TAX - Sep 4, 2018 (1 Hour) turn over to the heirs of the decedent.
It does not
Transfer for insufficient consideration (with
GPA)
Donor donated a house and lot (not capital asset) to
the donee under GPA. The property becomes as if
the property of the donee. The donee eventually
sold the property to a buyer for a very minimal
value which is 1 M (FMV is 10M). The (donee)
seller dies and so it forms part of his estate? There
is a diffence between the selling price and FMV of
9M.
A: Yes, the difference shall form part of the gross
estate of the donee, hence, subject to estate tax.
Otherwise, subject to donor’s tax
(Note: The GPA has to be stated in a deed or in a
will)
In sale with revocable transfer, it is a conditional
sale because there is no absolute transfer of
ownership.
Proceeds of Insurance
Example:
Gerald (husband)
— assued/policy holder and also insured
Marla (friend)
— even if no insurable interest and if designation
is revocable: included in the gross estate
—if irrevocable: excluded in the gross estate
Q: What if Gerald, the assured or the owner of the
policy, took out a life insurance for the life of
marla, his wife?
Marla (wife)
— insured
— if she will die, proceeds will go to Gerald being
the benefiacry regardless of the designation
whether revocable or irrevocable because he is the
holder of the policy.
Under Insurance Code, the proceeds in a life
insurance proceeds exclusively belongs to the
beneficiary (anyone) and the latter is not obliged to
dictate to whom the insurance proceeds will go.
But in estate taxation, it dictates to whom the
proceeds will go. So if we talk about the proceed,
we follow the insurance law.
Not subject to estate tax:
1. Accident insurance
2. Insurance policy taken by company for its
employees
3. Proceeds issued by the GSIS and SSS
4. Benefits received from the Phil and US
governments from the damages suffered
during last war
Q: For insurance proceeds, how do we determine if
it is exclusive or common property?
A: We take into consideration what is the property
relations and when the policy was taken (before or
after marriage). If taken before marriage,
presumptions is that the payment is taken from the
exclusive property of the other spouse.
Complication comes in when payment is made
before and payment is continued even after
marriage and if marriage is under conjugal
partnership.
If the policy is taken during the marriage,
premiums are paid through common property.
Then we consider the beneficiary. If the
beneficiary is the estate, executor administrator,
then it will form part of the common property.
If third person other than estate, administrator or
executor — payment of the proceeds goes to that
beneficiary even if the premiums are payed from
the conjugal funds.
Prior Interest
— those 3 scenarios (See definition provided in the
tax code) may still be included even if the passage
was made prior to 1997
Capital of the Surviving Spouse
— common properties form part of the estate
— But 1/2 share of the deceased spouse is not part
of the gross estate
Claims agains Insolvent (CAI)

— not necessarily bankrupt

— liability is higher than the asset
— total receivables shall form part of the gross
estate before you can claim deduction
— formal declaration of insolvency is not required

Example: The debts is 500k. Debtor payed 200k.

The 300k may de claimed as deduction but the total
amount of debt shall form part of the gross estate.