TRANSFER AND BUSINESS TAXATION

Estate Tax
The Concept of Succession

Mrs. Naty Kook suffered from COVID-19 causing her death on November 1, 2020. Her estate composed
of the following:

Cash in bank P1,000,000

Commercial building 5,000,000
Cars 1,000,000
House and lot 3,000,000

Jung Kook is the only heir of the decedent. Naty’s remains were cremated on the same day. The
executor of Naty’s estate filed the estate tax return and paid the corresponding estate tax on October 31,
2021. The properties left by the decedent were finally distributed to Jung on December 14, 2021.

Answer the following questions:

1. When will the transfer of ownership from the decedent to the heir take effect?

A: November 1, 2020
The rights to the succession are transmitted from the moment of death of the decedent,
notwithstanding the actual transfer dated December 14, 2021 (Art. 777 NCC).

2. When should the estate tax accrue?

A: November 1, 2020
Beginning 2018 (TRAIN Law), the executor is allowed under the tax code to file and pay the
corresponding estate tax within one (1) year from the date of death, however, the estate tax due
accrues immediately at the time of death. It shall be noted that the accrual of the estate tax is
distinct from the obligation to pay the same (RR 2-2003); (Lorenzo v. Posadas, 64 Phil. 353)

3. Assume that Naty’s total outstanding liabilities as of the time of her death amounted to
P12,000,000. How much of the outstanding liabilities of the decedent should be assumed by
Jung?

A: P10,000,000
Limited only to the extent of the value of properties and rights inherited.