TAXATION LAW I

ESTATES AND TRUSTS

Louella O. Janda

WHAT IS ESTATE?

Estate refers to the mass of properties

left by a deceased person.
Estate under administration or judicial

settlement is a taxable entity.

It is subject to income tax in the same
manner as individuals. Its own status is
dependent on the status of the decedent
prior to his death.
Personal exemption P20, 000.00

 If the taxpayer should die during the taxable year,

his estate may still claim the personal and

additional exemptions for himself.
Distribution to the heirs during the taxable year is
deductible from estate income which distributed
share would then form part of the recipient heirs
respective income.
Where no distribution to the heirs was made during
the taxable year that the income is earned, which is
then subject to income tax payment by the estate,
the subsequent distribution thereof after tax, is no
longer taxable on the part of its recepient.

WHAT IS TRUST ?

It is the right to the property, whether

real or personal, which is held by one
person for the benefit of another..

Taxable trusts

Trust, income of which is to be

accumulated
Trust, at the discretion of the fiduciary,
either distribute or accumulate the
income

Rules on Taxability

Taxable to beneficiary
Income of the trust for the taxable year

which is to be distributed to the

beneficiaries

Taxable to trustee or fiduciary

Income of the trust which is to be

accumulated or held for future

distribution , whether consisting of
ordinary income or gain from sale of assets
included in the Corpus of the estate

Exceptions:
1. Revocable trust
-taxable to grantor or trustee
2. Income is held for the benefit of the
grantor
-taxable to the grantor

Note:
Income of the trust shall be included in
computing the taxable income of the
grantor where the power to revest title to
any part of the corpus of the trust is vested:
1. In the grantor, either alone or in
conjunction with any person not having a
substantial adverse interest in the
disposition of the corpus or the income
therefrom; or

2. In any person not having a

substantial adverse interest in the
disposition of the corpus or the income
therefrom

COMPUTATION OF TAX ON
ESTATE AND TRUST

Allowable deductions same as individual

Special deductions
Personal exemption P20,000.00
Amount of income which is to be distributed

currently to the beneficiaries

Amount of income collected by a guardian of
an infant which is to be held or distributed as
the court may direct. However, the amount
allowed a s deduction shall be included in
computing the net income of the heir, legatee
or beneficiary

Note: Deductions are not allowed in trust

administered in foreign country

Formula
Consolidated gross income
xxxx
Less: Consolidated deduction xxxx
Consolidated net income
Pxxxx
Less: Personal exemption(P20,000) xxxx
Taxable income of several trusts Pxxxx
Apply 5-32% (year 2000)
Tax due
Pxxxx