Charrisse E.

Sonido January 23, 2019

BSA – 4A Dean Cordova

ASSIGNMENT IN TAX 102

What is transfer?
Transfer is a term that has a broad connotation among various industries and transaction
types. It refers to any transmission of property from one person to another. It may also refer to
the movement of an account from one bank or brokerage to another.

Types of Transfers
1. Bilateral transfers - involve transmission of property for a consideration. They are referred
to as onerous transaction exchange. Ex: Sales and Barter
2. Unilateral transfers - involves the transmission of property by a person without
consideration. They are commonly referred to as gratuitous transaction or simply,
transfers
3. Complex transfers - are transfers for less than full and adequate consideration. These
dales made at prices which are significantly lower than the fair value of property sold.

What constitutes an adequate consideration?

Adequate consideration refers to a price which is equal in value for an act or a thing for
which it is given. The price can be in the form of money, property, an act, and promise to do an
act or not to do an act. Inadequate consideration is not void; however, it can make a contract
unenforceable either by itself or due to procedural defects in bargaining. For example, If A
promises B, A’s house worth $25,000 for $5, then this would be inadequate consideration.

Types of Transfer Tax

1. Donor's tax - imposed on donation inter-vivos.
2. Estate tax - imposed on donation mortis-causa.

Classification of Transfer Taxpayers

1) Residents or Citizens:
a. Resident Citizen - Filipino citizens residing in the Philippines
b. Resident aliens - Citizens of a foreign country residing in the Philippine
c. Non-resident Aliens - Filipino citizens not residing in the Philippines.
2) Non-resident aliens - citizens of a foreign country not residing in the Philippines.

What is donation inter-vivos?

Donation inter-vivos is one made by a living donor. It is subject to donor’s tax. It is valued at
the date of completion or perfection of the donation.
What is donation mortis causa?
Donation mortis causa is one made by a deceased donor. It is subject to estate tax. It is valued
at the date of death.

What is incomplete transfers?

Incomplete transfers involve the transmission or delivery of properties from one person to
another, but ownership is not transferred at the point of delivery. The actual transfer of ownership
will take effect in the future upon the happening of certain future events or conditions.

Types of Incomplete Transfer?

1. Conditional transfer
2. Revocable transfer
3. Transfer in contemplation of death
4. Transfers with reservation of title to property until death.

What is succession?
Succession is the mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance, of a person are transmitted through his
death to another or others either by his will or by operation of law.

Types of Succession
1. Testamentary Succession - is that which results from the designation of an heir, made in
a will executed in the form prescribed by law (Art. 779, Civil Code). A person can specify
the recipient of his properties upon death. This designation must be made through a
written document called last will and testament. A person who died with a will is said to
be "testate."
2. Intestate Succession - when a decedent dies without a will or with an invalid one, the
distribution of the estate shall be in accordance with the default provision of the Civil
Code on succession.
3. Mixed Succession - transmission of the decedent properties shall be partly by virtue of a
written will and partly by operation of law.

What is will?
A will is an act whereby a person is permitted, with the formalities prescribed by law, to
control a certain degree the disposition of this estate, to take effect after his death (Art. 783,
Ibid). A will is an expression of the decedent's desire as to how his properties will be distributed
after his or her death.

Types of Will
1. Holographic will - a will which is entirely written, dated, and signed by the hand of the
testator himself
2. Notarial will - a notarized will signed by the decedent and witnesses
 3. Codicil - a supplement or addition to a will, made after the execution of a will and
annexed to be taken as a part thereof, by which disposition made in the original will is
explained, is added to, or altered. (Art 825, Ibid.)

Elements of Succession
1. Decedent - is the general term applied to the person whose property is transmitted
through succession, whether or not he left a will. If he left a will, he is called the testator
(Art. 775, Ibid.).
2. Estate - is the property, rights and obligations of the decedent not extinguished by his
death. This is also referred to as the "inheritance" of the decedent.
3. Heirs - a person called to the succession either by the provision of a will or by operation
of law (Art. 782, Ibid.)

Types of Compulsory Heirs

1. Primary heirs - Legitimate children and their direct descendants
2. Secondary heirs - Legitimate/illegitimate parents and ascendants
3. Concurring heirs - The surviving spouse and illegitimate descendants

What is estate taxation?

Estate taxation pertains to the taxation of the gratuitous transfer of properties of the
decedent to the heirs upon the decedent's death. It is governed by the law in force at the time of
the decedent's death. The estate accrues as of the decedent's death and the accrual of the tax
is distinct from the obligation to pay the same. Upon the death of the decedent, succession
takes place and the right of the State to tax the privilege to transmit the estate vests instantly
upon death.

Nature of Estate Taxation

1. Excise tax - estate tax is not a tax on the property but on the privilege to transfer property
through death
2. Revenue or General Tax - estate tax is intended as a revenue or fiscal measure
3. Ad Valorem Tax - estate tax is dependent upon the value of the estate
4. National Tax - estate tax is imposed by the national government
5. Progressive Tax - estate tax is determined based on a tax table of progressive rates.

What is gross estate?

It pertains to the totality of the properties owned by the decedent at the point of his death.
Gross estate consists of all properties of the decedent, tangible or intangible, real or personal,
and wherever situated at the point of death.
In the case of non-resident alien decedent, gross estate includes only properties situated
in the Philippines except intangible personal property when the reciprocity rule applies.
Distinguish the extent of gross estate of each type of decedent taxpayer

Residents or Citizens NRA without reciprocity NRA with reciprocity

Property Location Within Abroad Within Outside Within Outside

Real Properties      

Personal Properties
-tangible      
-intangible
     

Composition of Gross Estate

1. Properties, movable or immovable, tangible or intangible
2. Decedent's interest on properties
3. Proceeds of life insurance:
a. Designated as revocable to any heir
b. Regardless of designation, if the beneficiary is the estate, administrator or executor
4. Taxable transfer

Valuation of the Gross Estate

Properties subject to estate tax shall be appraised at their fair value at the point of death.
Conceptually, "fair value" refers to the amount at which two willing independent buyers and sellers
could transact an exchange. The valuation rules are the following:
1. The fair value of the property as of the time of death shall be The value to include in gross
estate.
2. Fair value rules set by law or revenue regulations must be followed.
3. In default of such fair value rules, reference may be made to fair value rules under
generally accepted accounting principles.
4. Encumbrances on the property or decrease in value thereof after death shall be ignored.

What is property regime?

A property regime is a set of rules agreed upon by the parties before getting married, which
would govern their property relations during the course of their married life.

Types of Property Regimes

1. Absolute separation of property (ASP) - Technically, all properties of the spouses are
separate properties, except those properties which they may acquire jointly.
2. Conjugal partnership of gains (CPG) - All properties that accrue as fruit of their individual
or joint labor or fruits of their properties during the marriage will be common properties of
the spouses.
 3. Absolute community of property (ACP) - All present properties owned by the spouses at
the date of celebration of the marriage shall become common properties of the spouses
including future fruit of their separate or joint industry or fruits of their common properties.

Absolute Community of Property vs Conjugal Partnership of Gains

Under absolute community of properties (ACP), marriage is viewed as a union of the
present property of the spouses including fruits of labor and industries of the spouses during the
marriage. While in conjugal partnership of gains (CPG), the properties of the spouses including
fruits before the marriage are their exclusive properties. Conjugal partnership of gains views
marriage as a union of gains that accrues during the marriage. Hence, all fruits of labor and fruits
of properties of the spouses during the marriage starting from the date of celebration of the
marriage are considered common properties. Since common properties begin to accrue only from
the date of marriage, this property regime is best described as prospective.

List of Exclusive Properties Under Absolute Community of Property

All properties of the spouses are effectively common with the exception of the following
week the law designated as exclusive properties of the spouses:
1. Properties received by way of gratuitous title during the marriage.
2. Fruits of separate properties of the spouses.
3. Properties for the exclusive personal use of either of the spouses, except jewelry.
Properties brought into the marriage by either spouse with a descendant by a prior
marriage.