What are transfer taxes?Transfer taxes are those imposed upon the gratuitous disposition of private property.They are taxes levied upon the transmission of property from a decedent to his heirs or from a donor to a donee.
Kinds of death taxes1. Estate Tax2. Inheritance Tax
Estate TaxIs a tax on the right of the deceased person to transmit his estate to his lawful heirs or beneficiaries and certain transfers by the decedent during his lifetime which are made by the law the equivalent of testamentary dispositions. It is levied upon the total net value of the property of a deceased person
Inheritance TaxIs a tax on the right of the heirs or beneficiaries to receive the estate of the deceased person. It is levied upon the part of an estate which each heir receives.Inheritance tax is no longer imposed. Both taxes have been integrated into an estate tax.
Purpose of the tax1. They are imposed at high rates to held reduce undue concentration of wealth in society to which the receipt of inheritance is a contributing factor2. Their imposition is also justified on the ground that it clearly conforms to the widely accepted principle of ability to pay since the beneficiaries receive assets which are in the nature of unearned wealth or windfall, thereby creating an ability to pay the tax
Property included in gross estateThe general rule is that all property owned by the decedent has to be included in the gross estate, to the extent of the value of his interest in such property at the time of his death
Deductions from the gross estateOrdinary deductionsFuneral expenses, judicial expenses of proceedings, claims against the estate, claims against insolvent persons, unpaid mortgages, unpaid taxesSpecial deductions-- property previously taxed, transfers for public use, family home, standard deduction equivalent to P 1,000,000, medical expenses, retirement benefits received by the heirs under RA 4917