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NOTES
and
CASES
ON
TRANSFER
TAXES
(ESTATE
TAX
AND
excess
of
the
two
hundred
fifty
thousand
pesos
(P250,000)
DONORS
TAX)
(
with
amendments
introduced
by
RA
10963
or
the
exempt
gift
made
during
the
calendar
year.
TRAIN
Law.)
Q:
How
are
transfer
taxes
distinguished
from
business
taxes?
TRANSFER
TAXES
IN
GENERAL
*
Transfer
taxes
are
taxes
imposed
on
the
privilege
of
Q:
What
is
a
transfer
tax?
transferring
properties,
real
or
personal,
without
consideration.
On
the
other
hand,
business
taxes
are
imposed
upon
a
person,
*
A
transfer
tax
is
a
tax
imposed
on
the
privilege
of
transferring
who
is
engaged
in
trade
or
business
or
in
the
exercise
of
properties,
real
or
personal,
without
consideration.
profession,
including
but
not
limited
to
value-‐added
tax,
other
percentages
taxes,
excise
taxes
and
documentary
stamp
tax.
Q:
What
is
the
nature
of
a
transfer
tax?
Take
note
of
the
remaining
relevant
provisions
RR
No.
02-‐03
dated
*
A
transfer
tax
is
an
excise
tax
or
privilege
tax
that
is
imposed
on
17
January
2003
which
supposed
to
consolidates
all
RRs
issued
on
the
act
of
passing
ownership
of
property,
and
is
not
a
tax
on
the
estate
tax
and
donor’s
tax.
But
this
will
now
be
read
together
with
property
transferred.
the
various
amendments
provided
for
in
RA
10963
or
the
TRAIN
Law.
*
These
are
estate
tax
and
donor’s
tax.
Estate
tax
is
a
tax
that
is
Sec.
84,
Rates
of
Estate
Tax
levied,
assessed,
collected,
and
paid
upon
the
transfer
of
the
net
estate
of
a
decedent
to
his
or
her
heirs.
On
the
other
hand,
There
shall
be
levied,
assessed,
collected
and
paid
upon
the
donor’s
tax
is
an
excise
tax
levied,
collected,
and
paid
upon
the
transfer
of
the
net
estate
as
determined
in
accordance
with
privilege
of
transferring
property
gratuitously
by
way
of
gift
inter
Sections
85
and
86
of
every
decedent,
whether
resident
or
vivos
by
any
person,
resident
or
non-‐resident.
nonresident
of
the
Philippines,
a
tax
AT
THE
RATE
OF
SIX
PERCENT
(6%)
based
on
the
value
of
such
net
estate
Q:
Differentiate
between
estate
tax
and
donor’s
tax.
Q:
What
is
an
estate
tax?
(1)
Estate
tax
is
a
tax
on
the
privilege
to
transfer
property
upon
one’s
death
(mortis
causa);
donor’s
tax
is
a
tax
on
the
privilege
to
*
Estate
tax
is
a
tax
that
is
levied,
assessed,
collected,
and
paid
transfer
property
during
one’s
lifetime
(inter
vivos).
upon
the
transfer
of
the
net
estate
of
a
decedent
to
his
or
her
(2)
The
maximum
tax
rate
of
estate
tax
is
6%
on
net
estates
;
the
heirs.
The
net
estate
is
computed
as
follows:
maximum
tax
rate
of
donor’s
tax
is
also
6
%
on
the
total
gifts.
IN
Sec.
85,
Gross
Estate
1. Land,
buildings,
roads
and
constructions
of
all
kinds
adhered
to
the
soil;
The
value
of
the
gross
estate
of
the
decedent
shall
be
determined
2. Trees,
plants,
and
growing
fruits,
while
they
are
attached
to
by
including
the
value
at
the
time
of
his
death
of
all
property,
real
the
land
or
form
an
integral
part
of
an
immovable;
or
personal,
tangible
or
intangible,
wherever
situated:
Provided,
3. Everything
attached
to
an
immovable
in
a
fixed
manner,
in
however,
that
in
the
case
of
a
nonresident
decedent
who
at
the
such
a
way
that
it
cannot
be
separated
therefrom
without
time
of
his
death
was
not
a
citizen
of
the
Philippines,
only
that
part
breaking
the
material
or
deterioration
if
the
object;
of
the
entire
gross
estate
which
is
situated
in
the
Philippines
shall
4. Statues,
reliefs,
paintings
or
other
objects
for
use
or
be
included
in
his
taxable
estate.
ornamentation,
placed
in
buildings
or
on
lands
by
the
owner
of
the
immovable
in
such
a
manner
that
it
reveals
the
intention
to
Q:
What
kind
of
assets,
properties,
and
interest
should
be
part
of
attach
them
permanently
to
the
tenements;
the
gross
estate?
5. Machinery,
receptacles,
instruments
or
implements
intended
by
the
owner
of
the
tenement
for
an
industry
or
*
Generally,
gross
estate
includes:
(1)
real
property;
(2)
works
which
may
be
carried
on
in
a
building
or
on
a
piece
of
intangible
personal
property;
and
(3)
tangible
personal
land,
and
which
tend
directly
to
meet
the
needs
of
the
said
property.
Specific
rules
are
followed
depending
on
who
the
industry
or
works;
taxpayer
is,
based
on
nationality
and/or
domicile.
For
residents
6. Animal
houses,
pigeon-‐houses,
beehives,
fish
ponds
or
and
citizens:
all
assets,
real
or
personal,
tangible
or
intangible,
breeding
places
of
similar
nature,
in
case
their
owner
has
wherever
located.
For
non-‐resident
aliens:
only
properties
placed
them
or
preserves
them
with
the
intention
to
have
located
in
the
Philippines,
provided
that
in
the
case
of
them
permanently
attached
to
the
land,
and
forming
a
*
The
fact
that
the
exercise
of
the
power
to
revoke
was
not
*
Life
insurance
proceeds
are
always
excluded
from
gross
done
during
the
life
of
the
decedent
is
of
no
moment
or
income,
whether
the
designation
of
the
beneficiary
is
immaterial.
The
revocable
nature
of
the
transfer
remains.
In
revocable
or
irrevocable.
However,
the
irrevocability
of
the
effect,
the
subject
property
is
considered
as
part
of
the
gross
designation
of
the
beneficiary
is
material
in
determining
estate.
whether
or
not
the
proceeds
will
form
part
of
the
estate
because
if
the
designation
is
irrevocable,
it
means
therefore
Proceeds
of
life
insurance
under
a
policy:
(1)
taken
out
by
the
86(A)
Deductions
Allowed
to
the
Estate
of
a
Citizen
or
a
Resident
-‐
decedent
upon
his
own
life;
(2)
where
the
beneficiary
of
which
is
In
the
case
of
a
citizen
or
resident
of
the
Philippines,
by
deducting
his
estate;
or
(3)
where
the
designation
of
the
beneficiary
is
from
the
value
of
the
gross
estate
-‐
revocable,
are
to
be
included
in
the
gross
estate.
The
source
of
premium
is
also
important
in
determining
whether
the
proceeds
)(1)
STANDARD
DEDUCTION.
–
AN
AMOUNT
EQUIVALENT
TO
FIVE
will
be
excluded
or
included
in
the
gross
estate.
MILLION
PESOS
(P5,000,000.)
Q:
Explain
the
concept
of
vanishing
deduction.
)(7)
The
Family
Home.
-‐
An
amount
equivalent
to
the
current
fair
market
value
of
the
decedent's
family
home:
Provided,
however,
*
It
is
a
way
of
reducing
the
tax
on
property
received
from
a
That
if
the
said
current
fair
market
value
exceeds
TEN
MILLION
prior
decedent
where
the
deceased
died
within
five
years
after
PESOS
(P10,000,000.00)
the
excess
shall
be
subject
to
estate
tax.
the
death
of
the
prior
decedent,
to
wit:
100%
of
the
value
if
the
prior
decedent
died
within
one
year
prior
to
the
death
of
the
Q:
What
is
the
limit
for
the
family
home?
decedent,
or
if
the
property
was
transferred
to
him
by
gift
within
the
same
period
prior
to
his
death;
*
The
deductible
amount
shall
be
the
current
fair
market
value
10,000,000.00
shall
be
subject
to
estate
tax.
80%
of
the
value
if
the
prior
decedent
died
more
than
one
year
but
not
more
than
2
years
prior
to
the
death
of
the
decedent,
or
if
the
property
was
transferred
to
him
by
gift
within
the
same
period
prior
to
his
death;
60%
of
the
value
if
the
prior
decedent
died
more
than
2
years
but
not
more
than
3
years
)(8)
Amount
Received
by
Heirs
under
RA
No.
4917.
-‐
Any
amount
prior
to
the
death
of
the
decedent,
or
if
the
property
was
received
by
the
heirs
from
the
decedent
-‐
employee
as
a
transferred
to
him
by
gift
within
the
same
period
prior
to
his
consequence
of
the
death
of
the
decedent-‐employee
in
accordance
death;
with
Republic
Act
No.
4917:
Provided,
That
such
amount
is
40%
of
the
value
if
the
prior
decedent
died
more
than
3
years
included
in
the
gross
estate
of
the
decedent.
but
not
more
than
4
years
prior
to
the
death
of
the
decedent,
86(B)
Deductions
Allowed
to
Nonresident
Estates.
-‐
In
the
case
of
a
or
if
the
property
was
transferred
to
him
by
gift
within
the
nonresident
not
a
citizen
of
the
Philippines,
by
deducting
from
the
same
period
prior
to
his
death
20%
of
the
value
if
the
prior
value
of
that
part
of
his
gross
estate
which
at
the
time
of
his
death
decedent
died
more
than
4
years
but
not
more
than
5
years
is
situated
in
the
Philippines:
prior
to
the
death
of
the
decedent,
or
if
the
property
was
transferred
to
him
by
gift
within
the
same
period
prior
to
his
(1)STANDARD
DEDUCTION.
–
AN
AMOUNT
EQUIVALENT
TO
FIVE
*
Article
562
of
the
Civil
Code
provides:
“Usufruct
gives
a
right
(C)
Share
in
the
Conjugal
Property
-‐
The
net
share
of
the
surviving
to
enjoy
the
property
of
another
with
the
obligation
of
spouse
in
the
conjugal
partnership
property
as
diminished
by
the
preserving
its
form
and
substance,
unless
the
title
constituting
obligations
properly
chargeable
to
such
property
shall,
for
the
it
or
the
law
otherwise
provides.”
Related
terms
are
purpose
of
this
Section,
be
deducted
from
the
net
estate
of
the
usufructuary
(the
person
that
enjoys
the
property)
and
naked
decedent.
owner
(the
person
that
owns
the
property).
(D)
Tax
Credit
for
Estate
Taxes
Paid
to
a
Foreign
Country
87(B)
The
transmission
or
delivery
of
the
inheritance
or
legacy
by
the
fiduciary
heir
or
legatee
to
the
fideicommissary;
(1)
In
General.
-‐
The
tax
imposed
by
this
Title
shall
be
credited
with
the
amounts
of
any
estate
tax
imposed
by
the
authority
of
a
87(C)
The
transmission
from
the
first
heir,
legatee
or
donee
in
foreign
country.
(2)
Limitations
on
Credit.
-‐
The
amount
of
the
favor
of
another
beneficiary,
in
accordance
with
the
desire
of
the
credit
taken
under
this
Section
shall
be
subject
to
each
of
the
predecessor;
and
following
limitations:
87(D)
All
bequests,
devises,
legacies
or
transfers
to
social
welfare,
(a)
The
amount
of
the
credit
in
respect
to
the
tax
paid
to
any
cultural
and
charitable
institutions,
no
part
of
the
net
income
of
country
shall
not
exceed
the
same
proportion
of
the
tax
against
which
insures
to
the
benefit
of
any
individual:
Provided,
however,
which
such
credit
is
taken,
which
the
decedent's
net
estate
That
not
more
than
thirty
percent
(30%)
of
the
said
bequests,
situated
within
such
country
taxable
under
this
Title
bears
to
his
devises,
legacies
or
transfers
shall
be
used
by
such
institutions
for
entire
net
estate;
and
administration
purposes.
(b)
The
total
amount
of
the
credit
shall
not
exceed
the
same
Q:
What
are
the
requisites
for
tax
exemption
of
bequests,
devises,
proportion
of
the
tax
against
which
such
credit
is
taken,
which
the
legacies,
or
transfers
to
charitable
or
similar
institutions?
decedent's
net
estate
situated
outside
the
Philippines
taxable
under
this
Title
bears
to
his
entire
net
estate.
*
Section
87(D)
of
the
1997
Tax
Code
mandates
compliance
with
the
following
conditions:
(1)
the
bequest,
devise,
legacy,
Sec.
87,
Exemption
of
Certain
Acquisitions
and
Transmissions
The
or
transfer
must
be
given
to
a
social
welfare,
cultural,
or
88(B)
Properties.
-‐
The
estate
shall
be
appraised
at
its
fair
market
Provided,
however,
That
estate
tax
returns
showing
a
gross
value
value
as
of
the
time
of
death.
However,
the
appraised
value
of
real
exceeding
Five
million
pesos
(P5,000,000)
shall
be
supported
with
property
as
of
the
time
of
death
shall
be,
whichever
is
higher
of
-‐
a
statement
duly
certified
to
by
a
Certified
Public
Accountant
containing
the
following:
. (1)
The
fair
market
value
as
determined
by
the
Commissioner,
or
. (a)
Itemized
assets
of
the
decedent
with
their
corresponding
gross
value
at
the
time
of
his
death,
or
in
the
case
of
a
. (2)
The
fair
market
value
as
shown
in
the
schedule
of
values
nonresident,
not
a
citizen
of
the
Philippines,
of
that
part
of
fixed
by
the
Provincial
and
City
Assessors.
his
gross
estate
situated
in
the
Philippines;
Sec.
89,
Notice
of
Death
to
be
Filed
(Repealed
by
TRAIN
LAW)
. (b)
Itemized
deductions
from
gross
estate
allowed
in
Section
86;
and
Sec.
90,
Estate
Tax
Returns
. (c)
The
amount
of
tax
90(A)
Requirements.
-‐
In
all
cases
of
transfers
subject
to
the
tax
imposed
herein,
or
where,
though
exempt
from
tax
,regardless
of
90(B)
Time
for
filing.
-‐
For
the
purpose
of
determining
the
estate
gross
value
of
the
estate,
where
the
said
estate
consists
of
tax
provided
for
in
Section
84
of
this
Code,
the
estate
tax
return
registered
or
registrable
property
such
as
real
property,
motor
required
under
the
preceding
Subsection
(A)
shall
be
filed
within
vehicle,
shares
of
stock
or
other
similar
property
for
which
a
90(C)
Extension
of
Time.
-‐
The
Commissioner
shall
have
authority
*
Except
in
cases
where
the
CIR
otherwise
permits,
the
estate
tax
to
grant,
in
meritorious
cases,
a
reasonable
extension
not
return
must
be
file
in
the
city
or
municipality
in
which
the
exceeding
thirty
(30)
days
for
filing
the
return.
decedent
was
domiciled
at
the
time
of
his/her
death,
or
if
there
be
no
legal
residence
in
the
Philippines,
with
the
CIR’s
office.
90(D)
Place
of
Filing.
-‐
Except
in
cases
where
the
Commissioner
otherwise
permits,
the
return
required
under
Subsection
(A)
shall
For
estate
tax
purposes,
“residence”
refers
to
the
permanent
be
filed
with
an
authorized
agent
bank,
or
Revenue
District
Officer,
home,
the
place
to
which
whenever
absent,
for
business
or
Collection
Officer,
or
duly
authorized
Treasurer
of
the
city
or
pleasure,
one
intends
to
return,
and
depends
on
facts
and
municipality
in
which
the
decedent
was
domiciled
at
the
time
of
circumstances,
in
the
sense
that
they
disclose
intent.
[Corre
v.
his
death
or
if
there
be
no
legal
residence
in
the
Philippines,
with
Tan
Corre,
100
Phil.
321,
1956]
the
Office
of
the
Commissioner.
Q:
How
are
estate
tax
returns
filed?
Q:
When
are
estate
tax
returns
filed?
*
The
case
Elegado
v.
CTA
pertained
to
the
settlement
of
the
*
For
purposes
of
determining
the
estate
tax,
the
estate
tax
estate
of
Warren
Taylor
Graham,
an
American
national
who
return
shall
be
filed
within
one
year
from
the
decedent’s
death.
died
in
the
United
States
but
left
certain
shares
of
stock
in
the
The
CIR
or
any
revenue
officer,
in
meritorious
cases,
can
grant
a
Philippines.
His
son,
through
his
lawyers,
filed
an
estate
tax
reasonable
extension,
not
exceeding
30
days,
for
filing
the
return
for
said
shares
of
stock
with
the
Philippine
Revenue
return.
Representative
in
the
United
States.
In
February
1978
and
on
the
basis
of
said
return,
the
CIR
assessed
the
decedent’s
estate
When
the
CIR
finds
that
the
payment
of
the
estate
tax
or
of
any
an
estate
tax.
This
first
assessment
became
final
and
executory.
part
thereof
would
impose
undue
hardship
upon
the
estate
or
any
of
the
heirs,
he
may
extend
the
time
for
payment
of
such
tax
Meanwhile,
Elegado
was
appointed
as
ancillary
administrator
or
any
part
thereof
not
to
exceed
5
years
in
case
the
estate
is
in
the
Philippines
and
in
such
capacity,
filed
a
second
tax
return
settled
through
the
courts,
or
2
years
in
case
the
estate
is
settled
in
June
1980.
On
the
basis
of
said
return,
the
CIR
issued
a
extra-‐judicially.
Estate
tax
can
also
be
paid
by
installment.
As
a
second
assessment
for
estate
tax.
Subsequently,
the
second
general
rule,
the
estate
tax
imposed
under
the
Code
shall
be
paid
assessment
was
cancelled
by
the
CIR.
at
the
time
the
return
is
filed
by
the
executor,
administrator
or
the
heirs.
One
of
Elegado’s
contentions
was
that
the
issuance
of
the
second
assessment
had
the
effect
of
cancelling
the
first
The
Supreme
Court
struck
down
Elegado’s
contentions
and
91(A)
Time
of
Payment.
-‐
The
estate
tax
imposed
by
Section
84
held
that
the
first
assessment
had
long
become
final
and
shall
be
paid
at
the
time
the
return
is
filed
by
the
executor,
executory
and
that
the
estate
of
the
decedent
was
liable
administrator
or
the
heirs.
thereunder.
[Elegado
v.
CTA,
GR
No.
L-‐68385,
12
May
1989.]
91(B)
Extension
of
Time.
-‐
When
the
Commissioner
finds
that
the
Q:
What
is
the
consequence
for
non-‐filing
of
an
estate
tax
return?
payment
on
the
due
date
of
the
estate
tax
or
of
any
part
thereof
would
impose
undue
hardship
upon
the
estate
or
any
of
the
heirs,
*
The
eldest
son
of
former
President
Marcos
initiated
filing
of
he
may
extend
the
time
for
payment
of
such
tax
or
any
part
the
case
of
Marcos
II
v.
CA
questioning
the
actuations
of
the
thereof
not
to
exceed
five
(5)
years,
in
case
the
estate
is
settled
CIR
in
relation
to
the
settlement
of
the
estate
of
the
late
through
the
courts,
or
two
(2)
years
in
case
the
estate
is
settled
President.
Here,
it
was
found
that
the
estate
of
the
deceased
extrajudicially.
In
such
case,
the
amount
in
respect
of
which
the
failed
to
file
an
estate
tax
return.
On
this
point,
the
Supreme
extension
is
granted
shall
be
paid
on
or
before
the
date
of
the
Court
ruled
thus:
expiration
of
the
period
of
the
extension,
and
the
running
of
the
Statute
of
Limitations
for
assessment
as
provided
in
Section
203
of
“The
omission
to
file
an
estate
tax
return,
and
the
subsequent
this
Code
shall
be
suspended
for
the
period
of
any
such
failure
to
contest
or
appeal
the
assessment
made
by
the
BIR
is
extension.
Where
the
taxes
are
assessed
by
reason
of
negligence,
fatal
to
the
petitioner's
cause,
as
under
the
above-‐cited
intentional
disregard
of
rules
and
regulations,
or
fraud
on
the
part
provision,
in
case
of
failure
to
file
a
return,
the
tax
may
be
of
the
taxpayer,
no
extension
will
be
granted
by
the
Commissioner.
assessed
at
any
time
within
ten
years
after
the
omission,
and
any
tax
so
assessed
may
be
collected
by
levy
upon
real
If
an
extension
is
granted,
the
Commissioner
may
require
the
property
within
three
years
following
the
assessment
of
the
executor,
or
administrator,
or
beneficiary,
as
the
case
may
be,
to
tax.
Since
the
estate
tax
assessment
had
become
final
and
furnish
a
bond
in
such
amount,
not
exceeding
double
the
amount
unappealable
by
the
petitioner's
default
as
regards
protesting
of
the
tax
and
with
such
sureties
as
the
Commissioner
deems
the
validity
of
the
said
assessment,
there
is
now
no
reason
why
necessary,
conditioned
upon
the
payment
of
the
said
tax
in
the
BIR
cannot
continue
with
the
collection
of
the
said
tax.
Any
accordance
with
the
terms
of
the
extension.
***
In
summary,
there
are
three
important
dates
to
remember
(a)
The
amount
by
which
the
tax
imposed
by
this
Chapter
exceeds
in
the
event
of
death
of
an
individual,
to
wit:
the
amount
shown
as
the
tax
by
the
executor,
administrator
or
any
of
the
heirs
upon
his
return;
but
the
amounts
so
shown
on
the
1. Filing
of
the
notice
of
death
–
within
60
days
from
date
of
return
shall
first
be
increased
by
the
amounts
previously
assessed
death;
(
no
need
under
the
TRAIN
Law)
(or
collected
without
assessment)
as
a
deficiency
and
decreased
by
2. Filing
of
estate
tax
return
-‐
within
one
year
from
date
of
the
amount
previously
abated,
refunded
or
otherwise
repaid
in
death
[Section
90
of
the
1997
Tax
Code];
and
respect
of
such
tax;
or
3. Payment
of
estate
tax
due
–
within
6
months
from
date
of
death,
unless
extension
is
allowed
as
approved
by
the
CIR
(b)
If
no
amount
is
shown
as
the
tax
by
the
executor,
administrator
[Section
91(A)
of
the
1997
Tax
Code.]
or
any
of
the
heirs
upon
his
return,
or
if
no
return
is
made
by
the
executor,
administrator,
or
any
heir,
then
the
amount
by
which
the
Sec.
92,
Discharge
of
Executor
or
Administrator
from
Personal
tax
exceeds
the
amounts
previously
assessed
(or
collected
without
Liability
assessment)
as
a
deficiency;
but
such
amounts
previously
assessed
or
collected
without
assessment
shall
first
be
decreased
by
the
If
the
executor
or
administrator
makes
a
written
application
to
the
amounts
previously
abated,
refunded
or
otherwise
repaid
in
Commissioner
for
determination
of
the
amount
of
the
estate
tax
respect
of
such
tax.
and
discharge
from
personal
liability
therefore,
the
Commissioner
(as
soon
as
possible,
and
in
any
event
within
one
(1)
year
after
the
Q:
What
is
the
consequence
for
delayed
payment
of
deficiency
making
of
such
application,
or
if
the
application
is
made
before
the
estate
tax?
return
is
filed,
then
within
one
(1)
year
after
the
return
is
filed,
but
not
after
the
expiration
of
the
period
prescribed
for
the
*
On
this
point,
the
case
of
San
Agustin
v.
CIR
held
that:
“The
*
A
donor
engaged
in
business
shall
give
a
Notice
of
Donation
on
every
donation
worth
at
least
PhP
50,000
to
the
Revenue
District
Office
which
has
jurisdiction
over
his
place
of
business
within
30
days
after
receipt
of
the
qualified
donee
institution’s
duly
issued
Certificate
of
Donation,
which
shall
be
attached
to
said
Notice
of
Donation.
On
the
other
hand,
the
Certificate
of
Donation
states
that
not
more
than
30%
of
the
donation/gifts
for
the
taxable
year
shall
be
used
by
the
qualified
donee
institution
for
administration
purposes.