Tax Outline

GLYKHA MAY M. LUBAS                                        

TAX 2-C                                                        SIR PATRICK IAN F. PEDARSE

CHAPTER 1: Introduction

Property - embraces everything which is or may be the subject of ownership. The term includes not only ownership and possession but also the right of use and enjoyment for lawful purposes.

Owner – the person in whom the ownership, dominion or title of property is vested.

Ownership – the exclusive right of possessing, enjoying and disposing of a property.

MODES OF ACQUIRING OWNERSHIP

The effectiveness of the various modes of acquiring ownership and other real rights over property is premised on the existence of title or judicial justification. The following are the modes of ownership acquisition:

1. Occupation. When ownership is acquired y occupation, the property seized is without a known owner. E.g.: a person’s occupation is fishing or hunting.
2. Intellectual Creation. The composer owns his musical compositions while the author owns his literary, legal, historical, scientific or other work.
3. Donation. An act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.
4. Succession. 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.
5. Prescription. One acquires ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law. In the same way, rights and actions are lost by prescription. The first is referred to as “acquisitive” and the second is “extinctive”.

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, estate tax is levied on the transmission of property from a prior decedent to his heirs. Estate encompasses the totality of assets and liabilities a decedent owns at the time of his death. In donation, donor’s tax is imposed as ownership of the property passes from the donor to the donee.

Transfer taxes are taxes imposed upon the gratuitous disposition of private property. A transfer is said to be gratuitous when there is no consideration is received. It is onerous when consideration is received. Onerous transfers such as sale, barter or exchange are subject to business taxes.

CHAPTER 2: Basic Concepts of Succession

Kinds of Succession

1. Testamentary or testate – is that which results from the designation of an heir, made in a will executed in the form prescribed by law. (with will)
2. Legal or intestate – is that effected by operation of law since the decedent did not execute a will. (w/o will)
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 testator.
2. Inheritance. Inheritance includes all the property, rights and obligations of a person which are not extinguished by his death. The inheritance of a person includes not only the property and the transmissible rights and obligations existing at the same 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 testamentary disposition of real estate while legacy is a gift or bequest by will of 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 will, they are called voluntary heirs; if by operation of law, legal or intestate heirs. Devisees and legatees are persons to whom gifts of real property and personal property, respectively, are given by virtue of a 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 resulting 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.

Executors and Administrators

Executor -  a person appointed by a testator to carry out the directions and request in his will, and to dispose of the property according to his testamentary provisions after his death.