- What is an “estate” and when is it considered as a separate income taxpayer? An “estate” is the totality of the property left by a deceased person, whether real, personal, tangible or intangible. An
“estate” is considered as a separate income taxpayer only when it is a subject either of an “intestate court proceedings” or a “testate court proceedings”.
2. What is a “trust” and when is it considered a separate income taxpayer? A “trust” is the totality of property conveyed by a person called the trustor to another person called the trustee for the purpose of enabling the latter to safeguard such property. A “trust” is considered as a separate income taxpayer if the “trust” created is an irrevocable trust.
- Rules in the computation of the tax on estates and trusts:
a. The same rules in the determination of gross income for individuals are applied in the case of estates and trusts.
b. Estates and trusts are allowed the same deductions from gross income as are allowed to individuals. In addition, they can further deduct the following items from gross income:
1. Amount of its income which is to be distributed currently to the beneficiaries; and
2. Amount of its income for the taxable year which is properly paid or credited during such year to any heir, legatee, or beneficiary, but the amount so allowed as a deduction shall be included in computing the taxable income of the heir, legatee or beneficiary.
c. Estates and trusts are required to use only the calendar accounting period.
d. Estates and trusts are allowed an exemption of P20,000.
e.The progressive rates of tax used for individuals are applied to estates and trusts.
4. Consolidation of income in trusts. This is done when the grantor and the beneficiary of the several trusts are the same person in each instance.
|Consolidated gross income||P||xxx|
|Less: Consolidated deductions||xxx|
|Consolidated net income||xxx|
|Less: Exemption of a single amount of||20,000|
|Taxable income of several trusts||P||xxx|
JONATHAN RUIZ CPA, MIB