Estate Tax Flashcards
CHARACTERISTICS OF TRANSFER TAX (PAEND)
- Proportional
- Ad Valorem
- Excise
- National
- Direct
Yes
Succession is where property, rights, and obligations are transferred through death of a decedent.
- Obligation = only up to amount of property and rights
Succession (Mortis Causa)
Yes
KINDS OF SUCCESSION
- Testamentary → with last will
- Legal / Intestate → without last will or void will
- Mixed
What do you call the one appointed by last will? the one appointed by court?
- Executor
- Administrator
Types of Heir
(DR)
Devisee - Real Property
Legatee - Personal Property
Estate Tax
- accrues from moment of death
- what is the deadline of filing and payment?
- who is the taxpayer?
- who is the one personally liable to pay and file?
- within 1 year from date of death
- estate
- primary : executor / administrator, secondary : heirs
Gross Estate
less : Deduction (Ordinary and Special)
Net Estate
less : Share of Surviving Spouse
Net Taxable Estate
x (what rate?)
Estate Tax
less Tax Credit / Payments
Estate Tax Payable
6% (6 letters = estate)
Taxability
- if RC
- if NRC
- if RA
- if NRA
R or C = within and without
NRA = within only
- intangible with reciprocity = ✘
different to income tax
Situs of Property
- receivables
- bank deposits
- shares from domestic company
- shares from foreign company
- debtor’s residence
- location of branch
- within
- without
within if
- >85% of business is located in PH
- acquired situs in PH
Valuation
- in general
- real property
- shares of stock (unlisted / common)
- shares of stock (unlisted / preference)
- shares of stock (listed)
- FMV at time of death
- higher of zonal value vs assessed value
- Book Value per share
- Par Value per share
- mean of highest and lowest quotation (date nearest to death)
INCLUSIONS
REAL PROPERTY AND PERSONAL PROPERTY
- movables and immovables
REVOCABLE TRANSFER
- take my house, give it back once I change my mind
RETENTION OF CERTAIN RIGHTS
- take my house, but I can still live on it
GENERAL POWER OF APPOINTMENT
- when I die, give my inheritance to whoever you like
- ✘ → SPA
TRANSFER IN CONTEMPLATION OF DEATH
VOID TRANSFER
Yes
INCLUSIONS
Insufficient Consideration
- what are the 2 steps?
1st Step → FMV @ Transfer vs Consideration
2nd Step → FMV @ Death less Consideration
INCLUSIONS
Proceeds of Life Insurance
- taken out by decedent upon his own life
Beneficiary is estate, executor, administrator
- revocable vs irrevocable
Beneficiary is 3rd party
- revocable vs irrevocable
EEA
- treat as extension of decedent (always inclusion)
3rd Party (rules of revocability)
- revocable → inclusion
- irrevocable → exclusion
INCLUSIONS
Claim Against Insolvent Persons
- insolvent → incapacity to pay should be proven
- priority → goverment before creditors
What is the treatment for CAIP?
Gross Estate → Amount of Receivable
Deduction → Amount of Uncollectible
EXCLUSIONS
Bequest to Institutions
- maximum ? is for administrative purposes
What is the treatment for bequest?
- 30%
- Gross Estate → Amount of Bequest
- Deduction → Amount of Bequest
EXCLUSIONS
Fiduciary Heir to Fideicommissary
- like SPA but 2 heirs → only 1 degree apart
X → A → B
- X → A = subject to estate tax
- A → B = not subject to estate tax
EXCLUSIONS
MERGER OF USUFRUCT IN OWNER OF NAKED TITLE
WAR DAMAGES, VETERANS, SSS, GSIS
Yes
ORDINARY DEDUCTIONS (LIT + TPU + VD)
Losses
- incurred within 1 year from date of death
- casualty losses (SHIFTERS)
- not compensated by insurance
- not claimed as deduction in income tax
Yes
ORDINARY DEDUCTIONS (LIT + TPU + VD)
Indebtedness
- Claims Against the Estate (COGSN)
- Mortgage Payable
What is the treatment for Mortgage Payable?
- not condoned
- good faith
- statement of disposition (3 years before death)
- notarized
Mortgage Payable
- Gross Estate → Amount of Mortgaged Property
- Deduction → Amount of Mortgage Payable
ORDINARY DEDUCTIONS (LIT + TPU + VD)
Taxes
- unpaid at point of death
Yes
ORDINARY DEDUCTIONS (LIT + TPU + VD)
Transfer for Public Use
- donation to government (public use nga e)
- must be stated in last will
What is the treatment for TPU?
- Gross Estate → Amount of Donation
- Deduction → Amount of Donation
ORDINARY DEDUCTIONS (LIT + TPU + VD)
Vanishing Deduction (PAPIN 5)
- Philippines
- Ascertained to be received from prior decedent
- Paid by prior decedent (donor OR estate tax)
- Included in gross estate of prior decedent
- No previous vanishing deduction
- 5 years from death of prior decedent
How to solve Vanishing Deduction?
Value to take (lower of FMV at death vs FMV at transfer)
- less : Mortage PAID by present decedent
Initial Basis
- less : (Initial Basis / Gross Estate) x LIT + TPU
Final Basis
- x Vanishing Rate
Vanishing Deduction
Vanishing Rate
≤ 1 year = 100%
≤ 2 years = 80%
≤ 3 years = 60%
≤ 4 years = 40%
≤ 5 years = 20%
SPECIAL DEDUCTIONS
Treatment for SD
- Gross Estate → Whole Amount
- Deduction → Deductible Amount
Yes
