D and D to 9. Mand N are second cousins; hey are six degrees apar. 10, Because of G's marriage to K, K becomes H's brother-in-law, H being G's brother. They become relatives by affinity. Affinity is the connection existing consequence of a marrage between each ofthe married spouse andthe kindred ofthe other, mA to C is one degree; from C to G is another degree and G to M is PROBLEMS, Problem 1: (Legitimes and Free Portion of the Estate) A died leaving an estate valued at P24,000,000. The surviving heirs were his spouse, 2 legitimate children and | illegitimate child ‘Required: Distribute the estate by applying the rules on legitimes, Notes: ‘The legtime ofthe children is always % ofthe tora estate regardless of the number of children + The legitime of an illegitimate child is of the legitime of | legitimate child + The legtime ofthe surviving spouse varies as shown in table C +The free portion may be given by the testator to anyone in accordance with his wishes. However, only voluntary heirs included in the provisions ofthe will should be recognized Problem 2: Assume the same data with Problem 1, except that there is only I legitimate child Required: Distribute the estate By applying the rules on legitimes, Problem 3: Assume the same data with Problem exeept thatthe testator provided P10,000,000 to his secretary. ‘Required: Distribute the estat by applying the rules on legitimes, Note: In this case, since P10,000,000 was allotted to the secretary, the legitimes of the children and the surviving spouse were impaired. The amount of estate left afer deducting 10,000,000 will not enough to sais the legitimes of the compulsory heirs amounting to PI8,000,000. Hence, the ‘amount ta be given to the secretary should be modified or reduced ta P6,000,000 to satisfy the legtimes, Purpose of. as ‘The following theories have been used to justify the imposition of estate tax 1. Benefit received theory — under this theory, the estate taxis paid on return forthe services rendered by the state in the distribution ofthe estate of the devedent and forthe benefits that accrue to the estate and the heir. 2, State partnership theory ~ the taxis considered the share ofthe state as “passive and silent partner” in the accumulation of property 3. Ability to pay theory — the tx is based on the fact thatthe receipt of inheritance creates an ability to pay and thus the receipt of inheritance creates an ability to pay and thus to contribute to governmental income. 4. Redistribution of wealth theory ~ the tax is imposed to help reduce undue concentration of wealth in society to which the receipt of inheritance isa contributing facto Basic Concepts in Estate Proceeding and Esta Tax [inheritance= eilance ineladae 1. ESTATE TAX Page 3 of 15 = prope, Highs and abligaions ofa person which are not exinguished by his dea. ](Gwil Cole, At 776) Tegitime = Ts that part ofthe testator's property which he cannot dispose of because the Iaw has reserved i for certain Beis ‘who and therefore, called compulsory hits Testate estate ‘Am estate of a deceased person which is settled or fo be selled wih a valid lat will and teiament Tatestate estate = ‘An estate ofa deceased person without a wil, Will = ‘An act whereby a person is permitted, with the formalities prescribed by aw, fo Contal to certain degree the disposition of his estate. (Civil Code, Art. 783) Codi = ‘A supplement or an additional to @ will, made aller the excoution of @ will and annexed to be Taken as & part thereof. by any disposition made in the original wll is explained, added to or altered (Civil Code, Art. 25) Holographic wil ‘One entirely written, dated and signed in the very handwriting of the testator himself and is subject 10 no required form, and may be made in or out ofthe Philippines, and may he made without a witness. (Civil Code, A. $10) ‘Notarial wil “A will wrtien tn public instruments, notarized by a Tawyer, signed By the estavor and witnesses, (Civil Code, ‘Art, 805.806) extator— The deceased person who made last will and texament, (Chal Cods, At. T75) Probate “X special proceeding to establish the validity ofa will. Probate is mandatory, whieh tesns that no will passes ‘her eal or personal property unless its proved and allowed in a proper cour. Reprobate— ‘A spesial proceeding Wo establish the validity of a will previously proved i a foreign County Legatee— ‘One who is given personal property through a wil. (Civil Code, Art. 782), Devisee = ‘One who is piven real property ina will (Civil Code, Ar. 782) Executor— The person named in the will who is entrusted to implement is provisions. (Rules of Coun, Rule 78) Execulrix — “A female exeeutor, ‘Administrator — The person entrusted with the care, castody and management ofthe esate of a decedent unl the esate Ts partitioned and distributed to the heirs, legatees and devisees, if any. (Rules of Court, Rule 78) “Ademiaisratrin— ‘A female administrator. Special proceedings = ‘A romedy by which a pary socks To cwablish a Satis, a HM, or paricular fat. (Rules oF Cour, Rule 1, See 3 fel). Among the subject matters of special proceedings are escheat and setlement of estate of deceased persons. (Rules of Cour, Rule 72, See. 1) Excheat = ‘A proceeding whereby the stale, by virtue of ls sovereignty, sleps in and claims the real or personal property of ‘person who dies intestate leaving no heir. In the absence ofa lawful owner, a property is laimed by the state to forestall an open “invitation o selfservice by the frst comers”. (Republic vs. CA, G.R. No. 143483) Eviate tax — ‘ATax on the tansferof the net estate oF the decedent. (Tax Reform Act of 1997, Sec. 84) Gross estate “The fotal value ofall property belonging to the decedent at the time of death, wherever Situated, (Tax Reform ‘Act of 1997, Secs. 85, 104) Netesiaie— | Gross estate less allowable deductions and exemptions. (Tax Reform Act of 1997, Sees, 84, 85 and 86) FORMAT OF COMPUTATION (BIR form 1801) Txaiusive [Common [Total Teal propenies excluding any Home Proce Pox Proce Personal properties a ox ax Fanily home x mx Xx Taxable transi = rm Xx | Gross esate Pas Pass | Pear Less: Deductions Guy Guy TC x) | tate after deductions mr ar a Family home =] Slandaed deduction xx] Net Estate Xx | Less: Share of Surviving Spouse (Net Conjugal Estate divided by 2) Gx) Taxable net estate Pax Tax due Pax Less: Tay erediisipayments | Foreign estate tax paid (ax rea) Tae “Tax paid in retum proviously Hed (This an amended rows) me Tax payable ax B, ESTATE TAX RATES There shall be levied, assessed, collected and paid upon the transfer of the net estate of every decedent, whether resident or non-resident of the Philippines, a tax at the rate of six percent 6% based on the value of such net esate C. TAXABILITY OF THE ESTATE IN GENERAL 1. Classification of a Decedent a. Resident Citizen 1. ESTATE TAX Page 4 of 151. Non-Resident Cizen «, Resident Alien a Non-Resident Alien 2. Types of Properties a, Real or immovable property b. Tangible personal property «, Intangible personal property Rights and claims ofthe decedent existing atthe time of death. 3. Taxability ofthe estate in accordance to the classification of a decedent and type of property Casifcation of Decedent Properties located in the Philippines Properties located ina Foreign Country ae peromal | ‘pewsut’ | 8 | pont | pana properties | properties | properties _| PPPS | properties properties Resident Citizen 7 7 7 T 7 7 ‘Non-Resident Citizen 7 7 7 7 7 7 ‘Resident Alien T F T T 7 7 ‘Non-Resident Alien ee 7 x [> xT x 4. Rule of reciprocity (Non-resident Alien)* ‘Properties covered by reciprocity Intangible personal property situated in the Philippines owned by non-resident alien decedent. Reciprocity can take place when th = Does not have any kind of death taxes Has death tax but allows exemption to non-resident Filipinos ign country where the non-resident alien was a citizen an residen b. Basie Rules ‘When there is reciprocity - The intangible personal property af non-resident alien situated inthe Philippines are not included in the gross estate ‘When there is no reciprocity - The intangible personal property of non-resident alien situated inthe Philippines are ineluded inthe grass extate Intangible properties considered situated inthe Philippines ‘The flowing shall be considered as situated in the Philipines (among others) 1) Franchise which must be exereised in the Philipines; 2) Shares, obligations or bonds issued by any corporation or Sociedad anonima organized and constituted in the Philippines in accordance with its law; 3) Shares, obligations or bonds issued by any foreign corporation 85% of the business of whichis located inthe Philippines; 4) Shares, obligations or bonds issued by any foreign corporation if such shares, obligations or honds have acquired a business situs in the Philippines; 5) Shares or rights in any partnership, business or industry established inthe Philippines, D. COMPOSITION OF THE GROSS ESTATE OF A DECEDENT ‘Grows estate (SEC, 8S) - The value of te grows estate of he decedent shall be determined by including the value atthe time of his death of all property, real or personal, tangible or intangible, wherever situated: Provided, however that in the case oF @ non-resident deeedent who atthe time of his death was not a citizen of the Philippines. only that par of the entire gross estate which Is situated in the Philippines shall be included in his taxable estate |. Properties owned and possessed by the decedent 2. Properties transferred (Taxable Transfers) ‘These are properties which at the time of the death of the devedent are not part of the decedent's assets because these were already transferred by him during his lifetime. © The values ofthese properties will he included in determining the value ofthe gross estate even though such properties are not anymore the part ofthe assets ofthe decedent. a. Transfer in Contemplation of Death ‘Transfer in contemplation of death isa transfer of property motivated by the thought of death, althought death may not be imminent Examples ofa transfer made in contemplation of death 1) When the transferor of property is at an advanced age 2) When the transferor of propery is terminally ill or with incurable disease, 3) When a person concurrently makes a will and transfer a property Examples of motives that preclude 2 transfer ftom the category of one made in contemplation of death (Motives associated with life) 1) To relieve donor fom the burden of management 2) To save income or property taxes 1. ESTATE TAX Page 5 of 15b, Revocable Transfer. 4. Transfers of Property for an Insufficient Consideration 3) To see fanily Migate and unligated disputes 4) To provide independent income for dependents 5) To see the children enjoy the property while the donor is alive 6) To protect the family from hazards of business operations, and 7) To reward services rendered Arrevocable transfer is a transfer where the enjoyment of the property maybe stewed, amended or revoked. Property Passing Under General Power of Appointment «¢. Transfer with retention or reservation of certain rights (possession or enjoyment of, or the right tthe income from the property, oF the right o designate a person who may exercise such right) 3. Interests Claims agai . Amount received by heirs under R.A. No. 4917 |. Family Home Proceeds of Life Insurance 1), The amount receivable by the estate ofthe deceased, his executor, or administrtor, a insurance under policies taken out by the decedent upon his own life, irespective of whether or not the insured retained the power of revocation, orto the extent of te amount receivable by any beneficiary designated in the policy of insurance, except when iis expressly stipulated thatthe designation ofthe beneficiary is revocable 2) The following are also not taxable: 4) proceeds benefits coming from SSS +) proceedstbenefts coming from GSIS. ©) the proceeds coming from group insurance. 3) When the designation ofthe beneficiary is mot stated or is mot clear, the Insurance Code assumes revocable designation, insolvent persons 1) Claims ofthe deceased against insolvent persons where the value of decedent's interest th 2) The full amount ofthe claims is included in the gross estate 53) The uncolfecible asount of the claims is deducted from the gross estate, in is included inthe value of e gross estate 1). Any amaunt received by he heirs from the decedent's employer as @ consequence ofthe death of the decedent-employee in accordance with Republic Act No. 4917. It shall also be allowed as deduction from the gross estate provided, that such amount i included in the gross estate of the decedent 2) RA. No, 4917 is entitle "An Act providing that retirement benefits of employees of private firms shall not be subject to attachment, levy, execution, or any tax whatsoever" The family home refers to the dwelling house, including the land on which itis situated, where the husband and the wife, or an unmarried person who isthe head of the family and members ofthe family reside, as ceriied by the Barangay Captain of te locality Prior interestiDecedent’s Interest Refers to the value of any intrest in property o rights accrued in favor of the decedent on or before his death which have been received only ater his death. (Sec. 85 (A) NIRC) ‘As ale, the interest must exist at the time of the decedent's death tobe included as part ofthe gross estate Examples 1. Dividends declared. 1rbefore the death of the stockholder, and recived by the estate after said stockholder's death 2 Partnership's profit earned prior o death ofthe parner, received by the estate after the partner's de 3. Accrued interest and rents on or before the lime of death, but collection was made after death. Exercises: a. Determine which ofthe following transactions are taxable transfers. Transaction ‘Answer 7 Properiy transfered inter vives, Wansferor i of advanced age and Ged within 3 years affor the date of tansfe 2) Property sold for adequate and fll consideration, transfroritller died ater one day because of incurable diseae 3) Peoportysold for. 000,000. The FMV ofthe property sold was P 1,100,000 “Property transferred, anseor has the right wo tke Dac the propery | 3) Peoperty tanaferred,uanseror ha te right to take back the property. The ransferor has waived the Tigh bebe | 1) Property transferred, the transferee has the power to appoint or transit to anyhody the sid prope | 7) Property transferred, the transferee has the power o appoint or transfer to anybody the said property as designated By Me teamsfevor. 3]_Property ansfoed. the WansTevr as ie Agito he income oF The property Wansiered while ef Waals 9) Property donated, Donor sax paid nthe dos of donation the danorexpresly reserved for himsel the usufnicl aver the property 1 ESTATE TAX Page 6 of 15b, Determine the value to be included inthe gross estate for each ofthe eases below. Case PMY, time of transfer ‘Consideration received FMV, ime of death] — Amount included in the gross estate 7 P2000, 000 P_1SW.000) P1700, 000 2 2,000,000 2,000,000) 1,000,000 3 2,000,000) Nan PI, 700,000- n 2,000,000) P_3,000,000 3 300,000 5 2,000,000, I 1,500,000) PI. 200,000 « Identify which ofthe following cases of proceeds of life insurance willbe included in the gross estate. T Proceeds of ie insurance, daughter of Ue insured was irevocably designated as beneficiary of the life insurance, 2) Prosseds of life insurance, wife of tie insured wat revocably designated as beneficiary of she life surance, 3) Proceeds of life insurance, the beneficiary's designation was not ated inthe insurance policy. 4) Proceeds of life insurance, the administrator oF the estate was revocably designated a3 boneficiary af the [fe awrance 3) Proceeds of ie insurance, the excoulr of the estate was irevocaBly designated as beneficiary ofthe ie nsurace | 6) Benefits eoeived from SSS, beneficiary was irrevocably designated as beneficiary. 1 7) Benefits ftom GSIS, beneficiary was revocably designated as benefciar 8) Proveeds of life insurance, the estate was designated as beneficiary of i 9) Proseeds of life insurance fom group insurance D. GROSS ESTATE OF MARRIED DECEDENTS 1, Properties included in the gross estate of the married decedent ‘Conjugal partnership of gains ‘Absolute community of properties | Exclsive properties of he desedent Tsluded Tncluded | Exclusive properties ofthe surviving spouse Not included Not included Common propertss I Included I Tncluded 2. Common types of property regimes: 4. Absolute separation of property (ASP)- All properies of the spouses ave separa propeviics, eXCapr Mose propenicy Which they May Segue jointly +, Conjugal partnership of gains (CPG)- All propetis that accrus a fruit oftheir individual or joint labor and fruits oftheir properties durin ‘marriage will be common propertic ofthe spouses of property (ACP)- All present properties owned by the spouses at the date of celebration of the mariage shall become ‘common properties ofthe spouses including future fruit oftheir separate or joint industry or fruits of their contmon properties. the ¢. Absolute communi 3.1n the absence of pre-nuptial agreement - (Date of Mar Before August 3, 1988 ‘On oF afer August 3, 1988 ‘Conjugal partnership of Absolute community of properties 4. Separate property of the Husband and Wife ‘Capital Property [ Property owned solely By te bunband Paraphernalia Proper [Property owned solely by the wife Capital’ Paraphernalia Property (exclusive property) of surviving spouse ~ The capital! paraphernalia ofthe surviving spouse of a decedent shall not be deemed a part ofthe gross estae ofthe decedent 5. Conjugal partnership of gains Exel je Prope ‘Conjugal Properties a Properties brought info the marrage as cher ofthe spouse's own, [-a, Propenies aquired by onerous title during the marriage at the expense of the common fund, whether the acquisition is for the partnership or for only one ofthe spouses. >. Properties acquired by gratuitous (or lucrative) title during marcage. | b. Properties obtained from labor, industry, work or profession of either for both ofthe spouses. , Properties acquired by right or redemption or by exchange with | c. The fits, natural, industrial or civil, due or received during the ‘other property belonging to only one ofthe spouses. marriage from the common property, as well at the net Euits From the exclusive property of each spouse. 4. Properties acquited with the exclusive money of either spouse, 44. The share of either spouse in the hidden treasure which the law awards tothe finder or ovmer ofthe property where the found. Properties acquired through occupation such as ishing and hunting £ Livestock existing upon the dissolution of the partnership in excess of the mamiber ofeach kind brought to the marriage by of either spouse. Properties acquired by chance, such as winnings from gambling and betting 1. ESTATE TAX Page 7 of 1546. Absolute community of properties Exclusive Properties T ‘Community Properties 4, Properties acquired during the mariage by gratuitous (or lucrative) | a All properties owned by spouses atthe time of the celebration of title by either spouse, andthe fruits as well asthe income thereof, if | marriage or acquired thereafter. any, unless it is specifically provided by the donor, testator or grantor tha they shall form part ofthe community b. Property for personal and exclusive use of either spouse, however, jewelry shall form part of the community property. & Property acquired hefore the marriage by cither spouse who hes legitimate descendasts by a former marriage and the fruits as well as the income if any. of such property 7. Summary: Similarities between Conjugal Partnership of Gain (CPOG) and Absolute Community of Property (ACOP) Property CPO ACOP 1. Property inherited or received as donation during marrage Exclusive propery | Exclusive property 1. Property acquired during the marriage (ather than inheritance o donation) —| Conjugal property | Community property ‘Property aquired irom labor, industry, work or profession of spouses ‘Conjugal property | Community property under ACOP, “JEWELRY” shall be considered community property even I They are for the exclusive we of elther spouse. 8. Difference between Conjugal Partnership of Gains (CPOG) and Absolute Community of Property (ACOP) Property ‘POG ACOP a, Property before manage or brought Ta the marrage Exclusive property Community proper b. Fruis or income due or derived during the mariage coming Wom exclusive property | Conjugal propery | Exclusive propery Exercise a, Mr, Hames , a married decedent left the following properties, Determine the taxable gross estate of Mr. Hames, EXCL- | CONF] EXCI- | COMME rg crG ACP, Ace Cash owned by his wife before the marrage, 2000.00 2._Cash owmed by Mr, Hames before the mariage; 5,000,000. 3._Real property inherited by Mr. Hames during the martage: 6,000,000. “4 Real property inherited by his wife during the marriage. 4,000,000 5. Personal property received by his wife as gift before the mariage, 400,000. “6 Personal propery received by Mi, Hames as gift before the marriagt 7,000,000 7. Property acquired by Mr, Hames using his cash owned before the manage, ‘600,000, Clothes of Mr. Hames purchased with his wife's exclusive money. 500,000, 9. Jewelry purchased with the exclusive cash of te surviving spouse 7,000,000, T0-Jewelry inkerited during the marriage by the surviving spouse 1,000,000, TT Jowoky inherited before the marriage by the the surviving spouse 7,000,000, 12, Unidentified propery. 1,200,000) TF Cash representing the income earned during the manage Hom the exclusive — | 2,000,000 property of Mr. Hames. TH, Cash representing the income earned during the mawiage Hom the common | 2,000,000 property ofthe spouses Taal I E, EXCLUSIONS AND EXEMPTIONS FROM THE GROSS ESTATE 1. Exemptions a1 The merger ofthe usuftuct inthe owner of the naked tte 1) Whe the same person becomes a usufructuary and owner ofthe naked tte, it makes hinvher the absolute owner ofthe property 2) USUERUCT - the legal right to use and enjoy the benefits and profits of something belonging to another. 3) Two persons involved in usurct: ¥-USUERUCTUARY — the person who has the right of enjoying the use and the fruits ofthe property belonging to another. ¥ OWNER OF THE NAKED TITLE - the person who is vested the ownership, dominion, oti ofthe property under the usufruct agreement, V- Heis NOT the absolute owner ofthe property-with respect to the right of e usuftuctuary. b. The transmission or dlivery of the inheritance o legacy of the fiduciary heir or legate tothe fideicommissary 1) The transfer is from fiduciary hei othe fdeicommissary 2) LEGACY- a gift or bequest by WILL ofa person (Personal Property) 3) DEVISE a TESTAMENTARY disposition of real property 4) LEGATEE -the person to whom a legacy in a willis given of personal property. 5) FIDUCIARY HEIR - the FIRST HEIR of the property 6) EIDEICOMMISSARY ~ the SECOND IIEIR whose relationship (othe fiduciary heir must be one degree of generation (a parent and a child) ¢. The transmission ftom the first het, legatee, or donee infavor of anather beneficiary, in accordance with the desire ofthe predecessor. The second transfer as desired by the predecessor ¥ The is only one transfer ffom the testator 4, All bequest, devices, legacies or transfer to social welfare, cultral and charitable institutions, 1) no part ofthe net income of which inures to the benefit of any individual and 1. ESTATE TAX Page 8 of 15Provided, however that 2) not more than 30% of such bequest, devises es of transfer shall be used for administrative purposes. The government agency which is empowered to determine the exemption isthe BIR. To enable it to exercise such power, the value of transfer to social welfare, cultural and charitable institutions should be included in the gross estate, While the Tax Codes inchudes ths item in the exempt acquisition ‘and transmissions, 15 actually considered a deduction from the gross estate. 7. Exclusions a 1s received as war damages 'b Amounts received rom the United States Veterans Administration ¢, Benefits received from the GSIS 4. Benefits received from the SSS «, Retirement benefits of employees of private fem (R.A. 4917) t 2 hb Inangible personal property of a non-resident alien decedent under the reciprocity clause Grants and donations tothe Inramuros Aéministation. Proceeds af life insurance whee the beneficiary is irrevocably appointed i, Proceeds of life insurance under a group insurance taken by employer (not taken out upon his ifs) jj Transfer by way of bona fide sales Transfer of property tothe National Government oto any ofits political subdivisions 1, Separate property ofthe surviving spouse 'm. Properties held in trast by the decedent 1. Acquisition and/or transfer expressly declared as not taxable F, DETERMINATION OF THE VALUE OF THE ESTATE - Usufiruet Usuftuct is valued Tn accordance with the latest Basic Standard Mortality Table, to be approved by the Secretary of Finance, upon the recommendation ofthe Insurance Commissioner 2 Property ‘, Generally it is valued at its fair market value at the time of decedent's death b, Real property is valued atthe Higher berween the zonal value (BIR) vs. assessed value (Provincial and City assessor) ©. Personal properties ~ Recently purchase ~ Purchase price Not recently purchase — Pawn value x 3 4, Seourties (Shares of stock) 1, Shares of stock traded in the local stock exchange- Mean between the highest and lowest quotations on valuation date or on a date ‘nearest the valuation date 2, Shares of stock mot traded inthe local stock exchange 12) Common (ordinary) share — book value per share of iscuing corporation b) Prefered (preference) share — Par Value sdent died leaving the following properties. Determine the Philippine gross estate: Resident] NRANo | NRA-With (Citizen __|_Reviprocity | Reciprocity Trouse and Tot, USA, FMV, ime of death P4000, 0000, cost, PH000,000 House and ot, Philippines, FMV, tite of deat, PZ,500,000; Value per tax declaration, time of death, P2,000,000, Furniture and appliances, Philippines, Pawn value time of death, PS00.000, Car Japan, purchase price, P1_200,000 reference Shares, Philippines, sold for P500,000 I day before death, FMV, dave of ale 'P2S0,000 Par value, date of death, P3S0,000 (Reason of death car accident) Bonds, issued by a Philippine Corporation, coi, P4S0,000;, ‘Ordinary shares oF stock, issued by a foreign corporation, RU ofthe business i Tocared the Philippines, par valu, time of death, P'500,000: book value, time of death, P600,000 Proceeds of ie insurance, Philippines (the estate isthe designated beneficiary), P1,800,000 Total b. (Value of Shares of Stock - Adjusted Net Asset Method) Mrs. A died leaving 2,000 shares of stocks of ABC Corporation, a closely held corporation, as part of her estate. The balance shoet of ABC Corporation is shown below together with the fir values of is assets and liabilities, Book Fair] Assessed | Zonal | Independent values values | values values | appraisal Cah 2,000,000 | P2,000,000 1,000,000 | 1,200,000. 4,000,000, P5000, 000_| P10, 000,000 _| 12,000,000 and B. 4,000,000 4,400,000 | 8,000,000 | 7,000,000, Building A~[ 2,000,000. 6,000,000 Building B | 1,000,000) 3,900,000 Tavestment | 3,000,000 | 3,600,000 ‘Assets PI7,000,000 Liabilities [7,000,000 [ Each share of lock of ABC Corporation has @ par value of PT,000, Mis, A purchased The shares at P1.200/share, ABC Corporation hes 20,000 shares oustanding, 1. ESTATE TAX Page 9 of 15Required: How much is shares of stock shall be included in Mrs. A's gross estate? G. DEDUCTIONS FROM THE GROSS ESTATE: 1. Ordinary Deductions ems of Deductions. ‘Resident allen or cllizen decedent ‘Non-resident alien decedent ‘a, Claims against the estate Deductible -100% Deductible Proportion Claims against insolvent persons PhILGE_ x (C+C+U) Unpaid mortgage World GE. Transfer for public purpose Dedutibie Dedueiibre ‘Property previously taxes (Vanishing | Deductible Deductible Deductions) 2 Special Deductions ems of Deductions Resident alien or eiizen decedent Non-resident alien decedent ‘a Family home Deductible (P10,000,000) ‘Not Deductible 1. Standard deduction Deductible (P5,000,000), Deductible (PSO 000) ‘e. Amount received under RA, 4917 Deductible Not Deductible 3. others ems of Deductions [Resident alien or citizen decedent ‘Non-resident alien decedent a. Share of Surviving Spome ‘Deductible Deductible H, DEDUCTIONS AMPLIFIED Deductions ‘Amount and items deduetible Deducted from Tndebiedness (Claims agai The Tabi represents a personal Debis or demands of pecuniary nature which | Common the estate) ‘obligation ofthe deceased existing atthe | could have been enforced against the deceased | property if time of his dea ‘nis liftime and could have been reduced to | connected to These are the obligations of | b, The lability was contracted in good faith | simple money terms common the decedent which is and for adequate and fll consideration ‘enforceable against him while | in money or money's worth Exclusive he sstil alive and ean be |e, The claim mast be a deht or claim which property if ‘enforced against his estate is valid in law and enforceable in court Connected to ‘upon his death 4. The indebtedness must not have bee exclusive ‘condoned by the creditor or the action to ‘collet from the decedent must not have preseribed Claims against the estate or indebtedness in Fespect of property may arise out of the following sources: 1, Conteact 2. Tort 3. Operation of law «the claim was based on a debt instrument, such instrument must be NOTARIZED. (Except loans granted by financial institutions where notarization is not part ofthe business practice ofthe financial insittion lender) £ Ifaloan was incurred within 3 years before the decedent death, the administrator, or exeeutor is required to render a statement showing the disposition ofthe loan proceeds. ‘Claims against insolvent a The value of the claims is included inthe | Claims tat are not collectible Common persons ross estate property if ’b, The debtors are incapable of paying their connected 9 ‘This shall be deductible but debs common ‘the fall amount of the claim must first be included inthe Exclusive sass estate, Only the property if ‘uncollectible portion shall be connected £9 allowed as deductions exclusive Unpaid mortgage a The fair marker value ofthe morigaged | Amount of unpaid morgage Common. ‘property undiminished by such property if ‘mortgage or indebtedness has been conmected 19 included as pact ofthe gross estate common ’. The mortgage indebtedness was ‘contacted in good faith and for an Exclusive ‘adequate and fll consideration propery if connected 9 exclusive 1. ESTATE TAX Page 10 of 15,2. Transfer for Public Use a Amount deductible | Arnount ofall bequest, legacies, devises or tamer or for to use of he Goveraanat af he PTppines, oF aay political subdivision fr exclusively public purpose ites Tor deduction I. The disposition must be a. textmentaryin character (inthe lst will and testament) ot b. by way of donation mots causa (should take effect ar death) 6, executed by the decedent before his death 2 In favor ofthe Government of the Philippines or any of ts political subdivisions. 3. Exclusive for publie purpose. 4The value ofthe property given is included in the gross esate (eDatucted from [exclusive propery b.Requ 3. Property Previously Tax (Vanishing Deduction) - This isa deduction derived from a property that was previously subjected to transfer tax. ‘a. Requisites for dec 1. Death "The present decedent must Bave died within five (3) years from tho receipt oF tho properly Rom prior decedent or donor, 2, Tdentity of the Property The property involved mast have Been a property Tansferred by a prior decedent ar donor to The present decedent or the property acquired in exchange for the original property so received 3. Inclusion of the Property ‘The property mist have formed part of the prior decedent's gross esiafe alluated Inthe Philippines or been included in the total amount of the gifts of the donor made within 5 ‘ears prior to the present decedent's death. “Previous taxation ofthe property The estate tax on the prior succession must have boon Finally determined and paid by the prior decedent. The same applics to gifts, in that onors must have taken care af the donor's tx. No previous vanishing deduction on the | The vanishing deduction on the property must not have been claimed by the previous slate property involving the same property b, Rates of vanishing deduction - Ifthe present decedent died within the following period after the date of prior decedent's death or aftr the date ‘of donation: More than’ But not more than The rates year 100% year 2 years years S years years 4 years years S years S years : . Format of computation Valeo take" i] Less Morigaged paid bythe cute Gemdent ba) inal basis Xn Tes: Proportional Deuctons Za asi» laims-etae-nsolvent pls unpaid mortgage plus TPU) ‘oxx) Gross exate FB a ‘Multiply by Rate of Vanishing Dedustion % ‘Vanishing Deduction [x ‘* Value taken is the OWER between the fair market value ofthe propery in the gros estate of the prior decedent or the fair market vale ofthe sift and the fair market value ofthe same property in the gross estate of the present decedent. Notes: 1. Under conjugal partnership of gains vanishing isa deduction from exclusive property 2. Under absolute community of property, vanishing deduction may be deducted from exclusive property or community property Exercise 4. Ms. Khris Gayna, single, died leaving a property she inherited 3 % years ago with afar market value of P800,000. During her father’s death, ithad a value of P750,000, and an unpaid mortgage of P100,00, 50,000 ofthe unpaid mortgage was paid by the present decedent Her gross estat, other than her inherited property ha a fair market value of P1,300,000, The total expenses, claims against estate, claims against insolvent, unpaid mortgage and transfer for public purpose amounted t0P300,000, How mach is the vanishing deduction? I. SPECIAL DEDUCTIONS 1, Family HomeThe family home refers to the dwelling house, including the land on whieh itis situated, where the husband and the wife, or an “unmatried person whois the head ofthe family and members ofthe family reside, as certified by the Barangay Captain ofthe locality ‘Conditions for the allowance of family home deduction from the gross estate: ‘4 The family home must be the actual residential home ofthe decedent and his family atthe time of his death, as certified by cof the locality the family home i situated 1. ESTATE TAX Page 11 of 15 Barangay Captain'b The total valuc of he Tally Rome must be included as par ofthe gross estate ofthe decedent, and «, Allowable deduction must be in an amount equivalent the current fir market value ofthe family home as declared or included in the gross ‘estate, oF to the extent ofthe decedent's interest (whether conjusal/community or exclusive), whichever i lower, but not exceeding P10, 000,000, Deductible amount Classification of family home Amount deductible a. Exclusive property Full value included i the gross estate oF PIO,000,000 whichever is Tower Conjugal community property ‘Dae HAIN By of The value TneTuded Th We Bross eats oF PTOODN N00 =, Parilyexelusive propery, partly conjugal community propery | Exclusive part (all value mehuded m the gross eva) > Conjugal/Community part (1/2x value included inthe gyoss estate) _xxx Total a Total or P10,000,000 whichever is lower Exercises: Determine the allowable family home deduction. FMV at the Time of Death af the Devedent Dadudibie Amount T TsaiveFaily Rome P 800,000 2 Exclusive family home P.300,000 3. Common family home 1,200,000 Common family home 3.600.000 5 Fxcusive family home (Deseden i angle) PRO, 000 © Exclusive lot F400, 000 LL common house 2. Standard Deduction- “Amount deductible ‘+The amount deductible is PS,000,000 (citizen or a resident) PS00,000 (nonresident) without any required substantiation 3. Amount Received by Heirs Under R.A. No. 4917 “Amount deductible and Requisites ‘© Any amount received by the heirs from the decedent's employer as a consequence of the death of the decedent employee in accordance ‘with Republic Act No, 4917 is allowed as deduction provided tha the amount ofthe separation benefit i included as part of the gross estate of the decedent Amount Received By Heirs Under R.A. No. 4917 [RA No. 4917 is entitled “an act providing the retirement benefits of employees of private firms shall not be subject to attachment, levy, ‘execution, or any tax whatsoev 2. The amount received by heirs from decedent's employer as a consequence of the dea of the decedent employee is included in the gross testate of the decedent 3. The amount above is also allowed as deduction from gross estate J. OTHER DEDUCTIONS 1, Share of the Surviving Spouse applicable only to married decedents “Gross Conjugal / community properties Xe Tess: Conjugal /eommunity deductions ax) "Net conjugal community properties (NCP) Xan ‘Share of surviving spouse (1/2 x NCP) Sox K. DEDUCTIONS FROM THE EXCLUSIVE OR CONJUGALICOMMUNAL RPOPERTY UNDER THE FAMILY CODE “a, Support of spouses, their common children and legitimate children of either spouse ‘Conj/Comm | All dcbis and obligations contracted during the marriage by the designated administrator spouse forthe benslic ofthe conjugal | Conj/Comm ‘partnership of gain or community, or by both spouses, or by one spouse with the consent ofthe other. © Debis and obligations contracted by either spouse without the consent of the other to the extent hat the lanlly way Bave Been | Cony/Comm benefited EAI taxes, Tens, charges and expenses, eluding major and minor repairs, upon the conjugal community propery ConiComm e Alltaxes and expenses for mere preservation made during the marriage upon the separate property of either spouse used By the | Conj/Comm family 7 Expenses fo enable either spouse to Commence or complete a profesional or vocational Sours, or oiler aciity Tor SeIE ‘ConyrComm employment Ante nuptial debis of ether spouse insofar as they have rebounded tothe benefit ofthe family ConiComm 7 Value of what is donated or promised by both spouses in fivor oftheir legitimate children for The Reuse Purpose OF ConjiComm: commencing or completing a professional or vocational course or other activity for sel-improvement 7. Expenses of ligation between the spouses unless the suit s found io be groundless ‘ConjComm 7_Ante-nuptial debis of ether spouse that did not redound to the benefit ofthe family Exclusive ‘Suppor of illegitimate children of ether spouse Exclusive 1. Liabilities incurred by ether spouse by reason of erie oF quasi deli Exclusive sakes, OF ay other Ki ‘mi Loss during the marrage in aay game of chance, betting, Swe prohibited by aw ‘oF gambling whether pomitied or Exclusive L. NET DISTRIBUTABLE ESTATE 1. ESTATE TAX Page 12 of 151, Net distributable estate vs Net taxable estate Net divibuable entate Net iaxable eae “The result afer the reduction ofthe gross estate By actual expenses or | The result ofthe application ofthe law under esate taxation payments “Variance between them can be taeed to deductions which do not involve payment like vanishing deductions, standard deduction, and faily Ihome. Where the actual amount of payment or expenses is higher than allowed like funeral expenses or medical expenses Not Taxable Estate Distributable Net Estate (Gross estate: Real or immovable propery Tachuded Tchaded “Tangible personal property Tncluded Tncluded Tatangible prsonal property Tneluded Tacinded Transfer in contemplation of death Included Not included Revocable transfers Tacluded [Not included Transfer under the general power of appointment Included Notinchaded Proceeds of life insurance Tacluded Tncluded Exclusion such as SSS, GS ‘Allowable dediuetions: ae Nor included Tacluded Claims against the estate ‘etua etal Claims against insolvent prion ‘Actual Actual “Transfer for public purpose ‘tual ‘Actual ‘Vanishing deduction AS computed Ni considered Standard deduction P5000, 00077500, 000 ‘Not considered Family home With iit ‘Not considered vou recived under RAT Tetual ‘Nor considered Share of surviving sponse | AS computed As computed | ‘NET TAXABLE ESTATE | Pax | Estate Tax Due Pox oa DISTRIBUTABLE NET ESTATE Prox T wthin te settlement period ond The rules in classifing property into conjugal and exclusive property are the same for purposes of computing the net distributable estate. For net taxable estate purpases, standard deduction is a special deduction, which means that it is neither conjugal nar exclusive deduction, For net distributable estate purposes, itis a conjugal deduction, M. TAX CREDIT FOR ESTATE TAX PAID TO A FOREIGN COUNTRY "© A tax credits allowed to the estate ofa citizen or resident allen decedent for estate tax pald to foreign countries pertaining (0, which are part ofthe presen estate T. Enilfed to tax credit Resident alien or Citizen decedents Z Deducted from estate tax due The estat tax imposed in the Tax Code shall be credited with the amounts of any estate tax imposed by the authority ofa foreign county. Limitations on credit Amount Deductible Actual Estate tax paid abroad “Whichever is lower », Limit there is only one foreign country involved Net Estate foreign World NetEstate x Philippine Estate Tax Due ‘Two or more foreign countries are involved (whichever is lower of the following) Per Foreign Count Whichever f ‘World Net Estate x Philippine Estate Tax Duc All Foreign Counties ‘World Net Estate Exercise ‘The following data are made available fom the esate ofa resident citizen decedent ‘et estate, Philippines 2,500,000, Net estate| USA (after paying P32,000 estate tax) 268,000 Net estate; Korea(before paying P200,000 estate tax) 300,000 [Net estate! Australia 100,000) 1. ESTATE TAX Page 13 of 15T Tow much is the allowable estate tx ered? 2. Assuming thatthe net estate in Australia is P400,000 and estate taxes paid was 60,000, How much isthe allowable estate tax credit? 3. Assuming that al foreign net assets are located in only one foreign country and foreign estate tax paid was P800,000, [ow much isthe allowable estate tax redit? N. ADMINISTRATIVE PROVISIONS 1, Estate Tax Returns a. Tax form ‘BIR Form 1801 — Esato Tax Roti b. Estate tax returns are T. Inall cases of transfer subject to ax; 2 Where the said estate consists of registered or regstrable property (regardless ofthe value ofthe gross estate). 1) Real Property b) Motor Vehicle ©) Shares of Stock, ‘e Personls who willie the returns 1. Executor 2. Administrator 3. Any of the legal heirs “E_tems shown inthe returns | The value ofthe gross estate ofthe decedent at the time of his death, or in ease of non-resident alien of that part of his gross estate situated in the Philip 2. The deductions allowed from the gross estate 43. Such part of such information as may a the ime be ascertinable and such supplemental data as may be necessary to establish the correct taxes ‘Period when the returns are fled Within 12 months (I year) after the decedent’ death _Refurns to be supported with statements certified by a CPA, When the estate tax retums show a gross value exceeding P'5,000,000 ® Contents of the statements certified by a CPA Tr Ttemized assets ofthe decedent with their corresponding gross valuc atthe time of his death, or in case of nonresident alien, ofthat part of his csttesitated in the Philippines 2, lemized deductions 3. The amount of tax due whether paid or still due and outstanding Ty Period when a certified copy of the schedule of partition and the order of the court ordering the same be fled ‘Within 30 days after the promulgation of such order T Extension period for filing the returns “The commissioner ean, in meritorious cases, extend the filing of returns fora period nor exceeding 30 days J Place where the returns can be filed 1) Incase of resident deced: a) Accredited agent bank bb) Revenue district office ©) Collection officer ) Duly authorized Treasurer ofthe city of municipality where the decedent was domiciled atthe time of death 2) Incase of non-resident decedent: 1) Revenue District Office where the executor or administrator is registered )_ Revenue District Office having jurisdiction over the executor or administrator’ legal residence ©) Office ofthe Commissioner [Office ofthe BIR Commissioner (RDO No. 39-South Quezon City) ifthe estate does not have an executor or administrator in the Philippines) 2, Payment of Tax ‘a. Time of payment of estate tax At the time the estate tax returns ae filed Bb. Extension of time of payment od estate fax 1) Estate is setled through the courts — not to exceed 5 years 2) Estate is settled extra-judicially —not to exceed 2 years © Extension of payment of estate tax not allowed ‘When there is 1. Negligence 2. Inentional disregard of rules and regulations 3.__Fraud on the par ofthe taxpayer “Payment by installment Tincase the available cash of te estate is insufficient to pay he total estate tax due, payment by installment shall be allowed within two (2) years fom the statutory date fr its paymest without civ penalty and interest. ‘e. Liability for payment 1 ‘The estate tax shall be paid by the executor or administrator before the delivery ofthe distributive share in the inheritance o any heir oF beneficiary. 2, Where there are two or more executors or sdministrators ‘The executor or adminis il all of whom are severally lable forthe payment of tax yr ofan estate has the primary obligation to pay the estate tax but the heir or beneficiary has subsidiary forthe payment ofthat portion ofthe estate tax which his distributive share bears tothe value ofthe total net asset, 3. Acts Requiring Certification from the Commissioner that the Estate Tax has been Paid ‘Acts requiring certification 1. Delivery of distributive shares tothe heirs, 2.__ Registration in the registry of Deeds of transfer of inherited real property or teal rights. 1. ESTATE TAX Page 14 of 153. Payments of deb by decedent's debtor tothe heirs, legatees, executor oF administrator of the creditor decedent 44. Transfer of inherited shares, rights or bonds. 5. Withdrawal from decedent’s bank deposit (it shall allow any withdrawal from the said deposit aecount, subject toa final withholding tax of six percent (6%) 4 Civil Penalties and Interest Subject to interest but not to] Any amount paid afler the sautory due date of the x, but within the extension period, soll be subject to surcharge interest but not to surcharge, 25%4 surcharge Penalty of 25% if there is no false or raudulent intent on the axpaye 50% surcharge Penalty of 50% if there i false, malice, fraudulent intent on the taxpayer interest, Tterest of double the legal interest rate per annum on the unpaid amount oF fax Wom We date Computed Uni fully paid. PROBLEMS: T An unmanied non-resident alien, died intestate on NovemberJ, 20x1. The following data were provided by bis esate House and lot, USA (family home) 2,000,000 Investment in stock, Philippines 800,000 Tavestment in stock, USA 1,000,000, Tnvestment in Bonds, USA (85% of the Business of the USA ‘Corp. i in the Phils), 700,000 ‘Cash in bank, Philippines 300,000 ‘Cash on hand, Philippines 50,000 “Accounts receivable from a debtor who resides in USA (ally suneolletible)| 200,000 (Car, Philippines 800,000 ‘Actual funeral expenses 50,000 Judicial expenses 300,000 Unpaid Philippine income tx for income in 20x0 20,000 [Loss on December 31, 20x1 due to theft of cash on hand 10,000 Loss on sale ofa portion of investment in stock, Phils. 20,000 Devise to Quezon City for children’s playground 70,000 ‘Medical expenses 500,000 Required: 1. How much was the Philippine gross estate? 2. How much was the total deductions from the Philippine gross estate? 3. How much was the net taxable estate in the Philippines? 4, How mitch was the estate tax payable in the Philipines? 2. “The devedent isan unmarried head of family with the following data Real and personal properties 2,000,000 Family home 900,000 ‘Amount received by hits under R.A. 4917 400,000 (Cains against insolvent debiors 200.000 ‘Ordinary deductions Funeral expenses (40% pai by relatives) 200,000 “udicial expenses (includes PS0,000 incurred for the benefit of het) 300,000 Losses (30% compensated by insurance) 100,000 ‘Unpaid taxes (includes P5,000 income taxon income eamed by the estate) 20,000 Unpaid mortgage on real property 30,000 Medical expenses 600.000 Required: How niuch is ie net esate? 3. The decedent isa married man with a surviving spouse with the following data ‘Conjugal real properties 5,000,000 ‘Conjugal family home 1,500,000) Exclusive properties 2,500,000 ‘Conjugal ordinary deductions Funeral expenses 150,000, ‘Other deductions 7,300,000) Exclusive deductions 500,000 Medical expenses (iluding unpaid hospital bills amounting t 200,000 incurred two (2) years before deat) 500,000 Required: How miuch is the taxable net estate? END 1. ESTATE TAX Page 15 of 15