Transcript
TAX
2
Estate
Tax
I.
THE
GROSS
ESTATE
A"y.
Terence
Conrad
H.
Bello
A. Introduc:on
A. Introduc:on
Lorenzo
v.
Posadas
1. When
does
the
estate
tax
accrue?
§ Upon
the
death
of
the
decedent.
Inheritance
taxa:on
is
also
governed
by
the
statute
in
force
at
the
:me
of
the
death
of
the
decedent
2. What
is
the
nature
of
the
estate
tax?
§ It
is
in
the
nature
of
an
excise
tax
imposed
upon
the
right
or
privilege
to
succeed
to,
receive,
or
take
property
by
or
under
a
will
or
the
intestacy
law,
or
deed,
grant,
or
giK,
to
become
opera:ve
at
or
aKer
death
A"y.
Terence
Conrad
H.
Bello
2
Slide
No.
3
3. At
what
point
is
the
value
of
the
gross
estate
measured
for
purposes
of
imposing
the
estate
tax?
§ Because
succession
takes
place
and
the
right
of
the
state
to
impose
estate
tax
accrues
upon
the
death
of
the
decedent,
the
tax
should
be
measured
by
the
value
of
the
estate
as
it
stood
at
the
:me
of
the
decedent’s
death,
regardless
of
any
subsequent
con:ngency
affec:ng
value
or
any
subsequent
increase
or
decrease
in
value.
Lorenzo
v.
Posadas;
NIRC
§
85
A"y.
Terence
Conrad
H.
Bello
Slide
No.
4
A. Introduc:on
B. General
Defini:on
of
Gross
Estate
4. Does
the
postponement
of
possession
postpone
the
payment
of
the
estate
tax
as
well?
§ No.
A
transmission
by
inheritance
is
taxable
at
the
:me
of
the
predecessor’s
death,
notwithstanding
the
postponement
of
the
actual
possession
or
enjoyment
of
the
estate
by
the
beneficiary,
and
the
tax
is
measured
by
the
value
of
the
property
transmi"ed
at
that
:me
regardless
of
its
apprecia:on
or
deprecia:on.
§ Thus,
the
estate
tax
is
payable
even
where
a
testator
provided
in
his
will
that
his
real
proper:es
be
held
for
a
period
of
10
years
aKer
his
death
then,
thereaKer,
the
real
proper:es
shall
go
to
his
nephew.
Lorenzo
v.
Posadas
A"y.
Terence
Conrad
H.
Bello
Slide
No.
5
C. Cons:tu:on
of
Gross
Estate
A"y.
Terence
Conrad
H.
Bello
Slide
No.
6
C. Cons:tu:on
of
Gross
Estate:
Property
in
which
Decedent
had
an
Interest
1. What
shall
be
included
in
gross
estate?
Proper&es
physically
in
the
estate
a. Property
in
which
decedent
had
an
interest
b. Proceeds
of
life
insurance
(unless
designa:on
of
beneficiary
is
irrevocable)
Proper&es
no
longer
physically
in
the
estate
a. Transfers
in
contempla:on
of
death
b. Transfers
taking
effect
at
death
c. Transfers
with
retained
interest
d. Revocable
transfers
e. Property
passing
under
general
power
of
appointment
f. Transfers
for
insufficient
considera:on
A"y.
Terence
Conrad
H.
Bello
1. What
is
generally
included
in
the
gross
estate
of
a
resident
ci:zen
decedent?
§ All
property,
real
or
personal,
tangible
or
intangible,
wherever
situated
(i.e.,
taxed
on
a
worldwide
basis)
(NIRC
§
85)
2. Nonresident
ci:zen?
Worldwide
basis
3. Resident
alien?
Worldwide
basis
§ Beam
v.
Yatco
4. Nonresident
alien?
§ Only
that
part
of
his
en:re
gross
estate
which
is
situated
in
the
Philippines
(see,
however,
special
rules
in
§
104
for
certain
intangible
property)
§ CIR
v.
Campos
Rueda
Slide
No.
7
1. What
is
covered
by
“property
in
which
decedent
had
an
interest”
(85(A))?
§ Covers
property
beneficially
owned
by
the
decedent
(includes
property
wherein
legal
:tle
is
not
in
the
name
of
the
decedent
but
is
beneficially
owned
by
the
decedent)
– E.g.,
land
registered
in
the
name
of
a
trustor
or
a
dummy
– Stock
cer:ficates
in
the
name
of
the
decedent’s
stock
broker
or
held
by
a
bank
in
trust
for
the
decedent
– Cash
deposits
in
a
numbered
account
in
the
Cayman
Islands
A"y.
Terence
Conrad
H.
Bello
Slide
No.
8
C. Cons:tu:on
of
Gross
Estate:
Property
in
which
Decedent
had
an
Interest
1. What
is
covered
by
“property
in
which
decedent
had
an
interest”?
§ Conversely,
if
the
decedent
merely
holds
:tle
to
a
property
only
as
a
guardian
or
trustee
or
in
some
other
fiduciary
capacity
(i.e.,
mere
naked
:tle),
he
would
not
be
considered
as
having
an
interest
in
such
property
A"y.
Terence
Conrad
H.
Bello
Slide
No.
9
C. Cons:tu:on
of
Gross
Estate:
Transfers
in
Contempla:on
of
Death
1. An
example
of
property
no
longer
physically
in
the
patrimony
of
the
decedent
at
the
:me
of
death
(because
there
was
an
inter
vivos
transfer)
but
by
fic:on
of
law
is
brought
back
into
the
patrimony
of
the
decedent
(i.e.,
deemed
inclusion)
–
85(B)
2. The
law
only
targets
gratuitous
transfers.
Hence,
transfers
for
a
full
and
adequate
considera:on
in
money
or
money’s
worth
is
not
covered
by
the
inclusion
(theory
of
conversion)
§ Reason:
the
transfer
amounts
only
to
a
subs:tu:on
or
exchange
of
assets
and
therefore
the
gross
estate
is
not
reduced,
and
no
estate
tax
is
avoided
A"y.
Terence
Conrad
H.
Bello
Slide
No.
10
C. Cons:tu:on
of
Gross
Estate:
Transfers
in
Contempla:on
of
Death
3. What
is
meant
by
a
transfer
in
contempla:on
of
death?
§ The
transfer
was
mo:vated
by
the
thought
of
death
– e.g.,
decedent
suffers
a
stroke
but
survives;
a
day
aKer
he
is
discharged
from
the
hospital,
he
donates
his
proper:es
to
his
children
(or
“sells”
the
proper:es
for
an
insufficient
considera:on)
– the
donated
property,
while
no
longer
physically
in
the
estate
of
the
decedent
at
the
:me
of
his
death,
would
s:ll
result
in
inclusion
because
the
transfer
was
mo:vated
by
the
thought
of
death
A"y.
Terence
Conrad
H.
Bello
C. Cons:tu:on
of
Gross
Estate:
Transfers
in
Contempla:on
of
Death
Slide
No.
11
4. How
do
you
know
whether
the
transfer
was
made
in
contempla:on
of
death?
§ Determined
using
a
“facts
and
circumstances”
test
(therefore,
subjec:ve).
Some
factors
considered:
– Age
(advanced
age
at
the
:me
of
transfer?)
– Health
(terminally
ill
at
the
:me
of
transfer
or
in
the
pink
of
health?)
– Length
of
:me
between
the
transfer
and
death
– Concurrent
making
of
a
will
– And
other
similar
circumstances
A"y.
Terence
Conrad
H.
Bello
Slide
No.
12
C. Cons:tu:on
of
Gross
Estate:
Transfers
in
Contempla:on
of
Death
C. Cons:tu:on
of
Gross
Estate:
Transfers
Taking
Effect
at
Death
5. Since
the
law
covers
only
transfers
mo:vated
by
the
thought
of
death,
if
the
mo:ve
for
the
transfer
is
something
else
other
than
the
thought
of
death,
the
transfer
will
not
result
in
inclusion.
Some
non-‐death
factors:
§ Reduce
annual
income
tax
liability
of
the
transferor
§ Relieve
the
transferor
from
the
burden
of
management
§ To
protect
the
family
from
the
hazards
of
business
opera:ons
§ Or
other
valid
business
reasons
A"y.
Terence
Conrad
H.
Bello
Slide
No.
13
C. Cons:tu:on
of
Gross
Estate:
Transfers
Taking
Effect
at
Death
§ These
transfers
are
essen:ally
equivalent
to
testamentary
disposi:ons.
The
effect
is
the
same
as
when
transfers
are
provided
for
in
a
last
will
and
testament
of
the
decedent
A"y.
Terence
Conrad
H.
Bello
Slide
No.
14
C. Cons:tu:on
of
Gross
Estate:
Transfers
Taking
Effect
at
Death
2. What
is
the
test
to
determine
whether
a
transfer
takes
effect
at
death?
§ The
possession
or
enjoyment
is
condi:onal
upon
surviving
the
decedent.
Thus,
if
the
transferee
of
a
property
interest
can
get
possession
or
enjoyment
while
the
decedent
transferor
is
living,
the
property
shall
not
be
included
in
the
decedent’s
gross
estate
§ Can
possession
or
enjoyment
of
the
property
be
obtained
without
surviving
the
decedent?
If
yes,
property
is
excluded
from
the
gross
estate.
If
no,
property
is
included
in
the
gross
estate
A"y.
Terence
Conrad
H.
Bello
1. What
is
the
ra:onale
for
inclusion?
Slide
No.
15
3. Thus
a
joint
survivorship
agreement
(e.g.,
“and/or”
account)
is
considered
a
transfer
taking
effect
at
death
§ The
survivorship
agreement
is
in
effect
a
dona:on
morCs
causa
made
by
the
deceased
co-‐
depositor
during
his
life:me
but
effec:ve
upon
death
because
the
acquisi:on
by
the
survivor
of
the
remaining
balance
is
a
considered
a
bequest.
BIR
Rul.
10-‐03
dated
Sept.
8,
2003
A"y.
Terence
Conrad
H.
Bello
Slide
No.
16
C. Cons:tu:on
of
Gross
Estate:
Transfers
Taking
Effect
at
Death
C. Cons:tu:on
of
Gross
Estate:
Transfers
with
Retained
Interest
4. Illustra:on:
§ Sr.
“donates”
house
and
lot
to
Jr.
in
a
Deed
of
Dona:on
purportedly
transferring
ownership
over
the
house
and
lot
to
Jr.
§ In
a
side
agreement,
however,
it
was
agreed
that
:tle
to
the
house
and
lot
and
possession
would
be
transferred
only
to
Jr.
upon
the
death
of
Sr.
§ In
the
mean:me,
Sr.
would
con:nue
to
live
in
the
house
and
lot
and
retain
possession
un:l
his
death
A"y.
Terence
Conrad
H.
Bello
Slide
No.
17
C. Cons:tu:on
of
Gross
Estate:
Transfers
with
Retained
Interest
A"y.
Terence
Conrad
H.
Bello
Slide
No.
18
C. Cons:tu:on
of
Gross
Estate:
Transfers
with
Retained
Interest
3. Illustra:ons:
period
a. For
life:
decedent
transfers
property
to
a
trust
with
the
income
therefore
payable
to
himself
“for
as
long
as
I
live”
and,
upon
his
death,
the
corpus
shall
be
distributed
to
his
children
b. For
a
period
not
ascertainable
without
reference
to
the
decedent’s
death:
decedent
transfers
property
to
a
trust,
with
income
therefrom
payable
to
himself
quarterly
for
life
but,
under
the
trust
agreement,
the
decedent
is
to
receive
none
of
the
trust
income
for
the
calendar
quarter
in
which
he
dies
c. For
a
period
which
does
not
in
fact
end
before
decedent’s
death:
decedent,
aged
40,
transfers
property
to
a
trust
with
the
trust
agreement
providing
that
decedent
shall
receive
the
trust
income
for
10
years,
at
the
end
of
which
period,
the
trust
terminates
and
the
corpus
shall
be
distributed
to
the
decedent’s
children.
The
decedent
dies,
however,
within
the
10-‐year
period
A"y.
Terence
Conrad
H.
Bello
1. The
decedent
must
have
retained
an
interest
in
the
property
for
a
specified
period
2. Two-‐fold
test
to
determine
whether
decedent
made
a
transfer
with
retained
interest:
a. Has
the
decedent
retained
an
interest
(i)
for
his
life;
or
(ii)
for
a
period
not
ascertainable
without
reference
to
his
death;
or
(iii)
for
a
period
that
does
not
in
fact
end
before
his
death?
b. Did
the
decedent
retain
(i)
possession
or
enjoyment
of
the
property;
or
(ii)
the
right
to
the
income
from
the
property;
or
(ii)
the
right
to
designate
(either
alone
or
in
conjunc:on
with
any
other
person)
the
person
who
shall
possess
or
enjoy
the
property;
or
(iv)
the
right
to
designate
(either
alone
or
in
conjunc:on
with
any
other
person)
the
person
who
shall
receive
the
income?
Slide
No.
19
4. Illustra:ons:
interest
retained
a. Possession
or
enjoyment
of
the
property:
§ Decedent
donated
a
Juan
Luna
pain:ng
to
the
Na:onal
Museum
but
reserved
the
right
to
keep
it
for
life
§ Decedent
sold
his
house
and
lot
to
his
son
(for
a
song),
but
reserved
the
right
to
live
in
it
for
life
§ Ra&onale:
with
the
transferor
retaining
for
himself
essen:ally
full
life:me
benefits
from
the
transferred
property,
the
ul:mate
shiKing
of
enjoyment
upon
the
death
of
the
decedent
is
akin
to
a
testamentary
disposi:on
of
property,
hence,
jus:fying
the
imposi:on
of
estate
tax
at
that
:me
A"y.
Terence
Conrad
H.
Bello
Slide
No.
20
C. Cons:tu:on
of
Gross
Estate:
Transfers
with
Retained
Interest
C. Cons:tu:on
of
Gross
Estate:
Transfers
with
Retained
Interest
4. Illustra:ons:
interest
retained
b. Right
to
the
income
from
the
property:
decedent
transfers
property
to
a
trust,
with
the
income
payable
to
him
for
life,
or
to
a
dependent
of
the
decedent
whom
the
la"er
would
otherwise
have
to
support
(note:
the
decedent
need
not
directly
receive
the
income.
The
income
may
also
be
paid
to
a
third
party
in
discharge
of
the
decedent’s
obliga:on
to
the
la"er)
A"y.
Terence
Conrad
H.
Bello
Slide
No.
21
C. Cons:tu:on
of
Gross
Estate:
Transfers
with
Retained
Interest
A"y.
Terence
Conrad
H.
Bello
Slide
No.
22
C. Cons:tu:on
of
Gross
Estate:
Transfers
with
Retained
Interest
4. Illustra:ons:
interest
retained
c. Right
to
designate
person
(either
alone
or
in
conjunc:on
with
any
other
person)
who
shall
possess
or
enjoy
property
or
income
therefrom:
§ Exercisable
in
conjunc:on
.
.
.:
the
decedent
creates
a
trust
wherein
B
had
the
right
to
the
income
but
the
decedent
retains
for
life
the
right
to
designate,
with
B’s
consent,
another
person
as
an
income
beneficiary
– Tax
policy:
Congress
wary
of
family
transac:ons,
which
are
always
suspected
of
tax
avoidance
mo:ves
A"y.
Terence
Conrad
H.
Bello
4. Illustra:ons:
interest
retained
c. Right
to
designate
person
(either
alone
or
in
conjunc:on
with
any
other
person)
who
shall
possess
or
enjoy
property
or
income
therefrom:
§ Exercisable
alone:
the
decedent
transfers
property
to
a
trust,
retaining
for
his
life
the
right
to
say
who
may
enjoy
the
transferred
property
or
the
income
therefrom
Slide
No.
23
4. Illustra:ons:
interest
retained
c. Right
to
designate
person
(either
alone
or
in
conjunc:on
with
any
other
person)
who
shall
possess
or
enjoy
property
or
income
therefrom:
§ Exercisable
in
conjunc:on
.
.
.:
If
decedent
names
a
3rd
party
as
trustee
and
gives
the
trustee
the
right
to
designate
who
shall
enjoy
the
property
or
the
income,
the
decedent
has
not
retained
the
prescribed
control.
BUT,
if
the
decedent
has
the
right
to
discharge
the
trustee
and
name
himself
trustee
with
the
same
right,
he
has
indirectly
retained
the
prescribed
control
A"y.
Terence
Conrad
H.
Bello
Slide
No.
24
C. Cons:tu:on
of
Gross
Estate:
Revocable
Transfers
C. Cons:tu:on
of
Gross
Estate:
Revocable
Transfers
1. Elements
of
§
85(C)
a. Transfer
of
property
was
made
(by
trust
or
otherwise);
b. but,
the
enjoyment
thereof
was
subject
to
change
(at
the
date
of
decedent’s
death);
c. through
the
exercise
of
a
power
(in
whatever
capacity
exercisable
and
without
regard
to
when
or
from
what
source
the
decedent
acquired
the
power);
§ by
the
decedent
(alone
or
in
conjunc:on
with
any
other
person);
d. power
exercised
is
the
power
to
alter,
amend,
revoke
or
terminate
the
transfer;
e. or
where
any
such
power
is
relinquished
in
contempla:on
of
death
A"y.
Terence
Conrad
H.
Bello
Slide
No.
25
C. Cons:tu:on
of
Gross
Estate:
Revocable
Transfers
v 85(C)
may
overlap
with
85(B)
(transfers
with
retained
interest)
A"y.
Terence
Conrad
H.
Bello
Slide
No.
26
C. Cons:tu:on
of
Gross
Estate:
Revocable
Transfers
3. What
is
meant
by
“subject
to
change
in
enjoyment”?
§ If
the
decedent
could
take
back
un:l
death
property
transferred,
interests
given
are
subject
to
change
§ If
the
decedent
could
name
another
income
beneficiary,
even
if
subject
to
consent
of
originally
named
beneficiaries
§ The
enjoyment
of
the
property
transferred
is
subject
to
change
if
the
decedent
could
accelerate
the
beneficiary’s
enjoyment
of
the
property
– Example:
under
the
trust,
A
shall
receive
income
for
10
years,
and
at
the
end
of
the
period,
the
corpus
shall
go
to
A.
The
trust,
however,
provides
that
the
trustor
may
terminate
the
trust
earlier
and
have
the
corpus
delivered
to
A
or
his
estate
A"y.
Terence
Conrad
H.
Bello
2. The
kind
of
power
which
brings
about
inclusion,
includes
any
power
affec:ng
the
:me
or
manner
of
enjoyment
of
the
property
or
its
income,
even
though
the
decedent
could
not
benefit
from
its
exercise
and
even
though
the
iden:ty
of
the
beneficiary
is
unaffected
§ Example:
A
creates
a
trust
to
pay
income
to
B
for
life,
with
remainder
to
C,
but
reserves
the
right
to
invade
corpus
and
accelerate
enjoyment
in
C’s
favor
§ Here
C
does
not
have
full
enjoyment
and
it
is
the
retained
power
to
accelerate
the
enjoyment
which
results
in
inclusion
Slide
No.
27
4. Example
of
power
to
revoke:
§ A
creates
a
trust
to
pay
income
to
B
for
life,
with
remainder
to
C,
but
reserves
the
right
to
take
back
the
property
altogether
5. Examples
of
power
to
alter/amend:
§ Name
new
beneficiaries
§ Change
propor:onate
interests
among
beneficiaries
§ Remove
the
trustee
and
appoint
himself
A"y.
Terence
Conrad
H.
Bello
Slide
No.
28
C. Cons:tu:on
of
Gross
Estate:
Revocable
Transfers
C. Cons:tu:on
of
Gross
Estate:
Revocable
Transfers
6. Example
of
power
to
terminate:
§ D
creates
a
trust,
with
income
payable
to
B
for
life,
remainder
to
C
or
C’s
estate,
but
reserves
the
right
to
terminate
the
trust,
effec:ng
an
immediate
distribu:on
of
corpus
to
C
– Here
B’s
enjoyment
of
the
income
is
subject
to
change
because
the
trust
may
be
terminated
– C’s
right
to
possess
the
property
and
enjoy
the
income
thereof
is
subject
to
change
because
his
en:tlement
to
the
property
may
be
accelerated
A"y.
Terence
Conrad
H.
Bello
Slide
No.
29
C. Cons:tu:on
of
Gross
Estate:
General
Power
of
Appointment
A"y.
Terence
Conrad
H.
Bello
Slide
No.
30
C. Cons:tu:on
of
Gross
Estate:
General
Power
of
Appointment
1. A
power
of
appointment
is
the
right
to
designate
the
person
or
persons
who
will
succeed
to,
or
will
become
beneficial
owners
of,
the
property
of
a
prior
decedent.
A
power
of
appointment
may
be
a
general
power
of
appointment
or
a
limited
power
of
appointment
2. Personali:es
involved:
§ Prior
decedent/donor
–
the
grantor
of
the
power
of
appointment
§ Decedent
–
the
grantee
of
the
power
of
appointment
§ Successor/s
–
the
person/s
who
will
succeed
to
the
property
A"y.
Terence
Conrad
H.
Bello
7. Where
power
to
alter,
amend,
etc.
is
relinquished
in
contempla:on
of
death:
§ The
relinquishment
of
the
power
results
in
the
inclusion
of
the
same
interest
in
property
in
the
decedent’s
gross
estate
§ Except:
if
relinquishment
was
an
adequate
and
full
considera:on
in
money
or
money’s
worth
§ Example:
decedent
relinquishes
power
to
alter,
amend,
etc.
upon
realiza:on
that
he
is
terminally
ill
§ Reason:
since
the
law
treats
the
power
to
alter,
amend,
etc.
as
equivalent
to
a
property
interest,
the
relinquishment
of
said
power
in
contempla:on
of
death
is
no
different
from
a
transfer
of
property
in
contempla:on
of
death,
hence,
includable
Slide
No.
31
3. Illustra:on:
§ A
transfers
property
to
a
trust,
with
B
as
income
beneficiary,
and
granted
C
the
right
to
direct
the
trustee,
by
will,
to
transfer
the
property
to
anybody
whom
C
nominates.
The
“anybody”
could
be
C
(i)
himself,
(ii)
his
creditors,
(iii)
his
estate,
(iv)
the
creditors
of
his
estate,
or
(v)
anybody
else
in
the
world
– A:
prior
decedent
(grantor
of
power
of
appointment)
– C:
decedent
(grantee
of
power
of
appointment)
– Anybody:
successors
who
will
succeed
to
the
property
§ Thus,
if
C
(the
decedent)
exercised
or
released
the
general
power
of
appointment
by
will
or
by
deed
in
certain
instances,
the
property
subject
to
the
power
will
be
included
in
C’s
gross
estate
A"y.
Terence
Conrad
H.
Bello
Slide
No.
32
C. Cons:tu:on
of
Gross
Estate:
General
Power
of
Appointment
C. Cons:tu:on
of
Gross
Estate:
General
Power
of
Appointment
4. Ra:onale
for
inclusion:
§ The
right
to
determine
who
may
become
the
beneficial
owner
of
a
property
is
such
an
important
a"ribute
of
outright
ownership
that
a
ques:on
may
be
raised
whether
for
estate
tax
purposes,
it
should
be
considered
the
equivalent
of
an
ownership
interest
includable
in
the
decedent’s
gross
estate
§ As
a
general
rule,
mere
possession
of
a
power
of
appointment
over
property
is
not
considered
an
interest
in
property.
Therefore
if
the
holder
of
the
power
dies
possessed
of
such
power,
there
is
no
“property
in
which
the
decedent
had
an
interest
in”
that
would
result
in
its
inclusion
in
gross
estate
§ By
the
same
token,
if
the
holder/grantee
exercised
the
power
of
appointment
during
his
life:me,
the
holder/
grantee
has
made
no
transfer
of
an
“interest”
in
property
which
may
be
taxed
under
§
85(A)
A"y.
Terence
Conrad
H.
Bello
Slide
No.
33
C. Cons:tu:on
of
Gross
Estate:
General
Power
of
Appointment
A"y.
Terence
Conrad
H.
Bello
Slide
No.
34
C. Cons:tu:on
of
Gross
Estate:
Proceeds
of
Life
Insurance
6. Property
over
which
the
decedent
held
a
power
of
appointment
is
not
includible
in
his
gross
estate
unless
such
power
was
“general”
§ A
power
is
general
when
it
authorizes
the
grantee/
decedent
(of
the
power
of
appointment)
to
appoint
anyone,
possibly
including
himself,
his
estate,
his
creditors
or
creditors
of
his
estate.
§ A
power
is
special
where
the
grantee/decedent
can
appoint
only
a
restricted
or
designated
class
of
persons
other
than
himself.
Property
which
passes
under
a
special
power
of
appointment
is
not
includible
in
the
gross
estate
§ Example:
A
leaves
his
property
in
trust
for
his
son,
B,
for
life
and
then
in
trust
for
such
children
of
B
as
B
shall
by
will
appoint
– The
power
of
appointment
is
a
special
power
of
appointment,
thus
the
value
of
the
property
is
excludible
from
the
gross
estate
of
B
A"y.
Terence
Conrad
H.
Bello
4. Requisites
for
inclusion
of
property
passing
under
GPA:
a. Existence
of
a
general
power
of
appointment;
b. An
exercise
of
such
power
by
the
decedent
by
will
or
by
deed
in
certain
cases
(i.e.,
life:me
transfer
(i)
in
contempla:on
of
death,
or
(ii)
taking
effect
at
death,
or
(iii)
with
retained
interest);
and
c. The
passing
of
the
property
by
virtue
of
such
exercise
5. For
exercise
or
release
of
GPA
to
result
in
inclusion,
it
must
be
by
will
or
by
a
life:me
transfer
which
if
it
were
a
transfer
of
actual
property
would
result
in
its
inclusion
in
gross
estate
as
in
contempla:on
of
death,
or
under
the
other
life:me
transfer
rules
Slide
No.
35
1. Proceeds
of
insurance
under
policies
taken
out
by
the
decedent
upon
his
life
shall
be
includable
if
the
beneficiary
is:
a. The
estate
of
the
decedent,
his
executor
or
his
administrator;
or
b. A
third
person,
unless
the
designa:on
of
the
beneficiary
is
irrevocable
2. When
are
proceeds
of
life
insurance
excludable?
§ When
the
beneficiary
is
a
third
person
(e.g.,
wife
or
kids
of
the
insured)
and
the
designa:on
is
irrevocable
A"y.
Terence
Conrad
H.
Bello
Slide
No.
36
A. Valua:on
of
Taxable
Transfers
II. VALUATION
OF
ESTATE
AND
AMOUNT
TO
BE
INCLUDED
IN
CASES
COVERED
BY
85(B),
(C)
AND
(D)
A"y.
Terence
Conrad
H.
Bello
37
1. In
a
(1)
transfer
in
contempla:on
of
death,
(2)
transfer
taking
effect
at
death,
(3)
transfer
with
retained
interest,
(4)
revocable
transfer,
and
(5)
property
passing
under
a
general
power
of
appointment,
the
value
to
include
in
gross
estate
shall
be
determined
under
the
following
rules:
a. If
the
transfer
was
in
the
nature
of
bona
fide
sale
for
an
adequate
and
full
considera:on
in
money
or
money’s
worth,
no
value
shall
be
included
in
the
gross
estate
b. If
the
considera:on
received
on
the
transfer
was
insufficient,
the
value
to
include
in
the
gross
estate
shall
be
the
excess
of
the
FMV
of
the
property
at
the
:me
of
the
decedent’s
death
over
the
considera:on
received
A"y.
Terence
Conrad
H.
Bello
Slide
No.
38
A. Valua:on
of
Taxable
Transfers
2. If
there
was
no
considera:on
received
on
the
transfer
(as
in
dona:on
morCs
causa),
the
value
includible
shall
be
the
FMV
of
the
property
at
the
:me
of
death
3. Illustra:on:
FMV
at
the
:me
of
transfer
Considera:on
received
FMV
at
:me
of
death
Amt.
includable
A"y.
Terence
Conrad
H.
Bello
100,000
100,000
180,000
None
100,000
60,000
180,000
120,000
100,000
None
180,000
180,000
Slide
No.
39
III. EXEMPT
TRANSFERS
A"y.
Terence
Conrad
H.
Bello
40
A. Exempt
Transfers
A. Exempt
Transfers
1. What
are
the
types
of
exempt
transfers?
a. The
merger
of
usufruct
in
the
owner
of
the
naked
:tle;
b. The
transmission
or
delivery
of
the
inheritance
or
legacy
of
the
fiduciary
heir
or
legatee
to
the
fideicomissary
c. The
transmission
from
the
first
heir,
legatee
or
donee
in
favor
of
another
beneficiary,
in
accordance
with
the
will
of
the
predecessor
d. All
bequests,
devices,
legacies
or
transfers
to
social
welfare,
cultural
and
charitable
ins:tu:ons
no
part
of
the
net
income
of
which
inures
to
the
benefit
of
any
individual:
provided
not
more
than
30%
of
the
said
bequests,
legacies
or
transfers
shall
be
used
by
such
ins:tu:ons
for
administra:on
purposes
A"y.
Terence
Conrad
H.
Bello
Slide
No.
41
2. Examples:
§ P
died
leaving
a
piece
of
land
to
Q
in
usufruct
(right
to
enjoy
the
fruits),
and
to
R
in
naked
ownership
(without
the
right
to
the
fruits).
The
land
is
subject
to
estate
tax
in
the
estate
of
P.
Upon
the
death
of
Q,
the
usufruct
shall
be
merged
into
the
naked
ownership
of
R,
who
shall
then
become
the
absolute
owner
of
the
property.
The
transmission
of
the
usufruct
from
Q
to
R
shall
be
exempt
from
estate
tax
A"y.
Terence
Conrad
H.
Bello
Slide
No.
42
A. Exempt
Transfers
2. Examples:
§ S
died
leaving
a
piece
of
land
to
T,
a
grandson,
to
be
owned
by
him
for
4
years,
with
the
obliga:on
to
preserve
it,
aKer
which,
one-‐half
shall
be
given
to
U,
a
great
grandson,
and
the
other
half
to
be
retained
by
T.
This
is
fideicomissary
subs:tu:on.
The
fiduciary
heir,
T,
is
entrusted
with
the
obliga:on
to
preserve
the
property
and
transit
it
to
the
fideicomissary
heir,
U,
with
the
subs:tu:on
not
going
beyond
one
degree
from
the
heir
originally
ins:tuted,
and
both
heirs
being
alive
at
the
:me
of
the
testator’s
death.
The
transmission
from
S
to
T
is
subject
to
estate
tax.
The
transmission
from
T
to
U
shall
be
exempt
from
estate
tax
A"y.
Terence
Conrad
H.
Bello
Slide
No.
43
IV. DEDUCTIONS
FROM
GROSS
ESTATE
A"y.
Terence
Conrad
H.
Bello
44
Deduc:ons
from
Gross
Estate
Deduc:ons
from
Gross
Estate
1. What
are
the
deduc:ons
from
the
gross
estate
of
a
ci:zen
and
resident
decedent?
a. ELITE
(expenses,
losses,
indebtedness,
taxes,
etc.)
b. Vanishing
Deduc:on
c. Transfers
for
Public
Use
d. Family
Home
e. Standard
Deduc:on
f. Medical
Expenses
g. Benefits
Received
from
Employer
by
Reason
of
Death
h. Share
in
the
Conjugal
Property
A"y.
Terence
Conrad
H.
Bello
Slide
No.
45
A. ELITE
A"y.
Terence
Conrad
H.
Bello
Slide
No.
46
A. ELITE
1. Funeral
expense
a. Actual
funeral
expense
b. 5%
of
gross
estate
c. P200,000
Whichever
is
the
lowest
among
a,
b,
or
c
§ Rule
of
thumb:
cut
off
point
is
the
interment
or
burial;
expenses
incurred
aKer
the
burial
or
interment
will
not
be
deduc:ble
A"y.
Terence
Conrad
H.
Bello
2. What
are
the
deduc:ons
from
the
gross
estate
of
a
nonresident
alien
decedent?
a. Pro-‐rated
ELITE:
[Phil.
gross
estate/worldwide
gross
estate]
x
[ELITE]
b. Vanishing
Deduc:on
c. Transfers
for
Public
Use
Slide
No.
47
What
are
examples
of
funeral
expense?
§ Mourning
apparel
of
surviving
spouse
and
minor
children
§ Expenses
during
the
wake
(e.g.,
food
and
drinks)
§ Cost
of
obituary
§ Telecommunica:on
expenses
incurred
for
informing
rela:ves
of
the
decedent
(e.g.,
overseas
calls)
§ Cost
of
burial
plot,
tombstone,
monument
or
mausoleum
(but
not
their
upkeep)
§ Interment
or
crema:on
fees
§ All
other
expenses
incurred
for
the
performance
of
the
rites
and
ceremonies
incident
to
the
interment
(expenses
aKer
the
interment,
such
as
prayers,
masses,
9th
day,
40th
day,
etc.,
are
not
deduc:ble)
A"y.
Terence
Conrad
H.
Bello
Slide
No.
48
A. ELITE
A. ELITE
2. Expenses
for
testamentary
or
intestate
proceedings
§ Expenses
incurred
during
the
se"lement
of
the
estate
(e.g.,
inventory
taking,
payment
of
debts
of
the
estate,
distribu:on
of
estate
to
heirs)
§ Cut-‐off
point
is
the
last
day
prescribed
by
law,
or
the
extension
thereof,
for
the
filing
of
the
estate
tax
return
§ Expenses
incurred
aKer
the
cut-‐off
point
are
not
deduc:ble
A"y.
Terence
Conrad
H.
Bello
Slide
No.
49
A. ELITE
A"y.
Terence
Conrad
H.
Bello
Slide
No.
50
A. ELITE
3. Claims
Against
the
Estate
§ To
be
deduc:ble,
claim
must
have
been
enforceable
against
the
decedent
if
he
were
living
§ If
claim
is
a
simple
loan,
there
must
be
a
debt
instrument
which
was
notarized
§ If
the
loan
was
contracted
within
3
years
from
the
decedent’s
death,
the
executor
or
administrator
is
required
to
submit
a
statement
showing
the
disposi:on
of
the
proceeds
of
the
loan
§
§ Examples:
a. Fees
of
executor
or
administrator
b. A"orney’s
fees
c. Court
or
filing
fees
d. Accountant’s
fees
e. Appraiser’s
fees
f. Clerk
hire
g. Cost
of
preserving
and
distribu:ng
the
estate
h. Costs
of
storing
or
maintaining
the
property
i. Broker’s
fees/commissions
for
selling
the
property
Deduc:ble
amount
of
claim
is
valued
as
of
the
death
of
decedent
irrespec:ve
of
post-‐death
developments
–
Thus
where
the
claims
are
reduced
or
condoned
through
compromise
agreements
entered
into
by
the
estate
with
its
creditors
resul:ng
in
the
reduc:on
of
the
amount
actually
paid
post-‐death,
the
deduc:ble
claim
would
s:ll
be
valued
as
of
the
date
of
death.
Dizon
v.
Court
of
Tax
Appeals,
G.R.
140944,
May
6,
2008
A"y.
Terence
Conrad
H.
Bello
Slide
No.
51
4. Claims
Against
Insolvent
Persons
–
provided
the
value
of
the
decedent’s
interest
in
the
claim
is
included
in
the
gross
estate
5. Unpaid
Debts/Mortgages
Upon
Property
–
provided
the
decedent’s
interest
in
the
property,
undiminished
by
the
debt/mortgage,
is
included
in
the
gross
estate
6. Taxes
–
which
have
accrued
as
of
the
death
but
not
yet
paid;
does
not
include
income
tax
upon
income
received
aKer
the
death,
property
taxes
not
accrued
before
death,
or
the
estate
tax
A"y.
Terence
Conrad
H.
Bello
Slide
No.
52
A. ELITE
B. Vanishing
Deduc:on
7. Casualty
Losses
§ Arising
from
fire,
storm,
shipwreck,
or
other
c a s u a l : e s ,
o r
f r o m
r o b b e r y ,
t h e K
o r
embezzlement
§ Must
not
be
compensated
for
by
insurance
or
otherwise
§ Must
not
have
been
deducted
for
income
tax
purposes
§ Losses
were
incurred
not
later
than
the
:me
required
to
pay
the
estate
tax
(6
mos.)
A"y.
Terence
Conrad
H.
Bello
Slide
No.
53
B. Vanishing
Deduc:on
A"y.
Terence
Conrad
H.
Bello
Slide
No.
54
B. Vanishing
Deduc:on
§ Condi:ons
for
deduc:bility:
a. The
present
decedent
died
within
5
years
from
receipt
of
the
property
from
a
prior
decedent
or
donor;
b. The
property
on
which
vanishing
deduc:on
is
being
claimed
must
be
located
in
the
Philippines;
c. The
property
must
have
formed
part
of
the
taxable
estate
of
the
prior
decedent,
or
of
the
taxable
giK
of
the
donor;
d. The
estate
tax
on
the
prior
succession
or
the
donor’s
tax
on
the
giK
must
have
been
finally
determined
and
paid;
e. The
property
on
which
vanishing
deduc:on
is
being
taken
must
be
iden:fied
as
the
one
received
from
the
prior
decedent,
or
from
the
donor,
or
something
acquired
in
exchange
therefore;
and
f. No
vanishing
deduc:on
on
the
property
was
allowable
to
the
estate
of
the
prior
decedent
A"y.
Terence
Conrad
H.
Bello
8. Vanishing
deduc:on
§ Property
may
change
hands
several
:mes
within
a
very
short
period
of
:me
by
reason
of
death
of
the
owner
shortly
aKer
receiving
the
property
by
giK
or
inheritance
§ Example:
Father
dies
in
2010
leaving
a
house
and
lot,
survived
by
an
only
son.
The
son
inherits
the
the
H&L.
in
2011,
the
son
died
in
a
vehicular
accident.
The
H&L
will
form
part
of
the
son’s
estate
which
will
again
be
subject
to
estate
tax
§ This
subjects
the
property
to
double
taxa:on,
because
the
tax
is
imposed
on
each
transfer
§ The
vanishing
deduc:on
is
meant
to
mi:gate
the
effects
of
double
taxa:on
Slide
No.
55
§ Amount
deduc:ble:
• 100%
of
value:
if
prior
decedent
died
within
one
year;
• 80%:
>
one
year
<
two
years
• 60%:
>
two
years
<
three
years
• 40%:
>
three
years
<
four
years
• 20%:
>
four
years
<
five
years
A"y.
Terence
Conrad
H.
Bello
Slide
No.
56
C. Transfers
for
Public
Use
D. Family
Home
• The
amount
of
all
bequests,
legacies,
devises
or
transfers
to
or
for
the
use
of
the
Government
of
the
Republic
of
the
Philippines,
or
any
poli:cal
subdivision
thereof,
for
exclusively
public
purposes
A"y.
Terence
Conrad
H.
Bello
Slide
No.
57
E. Standard
Deduc:on
A"y.
Terence
Conrad
H.
Bello
Slide
No.
58
F. Medical
Expenses
1. Available
as
a
deduc:on
in
addi:on
to
the
other
deduc:ble
items
2. Amount
deduc:ble
is
P1
million
A"y.
Terence
Conrad
H.
Bello
1. Dwelling
house
where
a
person
and
his
family
resides,
and
the
land
on
which
it
is
situated
(follows
defini:on
in
the
Family
Code)
• Cons:tuted
jointly
by
husband
and
wife
or
by
an
unmarried
head
of
family
2. To
be
deduc:ble,
must
be
cer:fied
to
as
such
by
Barangay
Chairman
where
family
home
is
located
3. Total
value
is
included
in
gross
estate
4. Amount
deduc:ble
is
the
FMV
or
P1
million,
whichever
is
lower
Slide
No.
59
1. Incurred
within
one
year
from
death
(whether
paid
or
unpaid);
cap
is
P500,000.00;
must
be
substan:ated
A"y.
Terence
Conrad
H.
Bello
Slide
No.
60
G. Death
Benefits
from
Employer
H. Capital
of
Surviving
Spouse
1. Any
amount
received
by
an
official
or
employee’s
heirs
from
the
employer
as
a
consequence
of
the
death
of
the
said
official
or
employee
under
NIRC
§
32(B)(6)(b)
A"y.
Terence
Conrad
H.
Bello
Slide
No.
61
§ Capital
of
the
surviving
spouse
of
a
decedent
(e.g.,
conjugal
share)
shall
not
form
part
of
the
gross
estate
of
the
decedent
A"y.
Terence
Conrad
H.
Bello
Slide
No.
62
Foreign
Tax
Credits
1. Purpose:
the
net
taxable
estate
of
a
decedent
who
was
a
resident
or
ci:zen
of
the
Philippines
includes
his
net
taxable
estate
within
and
without
the
Philippines.
It
is
possible
that
the
decedent’s
net
estate
without
the
Philippines
was
subjected
to
transfer
taxes
as
well
by
the
country
where
the
property
is
located.
There
is
therefore
a
possibility
of
double
taxa:on
of
the
same
property.
2. The
purpose
of
the
estate
tax
credit
is
to
avoid
or
mi:gate
the
effects
of
double
taxa:on.
V. FOREIGN
TAX
CREDITS
A"y.
Terence
Conrad
H.
Bello
63
A"y.
Terence
Conrad
H.
Bello
Slide
No.
64
Administra:ve
Provisions
1. Tax
rate
–
schedular
rate
of
5%
-‐
20%.
Top
rate
of
20%
applies
to
net
estates
with
a
value
of
P10M
and
above
•
•
•
•
•
VI. ADMINISTRATIVE
PROVISIONS
A"y.
Terence
Conrad
H.
Bello
65
Administra:ve
Provisions
Personal
Proper:es
P2,000,000.00
-‐-‐
Family
Home
Taxable
Transfers
Conjugal
P5,000,000.00
-‐-‐
6,500,000.00
-‐-‐
-‐-‐
Total
P7,000,000.00
-‐-‐
6,500,000.00
-‐-‐
GROSS
ESTATE
2,000,000.00
11,500,000.00
13,500,000.00
Less:
Deduc:ons
(ELITE,
etc.)
(500,000.00)
(2,000,000.00)
(2,500,000.00)
Estate
AKer
Deduc:ons
1,500,000.00
9,500,000.00
11,000,000.00
Less:
Family
Home
(1,000,000.00)
(1,000,000.00)
Standard
Deduc:on
(1,000,000.00)
(1,000,000.00)
Medical
Expenses
(500,000.00)
(500,000.00)
Sub-‐total
7,000,000.00
Less:
Share
of
Surviving
Spouse
(Net
Conjugal
Estate
÷
2)
NET
TAXABLE
ESTATE
A"y.
Terence
Conrad
H.
Bello
A"y.
Terence
Conrad
H.
Bello
Slide
No.
66
Administra:ve
Provisions
Exclusive
Real
Proper:es
(excluding
Family
Home)
Husband
and
wife.
Husband
died
Conjugal
real
proper:es
P5M;
exclusive
real
property
P2M
(subject
to
P500k
mortgage)
Family
home
P6.5M
(subject
to
P2M
mortgage)
Medical
expenses
P500k
Compute
net
taxable
estate
and
estate
tax
due
(3,500,000.00)
NET
TAXABLE
ESTATE
P5,000,000.00
ESTATE
TAX
DUE
On
first
P2M
On
excess
over
P2M
(11%)
P135,000.00
330,000.00
465,000.00
Less:
tax
credits/payments
Foreign
Estate
Tax
Paid
-‐-‐
Tax
Paid
in
Return
Originally
Filed,
if
this
is
an
Amended
Return
-‐-‐
Total
TAX
PAYABLE
-‐-‐
P465,000.00
(3,500,000.00)
5,000,000.00
Slide
No.
67
A"y.
Terence
Conrad
H.
Bello
Slide
No.
68
Administra:ve
Provisions
2. No:ce
of
Death
–
within
2
months
3. Estate
Tax
Return
–
within
6
months;
extendible
for
up
to
30
days
4. Payment
of
Estate
Tax
–
pay
as
you
file;
extendible
for
up
to
2
year
(extrajudicial
se"lement)
or
5
years
(judicial
se"lement),
if
payment
would
impose
“undue
hardship”
upon
estate
or
any
of
the
heirs
5. Consequences
of
Non-‐Payment
–
surcharge,
interest,
compromise
penalty
A"y.
Terence
Conrad
H.
Bello
TAX
2
Donor’s
Tax
Slide
No.
69
A. Meaning
of
GiK
A. Meaning
of
GiK
CIR
v.
Duberstein
§ Illustra:on
of
a
non-‐taxable
giK
vs.
taxable
compensa:on
for
services
rendered
§ Court
found
that
the
Cadillac
was
“a
recompense
for
Duberstein’s
past
services,
or
an
inducement
for
him
to
be
of
further
service
in
the
future”
CIR
v.
Duberstein
§ When
is
a
payment
a
non-‐taxable
giK
and
when
is
a
payment
taxable
compensa:on
for
services
rendered?
•
•
•
A"y.
Terence
Conrad
H.
Bello
Slide
No.
71
Mere
absence
of
a
legal
or
moral
obliga:on
to
make
such
a
payment
does
not
mean
it
is
a
giK
If
the
payment
proceeds
primarily
from
“the
constraining
force
of
any
moral
or
legal
duty,”
or
from
“the
incen:ve
of
an:cipated
benefit”
of
an
economic
nature,
it
is
not
a
giK
A
giK
in
the
statutory
sense,
on
the
other
hand,
proceeds
from
a
“detached
and
disinterested
generosity,
“out
of
affec:on,
respect,
admira:on,
charity
or
like
impulses”
A"y.
Terence
Conrad
H.
Bello
Slide
No.
72
A. Meaning
of
GiK
B. Composi:on
of
Gross
GiKs
§ When
conveyance
of
property
is
mo:vated
by
a
sense
of
gra:tude,
or
out
of
pure
liberality,
and
not
addi:onal
compensa:on
for
past
services
rendered,
the
transfer
is
a
giK
subject
to
donor’s
tax
Ø Thus,
the
renuncia:on
by
a
company
of
the
proceeds
of
a
life
insurance
policy
in
favor
of
the
heirs
of
a
deceased
officer
“out
of
gra:tude”
for
his
past
services
is
a
“giK”
subject
to
donor’s
tax.
Pirovano
v.
CIR
A"y.
Terence
Conrad
H.
Bello
Slide
No.
73
B. Composi:on
of
Gross
GiKs
A"y.
Terence
Conrad
H.
Bello
Slide
No.
74
B. Composi:on
of
Gross
GiKs
3. Reciprocity
rule
on
intangible
personal
property
-‐-‐
a. General
rule:
intangible
personal
property
located
in
the
Philippines
belonging
to
a
non-‐resident
alien
donor
is
included
in
gross
giKs
b. Excep:on:
not
includible
under
the
“reciprocity
clause”
i. if
the
donor
at
the
:me
of
the
dona:on
was
a
resident
of
a
foreign
country
which
at
the
:me
of
the
dona:on
did
not
impose
a
transfer
tax
of
any
character
in
respect
of
intangible
personal
property
of
ci:zens
of
the
Philippines
not
residing
in
that
foreign
country;
or
ii. if
the
laws
of
the
foreign
country
of
which
the
donor
was
a
resident
at
the
:me
of
dona:on
allows
a
similar
exemp:on
from
transfer
taxes
of
every
character
in
respect
of
intangible
personal
property
owned
by
ci:zens
of
the
Philippines
not
residing
in
that
foreign
country
A"y.
Terence
Conrad
H.
Bello
1. In
case
of
a
resident
or
ci:zen
donor,
the
gross
giKs
would
consist
of:
a. Real
property,
regardless
of
loca:on
b. Tangible
personal
property,
regardless
of
loca:on
c. Intangible
personal
property,
regardless
of
loca:on
2. In
case
of
a
non-‐resident
alien,
the
gross
giK
would
consist
of:
a. Real
property
located
in
the
Philippines
b. Tangible
personal
property
located
in
the
Philippines
c. Intangible
personal
property
located
in
the
Philippines
Slide
No.
75
4. Examples
of
intangible
personal
property
located
in
the
Philippines:
a. Franchises
which
must
be
exercised
in
the
Philippines;
b. Shares,
obliga:ons
or
bonds
issued
by
a
domes:c
corpora:on;
c. Shares,
obliga:ons
or
bonds
issued
by
a
foreign
corpora:on
85%
of
the
business
of
which
is
located
in
the
Philippines;
d. Shares,
obliga:ons
or
bonds
issued
by
a
foreign
corpora:on,
if
such
shares,
obliga:ons
or
bonds
have
acquired
a
business
situs
in
the
Philippines;
and
e. Shares
or
rights
in
any
partnership,
business
or
industry
established
in
the
Philippines
A"y.
Terence
Conrad
H.
Bello
Slide
No.
76
B. Composi:on
of
Gross
GiKs
C. Valua:on
of
Gross
GiKs
5. Transfers
for
insufficient
considera:on
(if
transfer
was
effec:ve
during
donor’s
life:me)
–
excess
of
FMV
over
considera:on
received
considered
a
dona:on
(Sec.
100)
A"y.
Terence
Conrad
H.
Bello
Slide
No.
77
D. Deduc:ons
from
Gross
GiKs
A"y.
Terence
Conrad
H.
Bello
Slide
No.
78
D. Deduc:ons
from
Gross
GiKs
1. Deduc:ons
allowed
for
resident
or
ci:zen
donor,
and
non-‐resident
alien
donors:
a. GiKs
made
to
or
for
the
use
of
the
Na:onal
Government
or
any
en:ty
created
by
any
of
its
agencies
which
is
not
conducted
for
profit;
b. GiKs
in
favor
of
an
educa:onal
and/or
charitable
and/or
religious
corpora:on,
ins:tu:on,
founda:on,
trust
or
philanthropic
organiza:on
or
research
ins:tu:on
or
organiza:on:
provided,
however,
that
not
more
than
30%
of
said
giKs
shall
be
used
by
such
donees
for
administra:on
purposes
A"y.
Terence
Conrad
H.
Bello
1. If
a
dona:on
is
made
in
property,
FMV
of
such
property
at
the
:me
of
dona:on
shall
be
the
value
of
the
gross
giK
a. In
case
of
real
property,
value
shall
be:
i. Current
FMV,
as
shown
in
schedule
of
values
fixed
by
the
local
assessor;
or
ii. FMV
as
determined
by
CIR
b. In
case
of
personal
property
recently
acquired
by
the
donor,
the
purchase
price
may
indicate
the
FMV
c. In
the
case
of
personal
property
not
recently
acquired
by
the
donor,
there
should
be
some
evidence
of
FMV
Slide
No.
79
2. Deduc:ons
allowed
for
resident
or
ci:zen
donors
only:
a. Dowries
or
giKs
made
on
account
of
marriage
and
before
its
celebra:on,
or
within
one
year
thereaKer,
by
parents
to
each
of
their
legi:mate,
recognized
natural
or
adopted
children,
to
the
extent
of
the
first
P10,000
§ QuesCon:
Mr.
and
Mrs.
H
are
making
a
joint
giK
of
P40,000
out
of
community
funds
to
Mr.
I,
a
legi:mate
child,
on
account
of
marriage
and
before
its
celebra:on.
How
much
is
the
deduc:on?
§ Answer:
there
are
2
dona:ons,
one
by
Mr.
H,
in
the
amount
of
P20,000
as
gross
giK,
from
which
he
is
en:tled
to
a
P10,000
deduc:on,
and
another
by
Mrs.
H,
in
the
amount
of
P20,000
of
gross
giK,
from
which
she
is
en:tled
to
her
own
deduc:on
of
P10,000
A"y.
Terence
Conrad
H.
Bello
Slide
No.
80
E. Net
GiKs
and
Imposi:on
of
Donor’s
Tax
E. Net
GiKs
and
Imposi:on
of
Donor’s
Tax
1. The
donor’s
tax
for
each
calendar
year
is
computed
on
the
basis
of
the
total
net
giKs
made
during
the
calendar
year
(NIRC
§§
99(A)
and
103(A))
2. Donor’s
tax
return
is
filed
within
30
days
from
the
giK;
pay-‐as-‐you-‐file
(NIRC
§
103(B))
3. Formula
for
compu:ng
the
donor’s
tax
on
the
first
donaSon
for
the
calendar
year
Gross
giKs
made
Less:
deduc:ons_
Net
giKs
made
A"y.
Terence
Conrad
H.
Bello
Slide
No.
81
F. Donor’s
Tax
Rates
1. Donee
is
not
a
stranger
–
schedular
rates
2%
-‐
15%
(top
rate
of
15%
applies
to
net
giKs
of
P10M
and
above)
2. Donee
is
a
stranger
–
flat
rate
of
30%
§ A
“stranger”
is
a
person
who
is
not
a:
– Brother,
sister
(whether
by
whole
or
half
blood),
spouse,
ancestor,
lineal
descendant
– Rela:ve
by
consanguinity
in
the
collateral
line
within
the
4th
degree
of
rela:onship
A"y.
Terence
Conrad
H.
Bello
Slide
No.
83
4. Formula
for
compu:ng
the
donor’s
tax
on
the
subsequent
donaSon
for
the
same
calendar
year:
Gross
giKs
made
on
this
date
Less:
deduc:ons__________
Net
giKs
made
on
this
date
Add:
all
prior
net
giKs
within
the
year
Aggregate
net
giKs
Donor’s
tax
on
aggregate
net
giKs
Less:
donor’s
tax
on
all
prior
net
giKs
within
the
year
Donor’s
tax
on
the
net
giKs
on
this
date
A"y.
Terence
Conrad
H.
Bello
Slide
No.
82