TRANFER AND BUSINESS TAXATION

3. Partial institution of heir. Consequently,

intestacy takes place as to the undisposed
Chapter 1
portion.
Transfer Taxes - taxes imposed upon the gratuitous 4. Other causes of legal or intestacy
disposition of private properties of rights. It is an  When the heir instituted is not
excise tax. capable of succeeding.
 Non-fulfillment of the suspensive
1. Bilateral transfer/onerous – subject to
condition attached to the institution
business taxes
of heir.
2. Unilateral transfer/ gratuitous - donations
 Pretention
3. Complex transfer - mixture of bilateral and
 Fulfillment of “resolutory condition”
unilateral
 Expiration of term or period of
Types of Transfer Taxes institution
 Non-compliance or impossibility of
1. Estate Tax - death
compliance with the will
2. Donor’s Tax – living
 Reputation of the instituted heir.

Succession - mode of acquisition by virtue of w/c

Elements of succession
the property rights and obligations to the extent of
the value of the inheritance of a person are 1. Decedents - person whose property is
transmitted though his death to another or others transmitted though succession, whether or
either by his will or by operation of law. not he left a will.
 Executor - person designated in the
Kinds of Succession
last will and testament to carry out
1. Testamentary or testate succession – that the provisions of the decedent will.
results from the designation of an heir, made  Administrator – person appointed by
in will executed in the form of prescribed by the court and performs the same
law. duty, in lieu of an executor, if the
2. Legal or intestate succession – effected by latter refused to accept the
operation of law since the decedent did not appointment, failed to qualify under
execute a will or if the last testament the law or the last will and testament
executed by him is void. did not appoint one.
3. Mixed succession – w/c is effected partly by
“will” and partly by operation by law. 2. Inheritance (estate) - all the property, rights
and obligations of a person w/c are not
extinguished by death and all w/c have
accrued thereto since the opening of
succession.
Causes of legal succession or intestacy:
3. Successor - a person who called the
1. If a person dies w/o or w/ a void will or one succession either the provision of a will or
w/c has subsequently lost its validity. by operation of law.
2. When the “will does not institute an heir.  Compulsory heirs - succeed by force
of law to some portion of the
inheritance, in an amount
 predetermined by law, known as 2. Holographic will – is a written will much
legitimate. must be entirely written dated and signed by
 Primary - legitimate children the hand of the testator himself.
3. Foreign wills - an alien who is abroad
and descendants
produces effect in the Philippines if made
 Secondary - legitimate with the formalities prescribed by the law of
parents and ascendants the place in w/c he resides or accdg. to the
 Concurring - illegitimate formalities observed in his country or in
children and descendants and conformity w/ those w/c the Phil. Civil
surviving spouse codes prescribes.
 Voluntary heirs - instituted by the A will may be revoked by the testator at anytime
testator in his will to succeed to the before his death any waiver or restriction of this
inheritance of the portion thereof w/c right is void.
the testator can freely dispose. Modes of Revoking will
 Legal or intestate heirs - who
1. By implication of law
succeed to the estate of the decedent
2. By some will codicil or other writing
by operation of law executed as provided in case of wills
Legitimate - part of a testator’s property w/c he 3. By burning, tearing, cancelling, or
obliterating the will with the intention of
cannot dispose the law has reserved it for certain
revoking it, by the testator or by some other
heirs. person in his presence and by his express
direction.
Institution of an heir is an act by virtue of w/c a
Consanguinity - the relation of persons descending
testator designates in his will the person/s who are
from the same slock or common ancestors. This is
to succeed him in his property and transmissible
known as blood relatives.
rights and obligations.
1. Collateral - w/c subsists between persons
Disinheritance is a testamentary disposition by w/c
who have the same ancestors, but who not
a compulsory heir is deprived of or excluded fr. the
descend one from the other.
inheritance to w/c he has right.
2. Lineal - w/c may be descending or
ascending is that w/c subsists between Requisites for disinheritance
persons of whom one is descended in a
direct line from the other. 1. Effect only through a valid will
3. Affinity - relatives by married. 2. For cause expressly stated by law
3. Cause must be stated in the will itself
4. Cause must be certain and true
5. Unconditional
6. Total (there is no partial disinheritance)
Will - an act whereby a person is permitted with the 7. The heir disinherited must be designated in
formalities prescribed by law, to control to a certain such a manner that there can be no doubt as
degree the disposition of his estate to take effect to his identity
after his death. It is a document whereby a person
called “testator”, disposes of his/her properties or
“estate” to take effect upon his/her death. Right of representation
Kinds of Wills It a “right” created by fiction of law where the
representative is raised to the place and degree of
1. Notarial or ordinary or attested will
the person represented and acquires the rights w/c
the latter would have if he were living or could have
inherited. Representation may arise either because  Non imposition
of:  Exemption
1. Death
2. Incapacity
3. Disinheritance Intangible asset- identifiable nonmonetary asset w/o
physical substance.
The situs of intangible personal property (is also
known as “mobilia sequntur personam”) is the
domcile of the owner.

Chapter 2: Gross State

Situs of tangible and intangible property
Estate tax - is a tax imposed on the privilege that a
person is given in controlling to a certain extent.  Real property and tangible personal
The disposition of his property to take effect upon property- the situs is the location of the
death. It is imposed on the act of passing the property
ownership of property at the time of death and not  Shares, franchise, copyright and the like- the
on the value of the property or right. situs is where the intangible is exercised
Justification for the imposition of Estate Tax regardless of where the corresponding cert.
Is stored
1. Benefit-Received theory- the law considers  Receivables- the situs is residence of the
the service rendered by the gov’t in the debtor
distribution of the estate of the decedent  Bank deposit- the situs is the location of the
either by law or in the accordance w/ his depository bank
wishes.
2. Privilege or State partnership theory-
inheritance is not a right but a privilege Value of gross state
granted by the state and legatees have been
acquired only w/ the protection of the estate. 1. In general- fair market value the of death
3. Ability to Pay theory- receipt of inheritance 2. Real property- the higher value between
w/c is in the nature of an unearned wealth or FMV determined by the commissioner and
windfall, are place assets into the hands of FMV as shown in the schedule of values
the heirs and beneficiaries. fixed by the provincial and city assessors
4. Redistribution of Wealth theory- the receipt 3. Personal property- FMV at the time of death
of an inheritance is a contributing factor to 4. Share of stock- unlisted common shares,
the inequalities in wealth and incomes. unlisted preference share, listed shares
5. Units of participation in any association,
Composition of the gross state based on citizenship recreation or amusement club- the price
and residency nearest the date of death published in any
 Citizen- property (real or personal) wherever newspaper or publication for general
situated circulation.
 Resident alien- intangible personal property 6. Right to usufruct use or habitation, and
wherever situated annuity-
 Nonresident alien- real property situated in
the Phils. Tangible personal property
situated in the Phils. Intangible personal
property w/ situs in the Phils., unless
excluded on the basis of reciprocity.

Reciprocity