Income Taxation- Chapter 4

There is co-ownership whenever the ownership of an _____ thing or right belongs to different persons, wherein the portion is presumed ___

undivided; equal

Inheritance is subject to ___ and donation is subject to ___

estate tax; donor’s tax

Are estate tax and donor’s tax an income tax?

No. only the income from those properties are subject to income tax

if the co-owners invest the income on business for profit, they would be constituting themselves into ___ and such shall be taxable as corporation

partnership

when inherited property remained undivided for more than ten years and no attempt was ever made to divide the same among the co-heirs, nor was the property under administration proceedings, nor held in trust, the property should be considered as owned by an ____

unregistered partnership subject to corporate income tax

What is the applicable tax for the gratuitous transfer of the property (ex. 60 million itself)

estate tax. the co-ownership itself is not taxable

income tax of an estate refers to the tax on income received by the state during the period of administration or settlement

True

what is administration or settlement period?

it is the period wherein the properties left by a decent is not yet finally transferred to the heirs

estate can be settled in two ways

1. pertains to settlement of an estate in a court proceeding

2. heirs or beneficiaries settle for themselves the distribution of their inheritance

1. judicial settlement

2. extrajudicially

who files the ITR and pays tax due thereon under judicial and extrajudicial

Judicial- trustee or fiduciary

extrajudicial- heirs or the beneficiaries

when prior to the settlement of the estate, the executor or administrator sells property of a decedent’s state for more than the appraised value, is the excess income taxable to the estate?

yes

the estate earned 4,750,000 (net of 5% creditable withholding tax) and incurred operating expenses of 2,000,000. How much is the taxable income, tax due, and income tax payable

Gross income: 5,000,000

Expenses: 2,000,000

Taxable Income: 3,000,000

Tax due: 702,500

WH Tax: 250,000

Income Tax Payable: 452,500

What is the treatment of Special Deduction (distribution of estate’s income to beneficiaries) to taxable income of the estate and the taxable income of the beneficiary

for taxable income of the estate, it is deducted (because it is already given to the beneficiary)

for taxable income of the beneficiary, it is added (because it is additional income from the estate)

what is the difference between co-ownership and unregistered partnership

co-ownership is when the heirs simply divided the fruits among themselves, and individual income received are subject to income tax

unregistered partnership is when after termination, the estate is still not yet divided

this is a right on property, real or personal, held by one party for the benefit of another

trust

the income of a trust is taxable to ____ if the income is to be accumulated or held for future distribution,. the income of a trust administered in foreign country is taxable also to him

trustee.

the income is taxable to the ___ if the title to any part of the corpus or principal of the trust may be revested to him, the income may be held or distributed is for this benefit,

grantor or trustor

are special deductions allowed in case of a trust administered in foreign country?

No

this classification of trust is when the income and corpus of the trust do not revert to the grantor. the trust income is accumulated and held for distribution to the beneficiaries

ordinary

this is a trust where at any time, the power to revest in the grantor, title to any part of the corpus of the trust is vested in the grantor either alone or conjunction with any person not having a substantial adverse interest in the disposition of such part of the corpus of the income thereon

revocable trust. the income of such part of the trust shall be included in computing the taxable income of the grantor

what are the requisites of being exempted to employee’s trust?

1. trust must form part of pension, stock bonus, profit-sharing plan of an employer

2. contributions are made to the trust by such employer, employees, or both

3. the contributions are made for the the purpose of distributing to such employees

4. it is impossible at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus to be used for exclusive benefit of huis employees

what is the formula for the tax apportioned to a trust?

consolidated tax x taxable income of the trust/taxable income of all trust. income tax already paid is ignored in computation