TALACTAC, Aira Rowena A.

2017400080
April 16, 2021
Taxation 2 3C

1. Discuss the concept of vanishing deductions.

Vanishing deduction is the deduction to the gross estate of the decedent when
there have been five succeeding deaths in a span of five years. In vanishing deductions,
the rate of deductions to the gross estate diminishes over the period of five years. The
requisites of vanishing deductions are as follows: the death of present decedents within
five years; property is received from prior decedents; the estate tax was previously
determined and paid; and no previous deduction was allowed to the estate.

2. What are included in the decedent's gross estate?

The decedent’s gross estate includes transfers under a general power of
appointment, revocable transfers, transfers in contemplation of death, proceeds of life
insurance, transfer for insufficient consideration, and prior interests.

3. Discuss the rules on the proceeds of life insurance viz a vis its inclusion in or
exclusion to a decedent's gross estate.
As to the rules on the proceeds of life insurance viz a vis its inclusion in or
exclusion to a decedent’s gross estate, it is important to determine whether or not the
designation of beneficiary is revocable or irrevocable. In case of revocable designation,
the proceeds of the life insurance shall be reverted back to the decedent’s gross estate
for there was no vested right over the proceeds. And as for irrevocable designation, the
proceeds are not reverted back to the estate and not be computed as income of the
beneficiary as there is vested right over such.

4. What are donations that are not subject to tax?

The donations that are not subject to tax are merger of usufruct in the owner of
the naked title, fideicommissary substitutions, and all bequests, devisees, legacies or
transfer to social welfare, cultural, or charitable institution provided that there is actual,
direct, exclusive use and not more than 30% are used for administrative purposes.

5. What are the rules on taxing the estate of a non-resident alien who died in the
Philippines in respect to real and personal properties located here?
As for the estate of non-resident alien, the deductions allowed by law are the
standard deduction of P500,000.00, claims against the estate, claims of the deceased
against insolvent persons, unpaid mortgages, and the net share of the surviving spouse
in the conjugal property. In this case, there are no deductions as to real properties
because non-resident aliens are not authorized by law to own real properties in the
Philippines. Also, it is important to determine whether or not the laws of the non-resident
citizen applies with reciprocity to the laws of the Philippines to determine whether or not
the intangible properties of the non-resident alien can form part his or her gross estate.