TAX 302

MODULE 1
Introduction to Transfer Tax
  A charge levied on the transfer of
ownership or title to property from one
individual or entity to another
Transfer Tax
 Tax on the right to transfer
 Excise or privilege tax
  Bilateral transfers -> with consideration
(onerous)
 Sale
 Barter
 Unilateral transfers -> without consideration
Transfer tax (gratuitous)
 Donation
 Succession
 Complex transfers ->less than full or adequate
consideration
  Assume a property with a fair value of P50,000 and tax basis of
P10,000 is sold for merely P30,000

Fair value P50,000

Gratuity 20,000 -> subject to transfer tax
What Consideration 30,000

constitutes an Less: Tax Basis 10,000

adequate Realized gain 20,000 -> subject to income tax

consideration? The transfer element is considered as an inter-vivos donations, but it

is a donation mortis-causa if:
a. The sale is made in contemplation of the death of the seller, or
b. The title to the property is agreed to be transferred upon the
death of the seller
 Inter-vivos Mortis causa
Transferor Living Decedent
Nature Voluntary Involuntary
Reason Gratuity Death
Scope of the only properties all properties of
transfer of selected by the the decedent at
properties donor death
Comparison
Property given Gift Estate
Transferee Done Heir
Transfer tax donor’s tax estate tax
Timing of date of donation date of death
valuation of
donation
  Tax evasion/minimization theory
 Tax recoupment theory
Rationale of transfer  Benefit received theory
taxation  State partnership theory
 Wealth redistribution theory
 Ability theory
  Privilege tax
 Ad valorem tax
Nature of Transfer  Proportional tax
Taxes
 National Tax
 Direct tax
 Fiscal tax
  1. Residents or Citizens such as:
Classification of  Resident citizens
Transfer  Resident aliens
Taxpayers  Non-resident citizens

These are taxable on global transfers of property.

 2. Non-resident Aliens
These are taxable on Philippine transfers of property.
  intangible personal properties of NRA or Filipino non-resident
Reciprocity Rule are exempt from Philippine transfer tax
  John Paul suffered an unexpected heart attack causing his death on
November 1, 2018. His estate is 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
Peter is the only heir. The executor of John Paul’s estate filed the estate

Illustration 1 tax return and paid the corresponding estate tax on October 31, 2019.
The properties left by the decedent were finally distributed to Peter on
December 14, 2019. Answer the following:
1. When will the transfer of ownership from the decedent to the
heir take effect?
2. When should the estate tax accrue?
3. Assume that John Paul’s total outstanding liabilities as of the
time of his death amounted to P12,000,000. How much of the
outstanding liabilities of the decedent should be assumed by Peter?
  Ana is an OFW residing in Canada. As promised, she sent her
younger brother (Pablo) in the Philippines several pairs of
brand-new Air Jordan shoes, a cellphone, and other gadgets
worth P400,000 on December 1, 2017. Pablo received the gifts
Illustration 2 on January 15, 2018 when the gadget is already priced at
P350,000 in the market. Is this case an example of a donation
inter-vivos? What is the applicable tax rate to Ana?
  San Mig. Inc. transferred a plant asset to Pureness Corp, one of
the former’s subsidiary. Will the transfer be subjected to
Illustration 3 donor’s tax?
  Mr. Cheng, a Chinese national residing in the Philippines,
donated a car (P1,000,000) in China to a friend, a motorbike
(P80,000) in the Philippines to his personal driver, and his
Illustration 4 vacation house (P3.000.000) in the Philippines to his brother in
America. What type of donation is this and which property will
be subjected to tax?
  Don Juan owns a hotel and a commercial building. He
promised to donate the hotel to son Juanito and the building to
his other son Juanico. Don Juan was able to donate the hotel to
Juanito when the property has a FMV of P40M. While
finalizing the deed of donation of the building to Juanico, Don
Juan met an accident and died, during which the FMV of the
Illustration 5 hotel and building is P45M and P50M respectively. A year after
his death, the properties have FMV of P48M and P52M. What
type of transfers are present? What will be the tax recognized?
What will happen to the properties upon the death of Don Juan?