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TAX > Transfer Taxation - Part I > Flashcards

Transfer Taxation - Part I Flashcards

1
Q

What are the types of transfer?

A
  1. GRATUITOUS TRANSFER
  2. ONEROUS TRANSFER
  3. MIXED TRANSFER
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2
Q

Define GRATUITOUS TRANSFER

A

It is a transfer without consideration.

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3
Q

Define ONEROUS TRANSFER

A

It is a transfer with consideration.

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4
Q

What is another term for gratuitous transfer?

A

Donation

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5
Q

What are the transfer taxes on donation?

A

Donor’s Tax and Estate Tax

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6
Q

Define Donor’s Tax

A

It is a transfer tax imposed on donation (or transfer) inter-vivos.

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7
Q

Define Estate Tax

A
  1. It is a transfer tax imposed on donation (or transfer) mortis causa.
  2. It is a 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.
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8
Q

What is the tax imposed on donation effective during the lifetime of donor and donee?

A

Donor’s tax

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9
Q

What is the tax imposed on donation effective upon the death of the donor

A

Estate tax

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10
Q

What is the subject matter of a transfer tax?

A

It is the PRIVILEGE of the transferor to GRATUITOUSLY transfer PROPERTY or RIGHTS which takes effect at the date of death of the transferor or during the lifetime of the donor and the donee.

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11
Q

Name of transferor of property or rights effective during the lifetime of the same.

A

Donor

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12
Q

What should the amount of transfer tax be based on?

A

Net estate or net gifts

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13
Q

Even if the amount of transfer tax is based on net estate or net gifts, what shall it not be construed as?

A

Property tax.

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14
Q

What should be transfer tax classified as? What should it be imposed on?

A

“Excise tax” or privilege tax. It should be imposed on the ACT of passing the ownership of property and NOT on the VALUE of the property or right.

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15
Q

What governs estate taxation in force and at what time does it accrue?

A

The statute governs it in force at the time it accrues, which is at the date of death of the decedent.

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16
Q

What is the relation of the accrual of the tax to the obligation to pay the same?

A

Both are distinct from each other.

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17
Q

Upon death of decedent, what takes place? And what is the right of the State that vests immediately upon the same?

A

Succession takes place. The State by now has the right to impose taxes on the privilege to transmit the estate.

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18
Q

Define succession.

A

Succession is a MODE of acquisition by virtue of which, the (1) property, (2) rights and (3) obligations of a person are transmitted through his death to another or others either by his (1) will or by (2) operation of law (Art.774 NCC).

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19
Q

How much is the extent of the inherited obligation?

A

It is to the extent of the value of the inheritance.

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20
Q

How does Art. 766 of the NCC describe the inheritance?

A

The inheritance, including all the property, rights and obligations of a person, won’t be extinguished by decedent’s death.

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21
Q



What are the modes of acquiring property?

A
  1. Occupation
  2. Intellectual creation
  3. Law
  4. Donation
  5. Tradition
  6. Contract
  7. Prescription
  8. Succession
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22
Q

What are the KINDS OF SUCCESSION?

A
  1. Testamentary Succession
  2. Intestate Succession
  3. Mixed Succession
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23
Q

What is Testamentary Succession?

A

A type of succession that results from the DESIGNATION of an heir, made in a WILL executed in the FORM prescribed by law.

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24
Q

What is Intestate Succession?

A

Also known as legal succession, it is a type of succession which is effected by OPERATIONS OF LAW since the decedent either: (1) did not execute a will or (2) if the last will and testament executed by him is void.

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25
Q

What is the operation of law that effects succession based on?

A

The provisions of the civil code regarding succession

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26
Q

What are the ELEMENTS OF SUCCESSION?

A
  1. Decedent
  2. Estate
  3. Heirs
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27
Q

What are the TYPES OF HEIRS?

A
  1. Compulsory or Forced heirs
  2. Voluntary heirs
  3. Legal or Intestate heirs
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28
Q

Define Compulsory Heirs.

A
  1. Those who succeed by FORCE OF LAW to some PORTION of the inheritance, in an amount predetermined by law.
  2. They succeed whether the TESTATOR LIKES it or not “because the law reserved such portion for them.”
  3. They CANNOT BE DEPRIVED by the testator of their legitime.
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29
Q

What is the amount predetermined by law for succession known as?

A

Legitime

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30
Q

Compulsory heirs CANNOT BE DEPRIVED by the testator of their legitime, except by?

A

By disinheritance properly effected.

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31
Q

How much of the estate would be the legitime? To whom would this portion of the estate be transmitted?

A

75%. Compulsory Heirs, regardless of whether or not a last WILL AND TESTAMENT was prepared.

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32
Q

How much of the estate would be free? To whom would this portion of the estate be transmitted?

A

25%. Either compulsory and/or voluntary heirs can receive the estate, as provided in the last will and testament.

33
Q

In the absence of a will for the free portion (25%) of the estate, the portion of the estate shall be distributed to whom? And should it be based on what?

A

“Intestate heirs” based in the order of priority.

34
Q

Who are the Primary Compulsory heirs based on order or priority?

A
  1. Legitimate children and their legitimate descendants.
  2. Surviving spouse
  3. Illegitimate children and their descendants, either illegitimate or legitimate
35
Q

Who are the Secondary Compulsory heirs based on order of priority? What are the conditions for them to be eligible as heirs?

A
  1. Legitimate parents and legitimate ascendants. They inherit only in default of legitimate children and their legitimate descendants.
  2. Illegitimate parents. They inherit only in default of (1) legitimate children and their legitimate descendants; (2) illegitimate children and their descendants, either illegitimate or legitimate
36
Q

What is the status of brothers and sisters as heirs?

A

They are neither compulsory heirs nor strangers. However, they may be voluntary heirs.

37
Q

Define VOLUNTARY HEIRS.

A

They are those instituted by the testator as determined through the last WILL AND TESTAMENT to succeed to the inheritance of the portion thereof of which the testator can FREELY DISPOSE (the 25% free portion), meaning the allocation of the same is based on testator’s wishes.

38
Q

How is the 25% free portion determined?

A

It can be determined after deducting the legitimes of the compulsory heirs.

39
Q

Define intestate heirs.

A

They are those who succeed to the estate of the decedent by OPERATION OF LAW in the following circumstances: (1) ABSENCE of a WILL or (2) INCOMPLETE disposal of estate BY WILL.

40
Q

What is the order of intestate succession?

A
  1. Legitimate children or descendants
  2. Legitimate parents or ascendants
  3. Illegitimate children or descendants
  4. Surviving spouse
  5. Brothers and sisters, nephews and nieces
  6. Other collateral relatives within the 5th degree of consanguinity
  7. State
41
Q

What is the nature of estate tax?

A

It is an EXCISE tax imposed on the ACT of PASSING the ownership of property at the TIME OF DEATH and not on the value of the property or right.

42
Q

Define legitime.

A

It is part of a testator’s PROPERTY which he cannot dispose of because the law has reserved it for certain heirs who are, therefore, called compulsory heirs.

43
Q

Distinguish the ACCRUAL of estate tax from its DUE DATE.

A

Accrual: Right upon death of the decedent

Due Date: Within one year from death

44
Q

WHO HAS THE PERSONAL OBLIGATION TO FILE AND PAY THE ESTATE TAX?

A

Order of priority:
1. The administrator or executor
2. Any of the heir(s)

45
Q

Who should pay the estate taxes?

A

Estate as a juridical person

46
Q

What is the COMPOSITION OF THE GROSS ESTATE of a Citizen or resident?

A

Estate within and without the Philippines valuated with the following:
1. Real property wherever situated.
2. Tangible personal property wherever situated.
3. Intangible personal property wherever situated

47
Q

What is the COMPOSITION OF THE GROSS ESTATE of a resident alien?

A

Estate within and without the Philippines valuated with the following:
1. Real property wherever situated.
2. Tangible personal property wherever situated.
3. Intangible personal property wherever situated

48
Q

What is the COMPOSITION OF THE GROSS ESTATE of a Nonresident alien?

A

Estate within the Philippines only valuated with the following:
1. Real property situated in the Philippines
2. Tangible personal property located in the Philippines
3. Intangible personal property with situs in the Phils., unless excluded on the basis of reciprocity

49
Q

The tax code excludes “intangible” personal property with situs in the Philippines from the gross estate of a non-resident alien decedent if there is reciprocity.

When is there reciprocity?

A
  1. 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
  2. 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
50
Q

What are the following Intangible personal property with situs in the Philippines, for estate tax purposes?

A
  1. Franchise which must be exercised in the Philippines.
  2. Shares, obligations or bonds issued by any corporation or sociedad anonima (public limited company) 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 if 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 Philippines.
51
Q

What is the BIR form for filing of Estate Tax Return?

A

BIR Form 1801

52
Q

What is the formula for Estate Tax Due? For Estate Tax Payable?

A

Gross Estate
Less: Allowable Deductions
____________________________
Net Estate
Multiply by Estate Tax Rate (6%)
____________________________
Estate Tax Due
Less: Estate Tax Credit
____________________________
Estate Tax Payable
____________________________
____________________________

53
Q

How do we valuate gross estate in general?

A

Fair market value upon death

54
Q

How do we valuate gross estate if the same is a real property?

A

The higher between the following:
1. The FMV determined by the Commissioner (zonal value)
2. The FMV as shown in the schedule of values fixed by the provincial and city assessors (assessed value)

55
Q

How do we valuate gross estate if the same is a personal property?

A

Fair market value upon death
or
Acquisition cost less depreciation

56
Q

How do we valuate gross estate if it is composed of unlisted common shares?

A

Book value per share

57
Q

How do we valuate gross estate if it is composed of unlisted preference shares?

A

Par value

58
Q

How do we valuate gross estate if it is composed of listed shares?

A

FMV shall be the arithmetic mean between the highest and lowest quotation at a date nearest the date of death, if none is available on the date of death itself.

59
Q

How do we valuate gross estate if the same is the right to usufruct, use or habitation and annuity?

A

It would be valued in accordance with the latest Basic Standard Mortality Table taking into account the probable life of the beneficiary, to be approved by the Secretary of Finance upon recommendation of the Insurance Commissioner.

60
Q

What is referred to as the FMV determined by the Commissioner?

A

Zonal value

61
Q

What is referred to as the The FMV as shown in the schedule of values fixed by the provincial and city assessors

A

Assessed value

62
Q

Who would approve the valuation of gross estate if the same is the right to usufruct, use or habitation and annuity?

A

It is to be approved by the Secretary of Finance upon recommendation of the Insurance Commissioner.

63
Q

What is another term for intestate succession?

A

Legal succession

64
Q

What is another term for testamentary succession?

A

Testate succession

65
Q

What is a mixed succession?

A

It is a type of succession that is partly testamentary and partly intestate.

66
Q

What does the free disposition of property imply?

A

It means the testate or decedent can freely allocate the portion of the estate to any heir he wishes to succeed to this free portion of the inheritance by last will and testament.

67
Q

What article number of the Civil Code of the New Civil Code states that succession is a MODE of acquisition by virtue of which, the (1) property, (2) rights and (3) obligations of a person are transmitted through his death to another or others either by his (1) will or by (2) operation of law?

A

Art. 774

68
Q

What are two names transfer taxes can be classified as?

A
  1. Excise tax
  2. Privilege tax
69
Q

Among the intangible personal properties included in the composition of gross estate for tax purposes, it included shares, bonds or obligations issued by foreign corporations as long as a portion of those businesses are in the Philippines. How much is that portion?

A

85%

70
Q

Where will the property or rights go if the heir receiving it already died and there are no longer any stipulation transmitting the same to any more heir?

A

The property or rights of the estate will go to the State.

71
Q

In taxation, what also dies after taxpayer dies?

A

The Taxpayer Identification Number (TIN)

72
Q

Define Gross Estate

A

It consists of all properties (real or personal - tangible or intangible) owned by the decedent at the time of his death; however, it shall not include the separate (exclusive) properties of the surviving spouse.

73
Q

What are the properties to be included in the gross estate of a decedent?

A
  1. Properties owned by the decedent and physically present in his estate at the time of death
  2. Interest (whether legal or beneficial) in property or possessed by the decedent at the time of his death
74
Q

Cite an example of an interest (whether legal or beneficial) in property or possessed by the decedent at the time of his death

A

Usufructuary rights

75
Q

Give three additions to gross estate.

A
  1. Taxable transfers
  2. Claims against insolvent persons
  3. Conjugal/community properties, if decedent was married.
76
Q

In the composition of a gross estate, define taxable transfers.

A

They are made during lifetime, but are in nature of testamentary dispositions. The decedent remains in control of the property, and the transfer is intended to take effect at or after his death.

In short, it is a transfer inter vivos but a transfer mortis causa in substance.

77
Q

What is referred to when the transfer is described as “in the nature of testamentary dispositions”?

A

Mortis causa in substance

78
Q

List down six taxable transfers that are in addition to the gross estate.

A
  1. Transfers in contemplation of death
  2. Revocable transfers
  3. Property passing under a general power of appointment
  4. Transfer with retention or reservation of certain rights over the income or enjoyment of the property transferred
  5. Transfer for insufficient consideration
  6. Proceeds of life insurance
79
Q

What is the standard deduction of estate?

A

P5,000,000.00

TAX (6 decks)

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