Estate Tax PDF

**Estate Tax -** Impose on privilege to donate upon death (Excise Tax). a. **Accrual:** Upon death of Successor. b. **Due Date:** Within 1 year after death of Successor, without penalty or interest. ***Note:** Grace period is 30 days but in discretion of government, upon evaluation of valid...

**Estate Tax -** Impose on privilege to donate upon death (Excise Tax). a. **Accrual:** Upon death of Successor. b. **Due Date:** Within 1 year after death of Successor, without penalty or interest. ***Note:** Grace period is 30 days but in discretion of government, upon evaluation of valid reason.* **Filed and pay by**: Order of Priority 1. Administrator / Executor 2. Any of Heirs ***Note:** Administrator if appointed by court and Executor if appointed in Last will and testament.* +-----------------+-----------------+-----------------+-----------------+ | **Situs** | | | | +=================+=================+=================+=================+ | | **w/n** | **w/o** | **Intangible** | +-----------------+-----------------+-----------------+-----------------+ | **R/C** | Yes | | | | | | | | | | ***Note:** Be | | | | | mindful that it | | | | | is all resident | | | | | regardless if | | | | | they are alien | | | | | or not and | | | | | citizen | | | | | regardless | | | | | whether | | | | | resident or | | | | | not.* | | | +-----------------+-----------------+-----------------+-----------------+ | **NRA** | Yes | No | Yes - Subject | | | | | to reciprocity. | +-----------------+-----------------+-----------------+-----------------+ **Intangible Property (Subject to Reciprocity)** 1. Franchise - Exercise in PH 2. Shares, Obligation in bonds of domestic Corp. 3. Shares, Obligation in bonds of foreign corporations - who have 85% of here in PH or ownership. 4. Shares, Obligation in bonds of Foreign Corp -- Resident Foreign Corp. 5. Partnership -- interest in Ph. 6. Cash in bank and Receivable -- debtor place **Valuation of Gross Estate** +-----------------------------------+-----------------------------------+ | **Real Property** | Higher between ZV and AV | +===================================+===================================+ | **Tangible Asset** | FMV upon death | +-----------------------------------+-----------------------------------+ | **Intangible Asset (Shares)** | | +-----------------------------------+-----------------------------------+ | Unlisted | **Common** -BV | | | | | | **Prefer** -- Par Val | +-----------------------------------+-----------------------------------+ | Listed | Ave. Of highest and lowest at the | | | time of death. | | | | | | ***Note:** if death is weekends, | | | whichever is near but suggest | | | that should be Friday.* | +-----------------------------------+-----------------------------------+ **Succession** - Transmission of property, right and obligation upon death of successor by either last will or testament. ***Note:** Obligation is only extent of Estate and only to unextinguished obligation by death of successor.* **Kind of Succession** 1. **Testamentary Succession** -- with valid last will and testament. 2. **Intestate Succession** -- without will or with will but not valid. 3. **Mixed succession** **Elements of Succession** 1. Decedent 2. Estate 3. Heirs **Type of Heirs** 1. **Compulsory Heirs** -- cannot be deprived by the testator of their legitime except by proper disinheritance. ***Note:** Disinheritance must be stated in the last will and testament with the reason and which includes the grounds included in the Civil Code.* **Primary** **Secondary** -------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------- **A.** Legitimate Children (LC) and their legitimate descendants (50% of Legitime) **B.** Legitimate Parents (LP) and their legitimate ascendants. ***Note:** B receives inheritance if there is no A.* **D.** Surviving Spouse (25% of Legitime) **F.** Illegitimate parents (no other descendants) **E.** Illegitimate children and their descendants (50% of received of legitimate) (Legitimate or not) ***Note:** F receives inheritance if there is no A and C.* ***Note:** Brother and Sister or noy compulsory but not a stranger, they may be voluntary heirs if they are stated in last will and testament.* 2. **Voluntary Heirs --** entitled only to free portion. 3. **Legal or Intestate Heir** -- Heir but there is no Last will and Testament. **Intestate Succession** (it applies to free portion) Order of Priority 1. Legitimate Children and descendants 2. Legitimate Parents and Ascendants 3. Illegitimate Children and descendants 4. Surviving Spouse 5. Brothers and Sisters, nephews and nieces 6. Other collateral relatives within the 5^th^ degree 7. State **Allowable Deductions** **R/C** **NRA** -------------------------------------- --------- --------- **Ordinary Deductions** (LIT) Losses, Indebtedness and Taxes **Yes** **Yes** Transfer for Public Use **Yes** **Yes** Vanishing Deduction **Yes** **Yes** **Special Deductions** **Family Home** **Yes** **No** **Standard Deduction** **Yes** **Yes** **Benefits under RA 4917** **Yes** **No** **Share of Surviving Spouse** **Yes** **Yes** ***Note:*** 1. *Ordinary Deductions* a. ***Losses*** - *Occurred during settlement of Estate Tax (within 1 year upon death).* - *Provided that it shall not be covered by insurance or if insured the portion only that is not covered.* - *Not use as deduction in Income tax.* - *Fortuitous Events and only robbery, theft or embezzlement.* b. ***Indebtedness*** - ***Claims Against the Estate** -- must be duly notarized, and if contracted within 3 years before death administrator or executor shall submit statement the disposition of proceeds. If accommodation (other people loans in use of decedent's name), still included in receivable of decedent.* - ***Claims Against Insolvent Person --** Must be insolvent and not nowhere be found.* - ***Unpaid Mortgages.\\*** c. ***Taxes*** - *Accrued but not paid as of the time of death.* - ***Must not be** Income tax received after death; property tax not accrued prior to death; Estate Tax and business tax.* d. ***Transfer for Public Use*** - *Donation to Government and political subdivisions, non-government organizations (accredited) and Charitable and religious institutions.* - *Must be stated in Last Will* - *Must be Non-profit, nonstock institutions.* - *Must not use the more than 30% of donations to administrative purposes.* e. ***Vanishing Deductions --** minimize the effect of double taxation of acquired inheritance or donation within 5 years prior to death.* *0 - ≤ 1 year* *100%* ----------------- -------- *1 - ≤ 2 years* *80%* *2 - ≤ 3 years* *60%* *3 - ≤ 4 years* *40%* *4 - ≤ 5 years* *20%* i. ***Initial Basis** (Lower between FMV of old and upon death **less** paid mortgage of decedent)* ii. ***Final Basis** (Initial Basis is deducted by the portion of Initial basis to LIT + TPU) FB = (IB/TGE x LIT + UP) IB* iii. ***Deductible** (Final Basis is Multiply to above vanishing Rate)* 2. *Special Deductions* a. ***Family Home Deductions --** Actual home of the decedent as certified by Brgy. Captain. [Deduction whichever is lower than the FMV of Residence and P10M]. Must be situated in PH.* ***Note:** if communal, the FMV of house must be divided by 2 before comparing it to limit of P10M. If the land and house are partly communal, only the share of decedent must compare to limit of 10M.* b. ***Standard Deductions --** no need for substantiation.* +-----------------------------------+-----------------------------------+ | *Train Law* | *SD* | +===================================+===================================+ | ***R/C only*** | *P5,000,000* | | | | | ***Note:** Sec 86 (A) (1) RA | | | 10963* | | +-----------------------------------+-----------------------------------+ | ***NRA*** | *P500,000 only* | | | | | ***Note:** Sec 86 (B) (1) RA | | | 10963* | | +-----------------------------------+-----------------------------------+ ***Note**: Before train law only can deduct are R/C in amount of P1M.* c. *RA 4917 (Retirement Benefits Act) - any benefits upon retirement or upon death of the decedent in pursuant to RA 4917 is **exempted from any taxes.*** **Family Code** +-----------------------------------+-----------------------------------+ | **Conjugal Property** | **Absolute Property** | +===================================+===================================+ | Before Aug. 3, 1988 | After Aug. 3, 1988 | +-----------------------------------+-----------------------------------+ | Conjugal | Community | | | | | 1\. Proceeds, products, fruits | 1\. Owned at the time of the | | and income of their separate | celebration of their marriage | | property | | | | 2\. Acquired thereafter \[Art. | | 2\. Acquired through their | 91\] | | efforts or through chance | | | \[Art. 106\] | 3\. Winnings from any game of | | | chance \[Art. 95\] | | 3\. Acquired through onerous | | | title during the marriage at | | | the expense of the common fund | | | | | | \[Art. 117\] | | +-----------------------------------+-----------------------------------+ | Exclusive | Exclusive | | | | | 1\. Brought as exclusive | 1\. Acquired during the marriage | | property | by gratuitous title | | | | | 2\. Acquired by gratuitous title | and fruits and income thereof | | during the marriage | | | | 2\. For personal and exclusive | | 3\. Acquired by right of | use, except jewelry | | redemption, barter or | | | | 3\. Acquired before the marriage | | exchange \[Art. 109\] | by either spouse | | | | | 4\. Purchased with exclusive | with legitimate descendants by a | | money | former | | | | | 5\. Bought on installment, paid | marriage \[Art. 92\] | | partly with conjugal | | | | 4\. Provided in the marriage | | funds and partly with exclusive | settlement \[Art. 91\] | | funds, if full | | | | | | ownership was vested before the | | | marriage \[Art. | | | | | | 118\] | | +-----------------------------------+-----------------------------------+