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TAX > Gross Estate > Flashcards

Gross Estate Flashcards

1
Q

Tax imposed on the privilege that a person is given in controlling to a certain extent, the disposition of his property to take effect upon death

A

Estate Tax

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2
Q

For the performance of the services rendered by the government in the distribution of the estate of the decedent and other benefits that accrue to the estate and the heirs, the State collects the tax.

A

Benefit-Received Theory

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3
Q

Under this theory, inheritance is not a right but a privilege granted by the State and legatees have been acquired only with the protection of the State.

A

Privilege or State Partnership Theory

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4
Q

Receipt of inheritance which is in the nature of an unearned wealth or windfall, are place assets into the hands of the heirs and beneficiaries.

A

Ability to Pay Theory

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5
Q

The receipt of inheritance is a contributing factor to the inequalities in wealth and incomes. The imposition of estate tax reduces the property received by the successor, thus helping to promote equitable distribution of wealth in society.

A

Redistribution of Wealth Theory

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6
Q

Composition of Gross Estate based on citizenship and residency

A
  • Citizen & Resident Alien
    1. Property (Real or Personal) wherever situated
    2. Intangible personal property wherever situated
  • Nonresident Alien
    1. Real Property situated in the PH
    2. Tangible personal property situated in the PH
    3. Intangible personal property with situs in the PH unless excluded on the basis of reciprocity
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7
Q

Reciprocity Clause

A

There is reciprocity if:

  • The decedent at the time of his death was a resident citizen of a foreign country which at the time of his death did not impose an estate tax of any character in respect of intangible personal property of citizens of the Philippines not residing in that foreign country; or
  • The laws of the foreign country of which the decedent was a resident citizen at the time of his death allow a similar exemption from estate taxes of every character, in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country.
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8
Q

Situs of Intangible Personal Property

A

Domicile of the owner (Mobilia Sequntur Personam)

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9
Q

Intangible Assets with Situs within the PH

A
  1. Franchise which must be exercised in the Philippines.
  2. Shares, obligations or bonds issued by any corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws.
  3. Shares, obligations or bonds issued by any foreign corporation, 85% of the business of which is located in the Philippines.
  4. Shares, obligations, or bonds issued by any foreign corporation it. such shares, obligations or bonds have acquired a business situs in the Philippines.
  5. Shares or rights in any partnership, business, or industry established in the PH
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10
Q

Situs of Tangible and Intangible Property

A
  • Real Property and Tangible Personal Property
    > Location of the property
  • Shares, Franchise, Copyright, and the like
    > Where the intangible is exercised regardless of where the corresponding certificate is stored
  • Receivables
    > Residence of the debtor
  • Bank deposit
    > Location of the depository bank
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11
Q

Valuation of Gross Estate

A
  • In General - FMV at the time of death
  • Real Property - higher between ZV or Assessed Value
  • Personal Property - FMV at the time of death
  • Shares of stock
    > Unlisted Common - BV per share
    > Unlisted Preference - Par value per share
    > Listed - arithmetic mean bet. the highest and lowest quotation at a date nearest the date of death if none is available on the death itself
  • Units of participation in any assoc, recreation or amusement club
    > bid price nearest the date of death published in any newspaper or publication for general circulation
  • Right to usufruct, use or habitation, and annuity
    > in accordance with the latest Basic Standard Mortality Table taking into account the probable life of the beneficiary
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12
Q

Exemptions from the Gross Estate

A
  1. Exclusive property of the surviving spouse
  2. Property outside the Philippines of a non-resident alien decedent
    3.Intangible personal property in the PH of a non-resident alien under the Reciprocity Law
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13
Q

Exclusions from the Gross Estate

A
  1. Merger or usufruct in the owner of the naked title
  2. Transmission or deliver of the inheritance or legacy by the fiduciary heir (1st heir) or legatee to the fideicommisary (2nd heir)
  3. Transmission from the first heir, legatee, donee in favor of another beneficiary
  4. All bequest devises, legacies, or transfers to social welfare, cultural and charitable institutions, no part of the net income of which inures to the benefit of any individual (provided however that not more than 30% of the said bequest shall be used by such institutions for administrative purposes.
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14
Q

Right or privilege to enjoy the use and advantages of another’s property

A

Usufruct

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15
Q

Merger of usufruct in the owner of the naked title

Mr. Yumao devised his parcel of land as follows:
- Naked ownership to Pedro, his grandson
- Usufruct to Juan, his son, for as long as he lives

Should Juan include the parcel of land in his Gross Estate?

A

No. The parcel of land should be excluded in his GE.

Pedro is the intended owner of the land therefore, the usufruct will be merged to his naked title upon Juan’s death and will be included in his GE.

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16
Q

Exists when the donee-decedent can appoint only from a restricted or designated class of persons other than himself.

A

Special Power of Appointment (SPA)

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17
Q

True or False

Property transferred under SPA should be excluded from the gross estate of the donee of the power because the donee-decedent only holds the property in trust.

A

TRUE

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18
Q

Transmission or delivery of the inheritance or legacy by the fiduciary heir/legatee to fideicommisary

A

Fideicommisary transfer of property is in substance, the same with transfer of property under SPA, except that the relationship of the 1st heir and 2nd heir should not be more than one (1) degree apart

19
Q

Elements of a fideicommisary substitution

A
  • Substitution must not go beyond one degree from the heir originally instituted
  • The fiduciary and fideicommisary must be both living at the time of the testator’s death
20
Q

Exclusions under Special Laws

A

TBF

21
Q

Decedent’s Interest

A

To the extent of the interest therein of the decedent at the time of death shall be included in the gross estate.

22
Q

Transfers in contemplation of death

A

Disposition of property prompted by thought of death.

  1. Transfer of property in favor of another person, but the transfer was intended to take effect only upon the transferor’s death.
  2. Transfer by gift intended to take effect at death, or after death, or under which the donor reserved the income or the right to designate the persons who should enjoy the income.
  3. Transfer with retention or reservation of certain rights.
23
Q

A transfer where the terms of enjoyment of the property may be altered, amended, revoked or terminate by the decedent.

A

Revocable Transfers

24
Q

Power of appointment authorizes the donee of the power to appoint any person he pleases.

A

General Power of Appointment

25
Q

Modes of Power of Appointment

A

a. By will

b. By deed to take effect in possession or enjoyment at or after his death

c. By deed under which he has retained for his life or any period not ascertainable without reference to his death or for any period which does not in fact end before his death.

d. The possession or enjoyment of or right to the income from the property.

e. The right, either alone, or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom.

26
Q

Transfers for Insufficient Consideration

A

Sale or transfer (other than a bonafide or valid sale) was made for a price less than its FMV

> the excess of the FMV of the transferred property at the time of death over the value of the consideration received - included in GE

  • FMV at the time of sale or transfer
    > consideration received = FMV — considered a valid sale. NOT subject to estate tax
27
Q

Rule (Transfer of property)

A

No consideration received ar the date of transfer and was made in contemplation of death — INCLUDED in GE

No consideration received at the date of transfer and was NOT made in contemplation of death — Donor’s Tax

28
Q

Miscellaneous Items

Claims against insolvent persons

A

As a rule regardless of the amount the debtor is unable to pay, the full amount of the claim against the insolvent person should be included in the gross estate of the decedent.

Uncollectible portion - deduction from the gross estate

Collectible portion - (D-Assets / D-Liab) x Claims
Uncollectible = Full amount - Collectible

29
Q

Miscellaneous Items

Proceeds of Life Insurance

A

Requisites:
1. It must be an insurance on the life of the decedent;
2. Beneficiary must be either:
> His estate or executor/administrator (revocable or not)
> Any third person provided that the designation is not irrevocable

Policy does not expressly say that the designation is irrevocable - presumed REVOCABLE

Group insurance - not subject to estate tax

30
Q

Estate Tax Rate

A

6% of Net Estate of Decedent (Resident or Non-resident)

31
Q

The Law that governs the imposition of Estate Tax and Accrual of Estate Tax

A

Statute in force at the time of death of the decedent

32
Q

Filing of Estate Tax Return and Payment of Estate Tax Due

A

Paid by the executor/administrator or any of the legal heirs at the time the return is filed.

  • Primary responsibility to file and pay - Executor or administrator
  • Secondary responsibility to file and pay - any of the heirs
33
Q

Situations wherein an estate tax return shall be filed under oath

A
  1. In cases of transfer subject to Estate Tax
  2. Where regardless of the gross value, the estate consists of registered or registrable property such as real property, motor vehicle, share of stocks or other similar property for which a Certificate Authorizing Registration from the Bureau of Internal Revenue (BIR) is required as a condition precedent for the transfer of ownership thereof in the name of the transferee, the executor or the administrator, or any of the legal heirs, as the case may be.
34
Q

Filing and Payment of Estate Tax

A
  • Estate tax returns with gross value > 5M
    > shall be supported with a statement duly certified to by a CPA containing the following:
    a. Itemized assets of the decedent with their corresponding gross value at the time of his death
    b. Itemized deductions allowed from the gross estate under S86 of the Tax Code
    c. Amount of tax due, whether paid or still due and outstanding
35
Q

Time for Filing the Estate Tax Return

A

Within 1 year from the decedent’s death

The court approving the project of partition shall furnish the Commissioner with certified copy thereof and its order within 30 days after promulgation of such order

36
Q

Extension of Time to File the Estate Tax Return

A

Not exceeding 30 days for filing the return

Filed with the Revenue District Office (RDO)

37
Q

Time for Payment of the Estate Tax

A

Paid at the time the return is filed

38
Q

Extension of Time to Pay the Estate Tax

A

Not to exceed 5 years - Judicial Settlement

2 years - Extrajudicial Settlement

39
Q

Cash Installment

A

a. Made 2 years from the date of filing of the ETR (BIR Form 0605)
b. Diled within 1 year from the death of decedent
c. Frequency of deadline and amount shall be indicated
d. Lapse of 2 years - remaining balance will be due and demandable
e. No civil penalties

40
Q

Request for Extension of Time, Installment Payment and Partial Disposition of Estate

A

Filed with the Revenue District Officer

Estate is required to secure its TIN and file the ETR.

Request shall be approved by the Commissioner or his duly authorized representative.

41
Q

Place of Filing the Return

A

In case of resident decedent
> Administrator or executor shall:
- register the estate of the decedent and secure a new TIN from the RDO where the decedent was domiciled at the time of his death
- file the ETR and pay estate tax with the Accredited Agent Bank

42
Q

Place of Filing the Return

A

In case of non-resident decedent (citizen or alien)
> the administrator or executor in the PH shall:
- file ETR and secure TIN from RDO where such executor or administrator is registered

If executor is not registered, from RDO having during jurisdiction over the executor’s legal residence

43
Q

Civil penalties and interest

A

Any amount paid after the statutory due date of the tax, but within the extension period, shall be subject to interest but NOT to surcharge.

25% - if there is no false or fraudulent intent
50% - if there is false, malice or fraudulent intent

Basis of interest - unpaid amount of tax from the date computed until fully paid.

TAX (6 decks)

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