24314005 Definition of Estate Tax

8/14/2019 24314005 Definition of Estate Tax

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I. DEFINITION AND PURPOSE OF ESTATE TAX

Estate tax is a tax on the right of the deceased person to transmit his

estate to his a!f" heirs and #eneficiaries. It is not a tax on propert$. Estate

tax is hed to #e an excise tax imposed on the pri%iege of transmitting

propert$ "pon the death of the o!ner. The estate tax is generated #$ thedeath and accr"es at the time of death. It is go%erned #$ the a! in force at

the time of death not!ithstanding the postponement of the act"a possession

or en&o$ment of the estate #$ the #eneficiar$.

Tax rates prescri#ed "nder RA '()( app$ to estate taxes faing d"e or

ha%e accr"ed #eginning *an"ar$ +, +--', the effecti%it$ of the said a!

other!ise no!n as /The 0a! Reform Act of +--12

Aside from the reason that transfer taxes pro%ide income to the

go%ernment, there are other &"stifications for their imposition. First is the

#enefit 3 recei%ed theor$ that recogni4es the roe of the State in the

distri#"tion of the estate of a decedent to the heirs !hether it is in accordance

!ith the decedent5s !i or #$ operation of a!. Next is the pri%iege theor$.

Inheritance is a pri%iege granted #$ the State. Estate ac6"ired and

acc"m"ated is "nder the State5s protection. The next theor$ is the a#iit$ to

pa$ theor$ that asserts that the heirs #eca"se of the inheritance the$ recei%ed

are a#e and capa#e to pa$ the taxes d"e the State. 0ast is the redistri#"tion

of !eath theor$ that red"ces the propert$ recei%ed #$ the heirs thro"gh

taxes.

II. 7ROSS ESTATE

Estate tax appies to citi4en, resident, and Non 3 resident Aien decedent

!ith properties in the Phiippines. Resident decedent inc"des that resident

aien decedent.

According to the definition in an Estate Tax Ret"rn form, 7ross Estate for

citi4ens and resident aiens sha inc"de a the propert$ of the decedent at

the time of death, rea or persona, tangi#e or intangi#e, !here sit"ated #"t

exc"ding the exc"si%e properties of the s"r%i%ing spo"se. For Non8resident

aien, it sha inc"de the propert$ sit"ated in the Phiippines.

A. 7ross Estate of 9iti4en and Resident Decedent

+. Rea Propert$ ocated !ithin and !itho"t the Phiippines

). Tangi#e persona propert$ ocated !ithin and !itho"t the

Phiippines

:. Intangi#e persona propert$ ocated !ithin and !itho"t the

Phiippines



A. 7ross Estate of a Non 3 Resident Aien Decedent

+. Rea Propert$ ocated !ithin the Phiippines

). Tangi#e persona propert$ ocated !ithin the Phiippines

:. Intangi#e persona propert$ ocated !ithin the Phiippines "ness

there is reciprocit$ in !hich case is not taxa#e in the Phiippines

SITUS OR PLACE OF TAXATION

Propert$ has a sit"s or ocation or a &"risdiction for tax p"rposes. Sit"s is

decisi%e in determining the estate of a deceased person taxa#e in the

Phiippines.

The sit"s of a rea propert$ is the co"ntr$ !here it is sit"ated; !hie in

tangi#e persona propert$, the sit"s is the co"ntr$ !here s"ch is act"a$

ocated at the time of the death of the decedent. In intangi#e persona

propert$, the foo!ing are considered as intangi#e persona properties

sit"ated in the Phiippines< =for non 3 resident aien decedent !ith propert$!ithin the Phiippines>

a> Franchise !hich m"st #e exercised in the Phiippines

#> Shares and o#igations or #onds iss"ed #$ an$ corporation

organi4ed in the Phiippines

c> Shares and o#igations or #onds iss"ed #$ an$ foreign corporation

'?@ of the #"siness of !hich is ocated in the Phiippines

d) Shares and o#igations or #onds iss"ed #$ a foreign corporation if

s"ch shares ha%e ac6"ired a #"siness sit"s in the Phiippines

e> Shares or rights in an$ partnership #"siness or ind"str$ esta#ishedin the Phiippines

Properties inc"di#e in the 7ross Estate Decedent5s Interest sha inc"de

a properties, rights and interest !hich the decedent o!ns at the time of

death. It sha inc"de<

+. Properties o!ned #$ the decedent act"a$ and ph$sica$ present in

his estate at the time of his death s"ch as and, #"idings, shares of

stoc, %ehices, #an deposit, etc.

2. The %a"e of an$ interest in propert$ o!ned or possessed #$ the

decedent at the time of his death s"ch as di%idends decared #efore

his death #"t recei%ed after his death, partnership profits !hich ha%e

accr"ed #efore his death, "s"fr"ct"ar$ rights, etc.

:. The %a"e of propert$, right or interest in the propert$, transferred #$

the decedent d"ring his ifetime !hich, "nder the a!, are in the nat"re

of testamentar$ disposition s"ch as ins"rance proceeds in fa%o"r of

re%oca#e #eneficiar$.



TRANSFER IN CONTEMPLATION OF DEATH

Impeed #$ the tho"ght of death, or the moti%ating factor or controing

moti%e for transfer of the propert$ is the tho"ght of death !itho"t regard to the

state of heath of the transferor.

Donation Mortis Causa

Taes effect "pon the death of the donor. Its characteristics are<

a. There is no con%e$ance of tite or o!nership to the done or transferee

#. The transfer is re%oca#e #$ the donor at !i d"ring his ifetime

c. The transfer sha #e %oid if the donor s"r%i%es the done

REVOCABLE TRANSFER

here the en&o$ment of the propert$ transferred ma$ #e atered,

amended, re%oed or terminated #$ the decedent. The re%oca#iit$ is notaffected #$ the fai"re of the decedent to exercise the po!er to re%oe d"ring

his ifetime. If the notice has not #een gi%en, the po!er to re%oe has not

#een exercised on or #efore the date of his death, s"ch notice sha #e

considered to ha%e #een gi%en, or the po!er exercised on the date of his

death.

PROPERTY PASSING UNDER GENERAL POWER OF APPOINTMENT

The r"e is the gross estate sha inc"de an$ propert$ passing or

transferred "nder genera po!er of appointment exercised #$ the decedent

a. B$ !i

#. B$ deed to tae effect in possession or en&o$ment at or after his death

c. B$ deed "nder !hich he has retained for his ife or an$ period not

ascertaina#e !itho"t reference to his death or for an$ period !hich

does not in fact end #efore his death

d. The possession or en&o$ment of, or the right to the income from the

propert$

e. The right either aone, or in con&"nction !ith an$ person to designate

the persons !ho sha possess or en&o$ the propert$ or the income

therefrom

The donee of a genera po!er of appointment hods the appointedpropert$ !ith a the attri#"tes of o!nership th"s, the appointed propert$ shaform part of the gross estate of thedonee of the po!er "pon his death.



These foo!ing transfers do not act"a$ con%e$ f" o!nership o%er thepropert$ transferred hence the propert$ sti remains part of the gross estateof the transferor<

1. Transfers !ith Retention and Reser%ation of 9ertain Rights o%erthe income or en&o$ment of the propert$ transferred

). Transfers !here the donor reser%es the right to the income of thepropert$ "nti death; or

3. Transfers !here the donor reser%es the right to the possession oren&o$ment of the propert$ "nti death

Trans!r or Insui"i!nt Consi#!ration

1. If the transfer is a #ona fide sae for ade6"ate and f"consideration in mone$ or mone$5s !orth, no %a"e sha #einc"ded in the gross estate.

2. If the transfer is not a #ona fide sae for an ade6"ate and f"consideration in mone$ or mone$5s !orth, there sha #e inc"dedin the gross estate on$ the excess of the fair maret %a"e of thepropert$ at the time of death o%er the %a"e of the considerationrecei%ed #$ the decedent$

3. If an inter %i%os transfer of the decedent is pro%en to #e fictitio"s,the tota %a"e of the propert$ at the time of death sha #einc"ded in the gross estate.

PROCEEDS OF LIFE INSURANCE

Proceeds of ife ins"rance "nder poicies taen o"t #$ the decedent "ponhis o!n ife sha #e inc"ded in his gross estate in the foo!ing cases<

+. !hen the #eneficiar$ is the estate of the deceased, his exec"tor oradministrator !hether or not the deceased retained the po!er ofre%ocation

). !hen the #eneficiar$ is other than the estate of the deceased, hisexec"tor or administrator and the decedent retained the po!er ofre%ocation

CLAIMS AGAINST INSOLVENT PERSONS



Are recei%a#es d"e or o!ing from persons !ho are not financia$ capa#eof meeting theiro#igations. The recei%a#es sha #e inc"ded in the grossestate at their f" amo"nt.

CAPITAL OF THE SURVIVING SPOUSE

The gross estate of a married decedent sha consist of the foo!ing<+. con&"ga or comm"nit$ properties). exc"si%e properties

The capita of the s"r%i%ing spo"se sha not #e deemed part of the grossestate.

I. CA0UATION OF 7ROSS ESTATE

+. Ca"ation Date 8 time of death). Basis of Ca"ation 8 fair maret %a"e, !hich is the price !hich a

propert$ !i #ring !hen it is offered for sae #$ one !ho desires, #"t isnot o#igated to se and is #o"ght #$ one !ho is "nder not necessit$of #"$ing it

:. Ca"ation of Us"fr"ct8 pro#a#e ife of the #eneficiar$ in accordance!ith the atest Basic Standard ortait$ Ta#e

(. Ca"ation of Rea Propert$ 3a> FC as determined #$ the 9ommissioner; or #> FC as sho!n in the sched"e of %a"es fixed #$ the Pro%incia

or 9it$ Assessors+. Ca"ation of Persona Properties8 FC at the time of the decedent5s

death

). Ca"ation of Shares of Stoca. Unisted Shares

i. 9ommon 3 #oo %a"eii.Preferred 3 par %a"e

#. 0isted SharesThe %a"e is the arithmetic mean #et!een the highest ando!est 6"otation at a date nearest the date of death, if none isa%aia#e on the date of death itsef.

I. EXEPTIONS FRO ESTATE TAX

+. The merger of the "s"fr"ct in the o!ner of the naed tite2. The transmission or dei%er$ of the inheritance or egac$ #$ the

fid"ciar$ heir or egatee to the fideicommissar$



3. The transmission from the first heir, egatee or donee in fa%or ofanother #eneficiar$ in accordance !ith the desire of the predecessor

(. A #e6"ests, de%ises, egacies or transfers to socia !efare, c"t"raand charita#e instit"tions, no part of the income of !hich in"res to the#enefit of an$ indi%id"a; Pro%ided, ho!e%er, that no more than :@ ofthe said #e6"ests, de%ices, egacies or transfers sha #e "sed #$ s"chinstit"tions for administration p"rposes.

I. PROB0ES

+. Ade6"ac$ of 9onsideration for Transfer

For each case, determine the %a"e to inc"de in the gross estate

comp"tation<



9ases

A B 9

9onsideration recei%ed #$ transferor decedent at the

time of transfer

+, ?,

Fair maret %a"e at the time of transfer +, +, +,

Fair maret %a"e at the time of death of transferor +)?, +)?, +)?,

CA0UE TO IN90UDE IN 7ROSS ESTATE 1?, +)?,

9ases

A B 9

Fair maret %a"e at the time of death of transferor -, -, -,

Fair maret %a"e at the time of transfer ', ', ',

9onsideration recei%ed #$ transferor decedent at the

time of transfer

?, ',

CA0UE TO IN90UDE IN 7ROSS ESTATE -, (,

2. Sit"s and 7ross Estate

Determine the sit"s of each propert$ and for each t$pe of decedent, #e a#e tocomp"te the gross estate of r. To if he eft the foo!ing propert$<

a.

#. Resident citi4en

c. Non 3 resident citi4en

d. Resident Aien

e. Non 3 resident aien, !ith reciprocit$

f. Non 3 resident aien !itho"t reciprocit$



Ca"e

+. Ban deposit at 9hina Ban, A$aa A%e.,

aati 9it$

IN )?,

). o"se G ot in Thaiand OUT +?,

:. B"iding G and on !hich it stands in Pasa$

9it$

IN ?,

(. Trees, pants, gro!ing fr"its G and on !Hh

the$ are panted in Bag"io 9it$

IN )?,

?. 9ar in the Phiippines IN :?,

. Appiances in ho"se G ot in the Phiippines IN +,

1. Appiances in ho"se G ot in Thaiand OUT ),

8. *e!er$ in the Phiippines IN ,

9. *e!er$ in Thaiand OUT )?,

+.Ban deposited in J"rich, S!it4erand OUT 1?,

++.o"se G ot in the Phiippines IN +)?,

+).Interest in an ind"str$ esta#ished in

Bris#ane, A"straia

OUT +,

13.Notes recei%a#e, de#tor residing in

Phiippines

IN 1?,

+(.Acco"nts recei%a#e, de#tor residing inS!it4erand

OUT '1,?

+?.Fish Pond in 0ag"na IN +,

+.9op$right exercised in the Phiippines IN +?,

+1.Can in aa$sia OUT (,



+'.Trademar "sed in aa$sia OUT ),

19.O#igations iss"ed #$ foreign corporation !ith

no #"siness sit"s in the Phiippines

OUT :1?,

).Franchise "sed in the Phiippines IN :?,

)+.She 9orporation certificate of stocs ept in

safe in Thaiand

IN ))?,

)).7o#e Teecom certificates of stocs ept in

the Phiippines

IN )1?,

23.Treas"r$ #onds iss"ed #$ Bango Sentra ng

Piipinas

IN ()?,

)(.Patent exercised in 9hina OUT :,

)?.Foreign shares, '@ of the #"siness is in thePhiippines

OUT (?,

26.Foreign #onds !ith #"siness sit"s in the

Phiippines

IN :)?,

)1.B"siness right in corporation esta#ished in

aca", 9hina

OUT 1?,

)'.In%estment in a partnership esta#ished in the

Phiippines

IN ++)?,

)-.Foreign shares, -@ of the #"siness is in thePhiippines

IN '1?,

a. resident citi4en

Ca"e

+. Ban deposit at 9hina Ban, A$aa A%e., aati 9it$ )?,

). o"se G ot in Thaiand +?,

:. B"iding G and on !hich it stands in Pasa$ 9it$ ?,

(. Trees, pants, gro!ing fr"its G and on !Hh the$ are

panted in Bag"io 9it$

)?,

?. 9ar in the Phiippines :?,

. Appiances in ho"se G ot in the Phiippines +,



1. Appiances in ho"se G ot in Thaiand ),

8. *e!er$ in the Phiippines ,

9. *e!er$ in Thaiand )?,

+.Ban deposited in J"rich, S!it4erand 1?,

++.o"se G ot in the Phiippines +)?,

+).Interest in an ind"str$ esta#ished in Bris#ane, A"straia +,

13.Notes recei%a#e, de#tor residing in Phiippines 1?,

+(.Acco"nts recei%a#e, de#tor residing in S!it4erand '1,?

+?.Fish Pond in 0ag"na +,

+.9op$right exercised in the Phiippines +?,

+1.Can in aa$sia (,

+'.Trademar "sed in aa$sia ),

19.O#igations iss"ed #$ foreign corporation !ith no

#"siness sit"s in the Phiippines

:1?,

).Franchise "sed in the Phiippines :?,

)+.She 9orporation certificate of stocs ept in safe in

Thaiand

))?,

)).7o#e Teecom certificates of stocs ept in the

Phiippines

)1?,

23.Treas"r$ #onds iss"ed #$ Bango Sentra ng Piipinas ()?,

)(.Patent exercised in 9hina :,

)?.Foreign shares, '@ of the #"siness is in the

Phiippines

(?,

26.Foreign #onds !ith #"siness sit"s in the Phiippines :)?,

)1.B"siness right in corporation esta#ished in aca",

9hina

1?,


Phiippines

++)?,

)-.Foreign shares, -@ of the #"siness is in the '1?,



Phiippines

TOTA0

)--1?

a. non 3 resident citi4en

Ca"e






)?,













+1.Can in aa$sia (,




:1?,





Thaiand

))?,


Phiippines

)1?,




Phiippines

(?,



9hina

1?,


Phiippines

++)?,

)-.Foreign shares, -@ of the #"siness is in the

Phiippines

'1?,

TOTA0 )--1?

a. resident aien

Ca"e






)?,















+1.Can in aa$sia (,




:1?,



Thaiand

))?,


Phiippines

)1?,




Phiippines

(?,



9hina

1?,


Phiippines

++)?,

)-.Foreign shares, -@ of the #"siness is in the

Phiippines

'1?,

TOTA0 )--1?



a. non 3 resident aien, !ith reciprocit$

Ca"e

+. B"iding G and on !hich it stands in Pasa$ 9it$ ?,

). Trees, pants, gro!ing fr"its G and on !Hh the$ are


)?,

:. 9ar in the Phiippines :?,

(. Appiances in ho"se G ot in the Phiippines +,


. o"se G ot in the Phiippines +)?,

7. Notes recei%a#e, de#tor residing in Phiippines 1?,

'. Fish Pond in 0ag"na +,

TOTA0 1?

a. non 3 resident aien, !itho"t reciprocit$

Ca"e


). B"iding G and on !hich it stands in Pasa$ 9it$ ?,

:. Trees, pants, gro!ing fr"its G and on !Hh the$ are panted

in Bag"io 9it$

)?,

(. 9ar in the Phiippines :?,

?. Appiances in ho"se G ot in the Phiippines +,


1. o"se G ot in the Phiippines +)?,

8. Notes recei%a#e, de#tor residing in Phiippines 1?,



-. Fish Pond in 0ag"na +,


++.Franchise "sed in the Phiippines :?,

+).She 9orporation certificate of stocs ept in safe inThaiand

))?,

+:.7o#e Teecom certificates of stocs ept in the Phiippines )1?,



+.In%estment in a partnership esta#ished in the Phiippines ++)?,

+1.Foreign shares, -@ of the #"siness is in the Phiippines '1?,

TOTA0 +:-'?

References<

1. A#ea, Att$. Ed!in R. =n.d.>. Ne!s and Cie!s< 7"ideines in Estate

and Donor5s Tax. Retrie%ed Decem#er , )-, from

http<HH!!!.thetr"stg"r".comHne!spg(.htm

2. Scri#d. =)'>. Tax)89h +8? Estate Taxes Re%ie!er. Retrie%ed

Decem#er , )-, from

http<HH!!!.scri#d.comHdocH:-+(+HTax)89h+?8Estate8Taxes8

Re%ie!er

:. BIR. Estate Tax Ret"rn

ftp<HHftp.#ir.go%.phH!e#admin+HpdfH+)+'+@)=fina>.pdf

4. Baada, S"san. Baada, in. =)->. Transfer and B"siness Taxation.

+ Ed. Phiippines.

http://www.thetrustguru.com/newspg4.htm

http://www.scribd.com/doc/3914010/Tax2-Ch15-Estate-Taxes-Reviewer


http://tmp/sv8cf.tmp/ftp://ftp.bir.gov.ph/webadmin1/pdf/16261801%20(final).pdf



http://tmp/sv8cf.tmp/ftp://ftp.bir.gov.ph/webadmin1/pdf/16261801%20(final).pdf

http://www.thetrustguru.com/newspg4.htm



TRANSFER AND BUSINESS TAXATION

7ROSS ESTATE

aria Princess 7. Bac"ngan

Decem#er 1, )-

Documents

24314005 Definition of Estate Tax