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01 Chapter 1 and 2 Taxation 2

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01 Chapter 1 and 2 Taxation 2

  1. 1. Taxation 2 │ INTRODUCTION TRANSFER TAXES and ESTATE TAX FLABERT VILLASENCIO, CPA Notre Dame of Dadiangas University
  2. 2. Learning objectives 1. Define a transfer tax 2. Differentiate an estate tax to a donor’s tax 3. Discuss the nature and concept of succession 07/07/14 2
  3. 3. Transfer of Property 07/07/14 3 Onerous TransferOnerous TransferOnerous TransferOnerous Transfer
  4. 4. 07/07/14 4 Gratuitous TransferGratuitous Transfer Transfer of Property
  5. 5. 07/07/14 5 Onerous TransferOnerous TransferOnerous TransferOnerous Transfer Casual TransferCasual Transfer Normal Course ofNormal Course of businessbusiness Vat or Percentage and Excise Tax Capital Gain Tax Transfer of Property
  6. 6. 07/07/14 6 Gratuitous TransferGratuitous Transfer Gift/ DonationDeath Estate Tax Donor’s Tax Transfer of Property
  7. 7. Difference of Estate and Donor’s Tax 07/07/14 7 Estate Tax Donor’s Tax o Impose on privilege to transmit property upon death o rate of tax is HIGHER o Allowed to extend filing and paying o Exemption per tax is P200,000 o Impose on privilege to transmit property during lifetime o rate of tax is LOWER o No extension for filing and paying o Exemption per tax is P100,000
  8. 8. Introduction to Estate Tax ESTATE TAX Theories Justifying the Imposition of Estate Tax ▪Benefit Received theory othe state renders services in the distribution of the decedent’s estate ▪Privilege theory oState Partnership theory oCollects the share in the accumulation of profit ▪Redistribution of Wealth Theory oResults in equitable distribution of wealth 07/07/14 8
  9. 9. Introduction to Estate Tax ESTATE TAX ▪Tax on the RIGHT of the deceased person to transmit his ESTATE to his lawful heirs and beneficiaries at the TIME OF DEATH ▪Levied on Net Estate ▪Not on the Property Transferred 07/07/14 9
  10. 10. Taxation 2 │ INTRODUCTION TRANSFER TAXES and ESTATE TAX FLABERT VILLASENCIO, CPA Notre Dame of Dadiangas University
  11. 11. Succession and Will SUCCESSION- a mode of acquisition by virtue of which the property, rights and obligation to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by will or by operation of law. WILL- an act whereby a person is permitted with the formalities prescribed by law, to control to a certain degree the disposition of his estate, to take effect after his death. 07/07/14 11
  12. 12. Element of Succession Decedent- the person whose property is transmitted through succession, whether or not he left a will. Heir- The person called to the succession either by the provision of a will or by operation of law. Estate- Refers to all the property, rights and obligations of a person which are not extinguished by his death. 07/07/14 12
  13. 13. Illustration: Rosario died leaving a five hectare coconut land to his son, Honesto. Identify the elements of succession. 07/07/14 13 Element of Succession
  14. 14. 07/07/14 14 Element of Succession
  15. 15. Kinds of Succession Testamentary- made in a will executed in the form prescribed by law. Intestate- no will or if there is, the same is void or nobody will succeed. Mixed- Partly by will and partly by law. 07/07/14 15
  16. 16. Kinds of Successors Legatee- An heir to a particular personal property given by virtue of a will. Devisee- An heir to a particular real property given by virtue of a will. 07/07/14 16
  17. 17. Classification of Successors PRIMARY COMPULSORY HEIRS SECONDARY COMPULSORY HEIRS 1. Legitimate children and their legitimate descendants 4. Legitimate parents and legitimate ascendants. (In default of No.1) 2. Surviving spouse (legitimate) 3. Illegitimate children and their descendants (legit. and illegit.) 5. Illegitimate parents (No other ascendants, in default of 2 and 3) 07/07/14 17
  18. 18. Persons Authorized to Manage Estate 1. Executor- person appointed by a testator to carry out the directions and requests of his will and the disposal of his property. 2.Administrator- person appointed by the court to administer his property. 07/07/14 18
  19. 19. Summary Diagram 07/07/14 19 SUCCESSION Testamentary Mixed Intestate Legatee Devisee Executor Administrator Kinds of Succession Kinds of Successors Authorized to Manage
  20. 20. Definition: An act whereby a person is permitted with the formalities prescribed by law, to control to a certain degree the disposition of his estate, to take effect after his death. 07/07/14 20 Will
  21. 21. Not Allowed to Make a Will oBelow 18 years old oIncapacitated oTwo or more persons who make a will jointly Not Allowed to Witness to a Will oAny person not domiciled in the Philippines oThose convicted of falsification of a document, perjury or false testimony 07/07/14 21 Disqualify to Make and Witness to a Will
  22. 22. Holographic Will ▪A will that is kept secret ▪Must be: oWritten, dated and signed by the hand of the testator oMaybe made inside or outside the Philippines oNeed not to be witnessed oNot subject to formalities Codicil- a supplement or addition to a will 07/07/14 22

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