ReSA ‘The Review School of Accountancy ‘Tel No. 735-9807 & 734-3989 TAXATION ‘TAMAYO/LIM/CAIGA/ MANUEL ‘TRUE OR FALSE: Wnte the word True when the statement is correct and the word False when the statement is incorrect. When your answer's Fase, undetine the werd 0 pivase that made the statement incorrect and supply the correct word or phrase. Transfer taxes are taxes imposed upon the gratuitous disposition of property, whether real or personal, tangible or intangible Transfer taxes are not property taxes because their imposition does not rest upon general ownership but rather Considered as privilege taxes imposed on the act of passing ownership of property. 3. The gross estate of both resident ctizen and non-resident citizen decedents consists of properties stuated within 10. nL 2, 13, 4 15, 16. v7, 18. 19, 20. a1. 2, 23, 24. 2. 22. 28. 29. 30. 1. A transfer passing under spedal power of appointment is 2 taxable transfer that shall be i and without the Philipines. The gross estate ofa resent alien decedent is composed of properties situate inthe Philippines ony. “The gross estate of a non-resident alien decedent is composed of properties situated inthe Philippines only. “The rule of reciprocty applies to all properties stuated inthe Philippines owned by a non-resident alien decedent. ‘Shares, obligations of bonds issued by any foreign corporation shall be considered as intangible personal property situated inthe Philipines. A transfer where the enjoyment of the property may be altered, amended, revoked or terminated by the decedent ‘sa taxable transfer and stall be included inthe gross estate. included in the gross estate of the decedent. Atransfer of property intended to protect the family from hazards of business operations isa transfer in contemplation of death Proceeds of life insurance taken by the decedent upon his own life ae included inthe gross estate whether the ‘designation of a third person as a beneficiary is revocable or irrevocabe. Benefits received from SSS and GSIS shall be exctided from the gross estate of the decedent whether the designation ofa beneficiary 1s revocable or revocable. When the beneficiary of the proceeds of Ife surance taken by the decedent upon his own if isthe estate, executor ofthe estate or administrator ofthe estate, such proceeds shall be always included inthe decedent's gross estate Giaims ofthe decedent against insolvent persons are included in the gross estate atthe full amount and are ‘deducted from the gross estate to the extent of what cannot be collected. ‘Amount received by heirs under R.A. No. 1917 is included in the gross estate ofthe decedent and is deducted from the gross estate. “The merger of usutruct in the ovner of the naked tie ison exempt transmission for estate tax purposes ‘All bequests, devise, legacies or vansfrs to sone welfare, cultural and chartabe institutions shal always be exempted from estate ax. Gross estate is generally valued at the historical cost ofthe properties owned by the decedent at the time of death. If the property is a real propery, the far market value shall be the fair market value as determined by the ‘Commissioner or the fair market value as shown in the schedule of values fixed by the provincial and city assessors, whichever is higher. Unlisted common shares are valued based on ther book value while unlisted preferred shares ae valued at per value. Tn determining the book value of comman shares, appraisal surplus shall not be considered as well as the value assigned to preferred shares, if there are any. For shares which are lsted inthe stock exchanges, the fair market value shall be the arthmetic mean between the highest and lowest quotation ata date nearest the date of death, if none is available on the date of death ise. ‘To determine the value ofthe night to usufruct, use or habitation, as wel as that of annuity, there shall be taken into account the probabie ife ofthe benefciary n accordance with the latest basic standard mortality table, to be ‘approved by the Secretary of Finance, upon recommendation of the Insurance Commissioner. Couples who got married on or after August 3, 1988, the date of effectivity ofthe Family Code, shall be under ‘absolute community of properties in the absence of a pre-nuptial agreement. Under absolute community of properties, all properties owned by the spouses before the marriage regardless of how acquired shall belong to the community properties without exception. 5. Under conjugal partnership of gains, all properties owned by the spouses before the marriage shall be considered exclusive properties. Under both conjugal partnership of gains and absolute community of properties, properties acquired during marriage by gratuitous ttle shall be considered exclusive properties. Under both conjugal partnership of gains and absolute community of properties, income from exclusive properties received during the marnage shall be considered cojugal/communtty property Under absolute community of properties, properties acquired during the marrage by gratuitous title by ether spouse may form part of the community properties i s specifically provided by the donor, testator or grantor that ‘such property shall form part of the community. Pieces of jewelry received as gifts during the marriage shall be considered exclusive property under both conjugal partnership of gains and absolute community of properties, TX-101 AReSA: The Review School of Accountancy statement false | situated in the Philippines. The word or phrase that makes the | ‘considered as intangible personal property | | Intangible personal properties only if 85% of the business is situated in the | phi pines or the shares, obligations or bonds have acquired business situs in the Phil General power 110. False a transfer in contemplation of death. {Not in contemplation of death but ‘transfer a 1 — _...._| motivated by motives associated with life it Fae ‘whether the desig a rd person | as a beneficiary is revocable or Only if the designation is revocable |__| irrevocable. __ Pott Ti j 17. False | always 7 ‘Not always. Only when the social welfare, cultural historical without exception | Considered conjugal/community property | | administration expenses do not exceed 30% of _ the total expenses | Fair market value atthe or charitable institutions are non-profit and the | Exception is property acquired before the | | marriage by either spouse who has legitimate | | descendants by a former marriage, and the fruits | ___| 25.06 weil as the income, if any, of such pre | Under absolute community income from exclusive | property received during the marriage is _Loonsidered exclusive property ll -END- TAXATION: DRILL IN ESTATE TAX (BATCH 37) TX-101 AReSA The Review School of Accountancy Tel No 735-9807 & 734-3989 ‘TAXATION ‘TAMAYO/LIM/CAIGA/ MANUEL ‘TRUE OR FALSE: WWnte the word True when the statement is correct and the word False when the statement 1s incorrect. 12, B “ 1s 6 7. 18. 19. 20. a 2, B. 24, 2s. When your answer 1s False, underine the word or phrase that made the statement incorrect and supply the correct word or phrase. The estate ofa resent or ctzen decedent can deduct both the ordinary deductions and spec deductions from ts gross estate, Under the TRAIN (R.A. No. 10962), the estate of a nan-vesdent allen decedent cannot deduct al the special deductions from its gross estate Before TRAIN (R.A. No. 10963) , the deductible funeral expenses shall be the actual funeral expenses (whether paid or unpaid) up to the time of interment, not borne by friends or relatives and duly substantiated or an amount equal to 5% of the gross estate, whichever is lower, but in no case to exceed 200,000, Before TRAIN (R.A. No. 10963), any amount for funeral expenses that exceed the P200,000 threshold, shall be alowed as 2 deduction from the gross estate if the came i stil payable. . Before TRAIN (R.A. No, 10963), judicial expenses allowed a5 deduction are those incurred in the inventory taking assets comprising the gross estate, thei adeninistratcn, the oayment of debts of the estate, as well as the distribution of the estate among the heirs. Before TRAIN (R.A. No. 10963), the deductible judicia! expenses are those incurred during the settlement of the estate but not beyond six (6) months after the decedent's death, or the 30-day extension thereo, for the filing of the estate tax return, Before TRAIN (R.A. No. 10963), any unpald amount for the cost and expenses claimed under “judicial expenses” should ’be supported by a sworn statement of account issued and signed by the creditor. Under the TRAIN (R.A. No. 10963) effective January 1, 2018, funeral expenses and judicial expenses are no longer allowed as deductions from the gross estate. Under the TRAIN (R.A. No. 10963), any loss due to robbery, theft or embezzlement shall be alowed as a deduction from the decedent's gross estate provided such loss is sustained within one year after the decedent's death and all the other requisites for deductons are met. ‘The word “daims' in reference to claims agairst the estate 's generally construed to mean debts or demands of a pecuniary nature which could have been enforced against the deceased in his lfetime and could have been reduced to ‘simple money judgements. ‘A claim against the estate representing a persona! ouligation of the deceased existing at the time of his death including ‘unpaid funeral expenses and unpaid medical exper.ves shall be alowed as a deduction from the decedent's gross estate ‘A requirement for deduction, in case of a simple loan, i s statement under oath executed by the administrator oF ‘executor ofthe estate reflecting the disposition ofthe proceeds of the loan if said loan was contracted within three (3) years prior to the death of the decedent. Unpaid taxes that accrued before the decedents death are deductible from the gross estate including tax upon income. received after the death of the decedent ‘The value ofthe net estate shall be determined by deducting from the value ofthe gross estate claims of the deceased against insolvent persons where the value of the decedent's interest therein i included in the value of the gross estate. ‘Gams against persons who absconded cannot be deducted from the grass estate because the persons who absconded ‘are not necessanly insolvent ‘The value of the net estate shall be determined by cieducting from the value ofthe gross estate unpaid mortgages upon, ‘or any indebtedness in respect to, property where the value of the decedent's interest therein, undiminished by such mortgage or indebtedness, is included in thc value ofthe gross estate In case unpaid mortgage payable is being claimed by the estate, venfication must be made as to who was the beneficiary of the loan proceeds. . Tf the loan is found to be merely an accommodation loan where the loan proceeds went to another person, the value of the unpaid loan must be included as a receivable ofthe estate I there isa legal impediment to recognize the accorimodation loan as receivable of the estate, the unpaid obligation or mortgage payable shall not be recognized as a deduction Irom the gross estat. ‘An oral transfer to the National Government exclusively for public purposes to take effect after the decedent's death is, deductible from the gross estate. In case of non-resident alien decedents, dechicton fox transfer for public purposes from the gross estate is allowed whether or not the property transferced is situated in the Philippines. ‘Ray amount received by the heirs from the decedert's employer as a consequence of the death of decedent-employee in ‘accordance with R.A. No, 4917 is alowed as deduction provided that the amount of the separation benefits included as part of the gross estate of the decedent. Ih order to be allowed @ deduction for property previously taxed, the date of death of the present decedent must not ‘exceed 5 years from the date of death of the prior decack:nt or date of donation, as the case may be. Deduction for property previously taxed is also known es vanishing deduction because the applicable rate increases as the ‘distance between the date of death of the priot decedent and the date of donation widens, ‘Among other requisites, vanishing deduction «alowed if the property shall have formed part of the prior decedent's gross estate situated in the Philippines or been incivoed in the total amount of the gts of the donor made within 5 years prior to the present decedent's death, Under absolute community of property, vanishirg deduction may be deducted from exclusive property or community property. TX-101 B