Documente Academic
Documente Profesional
Documente Cultură
SUCCESSION. A mode of transmission of the ownership, rights, interests and obligations over
property by reason of death of the owner in favor of certain persons designated by the owner
himself or by operation of law
Elements of succession
1. Decedent. The person who dies and whose properties, rights and obligations are transmitted. If
he left a will, he is called the testator.
2. Successors. The persons to whom the proper-ties, rights and obligations of the decedent will
pass. They are the heirs or beneficiaries.
3. Estate. The properties, rights and obligations which are the subject matter of the succession;
sometimes called the inheritance.
Kinds of succession
1. Testate or voluntary - carried out according to the wishes of the testator expressed in a will
executed in the form prescribed by law.
2. Intestate, involuntary, or legal - with an invalid will or without a will, thus giving rise to a
succession by operation of law.
INTER VIVOS TRANSFERS SUBJECT TO ESTATE TAX
Property may not be physically part of the estate because they were transferred by the decedent
during his lifetime (inter vivos). However, the property shall still be included in the gross estate if
such transfers were made under any of the following circumstances:
a. Revocable transfers – transfers where the decedent reserves for himself the power to alter,
amend, revoke or even terminate such transfer.
b. Transfers with retention or reservation of certain rights – the decedent retains for himself the
economic benefits of the property or the power to designate the persons who may exercise
such rights.
c. Transfers in contemplation of death – the decedent was motivated by the thought of death.
Exceptions: (not in contemplation of death):
1. To relieve the donor from the burden of management.
2. To save on income or property taxes.
3. To settle family disputes.
4. To provide independent income for dependents
5. To see the children enjoy the property while the donor is still alive.
6. To protect the family from the hazards of business operations.
1. Claims against the estate – debts or demands of pecuniary nature which could have been
enforced against the deceased in his lifetime and could have been reduced to simple money
judgments. Claims against the estate or indebtedness in respect of property may arise out of
(1) contract, (2) tort, or (3) operation of law.
Requisites:
a. Personal obligation of the deceased existing at the time of his death.
b. Contracted in good faith and for an adequate and full consideration in money or money’s
worth;
c. The debt or claim is valid in law and enforceable in court.
d. The debt instrument was duly notarized.
e. Not condoned by the creditor or must not have prescribed.
f. If the loan was contracted within 3 years prior to the death of the decedent, the executor or
administrator shall submit a statement showing the disposition of the proceeds of the loan.
2. Unpaid mortgage – the property left by the decedent which was encumbered by a mortgage
indebtedness still unpaid at the time of death.
Provided, that the gross value of the property mortgaged, undiminished by the mortgage
indebtedness, must have been included in the gross estate.
Rules:
a. The classification of the property mortgaged (conjugal, community or separate) is NOT the
basis in the determination of the deduction whether chargeable against the common
property or the exclusive property of the decedent.
b. Chargeable against common property – if contracted during the marriage.
c. Chargeable against exclusive property – if contracted prior to marriage or by the donor/prior
decedent.
3. Claims against insolvent persons–receivable of the decedent which can no longer be
collected due to insolvency of the debtor.
Requisites:
a. The amount of claim has been included in the gross estate.
b. The debtor’s incapacity is proven and not merely alleged.
4. Unpaid taxes – those which have accrued and unpaid as of decedent’s death. The following
are NOT deductible:
a. Income tax upon income received after death;
b. Property taxes not accrued before his death;
c. Estate tax due from the transmission of his estate.
5. Losses–if the following requisites are complied
a. Must arise from fire, storm, shipwreck or other casualties or from theft, robbery or
embezzlement AFTER the death of the decedent.
b. Not compensated by insurance or otherwise.
c. Not claimed as deduction for income tax purposes.
d. Incurred during the settlement of the estate and not later than the last day for the payment
of the estate tax.
B. Transfers for public purposes– All bequests, legacies or transfers to or for the use of the
government or any political subdivision thereof for exclusively public purpose. The transfer
must be testamentary in character. Oral transfers are not deductible.
C.Vanishing Deductions(Property previously taxed)
PURPOSE: To minimize the effects of a double tax on the same property within a short period
of time.
Requisites for vanishing deductions:
1. The property is situated in the Philippines.
2. Present decedent has acquired the property by inheritance or donation within five (5) years
prior to his death.
3. The estate taxes on the prior transfer or the gift taxes on the gift must have been finally
determined and paid.
4. The property subject to vanishing deduction must be identified as the one received from the
prior decedent, or from the donor or having been acquired in exchange for property so
received.
5. The estate of the prior decedent has not yet previously availed of the vanishing deduction
II.SPECIAL DEDUCTIONS
1. FAMILY HOME – the dwelling house where the members of the family reside and the land on
which it is situated; the place to which, whenever absent for business or pleasure, one still
intends to return.
a. Must be situated in the Philippines.
b. Beneficiaries of family home are the spouses, their ascendants and descendants,
including legally adopted children, brothers and sisters, whether the relationship be
legitimate or illegitimate,
c. who are living in the family home, and
d. who depend upon the head of the family for legal support.
Provided, that it must have been the decedent’s family home as certified by the barangay
captain of the locality.
Maximum amount deductible: P10 M
2. AMOUNT RECEIVED BY HEIRS UNDER RA 4917. Any amount received by the heirs from the
decedent’s employer as a consequence of death of the decedent employee. Provided, that
such amount is included in the gross estate of the decedent.
3. STANDARD DEDUCTION. An amount equivalent to P5 million.
2nd limitation
Net estate (all Foreign Countries)
Total net estate x Phil estate tax
ADMINISTRATIVE PROVISIONS
1. WHEN CPA CERTIFICATE IS NEEDED – where the gross value of the estate exceeds
P5,000,000.
2. Contents of the statement certified to by a CPA
a. Itemized assets of the decedent with their corresponding gross value at the time of
death.
b. Itemized deductions from gross estate.
a. Amount of tax due whether paid or still due and outstanding.
3. FILING AND PAYMENT – within one (1) year from the decedent’s death.
a. In case of resident decedent. - With any Authorized Agent Bank (AAB), Revenue
Collection Officer (RCO) or duly authorized Treasurer of the city or municipality in which
the decedent was domiciled at the time of the death.
b. In case of nonresident decedent - with the Office of the Commissioner or if there is an
executor or administrator, with the RDO having jurisdiction over the executor or
administrator’s legal residence.
SURCHARGES & INTEREST – If the return was filed and/or the tax was paid after the due
date, the corresponding surcharges and interest on internal revenue taxes shall be imposed.
1. Surcharges (ad valorem penalty)
50% – False or fraudulent return is willfully filed.
– Willful neglect to file the return on time.
25% – Failure to file any return and pay the tax due thereon.
– If the return is not filed with the proper internal revenue officer.
– Failure to pay on time the deficiency tax shown in the notice of assessment.
Note: The failure to file any return and pay the tax thereon are treated as one act or
violation for purposes of the imposition of penalties.
2. Interest for failure to pay tax per return on time
Rate– 12% per annum computed from the date prescribed for payment until the amount is
fully paid.
4. WHEN IS FILING OF RETURN REQUIRED?
a. When the transfer is subject to tax.
b. Regardless of the gross value of the estate, where said estate consists of registered or
registrable property such as real property, motor vehicle, shares of stock or other similar
property for which a clearance from the BIR is required as a condition precedent for the
transfer of ownership in the name of the transferee.
5. EXTENSION FOR FILING – CIR in meritorious cases may grant extension not exceeding 30
days.
The request for extension shall be filed with the Revenue District Officer (RDO) where the
estate is required to secure its TIN and file the estate tax return. The application shall be
approved by the Commissioner or his duly authorized representative.
6. EXTENSION FOR PAYMENT – when payment on due date would impose undue hardship, he
may extend the period not exceeding –
5 years – in case of judicial settlement
2 years – in case of extrajudicial settlement
Where the taxes are assessed by reason of negligence, intentional disregard of rules and
regulations, or fraud on the part of the taxpayer, no extension will be granted by the
Commissioner.
7. PAYMENT OF TAX BY INSTALLMENT–if the available cash of the estate is not sufficient to pay
its total estate tax liability.
If any amount of the net taxable estate is not paid within the statutory date, a
corresponding applicable penalty shall be imposed. If the payment after the due date is
approved by the Commissioner or his authorized representative, the imposable penalty shall
only be the interest.
In case the available cash of the estate is insufficient to pay the total estate tax due,
payment by installment shall be allowed within two (2) years from the statutory date for its
payment without civil penalty and interest.
7. ATTACHMENTS TO THE RETURN
a. Notice of death duly received by the BIR, if the gross estate exceeds P20,000 for deaths
occurring on or after January 1, 1988; or if the gross estate exceeds P3,000 for deaths
occurring prior to January 1,1998.
b. Certified true copy of the Death Certificate.
c. Deed of Extra-Judicial Settlement of the Estate, if the estate is settled extra-judicially
d. Court Orders/Decision, if the estate is settled judicially;
e. Affidavit of Self-Adjudication and Sworn Declaration of all properties of the Estate.
f. A certified true copy(ies) of the Transfer/ Original/Condominium Certificate of Title(s) of
real property(ies) (front and back pages), if applicable.
g. Certified true copy of the latest Tax Declaration of real properties at the time of death, if
applicable.
h. “Certificate of No Improvement” issued by the Assessor’s Office declared properties have
no improvement or Sworn Declaration/ Affidavit of No Improvement by at least one (1) of
the transferees.
i. Certificate of Deposit/Investment/ Indebtedness owned by the decedent and the
surviving spouse, if applicable.
j. Photocopy of Certificate of Registration of vehicles and other-proofs showing the correct
value of the same, if applicable.
k. Photocopy of certificate of stocks, if applicable
l. Proof of valuation of shares of stocks at the time of death, if applicable.
o For listed stocks – newspaper clippings or certification from the Stock Exchange.
o For unlisted stocks – latest audited Financial Statement of issuing corporation with
computation of book value per share
Note: Juan Torres mortgaged the property for P300,000 for the benefit of the conjugal
partnership and paid P200,000 before he died.
Deductions claimed:
1. Funeral services by Horizontal Funeral Homes P125,000
2. Other funeral expenses 50,000
3. Cost of the burial plot and tombstone 15,000
4. Loans from PNB 300,000
5. Loan from Asialink 20,000
6. Income tax on income of Juan Torres from January 1 to September 20, 2018 23,000
7. Income tax on income of estate of Juan Torres in 2018 7,000
8. Real estate tax payable for the 4th quarter of 2018 on house and lot in Manila 10,000
9. Legacy to University of Nueva Caceres for scholarship 25,000
10. Medical expenses incurred several days before his death but paid only on
September 30, 2018. 450,000
QUESTIONS:
1. When is the last day to file the return and to pay the tax without any penalty?
2. How much is the estate tax due?
3. Prepare a Estate tax return.
PROBLEM 2:Lolly, Filipino, married to Pops in 2005, died December 31, 2018 leaving the
following (assume absolute community of property regime):
Property acquired thru the labor of:
Lolly P 3,400,000
Pops (including family home valued at P5,200,000) 8,200,000
Accounts receivable 200,000
Cash in bank – savings account 3,000,000
Property inherited by Lollyduring and on occasion of marriage 2,000,000
Property donated to Pops before marriage 1,500,000
Dividend from Bukangbibig Corp., date of record, 12/1/18 300,000
Time deposit, exclusive property. Joint account with brother,
Philip 200,000
Jewelries (stolen on the day of burial) 300,000
PROBLEM 3. Paquito, Filipino, married to Ana, died testate on January 3, 2019 leaving the
following:
Conjugal properties:
House and lot in Manila, actual residence of the family 6,500,000
Vacation house in Bicol 800,000
Commercial building 5,200,000
Home appliances 200,000
Stocks in Ex Corporation – not listed in the stock exchange:
Common shares, 2,000 shares (book value-P50; par value-P20)
Preferred shares, 1,000 shares (book value-P40; par value-P30)
Stocks in Why Corporation – listed in the stock exchange
-P500 shares (highest-P45; lowest-P42)
Exclusive properties:
Jewelry 80,000
Car 850,000
Other personal properties 600,000
The estate of Paquito claimed the following deductions:
Mourning apparel of -
Surviving spouse 10,000
Legitimate daughter, 45 years old, unmarried 14,000
Illegitimate son, 17 years old 5,000
Mourning apparel bought after the burial 15,000
Long distance telephone calls informing the relative of Paquito 1,200
Expenses for prayers, masses, entertainment after interment 25,000
Obituary 20,000
Cremation and burial expenses (20% was borne by relatives) 60,000
Cost of burial plot 80,000
Expenses of the wake 64,800
Other expenses paid to the funeral parlor (20% of which have
not yet been paid during the burial) 64,800
Judicial expenses incurred until July 3, 2019 50,000
Judicial expenses incurred after July 3, 2019 20,000
Unpaid mortgage on commercial building (the proceeds of which
went as a loan to his brother) 50,000
Unpaid debt (condoned by his creditor-sister) 30,000
Medical expenses incurred in 2018 70,000
Medical expenses incurred 12/18 (P70,000 of which is unpaid) 550,000
PROBLEM 5: the following data appears in the BIR Form 1801 of the intestate estate of Keno
Recto who died from lung cancer on May 1, 2019:
Additional information:
1. Coconut land: FMV per tax declaration, P4,500,000; FMV per BIR, P4,000,000.
2. House and lot: House is built from the community fund of the spouses a year ago,
P3,000,000; Land worth P5,000,000 was inherited by the decedent 6 years ago and
during the marriage.
3. The savings deposit was withdrawn by the heir to defray the expense of wake and
burial of the deceased.
4. Book value and par value of ABC Corporation’s stock is P50 and P40 per share,
respectively.
5. The appointed irrevocable beneficiary of the life insurance policy is the eldest
daughter.
6. The actual funeral expense incurred amounted to P450,000.
7. The judicial expenses were incurred during the settlement of the estate and within
one (1) year from the death of Keno Recto.
8. The P50,000 has been borrowed from a loan shark who is an Indian national
(Bombay).
9. The unpaid mortgage is on the coconut land and is an accommodation loan to the
brother of the decedent.
10. The land is an exclusive property and was donated inter vivos a month before the
death of Keno Recto.
11. The insolvent debtor is a self-declared insolvent. The amount constitutes part of
the accommodation loan to his brother.
12. The actual hospital expense amounted to P600,000 which was entirely incurred in
2019.
COMPUTE for the correct estate tax due on the estate of Keno Recto.