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2
Estate
Tax
I.
A. Introduc:on
A. Introduc:on
Lorenzo
v.
Posadas
1. When
does
the
estate
tax
accrue?
Upon
the
death
of
the
decedent.
Inheritance
taxa:on
is
also
governed
by
the
statute
in
force
at
the
:me
of
the
death
of
the
decedent
Slide No. 3
Slide No. 4
A. Introduc:on
Slide No. 5
Slide No. 6
Slide No. 7
Slide No. 8
Slide No. 9
Slide No. 10
Slide No. 11
Slide No. 12
Slide No. 13
Slide No. 14
Slide No. 15
Slide No. 16
4. Illustra:on:
Sr.
donates
house
and
lot
to
Jr.
in
a
Deed
of
Dona:on
purportedly
transferring
ownership
over
the
house
and
lot
to
Jr.
In
a
side
agreement,
however,
it
was
agreed
that
:tle
to
the
house
and
lot
and
possession
would
be
transferred
only
to
Jr.
upon
the
death
of
Sr.
In
the
mean:me,
Sr.
would
con:nue
to
live
in
the
house
and
lot
and
retain
possession
un:l
his
death
Slide No. 17
Slide No. 18
3. Illustra:ons:
period
a. For
life:
decedent
transfers
property
to
a
trust
with
the
income
therefore
payable
to
himself
for
as
long
as
I
live
and,
upon
his
death,
the
corpus
shall
be
distributed
to
his
children
b. For
a
period
not
ascertainable
without
reference
to
the
decedents
death:
decedent
transfers
property
to
a
trust,
with
income
therefrom
payable
to
himself
quarterly
for
life
but,
under
the
trust
agreement,
the
decedent
is
to
receive
none
of
the
trust
income
for
the
calendar
quarter
in
which
he
dies
c. For
a
period
which
does
not
in
fact
end
before
decedents
death:
decedent,
aged
40,
transfers
property
to
a
trust
with
the
trust
agreement
providing
that
decedent
shall
receive
the
trust
income
for
10
years,
at
the
end
of
which
period,
the
trust
terminates
and
the
corpus
shall
be
distributed
to
the
decedents
children.
The
decedent
dies,
however,
within
the
10-year
period
A"y.
Terence
Conrad
H.
Bello
Slide No. 19
Slide No. 20
Slide No. 21
Slide No. 22
Slide No. 23
Slide No. 24
1. Elements
of
85(C)
a. Transfer
of
property
was
made
(by
trust
or
otherwise);
b. but,
the
enjoyment
thereof
was
subject
to
change
(at
the
date
of
decedents
death);
c. through
the
exercise
of
a
power
(in
whatever
capacity
exercisable
and
without
regard
to
when
or
from
what
source
the
decedent
acquired
the
power);
by
the
decedent
(alone
or
in
conjunc:on
with
any
other
person);
d. power
exercised
is
the
power
to
alter,
amend,
revoke
or
terminate
the
transfer;
e. or
where
any
such
power
is
relinquished
in
contempla:on
of
death
A"y.
Terence
Conrad
H.
Bello
Slide No. 25
Slide No. 26
Slide No. 27
Slide No. 28
Slide No. 29
Slide No. 30
Slide No. 31
3. Illustra:on:
A
transfers
property
to
a
trust,
with
B
as
income
beneciary,
and
granted
C
the
right
to
direct
the
trustee,
by
will,
to
transfer
the
property
to
anybody
whom
C
nominates.
The
anybody
could
be
C
(i)
himself,
(ii)
his
creditors,
(iii)
his
estate,
(iv)
the
creditors
of
his
estate,
or
(v)
anybody
else
in
the
world
A:
prior
decedent
(grantor
of
power
of
appointment)
C:
decedent
(grantee
of
power
of
appointment)
Anybody:
successors
who
will
succeed
to
the
property
Thus,
if
C
(the
decedent)
exercised
or
released
the
general
power
of
appointment
by
will
or
by
deed
in
certain
instances,
the
property
subject
to
the
power
will
be
included
in
Cs
gross
estate
A"y.
Terence
Conrad
H.
Bello
Slide No. 32
Slide No. 33
Slide No. 34
Slide No. 35
Slide No. 36
37
Slide No. 38
100,000
100,000
180,000
None
100,000
60,000
180,000
120,000
100,000
None
180,000
180,000
Slide No. 39
40
A. Exempt Transfers
A. Exempt Transfers
Slide No. 41
2. Examples:
P
died
leaving
a
piece
of
land
to
Q
in
usufruct
(right
to
enjoy
the
fruits),
and
to
R
in
naked
ownership
(without
the
right
to
the
fruits).
The
land
is
subject
to
estate
tax
in
the
estate
of
P.
Upon
the
death
of
Q,
the
usufruct
shall
be
merged
into
the
naked
ownership
of
R,
who
shall
then
become
the
absolute
owner
of
the
property.
The
transmission
of
the
usufruct
from
Q
to
R
shall
be
exempt
from
estate
tax
Slide No. 42
A. Exempt Transfers
2. Examples:
S
died
leaving
a
piece
of
land
to
T,
a
grandson,
to
be
owned
by
him
for
4
years,
with
the
obliga:on
to
preserve
it,
aKer
which,
one-half
shall
be
given
to
U,
a
great
grandson,
and
the
other
half
to
be
retained
by
T.
This
is
deicomissary
subs:tu:on.
The
duciary
heir,
T,
is
entrusted
with
the
obliga:on
to
preserve
the
property
and
transit
it
to
the
deicomissary
heir,
U,
with
the
subs:tu:on
not
going
beyond
one
degree
from
the
heir
originally
ins:tuted,
and
both
heirs
being
alive
at
the
:me
of
the
testators
death.
The
transmission
from
S
to
T
is
subject
to
estate
tax.
The
transmission
from
T
to
U
shall
be
exempt
from
estate
tax
A"y.
Terence
Conrad
H.
Bello
Slide No. 43
44
Slide No. 45
A. ELITE
Slide No. 46
A. ELITE
1. Funeral
expense
a. Actual
funeral
expense
b. 5%
of
gross
estate
c. P200,000
Whichever
is
the
lowest
among
a,
b,
or
c
Rule
of
thumb:
cut
o
point
is
the
interment
or
burial;
expenses
incurred
aKer
the
burial
or
interment
will
not
be
deduc:ble
Slide No. 47
Slide No. 48
A. ELITE
A. ELITE
Slide No. 49
A. ELITE
Slide No. 50
A. ELITE
Examples:
a. Fees
of
executor
or
administrator
b. A"orneys
fees
c. Court
or
ling
fees
d. Accountants
fees
e. Appraisers
fees
f. Clerk
hire
g. Cost
of
preserving
and
distribu:ng
the
estate
h. Costs
of
storing
or
maintaining
the
property
i. Brokers
fees/commissions
for
selling
the
property
Slide No. 51
Slide No. 52
A. ELITE
B. Vanishing Deduc:on
7. Casualty
Losses
Arising
from
re,
storm,
shipwreck,
or
other
c a s u a l : e s ,
o r
f r o m
r o b b e r y ,
t h e K
o r
embezzlement
Must
not
be
compensated
for
by
insurance
or
otherwise
Must
not
have
been
deducted
for
income
tax
purposes
Losses
were
incurred
not
later
than
the
:me
required
to
pay
the
estate
tax
(6
mos.)
A"y.
Terence
Conrad
H.
Bello
Slide No. 53
B. Vanishing Deduc:on
Slide No. 54
B. Vanishing Deduc:on
8. Vanishing
deduc:on
Property
may
change
hands
several
:mes
within
a
very
short
period
of
:me
by
reason
of
death
of
the
owner
shortly
aKer
receiving
the
property
by
giK
or
inheritance
Example:
Father
dies
in
2010
leaving
a
house
and
lot,
survived
by
an
only
son.
The
son
inherits
the
the
H&L.
in
2011,
the
son
died
in
a
vehicular
accident.
The
H&L
will
form
part
of
the
sons
estate
which
will
again
be
subject
to
estate
tax
This
subjects
the
property
to
double
taxa:on,
because
the
tax
is
imposed
on
each
transfer
The
vanishing
deduc:on
is
meant
to
mi:gate
the
eects
of
double
taxa:on
Slide No. 55
Amount
deduc:ble:
100%
of
value:
if
prior
decedent
died
within
one
year;
80%:
>
one
year
<
two
years
60%:
>
two
years
<
three
years
40%:
>
three
years
<
four
years
20%:
>
four
years
<
ve
years
Slide No. 56
D. Family Home
Slide No. 57
E. Standard Deduc:on
Slide No. 58
F. Medical Expenses
Slide No. 59
Slide No. 60
Slide No. 61
Slide No. 62
63
Slide No. 64
Administra:ve Provisions
65
Administra:ve Provisions
Personal Proper:es
P2,000,000.00
--
Family
Home
Taxable
Transfers
Conjugal
P5,000,000.00
--
6,500,000.00
--
--
Total
P7,000,000.00
--
6,500,000.00
--
GROSS ESTATE
2,000,000.00
11,500,000.00
13,500,000.00
(500,000.00)
(2,000,000.00)
(2,500,000.00)
1,500,000.00
9,500,000.00
11,000,000.00
(1,000,000.00)
(1,000,000.00)
Standard Deduc:on
(1,000,000.00)
(1,000,000.00)
Medical Expenses
(500,000.00)
(500,000.00)
Sub-total
7,000,000.00
Slide No. 66
Administra:ve
Provisions
Exclusive
(3,500,000.00)
P5,000,000.00
P135,000.00
330,000.00
465,000.00
--
--
Total
TAX
PAYABLE
--
P465,000.00
(3,500,000.00)
5,000,000.00
Slide
No.
67
Slide No. 68
Administra:ve Provisions
TAX
2
Donors
Tax
Slide No. 69
A. Meaning of GiK
A. Meaning of GiK
CIR
v.
Duberstein
Illustra:on
of
a
non-taxable
giK
vs.
taxable
compensa:on
for
services
rendered
Court
found
that
the
Cadillac
was
a
recompense
for
Dubersteins
past
services,
or
an
inducement
for
him
to
be
of
further
service
in
the
future
CIR v. Duberstein
Slide No. 71
Slide No. 72
A. Meaning of GiK
Slide No. 73
Slide No. 74
Slide No. 75
Slide No. 76
Slide No. 77
Slide No. 78
Slide No. 79
Slide No. 80
Slide No. 81
Slide No. 83
Slide No. 82