BUS. TAX CHAPTER 5 Flashcards
The transfer of the net estate of every decedent, whether resident or non-resident of the Philippines, as determined in accordance with the Code, shall be subject to the estate tax. The basis of estate tax is the net estate. This is arrived at by deducting from the gross estate the allowable deductions.
Net Taxable Estate
The TRAIN Law or RA ___ amended the graduated rates of estate tax under Section 84 of the NIRC to a fixed rate of _% based on net estate.
RA 10963
6%
Illustration: Mr. Fernan died leaving a net taxable estate of P400,000. The estate tax is _____ (P400,000 x 6%).
________________________________
Illustration: Mr. Fernan died leaving a net taxable estate of P13,000,000. The estate tax is _____ (P13,000,000 x 6%).
- 9,000
- 24,000
- 780,000
Net Estate and Estate Tax: Unmarried Decedent estate.
NET TAXABLE ESTATE
This chapter shall deal with the net estate subject to tax of an unmarried decedent.
The net estate subject to tax or net taxable estate is the basis for the computation of estate tax. Pro-forma computation follows:
Gross Estate
Less: Deductions
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Net Taxable Estate
The value of the net estate of a non-resident not a citizen of the Philippines shall be determined by deducting from the value of the gross estate situated in the Philippines at the time of death the following:
Non-Resident Alien Decedents
Non-Resident Alien Decedents determined by deducting from the value of the gross estate situated in the Philippines at the time of death the following:
Give 5
- Standard Deduction equivalent to P500,000
- Losses and Indebtedness subject to limitation
- Property Previously Taxed
- Transfers for Public Use
- Net Share of the Surviving Spouse in the Conjugal Partnership or Community Property
A ______ is an obligation contracted by the decedent when he was alive which he should have settled or paid during his lifetime. But because he died without paying this obligation and because said obligation is not terminated by his death, his estate is being
claim against the estate
The word “____” is generally construed to mean debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime and could have been reduced to simple money judgments. Claims against the estate or indebtedness in respect of property may arise out of: contract, tort or operation of law.
claims
The decedent-creditor during his lifetime must have lent another person-debtor a certain sum of money. Here, the creditor dies unable to collect from the debtor because of the debtor’s insolvency. Although the creditor’s death does not extinguish the right of his estate to collect from his debtor, the estate is being allowed a deduction for the claim because of the hopelessness of collection from the debtor by the estate
Claims Against Insolvent Persons
Allowed as deductions from gross estate are Claims of the Deceased Against Insolvent Persons as defined under R.A. ___ or The _____ (FRIA) of 2010 and other existing laws, where the value of the decedent’s interest therein is included in the value of the gross estate (Rev. Reg. 12-2018, TRAIN).
The incapacity of the debtors to pay their debts due to insolvency must be proven. The amount of receivable which is uncollectible may be allowed as a deduction from the gross estate.
R.A. 10142 or The Financial Rehabilitation and Insolvency Act (FRIA)
___ exists when the decedent leaves property encumbered by mortgage. For ___ to be deductible, the fair market value of the property mortgaged must be included in the gross estate in full. The unpaid mortgage deductible shall be to the extent that it was contracted bona fide and for an adequate and full consideration in money or money’s worth.
Unpaid Mortgages
– These are taxes which have accrued as of the death of the decedent but which were unpaid as of the time of death. This deduction will not include:
Unpaid Taxes
- income tax upon income received after death;
- property taxes not accrued before his death; or
- estate tax due from the transmission of his estate.
There shall also be deducted losses incurred during the settlement of the estate arising from:
: fires, storms, shipwreck, or other casualties, or robbery, theft or embezzlement,
Casualty Losses
The Tax Code also allows as deduction from the gross estate certain amount pertaining to property previously taxed (PPT). This is also referred to as vanishing deduction. This deduction is being allowed to lessen the impact of successive taxation of the same property within a very short period due to the death of the decedent-transferee.
Property Previously Taxed or Vanishing Deduction
Limitations on Amount Deductible
– The deduction is limited by the value of the property previously taxed or the aggregate value of such property if more than one item, as finally determined for the purpose of the prior estate tax (or gift tax) or the value of such property in present decedent’s gross estate, whichever is lower;
Value of the property
It is The initial value in no. 1 above shall be reduced by the total amount paid, if any, by the present decedent, on any mortgage or other lien on the property where a deduction was allowed, by reason of the payment, of such mortgage or other lien from the gross estate of the prior
Deduction for mortgage or other lien.
It is The value as reduced in no. 2 above shall be further reduced by an amount which bears the same ratio to the amounts allowed as deductions for losses, indebtedness, taxes, and transfers for public use as the amount otherwise deductible for property previously taxed bears to the value of the decedent’s gross estate. Note that family home, standard deduction, and amounts received under R.A. 4917 are not among the deductions hereunder.
Deductions for losses, etc.
The vanishing deduction shall be the
Percentage of deductions.
There shall be allowed as deduction from gross estate the amount of all bequests, legacies, devises or transfers to or for the use of the Government of the Republic of the Philippines, or any political subdivision thereof, for exclusive public purposes.
Transfers for Public Use
- The amount deductible from the gross estate as family home shall be the current fair market value of the decedent’s family home at the time of death. However, if the said current fair market value exceeds P10,000,000, the excess shall be subject to estate tax (TRAIN).
Family Home
