1 1 1 1 2 3 requred? Prescnption Period for assessment and collection Suspension of Prescription Penods 'ssusnce of Preliminary Assessment Nolice (PAN) ance of Final Assessment Nolice (FAN}/ Formal Letter of Demand (FLD) ‘Motion for Reconsideration Re-investigation Fina! Deasion on a Disputed Assessment (FDA) Claim for Remedies of the government Distt, in general Actual dstraint Constructive distraint Ley Forfeture Enforcement of tax lien Compromise Cases which cannot be compromised Tax credit certificate Documentary Stamp Taxes (OST) BOI and PEZA Registered Entities Local Taxation (Community Tax, Real Property Texes and Local Business Taxes Quizzer for Special Topics... 3 392 393 394 394 395 399 399 400 401 40t 401 402 402 402 402 404 405 405 405 408 423 437 456 482 Pr oes a Succession and Transfer Taxes ‘ownership on a number of ways, the New Civil Code ownership may be ‘onerous lanes. Business taxes ai‘assessed of the net two basic categories, the extent rough his dee w (AA.774 NCC). The inhentance includes all he .perty. rights and obligations of a person which are not extinguishe ‘death (Ar. 776 NCC). The sights to the succession are transmitted from the moment of death of the decedent (Ar. 777 NCC), tanding ihe postponement of the actual possession or enjoyment by the beneficiary. The “heirs succeed immediately to all he property of the deceased ancestor at the moment of death as completely had exec lvered to them a deed for the Tre ean of aati sxqreinert by ‘ud Site oe fn be combed cts hated sfer tax is the privilege of the transfer ‘ahts which takes effect at the date of insfer mortis causa subject to estate ‘and the daniee (known as transfer igh the amount of ‘be construed as 8 proper statute in accrues 26 t fom the ot pr 2.2003). In the governed by the new c ILLUSTRATION Pedto suffered an un His estate composed of he Cash in bank Commercial bulding Cars House and it Juan isthe only heir ofthe decedent. Pedro's remains w 2018. The executor of Pecro’s estat he est corresponding este Lax on October 31, 2012. The properties left by were finaly istnbuled to Juan on December 14.2019. Answer the fo Question 1: When wil the tanster of ownership fom the dece effect? Answer: November 1, 2018, TFT NCC) 2 When should tne estat tax accrue? ‘Answer November 1, 2018, 2018 (TRAIN Lee) Que serve (RR 2-2003}, (Lorenco vs Posada Law, the fing was within ai-mgrths from de TRAIN Law. the af death period was extend t0 wit000,000 he exten werited, Kinds of Succession (Ant 778 NCC) Whenever a person dies leaving property (inheritance), a question ‘08 38 10 how his property or estate will be dealt with by those heishe left behind, The answer depends on whether or not a decedent left a “will at the time of his death. The definition of “succession” in the tax code as discussed in page 2. clearly states that the Jinheritance are ransinitted elther by his will (with last will and testament) or by operations of law (in the absence of a last will and testament, the provisions of the civil code on succession shail apply). A person is normally said to have died testate if he left a wil at the ime of his/her death and a person is said to have died intestate if such a person died without leaving a wil To summarize, succession may be Classified as: 1. Testamentary or testate succession. A type of succession that results from the designation of an heir, made ina will executed in the form prescnbed by 2. Legal or intestate succession. A type of succession which is effected by operations of law (based on the provisions of the civil code regarding succession) since the decedent did not execute a will or if the fast will and testament executed by him is void -d succession. A type of succession which is effected parlly by and purtly by operation of law. ILLUSTRATION 2: ee Case A; Testamentary Succession Asean the and tester #1, In anéion, Pedra ieft @ duly executed last | Case B: Intestate or Legal Succession Assume the same data m iluskation #1 except that Pe and testament al Suc be disposed of in accordance Case C: Mixed Succession ‘Assume the same data in ilustaton #1. Assume f | Pedto’s death! In addition, assume that from the preparation ofthe “wif upto Pe Gale of his death, rental income from the commercial buldng amouctes to P2E0.050 (Of this amount, 150,000 was used to acquire parca and in Ma | of P100,000 was deposited in a new bank account. Sce the parcel ew bank account were acquired by the decedent after November 1, 2 | aforementioned properties were not includ in his wil | exists. Some the estate wil be transfered in accordance ly ex (estamentary file the new parce of and in Makati and the new bank accou tributed by dperations of taw intestate ot legal succession) CAUSES OF LEGAL SUCCESSION OR INTESTACY: 1. Ifa person dies without a will, or with a void wil has ee lost its val or one which _MLUSTRATION CASE A: VOID WILL, | CASE B: “WILL” WHICH HAS SUBSEQUENTLY LOST ITS VALIDITY | On the eve of November 2, 2018, a day afer enocuting is ast wl a testament the | festalor accidently obieraed the same. The testator was notable fo pepe a new? iW” before his death. Consequently, there is no more “ast | speak of An intestate or legal succostion exists. Al the tme | his estale shall be disposed of by operations ofNecccstepamged Lransfer Tares 2. When the “Wi WLUSTRATION & Assume ‘otous I" does not institute an hei scribed inthe “wil? a5 ve Verde Subdivision to my qosest and favorite has five (5) chiaren, 3. Partiat institution of heir. Consequently. intestacy takes place as to the undisposed portion. Pantal institution of heir means the entirelestate was not disposed of in the fast will and testament. Therefofe, a mixed succession exists. Part of the estate will be disposed of pr distributed to the heirs based on the last will and testament. Nonetheless, since there are properties in the estate that were not included in the will, such properties shall be disposed of by operations of law (only as 10 the Lundisposed portion or as to the portion of the estate not mentioned in the will) \TLUSTRETION 5 Portal institution: +b _ Refer to CASE C of flustration # 2 4, When the heir instituted is incepable of succeeding ILLUSTRATION 6: oe ee case: Assume Pesto named Juan ded | his sole beneficiary, except th 2heed of Pedra. Accordingly ‘and testament prepared by the testator shall be considered wai. Case 8: | nt of the Suspensive condtion atached to the Suspensive canaiion is 3. cx fepending upon the happening of an uncertain event nust be fulhiled before an obigation arises b._Preterition (omission in the testator's wil of one, some o the compulsory heirs in the direct sine which 5 ling the institution of heir) nent of “resciutory concit refers 10 a condition whereby, upon fulfillme already enforceable obligation. 4d. Expiration of term or period of institution © Non-compliance or impossibility of compliance withthe wil, f. Repudiation of the instituted heir 38 the effect of Elements of Succession: 1 3. Decedentis the general term applied to the person whose prapstty is transmitted through succession, whether or nof ETE a wil ithe let I he is called a testator (An. 775 NCC). Executor is a person designated in the last will and testament to carry out the provisions of the decedent's wil, He also pertoims a fiduciary duty such as taking care of the decedent's estate prio to final disposition to the heirs. Administrator is a person appointed by the court and performs the sami@duty-In lieu of an executor, if the latter fy under the law oF the last will and testament did not sppoint one, Inheritance (Estete) - Include all the property, rights and of a person which are not extinguished by death and all which have accrued thereto since the opening of succession, Rights which are purely personal are not transmissible for they are extingusted by death (Ar. 776 NCC) Successors ‘An heir or successor is 2 person wh ther the provision of a w Devisees and legataes are persons to wh property are respectively given by virtue of are classified under asfIse who have precedence over and exclude other mate chidren and descendants), ‘0 suceced only in the absence of the legitimate parents and imate children and Primary Compulsory Secondary Compulsory fenand their ——-D._Legiimate parents and legitimate ascendants. (They inhent only i@ dofaut of A) E. Megtimate parents (no other ).. They inherit only an 4 scte’s zee nether compulsory hers nor strangers However, they b. VOLUNTARY HEIRS - those instituted by the testator in his will 0 succeed to the inhertance of the portion thereof of which the t tan freely dispose. Free portion refers to the portion or value teft in ‘per deducting the legilimes of the compulsory heirs. A ough the last will and testament heir ts letermined LEGAL OR INTESTATE HEIRS - those who succeed to the estate of will or cecedent by operation of law (decedent died without 2 val ively disposed of by wil Pemputsory Tsp is (AL £86 NCC) The compulsory compulsory tance propery elec legiime by the testator except by dh tree portion shal be disposed of to presented in Table 1-2 below: The dist order of priont dogree exion of persons descending from the same These parsons are known as blood rel Socio cord to be related by blood or consanguiniy. may be lineal or atateral Lineal eonsanguinty. which may be descending or ascending, Sihat which subsists between persons of whom one is descended in 2 rect line from the other. Collateral consanguinity is that which subsists between persons who have the same ancestors, but who not descend (or ascend) one from the other. Proximity of relationship ts determined by the umber of generations. Each generation forms a degree, As illustrated below Consanguinity is the rel ‘stock or common ancestors ore A ond B. 10 A.C, G ond M, in th Ato Cis one degree, from C 10 G nother degree, D ond 8, in thot order, are relatives in the oxcencing CG and M, ave cele’ ere nag Se ee Gis the niece of OD, Dis Hand lore and Diol M ard N re secend cousins; they 6 Becouse of G's martioge f0 K, K bi brother They become relatives by affinity. & consequence of a marriege between eaci ef cde dyt 2,000,090 wit not i P5.000.000. Hence. the + Tae legtrne oft siete egartegs ofthe number os 1 10 P00: be as fleas. ILLUSTRATION 3 (LEGITINs and FREE PORTION ofthe ESTATE) yote im accoenee wth shoul be econ (Besed on Tete 13) 6,000,000 1.500.000 3.000.000, ‘hee parion It may be gen by he 8. However, onl these velunary Ries B except tha and testament. Obviously he legtmes ofthe ‘amount of estate fet after deducting the to satay ne ing ‘The making of or in part of the rohit a wil are those below 15 years old ant at the lime of iis execution (ons pronitited by ta ‘The law presumes thal every person ie dvund mind, in the abs Of proof to the contrary. The burden of p ‘esl sound mind ai 12 of making his di ns is of the parson ‘opposes the probate of the ‘one month, o making his maintains the validity of the 2 lucid interval. Supervening incapacty does wail, nor is the will of an incapable validated by the supe capacity. A married woman may make a he person who IF mace @ during dispose by her sep: conjugal partnership or absolule community property Kinds of Wilts: 1. NOTARIAL OR ORDINARY OR ATTESTED WILL ~ executed in accordance with 208 of the New CisSubsequent wills which do not is ones in an express such disposi stent in a subsequent thd new wil ye by reason Institution of heir (Art. 840) ion of an heir is an act by virtue of which designates in his will the person of persons wh are to succeed him in h property and transmissible rights and obligatigns. A will shall be valid in though it should not contain an institftion of an heir, or such tion should not comprise the entire estpte, and even though the ituted should not accept the pnheritance or should be tated to succeed. In such cases the testamentary disp ‘accordance with law shall be complied with and the rem fe shall pass to the legal heirs. A compulsory heir may, in consequehce of disinherttance, be deorved of his legiime, for causes expressly stated by law Dicnhentance can be effected only through a wil wherein the legal cause therefore shal be spectied. The burden of proving the truth of the cause for eisinhentance shall est upon the other heirs of the testator, if the disinnerited heir should deny it Disinheritance herttance is a testamentary disposition by which @ compulsory ‘3 of, of excluded from the inheritance to which he has @ .nce is not applicable to voluntary heirs. Caust bbe limited to those expr other testamentary dispositions shall be the legitime. descendants of the person disinher usufruct or admi property which cons disinherited must be that there can be no doubt As slaled above, the grouna(s) or cause(s) af to such extent as will not impair The children ime; but the ‘not have the ration of the tes the legitime. ited parent COMMON CAUSES FOR DISIN HERITANCE of children descendants, parents or ascendants, and spouse: — 1 2. When the heir nas been found gully of an etemt against te ie o th tsar. hiner descendans or ascendant and speuse nena of children and parents; en ee When the he has accused the te stalor of ere for wh bresrbeslnprsanment for 8 years or mate, ihe scesoton hes been found groundless; . ms When the hei by faud, violence,ad bs 58. Which is not authorized 10 take charge of the estate during intestate Pere executor c. Administrat b. Court d. Heirs , /- Chapter 2 Gross Estate | ‘The et esate tax aw in he Philppnes is embodies in Al 260 uch fect on Ju led estate tax ales computed on vs subsequety revises bythe Code of the Phiipines imposing upon “every transmission by rtue of inheritance, devise, bequest. git mors causa, or advance in rice, devise or bequesL” Since then, several ced to amending Act 2601, the Natonal intemal irvctured the tax base ‘and rates of both estate and donors taxes in addon to allowing the deduction of | expense rom the gIoss estate. Bulk ofthe estate tak aw (as determining m tax base and rates which are found in NIRC ere emboded inthe In the Philippines, Estafe Taxis a tax imposed on the person is given in cor property to take effect e constred as a direct tax on the property of the lax is based thereon. Since es 3Justification for the Imposition of Estate Tax 1 Beneft-Received Theory Taw considers the service rendered by the government in the Gistroution of the estete of the decedent, either by law or in Gecomdance with his wishes. For the performance of these services ghd omer benefits tna! accrue to the estate and the hei, the State collects the tax. 1 Privilege or State Partnorship Theory : ‘Under this theory inhentance is not a nght but a privilege grantod by the State and legatees have been acquired only with the protection ol the State. Consequently, the State as 2 passive silent partner in tation of property has the right to collect the share which is properly due to it j Ability to Pay Theory Receipt of inhi weatth or windlal beneficiaries contrinutes to governme tance which is in the nature of gn uneamed ‘are place assels into the hands of the heirs and creates an abilly to pay the lax and thus income ecistibution of Wath Theory ‘ha rocepl inhertance s 3 corbin factor fo the neq in neat and incomes, ‘The inposon of slate tax reduces the 1 ety receved by Ine successor, thus helping promote equtablo Feetitlen of weath m sovsly. The tax ase is the balue of the sty aad the. progressive. scheme of taxon | precisely led by the desire to mitigate the evils of inheritance in the ‘orm sification of Taxpayers and Composition of Gross Estate Section 25 of he Tax Code slates that the value of the gross should be determined by including the value at the sonal, tangible or intangible, however, case of a nonresident is dat te whvch fs situated in the Philippines “4 Senate ‘The composition of the estate tax may be eummanized as fo! SR es Gr 1) Property (Real or Personal roneny wherever chutes 2}, Irlengie personal property where rigite personal opines 3) Intangive pereona! unlass excluded on RECIPROCITY CLAUSE ‘The tax code excludes “intangible” personal property wi Philippines from the gross estate of a non-resident alien deceder is reciprocity. There is reciprocity it + The decedent at the time of his death was a resident ci ‘en of @ foreign country which at the ume of his deatn aid not impose an estate tax of any character in respect of intanghle per property of citizens of the Philippines not residing in that fares country, or + The laws of the ( ich the decedent was a resident citizen al the time of his death allow a sim from estate taxes of every character, in respect of intangible personal property ovned by citizens of the Philippines nat residingWNTANGISLE ASSETS WITH SITUS “1 9 intangible personal purposes: ‘exercised in the Philippines or by any corporation or ized oF constituted ia the Philippines in bor is issued by any foreign corporation, located in the bonds issued by any foreign corporat 's oF bonds have acquired a business Is any partnership, business or industry pines, Shares. oF established PROPERTY ‘SITUS Real Popery and Location of the property Tangle persoral propery \Whete the intangibles enercsed regardless cof where the conesponding certfcate is Residence of the debtor Location af the depository bank House & Lot Hongkong 15,000,000, Car, scared during mariag 1500,000 g cts issued b Shares of stocks issued by 2 a | 500,000 500,000 | 500,000 | Case A” Assume there no reciprocity Answer: P2,620,000 5 goes estate (Case B: Assume there is reciprocity, what ise correct value of | Answer: P1,500,000 | hy an Cau ace in mao sa be rede | fecedent's grass estate. ilangble properties mit sis wit the Prippenes | ____a1e excluded in he a|_Phisppine Branch iz 1 ABN Amro Bank (Foreign bark) - London __| Branch Recaiyables-debior from Philippines cs of mesic corporations. tes are stored'in the is of demneste corporations. es are stored abroad Gis of foreign corporations. PARTICULARS Parcel of Land - Makatl Ghaen « 8 | Resident ROSETTE ~ Receivables d Parcl of and ~Sandra~ | Howse ano ta Fam Hoe) = Tagulg~ Pest House Batangas Rest House Palavan Philippine Branch "ABN Amo Bank (Foreign band) London Branch ci Philippines Recewables debtors om Canada ‘Shares of slock of domestic corporations. ‘The cetifcates are stored in the Philippines | 16 | Shares of slock of domestic corporations. | Within | incude The crtficles ae sored abroad ‘Shares of stock o foreign corporations, ‘The certificates are slored inthe Prigpnes ‘Shares of stock of foreign coparaions “The cetficaes ae stored aoed Shares of stock of foregn copoations, 90% oft operations isin he Phitppines {Wie 7] Include ince Within “Exclude |” trode Wie wiclude “Eicde Excuse We | Treks > viihin cee “illo ude t Within 1 Include. xcs Bide Eide Eide Inc Eee 1 Bek Excite Easelon of Gross Estate (a8 ar (ed undor RA10963; RR 12-2018) ied by the Commissioner, the schedule of city assessors. Fair market value at the time of death Shares of stock «Unlisted common share: Book value pet share of the issuing corporation (Appraisal surplus not be considered, as well as the assigned to preference shares, If any). .d Preference share: Par value per share + Listed shares: FMV shall be the arithmetic mean between the highest and lowest quota | ata date nearest the date of death, if none is available on the date of death itself. {RR 2-2003) RR 12-2018) + The bid price nearest the date of death wublished in any newspaper or publication lation. » fn accordance Mortality Table [ILLUSTRATION correct amcuunt 10 be ndependent cases in ‘of PTG0,000 for four years On his way home, he ied | Answer: P3,000,000 : Case B “The decedent granted 3 P2,000,000 foan to fig best end two years before his death | with a 10% interest per annum evidenced by @ Rote Both the principal end interest \ unt ners of 10% fr 2 years Case C The decedent devised to his son a 1,000 square reter lt in iy. Taug wth {allowing valuation: Fair value as determined by cily assessors P20 00048 Zonal value as determined by the CIR. 17:900,000 FV determined by mdependent assessors 1,500 000 (1,000 s9.m x P20,000) alue a5 determined by Case D: Decedent ais 100,000 erdinary shares of that tine, Alpha's outstanding shares were * 000,000 w Earnings amounting to P5,000,000. The shares 4 Answer: P7,500,000 Bock value by the decedent atthe te of death | “PIOM + St X 100000 shores Case E 00,000 Answer: P5,0 4DEXEMPTIONS AND EXCLUSIONS FROM THE GROSS ESTATE A . Exclusions under Sections 85 and 86 of the Tax Code + Exciusive property of the suring spouse. vedent and the surviving spouse "ing spouse should be ese properties are not For woteen fon porponia, sackake propacton of Sol husband are known as “captal exclusive propertes of the wie are «noun 2s ‘parephemal properties. Whether such propery is exclusive or common will depend on the type of propery relstions of the husband end wife. Property relations ar discussed in Chapter + Property autside the Ptulippines. of a non-resident alien decedent. Sactisn 85 of the Tax Code provides that for nonresiden| afen decederts, only his properties situated or with situs within Phimppines shall tuded in his gross estate. y. properties outside of the Pt ng gross estate j intangible personal propery in the Philip en uncer the Reciprocity The tax code excludes * in the Philippines from the gross est decesent ff there is reciprocity le" personal property with tate of 2 non-resident alien Exclusions under Section 87 of the Tex Code ‘The manger of usutruct in the owner of the raed tle The pansmission o delivery of the inhentance of legacy by the ary eit (also known as the 1” heir) oF legatee to the fideicommisary {a!so keown 2s the 2 heir), The varemission from the first heir, legatee or donee favor of cotter benenery. 1 aocorsanice wit Te. dee of the or (also known aS “special” power of appointment). 5 of transfers to social welfare, cultural no part of the net income of which (Giidual. Provided, however. that not more than thity percen legaces or vansfers agminstration purposes exemption is the the exerot acqu dered a dec : de the property ta welfare, cultural or chavitable insututions asl parr the power of the BIR to assess taxes pr9; oe [usMON:ss—“‘C O™CSONOé‘CCNNNNNCOC(NYYYNC CON Case A - Merger of usufruct in the owner ofthe naked title sqned te west of is areal of (Pad) wes haved he cure oe nae Upon the eath of Mr. Yumao, the parce of and stout be incluced 9 2 death cf Juan, the patel of ‘erclided” in his Gross estate because he ig nat the owner of sattct Case B - The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee tothe fideicommisary. the last wil and ésed tis parcel ef and son (van) but grandson (Pedro) when the fo be inherted by Pedro, nat Juan on tegimes discussed in Chanter 1} fucary until such time tat the property Vansleved to Peco, See 2 fothar of Peto and bath were dive atte ime ofthe testers Yuran), the substlution or tensler trom Juan | fideicornmiesary 2555 Je be mcuded in hs gross offend should be “evcluded” mts 2 “D0Gao TM esi fr at nto canes a eve fae Senay atcordnc wt te dat fe preecesor ‘ound ba sone mm the SSS by ley taken out by th stor expressly a ment Ac INCLUSIONS IN THE GROSS ESTATE A. Properly owned by the decedent ACTUALLY AND PHYSICALLY PRESENT IN HIS ESTATE at the ty ings, shares of stock, vehicles, B. Decedent's Interest ~ Refers to the extent of ity or ownership partiopation oft decedent on any property physically existing| and present in the gross estate, whether or rot in his possession, control or d so refer to the value of any property owned or possessed by the decedent atthe time of his death (interest having value| (capable of being va intended to takeEstate Transfer with retention or reservation of certain rights ‘The decedent have transferred his property during his lifetime, id 3. Revocable Transfers a transfer where the terms of enjoyment of the propery may amended, revoked or terminated by the decedent. tig that the decadent had the power to revoke though he did not exercise the power. inclusions C.2 and ©3 above do not actualy convey full ownership ovsr the property transferred. Heoce, stil part ofthe gross estate ofthe lanstrar. | [ILLUSTRATION 5: sasieror upon her death? = Answer Yes The prop: official at | ‘upon her death (donation mortis causa) regardless of the date of the | the beneficiaries or heirs. } =< | cases." + 5 natural phitanthropist, gratuitously transfered @ property 10 Cl | | poo a ering his fee "yal amount should be inde inte gross ase | of Rafiate upon his deat! | % Aaswer: PO. | | The t ifetme. inhertan sisferred should be included in the estate of the high rerking 12 of her death because such transfers were intended to take take effect upon his death bul during his sabe esl sivas” rather than fr is eubject 10 donor's tex | at is only proper for tim tead of waiting for his death iden worth P200,000 00 time of Pedro's death, the ‘2 250,000,000. hel amou 2 J The fag mathe val should be ignored. is real properties wor PIC.000 000 to J Pearo reserved his rant \What smount should be included in Pedro's grass estate upon his death? Answer. P10,000 000. ston 2: ssume Juan subsequently died a year ator Pedro's eth, what amount shoud bo ‘cluded in Juan's gross estale? Answer’ PO ‘The transfer is revocable on the part of | | l Fighlto revoke was xe 4] Transfers under a general power of appointment Power of appointment refers to the right fo designate the person ar persons who will succeed to the property of the prior decedent. The power of appointment may be “general” or “special”. The power of appointment is “general” when the power of appointment suthonzes the donee of the power to appoint any person he pleases. The power may be exercised in favor of anybody donee-decadent The donee of a general the power upon his death Special power of appointment exists wh: yieled classbila Ye exercised by the donor-d iSTRATIONS "2 A, Ganeral Power of Appointment nt 1 trough Nis lst wil vision that to can the property to anyone. Ne 5. Transfer for insufficient consideration made for 8 price ess than ils fat maréel value sppeinime’ transfer, the excess of the fair market value of the tr owe a peinnent ai the time of daath over the v re Nendo may veel he pope “o anyone Should be included inthe gross estate. For this of anybody including the | fair market values shall be used: the power may be evercised The power of 2p nes the donee | Fair Market Values | FIV of the property at the time of sale or transfer This is use to determine whether or not the consid full and edequate. if received 1 subs same with the fair market value at the ume of transfer is considered @ bona fide sale, hence, not suby tax. time of death, + FMV of the property att This is used 10 determine the emount fo be included in the o's gross este? | ral poner of appointment olds the appoied ‘gross estate. Ifthe consideration received is substantial tower of for Pere sae Ths, te eppaited pore | a oe a 1 va ved tes of one a value at the for in of the donee-ceoedent market value at the ne time of sale of Wand testamentExtite Tee there was no consideration received at the date of transfer and such transfer was made “in contemplation of death’ (donation, mortis causa), the fair market value of the property at the d: Geath, not at the date of transfer, should be included in the death’, such transfer shall be considered donation inter-vivos subject lo donor's tax based on the fair market value of the property date the donation was made. The above consideration are summarized in Table 2-3 below: sete oe Consideration 2 FMV at the mam Bona fide sale. Excluded from the time of transfer. decedent's gross estate, < FA at the mmmmp> Insufficient consideration Include in the gross estate the sale regardess of the Sale was made in the pay ‘amount of consideration. ordinary course of trade No consideration recived mip ILLUSTRATION 7: _ Extate 1 Gueston 2 assuming | Answer PO, | Question 3: Assume Sale orttansfr was made nthe inary couse lyase ortus ees na rn Should be included 2 part ol the gross esate of he decedent? Answer PD. Tresthortarseriermuteatoaice ot \ cases \ in Janvary 2015, Juan sod for 5,000 000 an apanent wih caring value ‘| 3,500,000 to Pedro. Al the te of sale the propety has @prevaing market price of P5,000,000. Juan died on June 2016. AL the time of death, the preva ‘market value ofthe property was P8, 000,000 ‘Question: What amount shoul be included in the goss estate of he decedent? Answer: PO the consideratonrecved i substan twesiae Question 2 Assume Juan transfered the propery without consideration, what ‘amount should be included in his gross est | Answer. 8,000,000 take efect upon J ‘eth shoul be include in Question 3: Assume Juan transferred corresponding donor’ tax was patd, wh estate atthe time of his death? Answer PO. Thetvas! 6. Claims against insolvent persons tax purposes, an insolvent is @ person whore whether fully or partially. his rule regardless of the am amount of the claim again: the gross estate of the decedent. The por collectible should be allowed as a deduction from the gross estatteduction om the gross estate of Juan? cy ofthe debtor to 5 inatvet person The capa sume thet ate Juan failed to collect the amour} due from Pedro, he | vi we tre claim. The condonation was gladly welcomed by Pedro “juan died. How mach should be included inthe gross estate of Juan? There, tw contoatio tp dn exsing cobectble of PS 000,000 against Pedro whose properties hes cebis, Pedro's properties are valued at Pé,000,000 +> Answer: the entre amour ‘Question 2 How much s the ceducton from the gross estate of Juan? | + Answer: P2,000,000. ‘egune tat POM of Pedto’s Fabities are unpaid taxes ftom the | ‘nchuded as a deduction from the gross estate of L how much should be vepastares = PEM aADebl Labites x Claims insurance Code presut -ase the designate @ Insurance Code thi the right to change the beneficiary he desigi ntess he has expressly waived this nght in said pol sured should potiy, Case A: trance worth P10,000.000 was taken out by Pedro upon | a by Paseo upen ns ‘desgnated his frend, Juan, as benefciary. Should the proceed | g/055 estate of Petro upon his death? Angwer Yes case A, exc proceeds be ineudes in he grass estate oThe law Estate Tax. ess Pristto. A rolice the tax fo not taxable stato, P ) Beginning January 1, 2018 3 the “Tax Reform for 1. the netized assets of the decedent with their corresponding gross value at the time of his death, or in the case of onresident, not a citizen of the Philippines, of that part of {gross estate situated in the Philippines; copy thereof such order, is discussed in Chapter 1, the estate tax due “accrues” tne time of death. It shall be noted that the accrual of ct from the obligation to pay the same (RR 2. 0 vs. Posadas, 64 Phil. 353). The one-year time of allowable period of fling the return without ates and interest, fe Tax Retum Extension of Time to File the Es Under! Sec. 20(C) of the Tax Code (as amended; RR 10963; 13)RR 12-2018) provides, “the Commissioner or any Revenue ‘ed by him pursuant to the NIRC shall have the ty to gf (orious cases, a reasonable extension not excexding thirty (30) days for filing the retum’, The application for the ime to fie the estate tax return must be filed with the ‘Office (RDO) where the estate is réquired to secure ‘cation Number (TIN) and file the tax returns of the ‘rich ROO, likewise, has jurisdiction over the estate tax return iec by any party 28 a result of the distribution of the of the decedent. 19 Estate Tax .e estate tax imposed under the Tax Code ig filed by the executor, 1e the reN estate oF any of the heirs, he may ex tax or any part thereof not to exceed five Is settled through the courts (Judicial S case the estate is settled extrajudi such case, the amount in respi shall be paid on or before the date of the expiration of the pend extension, and the running of the statute of limi e assessment shall be susvended forthe pend of any such extension. t The application for extension of time 10 file the extension of time to pay estate tax sh District Officer (RDO) where the estate conditioned upon the payment the terms of total estate tax due, the estate may be alioweo to pay the estate tox due through the following options, including corresponding terms and conditions 1. Cash a) The cash inst ment yo (2) years from the in one (1}:year from the b) 56Extate lie Jn case of lapse of two (2) years he payment of entire tax reof shall be due and demandable icable penalties and interest reckoned from the 1g the return and payment of estate tax; subject 10 3Pi prescribed deadine for 2} No civil penaities or interest may be imposed on the estates, permitted to pay the estate lax due by installment. Nothing in this, ‘subsection, however, prevents the Commissioner from executing enforcement action against the estate tax due of the estate tax provided that al able laws and required procedures are foliowediobserved 2. Partial dispostion of estate and application of its proceeds to the estate tax dus 8) The disposition, for purposes of this option: shall refer to the conveyance of property, whether real, personal or intangible property, with the equivalent cash consideration; The estate tax return shall be filed within one (1) year from the date of the decedent's death; 2) The writen request for the partial disposition of estate shall be approve by the BIR. The written request shall be filed, together wrth a notarized undertaking that the proceeds thereof shall be exclusively used for the payment of the total estate tax due: 4) The computed estate tax due shall be allocated in proportion to tue of each property. shall pay fo the BIR the proportionate estate lax due of y intended to be disposed of; ‘cate Authorizing Regisiration (eCAR) shall be issued upon presentation of the proof of payment of the ruonate estate tax due of the property intended to be od. Accordingly, eCARs shall be issued as many as there ara properties to be disposed to cover the total estate lax due, net ‘proportionate eslate tex(es) previously paid under this option, and g) in case of failure to pay the total the said dispo estate tax due out from the the estate tax due shall be subject to the applicable '¢ lax, withoul prejudice of 19 properties 2 retum and payme Hing the issuance of eCARs on the remai ining bak REQUEST FOR EXTENSION OF TivE, INSTALLMENT PAY! PARTIAL DISPOSITION OF ESTATE. mee Request for exiension to fe the return, ection to pay ihe eta tax and payment by statment shall be fied wih the Recnue ones Gear (ROC whats He sats I vequned te sone to ie a estat i return. This request shall be epprove by the Comm'suic, his duly authorized representative. ees PLAQE OF FILING THE RETURN and PAYMENT OF THE ESTATE TAX In case of @ resident decedent, the 2 register the estate of the decedent and secure 2 new Revenue District Office where the decedent was do his death and shall file the estate tax return end pey N therefe ed at th he time ot decedent was domiciled at the time of his de: following prevailing collection: rules and regu! ath, whichever estate tax return shall be filed with and the TIN for the estate shall be seoured from the Revenue District Office where such executor ot administrator is registered. Provided, however, that in case the executor and the TIN of the estate shall be secured from the Ri Office having jurisdiction over the executor or administrator's leya residence. Nonetheless, in case the non-residant decedent does not have an executor or administrator in the Ph ne estale tax retum shel be filed with and the TIN for the estate shail be secured from the Office the Commissioner though RDO No. 39-South Quezon City. ones The foregoing provision, not Internal Revenue may continue to exercise the estate tax but the f me ongEstate Tix Where there is no executor or administrator appointed, qualified and acting within the Philippines, then any person in actual or constructive possession of any property of the decedent must file the return. The ‘state Tax imposed under the Tax Code shail be paid by the executor or any Where there are two or more executors or administrators, all of them are severally ble for ihe payment of the tax. The estate tax clearance iseued by the Commissioner or the Revenue District Officer (RDO) having ction aver the estate, will serve as the authonty to distibule the rgidisinbutablo properties/sharo in the Inheritance to tha heir or remai beneficiary PAYMENT BY INSTALLMENT [Sec. 91{C),as amended eceay Under RR 212003, in case the available cash of 12 estate is not sfificient to pay ils total estate tox In case the lowed to pay the tax by availabe cash of eT bility, the estate fray be installment and a clgarance shall be released only with the _ estate is respect to the property, the corresponding/computed tax Insufficient to pay on which has been paid. There shail, therefore, be as he estate tor due, payment by many clearances (Certificates Authorizing Registration) oe tare are as many properties released because they iaslaimen shat fave been paid for by the installment payments of the ai aie estate (ax. The computation of the estate tax, however, erences) aa shall always be on the cumulative amount of the Nel for its payment favable esiale Any amount paid after the statutory due without civil {the tax shall be imposed the corresponding penalty and dale o} applicable penalty thereto. However, if the payment of intrest the tax alter the due date is approved by Ihe ‘Commissioner or his duly authorized representative, the ne interest. impasable penaity thercon shall only be Civil penalties and. interest the statutory due date of the tax, but w amount paid after be subject to interest but not to surcharge or fraudulent intent on the taxpayer. _ malice of fraudulent intent on the tax from the date Payment of Tax Antecedent to the Transfer of Si Rights (Sec. 97, as amended) Thete shail not be transferred to any niew ma, parnership organized or established in the Prsippines any ight by way of git inter-vivos oF mont ext unless a certification from the Commissioner that the appticable tax have been paid. Ha bank has knowledge of the death of a pe a bank deposit account lene, oF jou b withdrawal from the said de ix percent (6%). For this purpose. all w statement to the effect that all of the joint depositors are ihdrawal by any one of the joint depositors and be under oath by the said depositors Under RA No. 10963 (TRAIN Law) In case the availache cash of stato tax due, pabment oy for vt 2) yo terest