Introduction to Transfer Taxes Learning Objectives At the end of the lesson, students will be able to: 4, discuss the nature of transfer taxes; 2. differentiate onerous transfer from gratuitous transfer of property; 3. distinguish between donor's tax and estate tax; 4, explain the concept of succession; 5. describe the kinds of successors; e of testamentary succession; 6. examine the natur intestate succession; and 7. define and describe 8. identify the causes of disinheritance.& ‘Simplified and Procedural Handbook an Transfer and Business Taxation CONCEPT AND NATURE OF TRANSFER TAXES Properties, whether personal or real, Peete or im personally used or connected with business, are 7 RgH WRGhe mocae’ Such as by Sale of ‘exchange, donation, or inheritance. The transfer of private properties may be either _ONerous oy gratuitous as shown in Figure 6.1. On the one ‘hand, onerous transtep of properties is financial_in-character since it involves monetary consideration or its equivalent. Gratuitous transfer, on the other hand, occurs out of the free will.of the owner or by way of succession, The onerous transfer of properties is subj i while the gratuitous transfer is subject to transfer tax. Transfer taxisa Privilege tax imposed on the act of transferring properties, ~~ The following features characterize the nature of transfer taxes: 1, Transfer taxes are imposed_on_the transmission of the property. 2. The transfer of property may be either-onerous or gratuitous, 3. Onerous transfer of property is subject to business tax. 4. oe transfer of property is ‘Subject .to.estate or donor's Movable, o, 5. ae taxes are Classified_as_excise_taxes_or_privileges taxes. 6. Transfer taxes are ‘ot considered taxes.on the property but on the right to transfer the property. Figure 6.1. Transfers of Property{WEROUS TRANSFER OF PROPERTY. The onerous transfer of private Properties involves monetary consideration. The act of transferring is either normal in the business operation oF casual (not regularly undertaken). if the act of transferring the Properties is normal in the business operation like in a sale or barter, the transfer is subject to business tax as shown in Figure 6.2. Business taxes (value-added. tax and percentagetax) have been lengthily discussed in the previous — chapters. However, if the transfer of properties is deemed casual or not regularly made subject to exceptions, it is subject to capital gain tax.as shown in Figure 6.2. Figure 6.2 Taxes applicable in onerous transfer US TRANSFER OF TY The transfer of properties for free or without_monetary Consideration is called gratuitous transfer. The two types of gratuitous transfer are: . 1, by way of donation.or-gift; and 2. through inheritance under the process of succession. The transfer of properties as a gift is subject to donor's tax (gift tax) while the transfer of properties due to death is subject to estate tax 88 shown in Figure 6.3. The donor's tax and the estate tax are generally considered ansfer taxes. VAT and percentage tax may be technically classified 8S transfer taxes because they are imposed on account of transfers Usually related to business activities. However, the term “transfer tax” mer it +5 tax and estate tax. Thus, in this book, the Peagilereta poh donor's tax and estate tax. ‘em “transter tax” will only refer tO a save, vajsuey 0} vonanpo.tuSimplified and Procedural Handbook on Transfer and Business Taxation Figure 6.3 Taxes applicable in gratuitous transfer DIFFERENCES BETWEEN DONOR’S TAX AND ESTATE TAX The following are the differences between donor’s tax and estate tax: [ effectivity of | Uponthe death of the | During the lifetime of the transfer | decedent donor and donee ae heaton payee Et A Bag Era aera| Amount exempt | Netestate is P200,000 | Net giftis P100,000and | from tax | and below below ‘Basis of tax [Netestate =| Net gift | computation Filing and payment | Within six months from | Within 60 days after | decedent's death giving of the gift | Provision on f Extended to five years No mention on extension extension if settled judicially, of filing and payment or two years if settled of donor's tax | _extrajudicially Persons : subject | Only natural persons ~ “Natural and juridical to tax | persons | Taxpayer | Estate of decedent Donor = | Mode of transfer / “Through succession Pa | Tax rates | Higher rates ran ranging I from 5% to 20% "Number oftax | Five tax brackete | brackets | 8%, 8%, 11%, 15%, | | and 20%) Through donation Lower rates ranging from 2% to 15% ‘Seven tax brackets (2%, 4%, 6%, 8%, 10%, 12%, and 15%)The following are the basic characteristics of donor's tax: ‘ 4. Itis imposed on the right of transferring without.consideration real or personal properties in favor of another. 2. It is not imposed on the donor or the property donated but rather on.the act or privilege of transferring 3. It is imposed to prevent the avoidance of estate tax, in which the transfer of property happened during the lifetime of the donor. Donor's tax will be discussed in depth in Chapter 9. ESTATE TAX The following are the basic features of estate tax: 1. Estate tax is imposed_on_the transfer_of properties without nsi upon the death of the decedent. 2. The transfer-of:properties on account of one's death can_be ill) or intestate (operation of law).procedures. 3. The transfer of properties on account-of the decedent's death generally results in succession. The full discussion of the concept of estate tax is found in Chapters 7 and 8. SUCCESSION Succession i: ‘mode-of acquiring-properties, i Bs Obligation to the oi fas through transfer brought about by the death of the decedent. a Saxe] Jaysuey, 0} vonjanpa.juyELEMENTS DF SUCCESSION ‘Succession has the following basic elements: 0 1, Decedent - a deceased person whose Property ig transferred through succession. A decedent who transferreg properties through a written will is called a testator. © 2. Estate - the properties of the decedent subject to transfer through succession 3. Successor - the heir or party to whom properties are being transferred : Aig: Acceptance - the act of the successor receiving properties transferred on his/her own free will KINDS OF SUCCESSORS (NEIRS) Successors refer to individuals with legal right to inherit the estate. Classification of successors The broad classification of successors includes: 1. Voluntary heirs - successors who inherit properties because of a will and who otherwise would not receive anything if not mentioned in the last will and testament of the decedent Voluntary heirs are brothers, sisters, and | strangers. is , Or forced heirs - successors to whom the legal portion of the estate has been reserved by 'aw.-The legal portion of the estate is called a legitime, Compulsory heirs are further classified as either: a. primary compulsory heirs, and -b, secondary compulsory heirs. #. Primary compulsory heirs are the firstto_receive thelegal © Portion in the testamentary succession, They include: { a. legitimate children and their-descendants, | ». surviving legitimate spouse (widow or widower), and | 2. g Simplified and Procedural. Handbook on Transfer and Business Taxation c.b. Secondary com Pulsory heirs are successors in the absence of primary compuls ee pulsory heirs. The secondary compulsory heirs a. legitimate parent: 's oF ascendants 7 default of legitimate chidren, ous who can only inherit in . illegiti b. ee parents who can inherit in default of surviving gitimate spouse and illegitimate children. 't should be noted that the presence of the primary compulsory heirs-eliminates.the lagi -Gliminates the legitime of the secondary KINDS OF SUCCESSION The three kinds of successions are: 1. Testamentary succession - a succession that follows the terms.of.the will (last will and testament) 2. Intestate_(legal) succession - 4 succession undertaken 3, Mixed-succession ~ 2 succession that is partly testamentary and partly intestate succession _ Testamentary succession © Nature of testamentary succession e salient features of testamentar (last will and testament). succession: The following are th ny Suc 4. The succession is Most of the time, the es i -t ic, Holographic . A wil be 2 * Aaa ond 2 SOY rp i i self. il He testator ie olowing the required formalities and prepare ; signed by winess** jaw raserues.2-portion-of cession, the irs, The decedent 3. In testamentary su will follows the a S80] JB|SUE, o} UORIMPOYVeguiime rate : a Sae pocten cannot deprive the rights of the compulsory heirs to the estate. The portion of the estate in excess of the legitime ig called free portion. 1 |. The free-portion is part of the gross estate of the testator that can be freely given to anybody regardless of the decedent's relationship. Testator refers.to.the decedent who transfers his/her properties through a written will. A last will and testament executed by the decedent violating the rules on legitime does not make the will null and void, However, it must be adjusted so that the compulsory heirs receive their legitimes. B a Distribution of the net distributable estate in testamentary succession [ZUG The heirs in Table 1 have been generally classified into 4 Simplified and Procedural Handbook on Transfer and Business Taxation _ deducting the actual expenses which include the estate tax due and primary compulsory heirs and voluntarily compulsory heirs. Column 1 indicates the surviving heirs at the time of the decedent's death. The data in fractional form to the right of Column 1 represent the legitime of the heirs. It is strongly emphasized that the legitime should not be violated in the execution of the last will; otherwise, the will is considered defective. Row 1 represents a situation in which the deceased at the time of his/her death is survived by only the legitimate children. In this case, the legitime of the legitimate children is equal to one-half of the total net distributable estate. Hence, in the execution of the last will, one- half of the net distributable estate cannot be transferred to a person indicated in the last will other than the legitimate children. Since the legitime is only equal to one-half of the net distributable estate, the other half could be distributed to voluntary heirs mentioned in the will. it is strongly emphasized that what is to be distributed to the heirs is the net distributable estate, and not simply the net estate. Usually, the net estate is computed to identify the amount of estate tax payable. It is determined by deducting the allowable deductions from the gross estate of the decedent. The. net estate is not the amount to be distributed to the heirs. The net distributable is computed by secant lindas mei cee from the existing estate of the decedent at the time of his/her jeath. ; x net distributable 5 existing estede = actual expt’ Be etter bavdue f peyabieIntroduction to Transfer Taxes (su1@4 Alosinduwoo jou ee | an Aey) eouls aseys Ou erey siejsis pue | eek Hh Si0\}040) siejs}s pue ‘sietjo4g ‘esnods | BAS A Lr CB ar eenaee esnods pue sjusied ejeuniBe Ajuo sjuaued eyeuunit *H ” % 3 2 Moe eo ee) s zh Se oui) 1 ENE ae pee. : e/ / “a USIP ye2uuNB9jq| pue ‘esnods Buvaing yo ayewy169] | (uespyiyo jo saquuinu: 4 T UeApy yo eye Bey! Jo ewmni6e] | ey Aq papmip eq | : ‘ oy jenb3 ileus a1eys) z/, Pue "UsIp|Iyo eyeus69) ‘sesnodg | "A 7 esnods pue pilqo syeuy6e7 | zh Avo esnods | ~~ syuepuedsep pue ueupyyo uaupyiyo 3 esnods seus Buyayungin which the survivor of the i -half of the net dist oniy the legtimate spouse. n this CaS, Pe ne other nao estate is the legitime of the surviving SP be distributed to the voluntarily heirs mentioned in the last will. Row 3 illustrates a situation in which the survivor of the decedent is one legitimate child and a spouse. Here, one-half of the net distributable estate is the legitime of the legitimate child while the legitime of the surviving spouse is equal to one-fourth. This indicates that there is still a remaining one-fourth available to be distributed to voluntary heirs. The voluntary heirs, unlike the primary compulsory heirs, should be mentioned in the last will in order to share in the net distributable estate. If the survivors of the deceased are legitimate children and a legitimate spouse, the share of the legitimate children which is one-half of the net distributable estate will be divided among them. Table 1 indicates that the law reserves a legal portion (legitime) of the net distributable estate to the compulsory heirs which should not be diminished in the distribution. If the legal share of the compulsory heirs cannot be satisfied in the distribution, the share of the voluntary heirs mentioned in the last will may be forfeited to satisfy the legitime of the former. ~Himat Yhon died on February 1 of the current taxable year and left a net distributable estate of P 10,000,000, He is survived by his two legitimate children, Ophelia and Alex. MED ricer testamentary succession, how will th te estate be divided? © net distributable xD Since the decedent is survived by only two legitimate children, the first row of Table 1 will be used to determine the legitime of the Primary compulsory heirs, Thus, the pol ich the Compulsory heirs is one-half of the net distributable estate, Row 2 shows a situation Procedural Handbook on Transfer and Business Taxation @~--The net distributable estate will be apportioned as follows: “Legitime - compulsory share of the legitimate children (P10,000,000 x Ye = 5,000,000) Share of Ophelia (P5,000,000/2) 2,500,000 Share of Alex (P5,000,000/2) 2,500,000 Free portion : 5,000,000 Net distributable estate 210,000,000 In testamentary Succession, the net distributable estate is divided into: a, the legitime which is the legal portion of the compulsory heir; and b. the free portion which can be given to anybody according to the intention of the testator as indicated in the last will. As shown in Table 1, in the case of a decedent survived by legitimate children only, the legitime shall be one-half of the net distributable estate. Since the net distributable estate is P10,000,000, the legitime is 5,000,000 (P10,000,000/2) which can never be transferred to a person other than the two legitimate children. The legitime of 5,000,000 will be divided equally between the two legitimate children. Thus, each child will receive P2,500,000. The free portion, after satisfying the mandatory legitime requirements, can be distributed to voluntary heirs mentioned in the last will and testament. If there is no remaining free portion or in case the legitime tated in the last will is not fully satisfied, the voluntary heir st cannot abies any inheritance. The basic principle is to satisfy frst the legitime of the primary compulsory hel. : : he F =z EIRENE eae Dee 1 of the current taxable year ang left a net distributable estate of P 10,000,000. He is survived by his legitimate spouse. Under testamentary succession, how will the net distributable estaté:be divided? ELL» The second row in Table 1 indicates the legitime of the surviving spouse since the decedent is survived by his spouse alone. The distribution of the net estate will be as follows: ylegitime Share of the surviving spouse (P10,000,000 x 1/2) 5,000,000 i “Free portion 5,000,000 Net distributable estate 210,000,000 Since the testator is survived by his legal spouse only, 50% of the net distributable estate will be the legitime. The “other 50%—which is considered a free portion—will_be distributed among the voluntary heirs mentioned in. the will In a similar manner, the written will executed by the decedent should not indicate transfer of more than 50% of the net distributable estate to voluntary heirs or sacrifice the legitime of the compulsory heirs just to comply with the requirements of the will. Balda Dhou died with a net distributable estate of P15,000,000. He is survived by his legitimate son, Max, and spouse, Mercy. HEI vetermine the distribution of the net estate ‘under the testamentary succession. MLD 10 Table 1, row 3 determines the legitime of the decent since he is survived by his son and spouse only, ‘ Considering the legitime of the primary gompulsory heirs, ee the distribution will be as follows: i i Simplified and Procedural Handbook on Transfer and Business TaxationLegitime Share of Max — legitimate child - (P15,000,000 x 1/2) ~ P7,500,000 “Share of Mercy — spouse (P15,000,000 x */.) 3,750,000 (Free portion 3,750,000 Net distributable estate 15,000,000 Following the rule of testamentary succession, one-half of the net distributable estate will go the legitimate child and | ‘one-fourth will be given to the spouse of the testator. | In the above case, the net distributable estate is sufficient to cover the legitime of the compulsory heirs. Again, in case the net distributable estate.is not enough to cover the legitime of the compulsory heirs, then there is no free portion to be given to those heirs. mentioned in the will other than the; ‘ compulsory heirs. 1§ On March 1, Furo Bukol died with a net distributable estate of ®20,000,000-to be distributed to his spouse, Mary, and faurleaitimate children, namely Efren, Ben, Grace, and Janet. REID How wit the net estate be distibuted under the testamentary succession? The appropri decedent is su ate row to use in Table 1 is row 4 since the rvived by his spouse and legitimate children. The net estate will be distributed as follows: z Legitime a z re of the four children é | x “220,000,000 x Yo = P10,000,000) e f Efren (#10,000,000/4) 22,500,000 Ben (?10,000,000/4) 250,000 2,500,000~" z Grace (710,000,000/4) ' Janet (10,000,000/4) 2,500,000 2,500,000Free portion > 7,500, 66 Net distributable estate £29,000, 099 i ‘i le 1, the legitime of 4) Using the fourth row in Tab! Ir ne legitimate children is equal to one-half of the net distributabig. estate amounting to 10,000,000 (50% of the 20,000,000), Since there are four legitimate children, the legitime is divided among them. Thus, each legitimate child will receiv 2,500,000 (P10,000,000/4). ‘ The spouse, on the other hand, will receive a legitime. equal tothe share of one child, Hence, P2,500,000 will be allocated to the spouse. ~ Hurha Ghok died on January 31 of current taxable year and is survived by the following: his spouse, Nancy; his legitimate children, Roy, Eva, and Josephine; and, his illegitimate child, Alvin. The net distributable estate of the decedent was P15,000,000. MOD Aliocate the net distributable estate under testamentary succession, In determining the legitime of the primary compulsory heir, the appropriate row in Table 1 is row 4 since the decedent Is Survived by a spouse, legitimate children, and an illegitimate child. Business Taxation The distribution under the testamentary succession will appear as follows: Legitime Share of the legitimate children (815,000,000 x */» = 27,500,000) Roy (P7,500,000/3) 000 Bva (P7,500,000/3) oy & ‘Simplified and Procedural Handbook on Transfer and 0 Josephine (P7,500,000/3) ra Share of spouse (equal to the el ok legitime of 1 child) ‘ os Share of illegitimate child - 52,500,008 (2,500,000 #/2) : 5 Una Free portion - 1,250,000 j Total distributable estate _ — 3,150,000The legiti among ths three mee con USO heits is divided equal to the share of - TN spouse will receive a legitime receive one-half of ie Child while the illegitimate child will @ legitimate child, The " the legitime of on : free portion can be distributed among the voluntary heirs Will of the decedent. mentioned in the last FORMS OF THE WILL The last will and testament follows the legal forms Prescribed by law. It is usually prepared by lawyers following the required formalities and signed by witnesses. For a will to be valid, it should not violate. the legitime_of the » primary compulsory heirs. What will happen if the testator executed a will that violates the rules of the legitime? LD» A last will and testament that does not observe the rules of the legitime is not considered null and void. However, it must be adjusted_so that the legitime of the compulsory heirs are satisfied. On the other hand, a will executed by the testator isinheriti irs without legal cause makes isinheriting the compulsory. heirs wi caus will void. In such case, the intestate succession will apply. ill indicating the distribution of i executed a will indicating Nhana Lak, a widow, her assets as follows: value of | ‘sax2], JaJSUey) 0} UORONPO.AL >.During the current taxable year, Nhana Lak died leaving a net distributable estate of P20,000,000. HEETOND ‘ow will the net estate of the decedent be distributed? é a ‘Simplified and Procedural Handbook on Transfer and Business Taxation % Commercial building Fishpond Inheritance © based on 4,000,000 4,500,000 jast wil x The legitime of the legitimate children is 10,000,009 (50% x 20,000,000) and each legitimate child will receive P5,000,000 (P10,000,000/2). There is a free portion of P10,000,000 (20,000,000 - P 10,000,000). It can be observed, however, that the fair market value of the two properties indicated in the will is lower than the legitime of the compulsory heirs shown as follows: Commercial building (fair market value) ‘4,000,000 Fishpond — 4,500,000 Total values =P8,500,000 Legitime 210,000,000 The fair value of P8,500,000 is lower than the legitime of 10,000,000. Distributing only the properties to the compulsory_heirs.as their inheritance, therefore, violates the rule of the legitime. The legitime of Wilson is.5,000,000 and if he is made to receive only the commercial building with a fair market value of P4,000,009, his legitime will not be fully satisfied. The same ‘scenario will likewise happen to Margaret. Since the last will and testament did not fully observe the rules of the legitime, the distribution of the net estate will be modified accordingly. in a tabular presentation, the distribution will appear as follows: Brothers Wil Margaret ee coe pen acend Sisters Total 4,000,000 4,000,000 P4,200,000 4,500,000 8,500,000additional + properties analy 1,000,000 $00,000 sade 800,000 phe eqhtiine Required 5,000,000 ‘) Tesitime 5,000,000 95,900,000 Peuiey Free portion 710,000,000 _10,000,000 Inheritance 5,000,000 8,000,000 30,000,000 —ra.g00,000 The basic principlein.the. distribution of the net distributable estate under testamentary succession is to satisfy the legal claim of the compulsory heirs first before distributing the free portion to voluntary heirs, Likewise, the compulsory.heirs can_also share in the free portion if. such is the intention of the testator. ~} INTESTATE OR LEGAL SUCCESSION Intestate succession is a kind of succession of properties from the decedent without.a will, Intestate succession may happen under the circumstances: 1. The decedent did.not.execiite.a.written.will, 2. The decedent.executed a willl but it is considered void its validity, 3. The will of the decedent has lost its validity, 4. The will of the decedent didnot mention the names.of the following aon)-© Distribution of the net estate in intestate succession The intestate distribution of the net estate is illustrated in Tabie 2: Table 2. INTESTATE DISTRIBUTION. OF. NET DISTRIBUTABLE Egtare arene a eT Reading the table All We Ve treated as one legitimate child; the estate:is divided by.the total number (children and. s| jouse) In intestate succession, the heirs of the decedent are not classified as voluntary or compulsory. Likewise, the net distributable estate is not Table 2. is the spouse alone. In this case, transferred by way of-successi child..alone, ion.to the spouse, the survivor of the decedent is a legitimate child alone or an illegitimate all_the net_distributable. estate. i legitimate child or illegitimate Child as the case. ‘May be. divided into legitime and free portion. The net distributable estate shall be divided in accordance with the mode of distribution as shown in Row 1 indicates a situation in which the Survivor of the deceased 'n a similar manner, if is transferred to the: ws pas ‘ | ne aes shuation ah which the survivors of the decedent | ieee eae estate wil’ be’ equal Uden one y | etween th pada shapes (2) or 60% will be distributed tothe! eit a spouse r half will be given to the legitimate child. gitimate i aa atten ote docige under intestate succession in lecedent are the spouse iti i o ‘ and legitim ae ae spa the total net distributable estate will be sotake divi A Me ene spouse and the children. Hence, if there axe fi v ig iidren and a spouse, the net distributable estate will be divided into six, or one-sixth (1/s) for each heir. I I t it can be observed that the fractional i i i share in Tabl one in all instances. This is because there is no free. ee 5 ad to succession. in October 15 of the current taxable year, Ferme Sirko died intestate in a vehicular accident. He is survived by his legal spouse and four legitimate children. The net distributable estate of the decedent at the time of his death amounts to 6,000,000. x» Under intestate succession, determine the share of the heirs. h heir in the net distributable estate is 100,000/5). It is divided into five because e children and one legal spouse. The share of eac’ 1,200,000 (P6,0! there are four legitimate | I ' I i ' I i | taxable year, Ben Jamin executed his ating only the following successors of and Rachelle, his spouse. His three id Magdalene, were not intentionally of the current ‘ On January : ament design last will and test his properties: Cora, his mother, legitimate children. Mario, Claro, an stated as heirs in the ‘executed will. : ow will the net distributable estate be , n Jamin dies, he . =<» Le ng the heirs? divided amo! however, cannot’ Ee ‘Smaplified and Procedural Kandbook on Transfer and Business Taxation _ of his death. These properti entary succession because of a defective i inthe state. The net distributable estate wiy digtnbution of th ; be divided pyar between his surviving spouse and three legitimate children. follow the testam will, hence, MIXED SUCCESSION Mixed succession is a kind of succession covered by a will and partly legal or through the operation of law. The mode of distributing the net estate under mixed succession shall be as follows: 1. The distributable estate covered by the will of the decedent succession. 2. The properties of the decedent not covered by the will shali be distributed.in-accordance with intestate succession. Naning Kamot, a widower, executed his last will on January 1 of the current taxable year. The will indicates that his assets are to be divided as follows: a. Josephine, his ____only daughter 1: at the time of the deced 1 b, Mike, his only commercial building with a | son ___ 3,500,000 at the time of the decedent's death _ |G. Magno, his only agricultural land with a fair market value of | brother _..... P1,000,00 at the time of the decedent's death On June 4 of the same year, Naninc ‘ ee a : ° year, Naning Kamot purchased three units of mini-bus with a total fair market value of P6,000,000 at the timeDetermine the distribution of the net astate of the decedent. in iy am both the testamentary and intestate successions apply. The testamentary succession is applicable to the estate mentioned in the will while intestate succession is observed on the estate acquired after the execution of the will or properties not mentioned in the will. The basic tax procedures are as follows: 1, Determine the legitime of the compulsory heirs based on the testamentary distribution of the net distributable estate. 2. Compare the amount_of the legitime with the amount. mentioned in the will. @. Ifthe amount of the legitime is less than the fair market value of the properties mentioned in the last will and testament, distribute the properties to the compulsory heirs. The rule of the legitime is not violated if the value given to compulsory heits is more than what is indicated in the will. b. If the amount of the legitime is more than the fair market value of the properties indicated by the testator in the will, satisty.the-legitime_by allocating first the properties mentioned in.the will and then filing.up the balance from the {r6e- portion.of the netestate, Under testamentary succession, the legitime of the compulsory heirs is computed as follows: distributable estate 0 Multiply b Legitine of compulsory heirs ince there are two ildrer 5,000,000 Si children, the amount of P5,000, It be divided peor the two; that is. each will receive wil fl i le estate. é the net distributab! Pesonuey ee Josephine will receive @ house and As stated in the will, “CUS 0 000 and Mike will receive “ot with a fir market value re market value atthe tiie OF a commercial building WIN © eee‘ 0. Since the cedent’s death of P3,500,00 amounts : Sia indicated in the will are more than the l©Qiting ‘of 2,600,000, distributing the properties to their Tespectivg heirs does not violate the rule of the legitime, The free portion after the distribution of the house lot and the commercial building is P3,500,000 computed as of } follows: ' py 5 Net distributable estate 10,000,000 | Less: Share of Josephine 3,000,000 ' Share of Mike 3,500,000 5,500,000 i Free portion =23.500,009 Since.the free portion of P3,500,000 is enough to absorp the amount intended for Mr. Magno, a brother and aiso Classified as voluntary heir, the provision of the will can be implemented accordingly. Mr. Magno, therefore, shall receive the agricultural land valued at 1,000,000 and the balance of 2,500,000 will be divided equally between the compulsory heirs. « In tabular presentation, the distribution will appear as follows: | Testamentary | Intestate “| 2500000) .000 1,000,000 | P 10,000,000 kl» Disinheritance refers to an. i properties deprives a -Act by which an-owner.of : 4 of disinheritance - “"ight-to.inherit, The causes disinheritance Tolake oon 2881. 80d authorized by law forthe | onthe person disinherited. Disinheritance can be L erefor iS specifieg total in abplication, and the 25 1 gaat be expressed in a wilDisinheritance based on a cause not authorized by | law is not _ operative. In case the disinherted her denies the dsinerance, the arene eine of disinheritance shall rest The following causes of disinheritance of children. and descendants, both legitimate and illegitimate, are legal: 4, When the child or descendant has been found guilty of an attempt_againstthe life of the testator, the testator's spouse, descendants,.and-ascendants. 2. When the.chiid or descendant has accused the testator of a crime punishable by imprisonment of at Jeast six years and the accusation is proven without valid ground 3. When the child or descendant has been convicted of adultery or.concubinage-with the-spouse.of the.testator 4. When the child or descendant, by fraud, violence, intimidation, orundue. influence, causes the testator to make a will or to change one already made 5. A refusal without justifiable.cause ascendant who aisinherits such child or descendant 6 The maltreatment of the testator, by word or deed, by the child or descendant # ; 7. when a chil a dascondant eas a ishoncss tt Vaan or descendant-is- convicted. of a.crime which 8. When & ith it the penalty of civil interdiction i isinheritance of sufficient causes for the disin The following shail be : eee ‘ 1 Parents or ascondan's: nandoned het cidrn or nduced t 4. When the parents ie a comuptor. immoral if, or attempted | their daughters coa Simplified and Procedural Handbook on Transfer and Business Taxation 3. When the parent or ascendant has accused the testato, z crime for which the law.prescribes.imarisonment for si ye, or more, if the accusation has been found.ta be false, 4 4, When the parent or ascendant has been ie i 4 f ; a n 5. When the parent or ascendant, by fraud, intimidation, or undue influence, causes the testator pray will or to change one already made 6. The loss of parental authority for causes specified in the ivi, Code 7. The refusal to support the children.or descendants without Justifiable cause 8. An attempt by one of the parents against-the-life of the other, unless there has been a reconciliation betweenthem. REPUDIATION OF INHERITANCE Repudiation of inheritance refers to the refusal of.an inheritance. It should be noted that any_heir called to an inheritance may_either accept or refuse the inheritance. Soci taal sear kas The following basic guidelines may be observed in the repudiation of inheritance: 1. The repudiation must-be made_in public_or in.an-authentic document, or by petition to the court having jurisdiction over the testamentary or intestate proceedings. . Repudiation of an inheritance may_be in-favor of any one-ot more of the other heirs, ar in favor of nobody in particular. 3. When an inheritance is repudiated in favor of one or more of.the.heirs, the effect is as if the inheritance was accepted and subsequently donated.to others in whose favor the d repudiation was made. The person.who repudiates the inheritance will be subject to donor's tax. 4. When an inheritance is repudiated in favor of nobody, the repudiated inheritance stays.aSpart_of the estate of the decedent, and will be disposed-according to the rules on ? Aico. npIES OF CERTAIN OFFICERS 1. No judge. shall er_a distributive share t judici r to. unless a Certification fat ory party ets aecas tax has been paid is shown r that the estate cc Shall not register in the Registry-of Property therein or any chattel mortgage, by way of gifts inter vivos or mortis causa, legacy, or inheritance, from the i id. The BIR must be immediately notified of the non-+ payment of the tax once discovered. 3. Any lawyer, notary_public, or -government_officer who, by reason of his/her official duties, intervenes in_the preparation or_acknowledgement_of documents. regarding the partition or disposal of donatio inter vivos or mortis causa, legacy, or inheritance, shall-furnish the BIR with copies of such documents and_any information whatsoever which-may-facilitate the collection ofestate tax. 4. A debtor of the deceased shall not.pay his/her debts to the heirs, legatee, executor, or administrator unless. a certification fromthe BIR_Commissioner that the estate tax has been.paid is shown. However, he/she may pay the executor or judicial administrator without the said certification if the credit is included in the inventory of the estate of the decedent. 5, in the books of any corporation, sociedad andnima, partnership, business, or industry organized or established in the Philippines any S ‘are, Obligation, bond, or right i it y share, obligati ig by ae of ait ie ies or mortis causa, legacy, or inheritance y way 2 t 6. Ifa bank has knowledge ©! of the death of a person who maintained - 1a ban as or jointly with another, it shall not a bank deposit eee paid deposit account unless a allow any withdrawal BIR Commissioner that the estate tax has, certification from the wever, upon authorization of the BIR been paid is shown. Ho ¥ the estate or any one of the Commissioner, istrator 0! h ade a pike not exceeding P20,000 without the heirs may withdr said certification. Saxe] JaySUBU] 0} VORONPO.AUT