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    TAX2 - Chapter 1 and 2

    Uploaded by

    Karina Barretto Agnes
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    TRANSFER & BUSINESS TAXATION Ordinarily, a human being is born of a mother and a father, grows to adulthood, acquires and controls property by venturing into business or otherwise, becomes the mother or the father of children, lives a meaningful life, and dies. Part | of this book shall deal with the transfer of property during the lifetime of an individual, or in contemplation of, or as a result of his death. Part Il deals with business taxes. Knowledge of the law on business taxes is a must for those who are into business, for one who works as a bookkeeper or as an accountant of a private or government office, for tax consultants, and for practicing CPAs and lawyers. The focus of Part 1 of this book is on the transfer of property. aeanengy cniraccs everything which is or may be the subject of ownership. The term includes not only ownership and possession but also the tight of usesandvenjoyment for lawfulypurposes, The person in whom the ownership, dominion or title of property is vested is known as the owner. O¥Wiership is the exclusivestight of possessing, enjoying and.disposing of a property. MODES OF ACQUIRING OWNERSHIP Under the Civil Code, owfG?SRip may be,exereised oversthings ortights. The owner has the right to enjoy and dispose of a thing, without other limitations than those established by law. Ownership is acquired by ocoupation and by intellectual"eréation. Ownership and other real rights over property are acquired and transmitted by law, by donation, by {estate and intestate swevession, and in consequence of certain"eontracts, by tradition. They may also be acquired by means of prescription: The effeétiveness of the various modes of aequiringownership and otherréabrights over property is premised on the existence of title.or,judicialjustifieation. The following are the modes of ownership acquisition: 1, Occupation. When ownership is acquired by occupation, the property seized is - ‘withoutasknownowner. For example, a person’s occupation is fishing or hunting, Intellectual Creation. By intellectual creation, the composer owns his musical compositions while the author owns his literary, legal, historical, scientific or other work. 2 wets 3. Donation. Donation is an aet'6F liberality whereby a person disposes gratuitously of a thingorsight in favor of another, who aegepts.it. 4, Succession. Succession is a 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 trafismined throughhis'deathitormother.” Guay Lj, helen, 5, Prescription. By prescription, one acquires ownership and other real rights through the in the manner and under the conditions laidsdawmiby law. In the same coo Tights and actions are lostibysiprescription. The first is referred to as “gequisitive” prescription and the second as “extinetive” prescription. CONCEPT AND NATURE OF TRANSFER TAXES Two of the five modes of acquiring ownership as enumerated in the Civil Code are succession and donation. In succession, estavestax is levied on the transmission of property from a prioridesedentitoshisheirs. Estate encompasses the totality of assets and liabilities a decedent owns atith@iA€ OP hisedeath. In donation, donor's tax is imposed ‘as ownership of the property passes from the donor to the donee. Estate tax and donor’s tax are the two transferstaxes under our laws. Transfer taxes are taxes imposed upon the geattfitUsidisposition of privateypropenty. A transfer is said to be gratuitotis when there is noweonsideration for the transfer; it is on@Fows when a ‘consideration is received. Onerous transfers such as sale, barter or exchange are subject to business taxes. Estate and donor’s taxes are excise taxes. Both taxes are imposed upon the right of a person to transfer his property that may take effect during his lifetime or upon his death. RECENT BIR ISSUANCE ON ESTATE & DONOR’S TAXES Revenue Regulations 2-2003 dated Dec. 16, 2002 is a consolidated revenue regulations on estate tax and donor’s tax incorporating the amendments introduced by RA 8424, the Tax Reform Act of 1997, thus amending Revenue Regulations 17-1993. These regulations shall govern the taxation of the: 1, transmission of the decedent’s estate; and 2. donations made by persons natural or juridical * citizens or aliens ‘© residents or non-residents a) roe oot TRANSFER & BUSINESS TAXATION Basic Concepts of Succession ‘An elderly couple requested that a lawyer stop at their home to discuss the task of writing ‘heir wis. The gentleman was 85 years of age; his wife 63. They had raised 12 children, ail ‘of whom had children of their own. The lawyer explained the process involved in making @ will and what the couple should be thinking about regording thelr property. But the old gentleman had a puzzied expression ‘on his face, When asked whether it was his wish that all his property pass to his wife, the mon said, "Yes, | leave everything, to ‘Mama’, but if she will mary again, she'll get nothing!” Despite the fact that his wife had bome him 12 children and had been a good wife to him for many years, the old gentleman was worried about her marrying again. The case indicates the kinds of superstitions and fears that people entertain, even today, concerning the making of a will. The feeling occurs mostly among elderly people, but many younger persons do not appreciate the need for and importance of a will. Going back to the story of the old couple, what do you think would the lawyer’s advice be to the old gentleman who, although willing to pass all his property to his wife, would ‘want to impose a condition in his will? Would said condition—that the wife should not ‘marry again—be valid under the law on succession? Under our laws, such a condition is valid as to the free (disposable) portion of the estate but not as to the fegitime (that part of the testator’s estate reservedforeompulsory"heirs.) Therefore, the wife, being compulsory heir, still gets her legitime, It is important to realize that the laws on succession and estate taxation deal with serious ‘matters of life and death. Matters of life and death bring forth strong human emotions. Lawyers know from experience that no matter how strong a human being may seem, when asked about the death of loved ones or friends that occurred years before, may suddenly burst into tears. As we study these laws, we should develop a genuine compassion, empathy, and sympathy for our fellow human beings and the matters of life and death Every country has laws governing their ways in which property passeson the death of the owner who dies without a will, An “estate” is the sum total of all the property of a deceased individual. That property passes to the deceased’s heirs at law, if he dies without a will, or to his beneficiaries under his will. fits — Gan can Al ‘yi Creweeshl : Practically, every adult owns some property at death, including clothes, jewelry and other personal effects. In fact, most adults, even if they do not own real property, do own a substantial amount of personal property. Every adult has or may have a significant estate ‘o planandkadminister. The process known as “estate"planifing” that is so much discussed today secks to insure that a decedent's loved ones receive his property with’a minimum of expenses and taxes. However, in the Philippines, the concept of estate planning is not as popular as itis in the United States. SUCCESSION As carlier defined, stiéeession is a 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 awe ‘The rights to the succession ate transmitted from the moment of death of the decedent. Kinds of Succession 1. Testamentary or testate ~ is that which results from the designationrof an heir, made in a will executed in the form"preseribed byslaw. 2. Legal or intestate ~ is that effected —— since the decedent did not execute a will, tarot Plamen 3. Mixed — is that effected partly by will and partly by operation of law. Elements of Succession 1. Death of the decedent. 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 also called the restator, 2. Inheritance. Inheritance includes all the property, rights and obligations of a person which are remnants det ‘The inheritance of a person includes not only the property and the transmissible rights and obligations existing at the time of his death, but also those which have accrued thereto since the opening of the succession, A personal right, such as a license to practice law, cannot be inherited. Devise.is a testamentary disposition of reakestate while Jegacy is a giftorbequest by willof personal property. 3.) Successors. Heirs, devisees and legatees are all successors. An heir is a person called to the succession either by the provision of a will or by operation of law; if by willy they are called voluntarysheirs; if by operatiomof-law, legalOnintestate’eirs. Devisees and legatees are persons to whom gifts of real property and personal property, respectively, are given by:virtueofa-will. 4. Acceptance. The acceptance of an inheritance may be express or tacit. An express acceptance may be made in a public or private-document. A tacit acceptance is one ting from acts by which the intention to accept is necessarily implied, or which ‘one would have no right to do except in the capacity of an heir. An heir may accept or repudiate an inheritance. The acceptance or'repudiation of the inheritance is an act which is ec. The effects of the acceptance or repudiation shall always retroact to.the:moment’of the’death of the decedent. Any person having the free disposal of his property may accept or repudiate an inheritance. Executors and Administrators ‘An exeeutor is a person appointed by a testator to carry out the directions and requests in his will, and to dispose of the property according to his testamentary provisions after his death. An administrator is a person appointed by the courtto administer the assets and liabilities of a decedent. He is usually a relative of the decedent who has come forward and appliedsfor the position, All matters relating to the appointment, powers and duties of executors and administrators and concerning the administration of estateS of deceased persons shall be governed by the Rules of Court. TESTAMENTARY SUCCESSION Wills A person may make a Jegal-dectaration’ before his"death regarding how he wants his property transferred after his death. This declaration is known as a will. Ifa person dies Teaving a will, the person is said to have died testate, a statusiknown’as testacy: A will is an act whereby a person is permitted, with the formalities'presctibed bylaw, to control to a certain degree the disposition of his estate to take effect after his death. The making of a will is a strietly:personalvact; it cannot be left in whole or in part to the discretion of a third person, or accomplished through the instrumentality of an agent or attorney. The testator may entrust to a third person the:distributiom=of specific-property or sums of, money that he may leave in general to specified classes or causes, and also the designation of the persons, institutions or establishments to which such property or sums of money are to be given or applied. A codicil is an instrument is an instrument that amends (i.e., changes, modifies, or supplements) the A codicil must be executed with the same formalities as a will, but is only required to have a provision or provisions amending a will, aemtemeerreeinagth: comaacananlig elie is proved to be valid-or-invalid, Generally, the probate provess involves collecting a decedent’s estate, liquidating liabilities, paying necessary taxes (¢.g,, estate tax), and distributing property to heirs. nord trent Be inbetween nh 4 ‘ Peay i i eam vie x ‘These activities are carried out by the executor or administrator of the estate, usually under the supervision of the probate court or other court of appropriate jurisdiction Capacity and Intent to Make a Wi All persons who are not expressly prohibited by, law may make a will. Persons of either sex under eighteen years of age, which is the age of majority, cannot make a will. Although a child under the age of majority may own property, he, as a minor, does not have the legal capacity to make contracts, hence he cannot acquire and control property independently. In order to make a will, it is essential that the testator be of sound:mind:at'the:timesof its execution. To be of sound mind, it is not necessary that the testator be in full possession of all his reasoning faculties, or that his mind be wholly unbroken, unimpaired, or unshattered by disease, injury or other cause. It shall be sufficient if the testator was able at the time of making the will to know:the:mature:of the estate:to*be:disposed of, the proper objects of his bounty, and the character of the testamentary act. ‘The law presumes that every person is of sound mind, in the absence of proof to the contrary. The burden of proof that the testator was not of sound mind at the-time of making his dispositions is on-the:person.who opposes the probate-of the will; but if the testator, one month, or less, before making his will was publicly known to be insane, the person who maintains the validity of the will must prove that the testator made it during a lucid interval. If someone who signs an instrument did not know what the instrument said at the time of signing, the instrument is notaawilk The same holds true if one who signs an instrument is forced to sign it “against his will” as the result of duress (ie., unlawful pressure to act, such as a gun held to one’s head), the instrument is not a will. In either case, not knowing what one is signing or signing tinder duress, the requirement of intention to make a will having legal effect, has not been met. Also because of this requirement, a will or a provision in a will, may also be invalidated by fraud (ie., intentional misrepresentation or concealment), ‘A married woman may make a will without the consent of her husband, and without the authority of the court. A married woman may dispose by will of all her separate property as well as her share of the conjugal partnership or absolute community property Capacity to Succeed by Will or by intestacy Persons not incapacitated by law may succeed byswill or absimtestato. In order to be capacitated to inherit, the heir, devisee or legate must be living at the moment the succession opens, except in case of representation, when it is proper. A child already conceived at the time of the death of the decedent is capable of succeeding provided it be born later. For civil purposes, the fetus is considered born if it is alive at the time it is completely delivered from the mother’s womb. However, if the fetus had an intra-uterine life of less than seven months, it is not deemed born if it dies within twenty-four hours after its complete delivery from the maternal womb. ‘A testamentary disposition may be made to the State, provinces, municipal corporations, private corporations, organizations, or associations for religious, scientific, cultural, educational, or charitable purposes. All other corporations or entities may succeed under ‘a will, unless there is a provision to the contrary in their charter or the laws of their creation, and always subject to the same. Forms of Wills ‘The formalities required for a written witnessed will were designed to limit fraud and abuse by making sure that each will was an authentic declaration of its maker's desires Hence, every:will:must be :im-writing and exeouted, in a lafiguagevor dialect’known to the Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself or by the testator’s name written by some other person in his presence, and by his express direction, and attested and subscribed by three or more credible witnesses in the presence of the testator and of one another. ust be acknowledged sbeforesa=notary"public by the stestator and the ‘witnesses, ‘The notary public shallenot'beitequired to retain-a-copy-of the will, or file another with the office of the Clerk of Court. A holographic-will is a will written entirely by the testator with hissown-hand and"not ‘witnessed or attested. A person may execute a holographic will which must be entirely written, dated, and signed by the hand of the testator himself. It is subject to no other form, and may be made in or out of the Philippines, and need not be witnessed. The testator’s handwriting is deemed a sufficient assurance of the will’s authenticity. In the probate of a holographic will, it shall be necessary that atsleast-one;witness who knows the handwriting and signature of the testator explicitly declare that the will and the ‘signature are in the handwriting of the testator himself. If the signatureof the'testator in a will is contested, atleast three of such witnesses shall be required. The will of an alien-whovis;abroad producesveffectin'the Philippines if made with the it i of the place in which he resides, or according to the formalities observed in his country, or in conformity with those which the Civil Code prescribes, ‘A will madevin'thesPhilippines by a citizen or subject to another country, which is executed in accordance with the law of the country of which he is a citizen or subject, and which might be proved and allowed by the law of his own country, shallrhave the-same Revocation of Wills and Testamentary Dispositions ‘A will may be revoked by the testator at any time beforehis'death. Any waiver or restriction of this right is void. this country, is valid’ when it is made, or according to the law of the place in which the testator had his dor time; and if the revocation takes place in this country, when it is in accordance with the provisions of the Civil Code. Subsequent will which do not revoke the previous ones in an express manner, annul only such dispositions in the prior wills as are inconsistent with or contrary to those contained in the later wills. A revocation of a will based on a false cause or an illegal cause is null and void. Institution of Heir Institution‘of anvheir is anvact-by-virtue of which a testator designates in his will the person or persons who are to succeed him in his property and transmissible rights and obligations. ‘A will shall be valickeven though it should not contain an institution of an heir, or such institution should not,comprisethe-entire.¢state, and even though the person so instituted should not accept the inheritance or should be incapacitated to succeed. In such cases, the testamentary dispositions made in accordance with law shall be complied with and the remainder of the estate shall pass to the legal heirs. Legitime ‘Legitime is that part of the testator’s property which he eannotdispose of because the law has reserved it for certain heirs who are, therefore, called:campulsorpheirs. The rules on legitime safeguard the rights of the compulsory heirs with respect to their legitimes. The following are compulsory heirs; 1. Legitimate,childreneand"descendants, with respect to their legitimate parents and ascendants; 2 2. In default of the foregoing, (inate case- see with respect to their hy legitimate children and descendants; : dhnt 3. The widow orwidower:, — 4 opulid ¥, ARP ended 0 4. Acknowledgednaturalchilived, id Sita hildren by tegal fiction: 5, Otherillegitimate children. ‘Compulsory heirs mentioned in Nos. 3, 4 & 5 are not excluded by those in Nos. | and 2; neither do they exclude one another. For example, if the decedent is survived by his legitimate child (no. 1) and his widow (no. 3), both of them shall inherit. ‘One who has no compulsory heirs may dispose by will of all his estate or any part of it in favor of any person having capacity to succeed. One who has compulsory heirs may dispose of his estate provided he does not contravene the provi with regard to the legitime of said heirs. Hence, if in the last will of a decedent, the disposition of his estate impairs the legitime of his compulsory heirs, such will may be modified accordingly. gt The table below explains the legitime of the compulsory heirs: a jt by Legitimate Legitimate aw! uw Illegitimate a Children’ Parents/ Surviving Children’ Free Descendants Ascendants Spouse Descendants Portion ti ‘esiate) % a. % excluded —_sarré-ab fhe legit Yathe legitime of varies. ‘ofa legitimate ‘a legitimate child b. none surviving % none surviving none surviving % c, none surviving 4% % none surviving % d. none surviving none surviving % none surviving % enone surviving none surviving Us us 3 a. The legitime of legitimate children/descendants consists of estate of the father and of the mother. Legitimate parents/ascendants are exeluded by the Leper cerca ripe =e pera Cedi ‘Should there be only one legitimate child/descendan If of the hereditary estate goes to the child, one- fourth to the surviving spouse and the other one-fourth is free portion. Thus, if the hereditary estate is P1,500,000, P750,000 goes to the child, P375,000 to the surviving spouse, and the other P375,000 is free portion. If there are two or more legitimate children/descendants, one-half shall be divided equally among the children while the surviving spouse gets the same share as each legitimate child. Thus, if the hereditary estate is P1,500,000 and there are two legitimate children, P375,000 goes to the first child, P375,000 to the second child, 375,000 to the surviving spouse and the remaining P375,000 is free portion. If there are three legitimate children/descendants, each child gets 1/6 (1/2 + 3) of the hereditary estate and the surviving spouse gets 1/6 also, Thus, if the hereditary estate is P1,500,000, the children share equally in one-half of the hereditary estate or P750,000 such that each child gets P250,000; the surviving spouse gets P250,000 also; and the remaining free portion is PS00,000. The illegitimate child always gets one-half the share of a legitimate child. Thus, the fice portion varies depending on the number of legitimate children/descendants on whose share the surviving spouse’s and the illegitimate children/descendants’ share depend, b. The legitime of legitimate parents/ascendants consists of one-half of the hereditary estate of their children/descendants. This case assumes that their child/descendant has no, legitimate »ehildren/descendants, stifViving spouse and illegitimate children/descendants. The free portion is one-half the hereditary estate. _. The legitime of legitimate parents/ascendants consists of one-half of the hereditary estate of their children/descendants, The surviving spouse has the right to one-fourth of the hereditary estate, This case assumes that their child/descendant has no legitimate children/descendants and has no illegitimate children/descendants, The free portion is one-fourth the hereditary estate If the only survivor is the widow or widower, she or he shall be entitled to one-half of the hereditary estate of the deceased spouse, and the testator may freely dispose of the other half. If married in artieulo,mortis, and spouses had notbeen living:for:S ‘years together as,husband.andewife, and deceased spouse dies within. three-months ‘rap eeimasstamnaeses surviving spouse’s share is reducedstorone+third. This limitation does not apply to intestacy ‘and is believed inapplicable where the healthy spouse is the one who dies within the three-month period. If the testator leaves illegitimate children, the surviving spouse shall be entitled to ‘one-third of the hereditary estate of the deceased and the illegitimate children to ‘another one-third, The remaining one-third shall be at the free disposal of the testator. ‘There are other possible situations aside from those mentioned but the essence of the law on legitimes is that the surviving spouse is always entitled to his legitime depending on the existence of other compulsory heirs. Disinheritance When a person expects or is expected: to, inherit, but does.notsthe person is said to be disinherited, A compulsory heir may, in consequence of disinheritance, be deprived of his legitime, for causes expressly stated by law. Disinheritance can be effected only through a will wherein the legal cause therefor shall be specified. The burden of proving the truth of the cause for disinheritance shall rest upon the other heirs of the testator, if the disinherited heir should deny it. ‘The following shall be sufficient causes for the disinheritance of children and \S descendams, legitimate as well as illegitimate 1. When a child or descendant has been found guilty of an attemptagainst the life of the testator, his or ‘her spouse, descendants or ascendants; 2. When a child or descendant has accused the.testator of.a.crime for which the law prescribes imprisonment for six-years-or-more, if the accusation has been found 3, When a child or descendant has been convicted of adultery’or concubinage with the ‘spouge.of-the testator; 4, When a child or descendant by fratid, violence, intimidation, or undue influence causes the testator to make a will or to change one already made; 5. A refusal-without;justifiable cause to support the parent or ascendant who disinherits such child or descendant; 10 6. Maltreatment of the testator by word or deed, by the child ordescendant; 7. When a child or descendant leads a dishonorable or disgraceful life; 8. Conviction of a crime which carries with it the penalty of eivilinterdiction. The following shall be sufficient causes for disinheriting a spouse: 1. When the spouse has been convicted of an attempt against the life of the testator, his or her descendants, or ascendants; 2. When the spouse has accused the testator of a crime for which the law prescribes imprisonment for six years or more, and the accusation has been found to be false; 3. When the spouse by fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made; 4. When the spouse has given cause for legalsseparation; 5. When the spouse has given grounds for the loss-of;parental authority 6. Unjustifiable refusal to support the children or the other spouse. LEGAL OR INTESTATE SUCCESSION Ifa person dies without leaving a will, the person is said to have died imtestate, a status known as i In this case, the government provides a defauitestate-plan under which the decedent's estate is disposed. A person who succeeds in the ownership of an intestate decedent's property is said to take the property by intestate suecession. Legal or intestate succession takes place: HC 17s portn dessa 60h Sone which hss ema # its validity; Trstiprakes off 2. When the will does not institute an heir to, or dispose of all the property belonging to thestestator. In such case, legal succession shall take place only with respect to the property of which the testator has not disposed; 3,_ Ifthe suspensive condition attached tothe institution of heir doesnot happen ori not fulfilled, or WF the heir dies before the testator, or Yepudiates the. inheritance, there being novsubstitution, and norightof accretion takes place; 4. When the heir instituted is ineapable-of succeeding, except in cases provided in the Civil Code. In default-of:testamentary heirs, the law vests the inheritance, in accordance with the rules hereinafter set forth, in the legitimate and illegitimate relatives of the deceased, in the surviving spouse, and in the: State In every inheritance, the relative nearest in degree excludes the more distant ones, saving the right of representation when it properly takes place. Proximity of relationship is determined by the number of generations. Each generation forms a degree. Consanguinity is the relation of persons descending from the samesstock or common aneesior. These persons are known as bloodelatives, and are said to be related by blood or consanguinity. It may be lif@al"ortcollateral. Lineal consanguinity, which may be deseending-or ascending, is that which subsists between persons of whom one is descended in a direct:line from the other, as between son, father, grandfather, great- grandfather, and so upwards in the direetaseending line; or between son, grandson, great- grandson, and so downwards in the directidescendingnline... Collateral,consanguinity is that which subsists between persons who have the same-anegsiars, but who not descend (or ascend) one from the other. ‘Thus, father and son are related by lineal consanguinity while uncle and nephew by collateral consanguinity. BO ne Sewanee Mlustration: aes, Pe a ae M In the illustration, C and D are siblings (sister and brother, respectively). Their ‘common parents are A and B. Gis the daughter of C and E; J is the son of D and F. Mis the son of G and K; N is the daughter of J and L. ‘A.C, Gand M, in that order, are relatives in the descending direct line. From A to C is one degree; from C to G is another degree and from G to M is another degree N, J, D and B, in that order, are relatives in the ascending direct line. ind M are relatives of D, J and N in the collateral line, 2 7. G isthe niece of D, D is the uncle of G; J is the nephew of C, C is the aunt of J, 8. Hand 1 ate first cousins; they are four degrees apart, Hto C, C to AB, AB to Dand D. tol 9. Mand N are second cousins; they are sivdegrees’@part. 10. Because of G's marriage to K, K becomes H’s brother-in-law, H being G’s brother. They become relatives by affinity. Affinieyis the connection existing in consequence cof a marriage between each of the married spouse and the kindred of the other. Right of Representation Representation is a right created by fietiomof law, by virtue of which the representative is raised to the place and the degree of the person represented and acquires the rights which the latter would have if he were living or if he could have inherited. The right of representation takes place in the direct descendingiline, butmevenim the ascending. In the previous illustration, if C dies ahead of A, C’s daughter G and son H may represent C to the succession when A dies, In the collateral line, it takes place only in favor of the children of brothers or sisters, whether they be of the full or half blood. Full blood relationship is that existing between persons who have the same father and the same mother. Half blood relationship is that ‘existing between persons who have the same father, but not the same mother, or the same mother, but not the same father. Order of Intestate Succession ~ tl Sh scludes the ate children/descendants) Descending direct line (legit 1 ’ 2. Ascending direct line (legitimate parents/ascendants) 7 3._ Illegitimate children/descendants¢ 9 hae denture Bos" o 4, Surviving spouse pit 5. Collateral relatives within the 5" degree ats 6. The State ue Men eek lestimste Sunn fer fering Nagler fee noo Keech ae econ Eom rete mld) eset ae erg Es) ga wad tea Raed Resin ee ee se So aan cluded “noe surviving 1B xc ‘cided Eacadet 4 amen. |; ate So BORRAER, caemamiaig ecb, seceded peer ohiae * e ee ee esc PO we eee er * * Ean ocetaes yop epreiecten pening a cla aber at tere Eo Sitanneg Ssennoae teenie 1 oi r Seid Eel [ Gecores comes nee ey Sout Sod f | Sirknned | noearvoes ” eemiseaaeee wen tie tcrcteg 'aae) areas Ci: Reena. See eee eee eS nase Ae if hh "ae of ao wo Descending direct line. Succession pertains, in the first place, to the descending direct line. Legitimate children and their descendants succeed the parents and other ascendants, without distinction as to sex or age, and even if they should come from different marriages, a, When legitimate children/descendants survive alone, the entire estate is to be divided among them in equal shares. Hence, if the hereditary estate is P1,000,000 and there are five legitimate children, each child gets P200,000. b. When only one legitimate child and spouse survive, each is entitled to one-half of the estate. Hence, if the hereditary estate is P1,000,000, the child and the spouse get P500,000 each. c. When two legitimate children with the spouse survive, cach is entitled to one-third of the estate. Hence, if the hereditary estate is P1,000,000, each of them gets 333,333.33 Ascending direct line, In default of legitimate children and descendants of the deceased, his parents and ascendants shall inherit from him, to the exclusion of collateral relatives. d. When only the legitimate parents survive, the father afd mother, if living, shall inherit in equal shares, Should only one of them survive, he or she shall succeed to the entire estate of the child, Mlegitimate Children. | e. If legitimate ascendants, the surviving spouse, and illegitimate children are left, the surviving spouse, and illegitimate children are left, the ascendants shall be entitled to ‘one-half of the inheritance, and the other half shall be divided between the surviving spouse and the illegitimate children so that such widow or widower shall have one- fourth of the estate, and the illegitimate children the other fourth. f. Ifa widow or widower survives with illegitimate children, such widow or widower shall be entitled to one-half of the inheritance, and the illegitimate children or their descendants, whether legitimate or illegitimate, to the other half. Surviving spouse. g. In the absence of legitimate descendants and ascendants, and illegitimate children and their descendants, whether legitimate or illegitimate, the surviving spouse shall inherit the entire estate. h. Should brothers and sisters or their children survive with the widow or widower, the latter shall be entitled to one-half of the inheritance and the brothers and sisters or their children to the other half. Collateral relatives. i, Should the only survivors be brothers and sisters of the full blood they shall inherit in equal shares. Should brothers and sisters of the full blood survive together with 14 brothers and sisters of the half blood, the former shall be entitled to a share double that of the latter. J. Ifthere are no descendants, ascendants, illegitimate children, or a surviving spouse, the collateral relatives shall succeed to the entire estate of the deceased. The State. k. In default of persons entitled to succeed in accordance with law, the State shall inherit the whole estate, llustration. BIR Ruling 078-99, June 17, 1999 Mr, Manuel N. Najera wrote the BIR on May 31, 1999 requesting for a ruling that the parcel of land with improvements classified os conjugal property, the Ione property of the late Emiggio N. Nojera, Sr. and Rosaling N. Najera be computed separately for estate tox Purposes, The late spouses Emigdio ond Rosaiina died intestate on Dec. 1, 1986 and May 16, 1997, respectively: both estates have not filed estate tax retums and poid the estate tox due thereon. A Deed of Extra-Judicjal Settlement was executed by and among the ten (10) suviving heirs each receiving 1/10 shore, The BIR explained: The esiates ofthe spouses should be computed separately for estate fax purposes. Accordingly, upon\the death of the late Emigdio, only one-half of the froperty shall form part of his gfo¥s estate for purposes of determining his net estate subject fa estate tox which is governed by the statute in force and based on the value of the property at the time of his death, Under Art. 996 of the Civil Code, upon the death of the decedent, in this case Emiggio, the share of the surviving spouse, Rosalina, shall be computed in relation to the share of their children, .¢., the surviving spouse should always be considered as one child in the division ‘of the estate. In so doing, the heirs of the late Rosalina should include her one-half part of the property, being a pro-inciviso owner of the properly covered by the Deed of Extra- Judicial Settlement as well as her share in the estate of the late Emigalo N. Najera, Sr WHEN ST OF ra a yer Al ee a aS oe Wy hb garrins ‘ial ‘The executor or ji has the 3k of making Paes the estate tax has been paid before he delivers a distributive share to any party interested in the estate. In estate taxation, the gross estate of citizens and residents include all their property wherever situated. This gross estate is allowed deductions under the tax law; the

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