MODULE 4 CO-OWNERSHIP, ESTATES AND TRUSTS CO-OWNERSHIP ● There is a co-ownership whenever

the ownership of an undivided thing or right belongs to different persons. ● The portions belonging to
the co-owners in the co-ownership shall be presumed equal, unless the contrary is provided. ● For
taxation purposes, there is co-ownership when two or more heirs or beneficiaries inherit an undivided
property from a decedent, or when a donor makes a gift of an undivided property in favor of two or
more donees. ● Co-owners are taxed individually on their distributive share in the income of the co-
ownership. ● Co-ownership itself is not taxable for the reason that the activities of co-ownership are
generally limited to the preservation of the common property and the collection of the income. ● If the
co-owners invest the income in business for profit, they would be constituting themselves into a
partnership and such shall be taxable as a corporation ● When the property remained undivided for
more than 10 years and no attempt was ever made to divide the same among the co-heirs, nor was the
property under administration proceedings nor held in trust, the property should be considered as
owned by an unregistered partnership, consequently, taxable as corporation. ESTATE ● Income tax of an
estate refers to the tax on income received by the estate during the period of administration or
settlement. ➔ “Administration or settlement period” refers to the period when the title to the
properties left by a decedent is not yet finally transferred to the heirs/b beneficiaries ➔ Temporarily in-
charge of the administration of the estate until such time that the estate is finally distributed to the
rightful heir is either: ◆ the executor named by the deceased in his last will or testament ◆ or, the
administrator appointed by the court ➔ While under administration, the estate may earn income, thus,
the corresponding income tax should be paid. ● Estate tax is a mass of all property, rights, and
obligations of a deceased person which are not extinguished by his death, including those which have
accrued thereto since the opening succession ● The estate of decedent may be settled judicially or
extrajudicially ➔ Judicial Settlement - settlement of an estate in a court proceeding
(administrator/executor) ➔ Extrajudicial Settlement - the heirs or beneficiaries settle for themselves the
distribution of an estate or their inheritance APPLICABLE TAX ● Same manner as individual, tax due is
computed using the graduated income tax rate for individuals. TAXABLE INCOME OF THE ESTATE

Gross income

xx

Less. Deductions

Business Expense

(xx)

*Special Deduction:

Distribution of estate’s income to beneficiaries

(xx)

Taxable Income of the Estate

xx

Tax Due (Graduated Tax Rate)

xx TAXABLE INCOME OF THE BENEFICIARY

Compensation income, if any