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2. Non-resident alien:
1) Real or immovable property located in the Philippines.
2) Tangible personal property located in the Philippines.
3) Intangible personal property with situs in the Philippines subject to the
rule of reciprocity exemption.
Taxable Transfers:
1) Transfer in contemplation of death (3-year presumption repealed by
PD 1705, 8/1/80)
2) Transfer with retention or reservation of certain rights.
3) Revocable transfer.
4) Transfers of property under general power of appointment.
a. Existence of general power of appointment held by the decedent.
b. Exercise of such power by the decedent by will or by deed
intended to take effect upon death.
c. Passing of property by virtue of such death.
5) Transfers for insufficient consideration.
a. Covers only the excess of the fair market value over the value of
the consideration.
b. Transfer was made in contemplation of death, otherwise will be
subject to donors's tax.
Kinds of Property:
1) By Nature:
a. Real or immovable property.
b. Personal property, tangible or intangible.
2) By Ownership:
a. Exclusive capital or paraphernal property.
b. Conjugal or community property.
Personal Properties:
1) Shares of stocks, bonds and securities.
2) Interest in partnerships, business or industry.
3) Cash on hand and in banks.
4) Machineries, transportation equipments, farm implements, tools, farm
animals, etc.
5) Antiques, jewelry, silverware, paintings, etchings, engravings,
books, statues, vases, oriental rugs, collection of stamps and coins.
6) Household furnitures, fixtures, appliances and other personal effects.
7) Usufruct, annuities, use or habitation.
8) Mortgage notes, participation certificates, judgements, obligations and
action which have for their object movables or demandable sums.
9) Goodwill, patents, and trademarks.
Exclusions and Exemption from the Gross Estate:
1) Exempted under Special Laws and Exemptions by Omission:
a. GSIS proceeds/benefits
b. Accruals from SSS
c. Proceeds of life insurance where the beneficiary is irrevocably
appointed.
d. Proceeds of life insurance under a group insurance taken by
the employer (Not taken out by the decedent upon his own life)
e. WAR damage payments.
f. USVA -RA 136.
g. Properties held in trust by decedent.
h. Transfer by way of bonafide sales.
i. Transfer of property to the National Government or to any of its
political subdivisions.
j. Separate property of the surviving spouse.
2) Exempted under the Tax Code:
a. Merger of usufruct in the owner of the naked title.
b. Transmission or delivery of the inheritance or legacy by the
fiduciary heir or legatee to the fideicommissary.
c. Transmission from the first heir, legatee or donee in favor
of another beneficiary in accordance with the desire of the
predecessor.
d. All bequests, 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 that not more than 30% of which shall be used for
administration purposes (PD 507, 1974)
Allowable Deductions:
1) Expenses, losses, indebtedness and taxes:
a. Funeral expenses:
i. CA 466 (July 1, 1939) - 5% of gross estate
ii. PD 69 (January 1, 1973) - 5% of gross estate but not
exceeding P50,000.00
iii. RA 7499 (July 28, 1992)- 5% of gross estate but not
exceeding P100,000.00.
iv. RA 8424 (January 1, 1998)- 5% of gross estate but not
exceeding P200,000.00
b. Judicial expenses.
c. Claims against the estate
i. Claims against insolvent persons
ii. Unpaid mortgages or indebtedness
iii. Unpaid taxes
iv. Losses
v. Transfer for public purposes
vi. Vanishing deduction (Property previously taxed)
d. Share of the surviving spouse in the net conjugal properties – ½
of the net conjugal properties.
e. Family Home - Amount allowable is equivalent to the current or
fair market value or zonal value of the decedent's family home,
whichever is higher, but not exceeding P1,000,000.
i. Must not exceed the value included in the gross estate
or P1,000,000, whichever is lower.
ii. The amount in excess of P1,000,000 shall be subject to
estate tax.
iii. Must be the decedent's family home as certified to by
the Barangay Captain in the locality.
iv. Only one (1) family home may be claimed.
f. Standard Deduction of P1,000,000.
g. Medical Expenses incurred within one year from death in an
amount not exceeding P500,000.00.
h. Amount Received by heirs under RA No. 4917.
i. Deductions allowable to a non-resident decedent who is not a
citizen of the Philippines:
i. A proportion of the expenses, losses, indebtedness and
taxes:
Formula:
Phil. Gross Estate
------------------------- X Expenses, losses,
indebtedness & taxes
World Gross estate
Vanishing Deduction
Requisites:
1) Present decedent must have died within five (5) years from the date of
death of prior decedent or date of gift.
2) The property with respect to which deduction is claimed must have
formed part of the gross estate situated in the Philippines of the prior
decedent or taxable gift of the donor.
3) The property must be identified as the same property received from
the prior decedent or donor or the one received in exchange therefore.
4) The estate taxes on the gift must have been finally determined and
paid.
No vanishing deduction on the property was allowed to the
prior estate.
5) Determine the year interval between the date of death of the prior and
present decedent or date of gift and death of present decedent to find
the applicable percentage deduction:
0 - 1 year - 100%
1 - 2 " - 80%
2 - 3 " - 60%
3 - 4 " - 40%
4 - 5 " - 20%
5 over - 0%
The final basis (Step (d) multiplied by the percentage deduction (Step (e) will
be the vanishing deduction allowable.
Conjugal properties
-------------------------------------------------------------------------------- P7,000,000.00
Conjugal family
home------------------------------------------------------------------------------- 3,000,000.00
Property valued for P4,000,000 was inherited from his
father who died on June 30, 1997 together with a
mortgage loan of P1,000,000 which
was paid by "A" on April 30, 1998
------------------------------------------------------------- 5,000,000.00
Gross estate
-------------------------------------------------------------------------------------- P15,
000,000.00
Less: Deductions:
Expenses, losses, indebtedness, taxes
& transfer for public use -------------------------------------------------------------------
P2,000,000.00
Share of surviving spouse:
Conjugal properties --------------------------------------------------------------------------
P10,000,000.00
Less: Conjugal
deduction ---------------------------------------------------------------------- 2,000,000.00
Net conjugal estate
--------------------------------------------------------------------------- P 8,000,000.00
1/2 share of surviving spouse ------------------------------------------------------------------
P 4,000,000.00
Family home
-----------------------------------------------------------------------------------------
1,000,000.00
Vanishing deduction (80%)
Inherited property -----------------------------------------------------------------------------
P 4,000,000.00
Less: Mortgage paid
----------------------------------------------------------------------------- 1,000,000.00
Initial basis [Step
(b)]---------------------------------------------------------------------------- 3,000,000.00
Less:
3,000,000 x P2,000,000
-------------------------------------------------------------------- 400,000.00
15,000,000.00
Final basis [Step (d)] ---------------------------------------------------------------------------
P 2,600,000.00
80% Vanishing deduction [Step (e)]
---------------------------------------------------------- 2,080,000.00
Total deductions
-------------------------------------------------------------------------------- P
9,080,000.00
Net taxable estate
-------------------------------------------------------------------------------- P
5,920,000.00
Computation of estate tax:
P5,000,000
---------------------------------- P465,000.00
920,000 @ 15%
------------------------- 138,000.00
Total estate tax due
------------------------------- P 603,000.00
Concept of Consideration:
1. Consideration must be measurable in money or money's worth. Mere
legal consideration is not sufficient.
2. The consideration must flow to the donor, mere detriment to the donee
does not satisfy the purpose of the statute.
Commissioner V. Wemyss (324 U.S. 303, 1945)
Marriage is not a consideration reducible to money value. If a person
transfers a property to a trust in consideration of marriage, a gift is
made because no money consideration flows to the transferor/donor.
Donative intent on the part of the tranferor is not an essential element
for the imposition of the gift tax to the transfer.
Kinds of Donation:
1. Inter-vivos
2. Mortis causa
3. Indirect donation (Except real property referred to in Section 24(D) and
Section 27(D)(5) of the NIRC).
Answer: