CHAPTER3 of Ooo.

Co-venershit Estates pd Grists

I. CO-OWNERSHIP

- Co-ownership occurs when two or more heirs inherit an undivided property from a
decedent, or a donor makes a gift of an undivided propertyin favor of two or more
donees. ; oes

GENERAL RULE: A Co-ownership is not subject to income tax. The income of the co-
ownership will be taxable (basic income-tax) to the co-owners in their respective
capacities.

EXCEPTION: The following are the instances when the co-ownership may become an
unregistered general co-partnership and therefore becomes a taxable corporation:

1) Co-owners appoint an administrator who manages the affairs of the co-ownership

by making investments therein from which profits are realized. This applies even
if there is already a partition ordered by the court should the joint management
‘be given to one of the co-owners.
2) The co-owners used the common properties and/or income derived therefrom as
a common fund with intent to make profits.
3) When the property remained undivided for more than ten (10) 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.
4) In all other instances when the co-ownership activities are already beyond mere
preservation of the co-owned property.

II. ESTATES AND TRUSTS

The taxable income of an estate or trust shall be computed in the same manner and
on the same basis as in the case of individual taxpayers.

However, the following additional deductions shall be allowed:

1) The amount of the income of the estate or trust for the taxable year which is to
be distributed currently by the fiduciary to the beneficiaries; and

2) The amount of the income collected by a guardian of an infant which is to be

‘held or distributed as the court may direct.

NOTE:
1) The above additional deductions allowed shall be taxable (basic income
tax) to the beneficiaries.
2) Incase of a trust administered in a foreign country:
a. The above-mentioned additional deductions are not allowed;
b. The income distributed to beneficiaries is not deductible.

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 ~
t,

Chapter J S Co-eupnershi Estates bad Trusts

GRADUATED TAX RATE BEGINNNG 2023 TAXABLE YEAR for

Individuals, Estates, and Trusts
INCOME TAX
Not over P250,000° Exempt
Over P250,000 but not over.P400,000 15% of excess over P250,000
Over P400,000 but not over P800,000 P22,500 + 20% in excess of P400,000
Over P800,000 but not over P2M P102,500 + 25% in excess of P800,000
Over P2,000,000 but not over P8M P402,500 + 30% in excess of P2M
Over P8,000,000 P2,202,500 + 35% in excess of P8M .

* ESTATES
JUDICIAL VS. EXTRAJUDICIAL SETTLEMENT
JUDICIAL EXTRAJUDICIAL

Taxable as a separate entity Not taxable as a separate entity.

The income of the estate is to be declared by the
beneficiaries. .

Fiduciary/trustee files the ITR and Heirs and beneficiaries file the ITR of the estate and
pays the tax thereon pay the tax due thereon

Shown below is the pro-forma computation of the taxable income of the estate and the
heirs/beneficiaries:

TAXABLE INCOME OF THE ESTATE

GROSS INCOME OF THE ESTATE Pxxx
Less: Deductions
Expenses PXxxx
Special Deduction:
Distribution of year's income to the
beneficiaries xX XXX
Taxable income of the Estate PXxx
Tax Due [Section 24(A), as amended] PXxxx

Taxable Income of the Beneficiary

Compensation income, ifany PXxx
Gross income from business or practice of XXX
profession
. Add: ‘
cd Amount received from the estate’s income during XXX
the year
Less: Business expenses __ (xxx) _]
Taxable, income of the Beneficiary PXXX __
Tax Due [Section 24(A), as amended] PX __]

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 . Chapter s Z Co wanershity Estates PAS Trusts

KINDS.._- 3 TAXATION
revocable Trust Taxable as a separate entity.

» Revocable Trust - is a trust - Not taxable as a separate entity

where title can revert back to :
the grantor anytime.
» — Trustin which Income is forthe - The income of the trust is to be declared and
benefit of the Grantor _ taxed to the GRANTOR

Shown below is the pro-forma computation of the taxable income of a Trust and a Beneficiary:
Gross income of the Trust PXxxx
Less: Deductions
Business expenses PXxx
Special Deduction:
Distribution of year’s income to the
beneficiaries . get
BS
Taxable income of the Trust } PXxx
Tax Due [Section 24(A)] PXxx

Taxable Income of the Beneficiary

Compensation income, if any PXxx
Gross income from business or practice of XXX
profession : -
Add: zs
|___+_+_s | Amount received from the trust's income during XXX
the year 1
Less: Business expenses GORY
os =|
Taxable income of the Beneficiary PXXX__
Tax Due [Section 24(A)} Pxxx

* CONSOLIDATION OF TWO OR MORE TRUSTS ;

REQUISITES FOR CONSOLIDATION:
1) There are two or more trusts which derive income;
2) The creator of the trust in each instance is the same.person; and
3) The beneficiary in each instance is the same.

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 Chapter oS ; Co-curnerhify Estates aud, Trasks

Choose the letter of the correct answer.

1. It arises when two or more heirs or beneficiaries inherit and undivided property from a
decedent, or when a donor makes a gift of an undivided property in favor of two or more
‘donees
a. Partnership c. Joint account
b. Trust d. Co-ownership

“- Answer: D |

2. When will an inherited property be considered as owned by an unregistered partnership?

_ |. When the property remained undivided for more than ten (10) years.
ll. | When no attempt was ever made to divide the same among the co-heirs, nor
was the property under administration proceedings nor held in trust
Only condition | is required.
ao 7D

Only condition II is required

Conditions | and II are required
None of the above

“ Answer: C

Use the following data for the next three (3) questions:
Pedro, Juan, and Antonio are heirs of Luna who died on November 1, 2022. The properties of
Luna comprised solely of real property valued at P50,000,000 at the time of his death. The
property is subject to lease earning rental income. During 2023, the property remained
undivided and it derived a net rental income of P15,000,000.

-3. For income tax purposes, the heirs will be tax on net rental income from the inherited
property for the year 2023 as:
a. _ Partners in a commercial partnership
b. Partners in a general professional partnership
c. Partners in an‘unregistered co-partnership -
d. Co-owners

“+. Answer: D

4. What amount should be reported as taxable income of the co-ownership in’2023?

a. P50,000,000 c. P14,980,000
b. P15,000,000 d. PO

“e Answer: D
{2 Co-ownership is not subject to tax

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 : Clapter 3 Co-oumershyp Evtades et Trusts

5. What amount should each heir report in their individual retums as their share in the net
rental income of the property they inherited in 2023?
a. P50,000,000 c. P10,000,000
b. P15,000,000 d. P5,000,000

“+ Answer: D
(Share of each co-owner = P15M/3 = P5,000,000

6. Income received by an.estate during the period of administration or settlement of the

estate, for tax purposes is known as
a. Income of the estate
b. Income of the heirs
c. Income of the trustee
d. Income of the testator

“ Answer: A

iE " Statement 1: Where an estate is under judicial administration, the income of the estate
shall be taxable to the fiduciary or trustee.

Statement 2: Where an estate is not under judicial administration, the income of the estate
shall be taxable to the heirs and beneficiaries
a. Statements 1 and 2 are false ;
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true”
d. Statements 1 and 2 are true

“+ Answer: D

8. Statement 1: The amount of income of an estate for the taxable year, which is properly
paid or credited during such year to any legatee, heir, or beneficiary, is a special item of
deduction from the gross income of the estate.

Statement 2: An allowance paid to a widow or heir out of the corpus of the estate, is not
deductible from the gross income of the estate.
a. Statements 1 and 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true

¢ Answer: D | .
£0 Corpus of the estate means share in inheritance, non-deductible from estate's
gross income.

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 Chapter Se Co-vusnersh i ES lites aut Truss

9; Statement 1: When an estate, under administration, has income-producing properties,

the annual income of the estate becomes part of the taxable gross estate. ;

Statement 2: When an estate, under administration, has income-producing properties

and its income during the year is distributed to the heirs, the income so distributed is
taxable to the heirs as part of their gross income for the year.
a. Statements 1 and 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement / is false but statement 2 is true
d. Statements 1 and 2 are true

“+ Answer: C
3 Annual income of the estate is subject to income tax, but not to estate tax (a
transfer tax). Inheritance and donation are not classified as income, hence not
subject to income tax.

40. The following statements refer to the rules in determining the taxable income and the
applicable income tax liability of an estate. Which of the statements is correct?

|. The items of gross income of the estate are the same items as the items of
gross income of individual taxpayers.
|. Deductions from the gross income of the estate are the same as the items of
deductions allowed to an individual taxpayer..
ill. In addition to the allowable deductions under Section 34 of the Tax Code, the
estate is allowed to deduct the amount of income of the estate during the
taxable year that is paid or credited to the legatee, heir or beneficiary.
IV. The amount of income of the estate during the year that is paid or credited to
the legatee, heir or beneficiary is subject to final withholding tax of 15%.

a. | and Il only c. |, Il, Ill and IV

b. |, Il and Ill only d. None of the above

“+ Answer: “B”
£2 Item “IV" is false. Income of the estate during the year that is paid or credited to
the legatee, heir or beneficiary is pallet to creditable withholding tax of 15%, not
a final tax.

11. Which of the following is included in the income of the estate of a decedent?
a. Income received by the estate of a deceased person cum the period of
administration or settlement of the estate.
- b. Excess of selling price, over the appraised value placed upon the property at the
time of death, where the property was sold after the settlement of the estate.
c. Appreciation in the value of property passed to the executor or administrator upon
‘death of decedent.
d. Delivery of property in kind to legatee or devisee.

“> Answer: A

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 Chapter Si Co-vanershiy Ee os Trusts

ROP Ra Ae neha Uri se

a TO eae AE as eR :
; Use the following data for the next two (2) questions:

Namahinga Nah died leaving an estate worth P10,000,000. The estate is under administration.
In 2023, the properties in the estate earned a gross income of P1,500,000 and the estate
incurred expenses of P600,000.. Felipe, the only heir, received P200,000 from the income of
the estate.

12. How much is the income tax due of the estate?

a. P82,500 c. P150,000
b. P102,500 d. P160,000

“¢ Answer: A

Solution:

Gross income ; P1,500,000

OPEX (600,000)
Income of the estate distributed fo Felipe (200,000)
Estate’s taxable net income 700,000
Income Tax Due (Using 2023 Tax Table for individuals) 82,500

13. Assume that Felipe also earned net income of P500,000 from his trading business. What
amount should Felipe report as his taxable income for the year?
a. P200,000 c, P530,000
b. P500,000 d. P700,000

“+ Answer: D

Solution;

Gross income from trading business P500,000

Amount received from the Income of the estate 200,000
Taxable net income of Felipe P700,000

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 Cheer Se Co-evnership Estates teil,”Trasts

~
aoe =~ Republic of the Philippines
For BIR = acsy é @® Department
of Finance
Use Oniy. tom Bureau of Internal Revenue
BIR FormNo. ~ 7
1701 Annual Income Tax Return
~_ Individuals (including MIXED Income Eamer), Estates and Trusts :
donee DH ENA) Enter all requsred information in CAPITAL LETTERS using BiLACK ink Mark applicable boxes with |
9X". Teo copves must de filed wih the BIR and one held
by the Tax Filer. 1 OUIBER 1

1 For the Year (yyy [2;0)213] 2 Amended Return? . |_| Yes {X}No | $ Ghost pated Retin? {| Yes [X} No’
PART | = Background Information payer/Filor
4 Taxpayer Identification Number (TiN) _ 17,3\8 219,15 0,0 ,0,0,0] 5 RDOCode: |0\2,7
6 Taxpayer Type |_| Single Proprietor [_| Professional [X} Estate |_| Trust [_] Compensation Earner
7 Alphanumeric
Tax Code (ATC) [— ]s0t2Busress
Income Greduatad 7 Rates [__] 0914 income tam Prtesston-Graftaied
IT Rates [__] ma hens income-Gactinied
1 Rates
[J itots Compensation
income [__]ii0tS ausress income -@561T Rete. [_] 1017 income kom Profession
~ 8% 17 Rate [X_]. 1016 Mexod income - 6% (7 Rats
BTa 's Name (Las Name First Name Middle STATE OF (First ‘Aidcle Name. Last Name TRUST FAO) (Fast Name, Mickie Last
E,\S TATE JOF »NA MAH INGA GN ASH yp pp pp
SR Address adaiess, Fhe ediens & deer! ton te are foe ROO kites BR Famine7
18,9, »PUMANAW, «8,7, .,BiR GY. UN EY A, K AVN Gop yy yp
GAL;O,OCiAN (CytyTs¥ 5 3 4 hep es pots oi ey | 4, 3,03
[ sAziPCode
0 Date of Birth
aenoryvyy)| 14 Email Address
1,1 [2,3] 1,9,5,9] n, apm, ah, 1,n,g,[email protected],i,l,.,c,om, yy) yp py pp
2 Citizenship 43 Claiming
Foreign Tax Crediis?| 14 Foreign Tax Number,
if appscabie 8

FAL PUNO yy yy Leet INO] yp pe

fonccer oe. 16 Civil Status (# appicabie) ae :
0.2,8,3.2,6.7,0,0,9, , [X] Single [_] Married |_| Legally Separated |_| Widow/er
| Yes XX! No _|18 Filing Status |__ Joint Filing |__| Separate Filing
1) Yes. 1X] No | 20 income subject fo SPECIAVPREFFRENTIAL RAE? | | Yes [Xi Nos
per Tax it yes, fill out also consolidation of ALLactivities por Tax Regime (PartX)}
21A Method of Deduction
(choose ona)
Rate" [X] Graduated Rates [X] ltemized Deduction [_] Optional Standard Deduction (SO)Fees [Ser SHU), NRG
Vchoose one) (Chaase Method of Dectuction in thor 2A) [Sec M(Aw}, MIRC] [40% of Gross Sales Receipts Revenes
C 8% in lieu of Graduated Rates under Sec. 24(A)& Percentage Tax under Sec. 116 of NIRC
Ls sal pis and ci-er income do not exceed Three mition (23K?
PART Ii — Total Tax Payable (20 NO? enter Cortera: & Cortney 3 (meostp omer er mera Oy
Particulars as A. TaxpayeriFiler B. Spouse

biertnome 1p a 18,2, 50,0] 7 p py tt 1 |0

Less; Total Tax Credits/Payments (From Pert Vil lem 10) ea ee e ee ee
4 Tax Payablei(Overpayment) (item 22 Less ten 23) : 1p y 1842p 5,0,0] » pp 1 py 0
& Less. Fortier
of lax Payable Allowed for 2~ Inctallment to be paid cn or before October 15
Sees bop Op 0
Amount of Tax Payable/(Overpayment) (ten 24 Less tom 25} Lobb 18121 50,0] ppp punt {0

Add. Penaties 27 Interest bap a e OT et

ok 28 SCORES: : cages gel ges Ne 8
{ bed phi pepe ty p Oly ba py 0
Total Penalties (Sum of Hens 27 fo 29) = Ler etppyOlery pug | 10
51 Total Amount Payable/(Overpayment) (Sur o items 26 aed 2} tt 1 8r2y 50,0] 1; py yn 1 0
2 Aggregate Amount PayableOverpayment) (Sum of llems 31A and 318) | Lp41 8 /21510,0 |
if mack cne (1) box only, (Once the chace is made. the same is irrevocabdie)
To be refunded (_] To be issued Tax Credit Cectificate (TCC) ~ [_] To be cartied over as 3 tax credit for next year/quarter
I deciams under ine peneSes of paqury tel this return, and afi Bs attachments have been made in good faith, vented by me, and to the best of my knowleage and betat sre true ang comect
[ourant fo Phe prowsions of the Netonel Inlernal Revenue Code, a3 emended, end the requietions issued under authorlly thereof Further, | give my conseet fo the processing of my infomiaion a2
x underthe “Data Prwacy Act of 2012 (RA No_10173) for legitynels
and lowful pumoses. an Authorised tative, incticale TIN and attach authcrzsture
kvte)

FELIFE NAH 33 Number of Attachments{ |__|

Prrted Name and Signature of Texpayer/Authorzed Representative ‘
PART ill - Details of Payment
_ Particulars Drawee Ba Number 3 Date (MM/DD/VYYY) Amount iy
* P4CasWBankDbiMero | 6) yy | et ep tt Et ESb peg gey
85 Check Post f 4: 1 4 fd dt al L Le rf -.1] po) af lL ee ee e

6 Tax Debit Memo Hs (eo yey poe |g L Lu4 per gg gy

pg bd od | Bes $.fo>9: yf _- J | Die Nhe SMALE Be ag ie Oe ot | 1 | 1 peat fe de Ed
Mactine ValidatioRevenve Official Roceipa Detads (¢ not fied win an Authonizod Agent Bank) Stamp of Recolving Offico/AAB and Dale
of Recept
(RO's SignaturerBank Tellers bisa)

- : The BIR Data Privacy Policy is in the BIR website (www. ber.gov.ph)

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 Cha er Se Co-cenerslity Estates did Trusts

om 3
1701 Annual Income Tax Return
2018 (ENCS) Individuals (including MIXED Income Earner), Estates and Trusts

7,5,8,8,1.0,0,0,0,0
Spouse's Taxpayer Identification Number 0,0,0,0,0 2 RDO Code
fiers T , ; Professional ~~ ‘ Compensation Earner
Alphanumeric Tex Code (ATE) 8012 Business
Income -Grodualed [T 1014 Income from Protession-Graduated iT Rites 5019 Moed Inowne-Grateated IT Rates

Compensation Income Business noome - 8%IT Rate 1012 income fren Profession = 8957 Pate’ [_] UOTE Med income - 99677 Rate

Contact Number
Claiming Foreign Tex Credits?

. (choose cs
Rate’ [_] Graduated Rates Itemized Deduction tional Standard D a
one) (Caoase Method of Detaciton hy Row 12A) {See MAW, MRC] ve of Gross Naeaiiceason eiteceeeyea {See 40). WAC]
ri 8% in teu of Graduated Rates under Sec. & Percentage Tax under Sec 116 of NIRC

b. ‘3 TIN

b. Employer's TIN»

4 Gmss Compensation Income (From Part V Schedule 1 fem WAd32¢)

6 Less Non-Taxable / Exempt Compensation
6 Taxable Compensation income (tem 4 Less fem 5)
7 Tax Due-Compensation Income (tes &x sppic
abie income Tex Rete)

8 SalesRevenuesReceipis/Fees
9 Less: Sales Retums, Allowances and Discounts
Net SalesRevenvesfeceipis/Fees (tem 8 Less tem 9)
Less: Cost of Sales/Services fepplic able only aveling Remmired Deductions)
Gross incomes{Loss) {rom Operation (tem 10 Less tern #1)

Ordinary Aliowable Itemized Deductions (Fran Part V Scheose4 fem 18}

Special Allowable itemized Deductions Pat V Sdredule $item 3 anddriten 6)
Acuance fot Ned Opecsting Loss Camy Over (NOLCO) (From Part V Sovetde 6 tan 6 andor ten
Total Allowable hemized Deductons (Sur
of fers 13 to 15)

Optional Standard Deduction (OSD) (40% of Rem :

Net Incomes/(Loss) 12 Lecs tern fem {0Lossitem tT)

nhip
9 Patner from Generd Prfessnnd Patre
e
Income (Sum Opi
Sey ay se
and
ont 29 —
& Business Gow of ReG6 vs
border gudaietnved —

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 .

Chapter 3. Co-onanersh ty Eshites and, Wash

1701 Annual Income Tax Return .

January 2018 (ENCS) Individuals (Including MIXED Income Eames), Estates and Trusts

0,0,0,0 H

SolesRevenves/He
ce iptsF ees (et of arlesretona alowhnces ead discount)”.

Total INCOMB (Sum of ferms Mand

27} |

Taxable Incomsf(Loss) citem 7S Less em 29)

Tex Qut-Biminese
home tee Wx OY Fathers Te Py) |”
Voted Tax Der~Campemsthe & Beciness tex eae trove Gi 912) (Sa ows Peat Jj ToPet ime h

4 Amodizatons
Bae Dedis
3 Chantabdie and Other Contrib unions
4 Depistian ;
6 Depreciation”
6 Entenainmeni. Amusement and Recreation
7 Fringe Genefis : , es '
8 interest us
8 Losses
Pension Trusts
11 Rental ees -. (Sampie only}
12 Research and Development Sey RET
43 Salaries, Wages and Allowances ¢
44 SSS, GSIS, Phitheath HDMF and Othe: Contributions
45 Taxes end Licenses ,
46 Transportanon and Travel

a and Messengans! Services

. b [Professional Fees &
c {Security Seicas
=
48 Tod Crdesary Atomable Leeniaed Decuchoms (Sumot tan tte 132) (To Fen V Shekee LA bw 13

Total Spent Nlowable femized Dedsctors-Texpepenifiter (Sum

af Revns 1 and 2) (To Pat ¥ Schedule 3.4 Hern 14a)

Tots! Special Allowable Itemized Deductions Spouse (Sun

or tems 4 and5) (To Pat V Scheauke 2.4 item 148)

TGressincome § 2 Pest i pales

2Less Allowable Deductions oh :
Not LOSS (own § Leze tem 7) To Scuadde 6A 9 ton 7A Lr Scrmhte SAL tern 127A)

Saree ae ; B_NOLCO Applied: 80 Exared .- | 0-.,DNOUTO Appied

- |.
~Yearincured |) A Amount f'* Previous Yeats. > pe tne Exped | eo emen vee o *,

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 Pe
Chapter Sy Co-vnsnersiy Estates ica Trasts

1701 Annual Income Tax Return il

2018 (ENCS) Individuals (including MIXED income Earner), Estates and Trusts

7, 3,8, 9, 1,5,8,
8, 10,0
Se. “4

: mame] BNOLCO ARIE. ] ) e NOicOEend |} D

Yewtwues | AArmoun <1 Src Nenie at eer LOny:

Recular Rate-income Tex Dus ¥, Ethey hem 26 of here 32) |

Spaciat Rate—lncans Tax Dine (From Pat X ken U7 BN 7E,
Loss Share of Other Government , B pemited dreotly to the Agency \
God: {lem 2t ess fem Y
Hei Special Rate-Income Tax Duetdshre a
Total Incoma Tax Dug (Sunt of Rens 1S (7oPad # em29

Prior Year's Excess Cresits

Tex for the First Three (3) Quarters
@) Quarters
Cradtebla Tex Wrhheld forthe First Three
4" Quarter
Creduable Tax Wehheld per BIR Form No. 2307 forthe
Crectatis Tax Witted BIR Foren No 2316 Pan Scheduk 1 Rém 24320}
Amended Return
Tai Paid in Return Prewiously Filed, tf this ts on
;
F Tax Credits, &
Spaciai Tax Credits, fappicatie (70 Part Vill Sern
her Tax
Total Tax of teres 1 to 9) {To Pat § Rem 2}
(Sum

tar $6F X neene Sx erie}

4 Reaite beam: Tex Obennce Dur.
Tax Patel 01 Specs Aiohetie temized Deductions pe
Tete!— Tax Rete! (Sunol tems 1 andZ
Less. income Tex Due (FomPotx fem 178 senvor Serni 7F)

Tox Rebel Arsiment Before Fax Cradil (em Less kom F

Add: Spocal Tax Creda, ¢ rom Past Vik hem8)
! SPECIAL (Sumofiters 5 and &
Av aiiment.
Total Tax Ralie

Repda income Tax thorvdve Lam [Pat X Barn 154 hr HE X

Tax Pebel on Spend Aloveble temized Deductions
10 Total Tax Relief Avaiknent. EXEMPT (Suma! here 8 and

1 incomeALoss) Books

2
3.
4
Total (Sun of tems to$

6
7

10 Total oF, 9)- . akan: 2

41 Met Taxable Income/{Loss) 3 less hemi 10)

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 Chapter J Comvanership Extites wid, Trusts

INCOME TAX OF A TRUST ©

14. Which of the following statements is not correct?
a. Anirrevocable trust is subject to income tax.
b. . Anirrevocable trust is taxed in the same manner as an individual taxpayer.
c. Anincome ofa trust which is distributed to the beneficiary is a special deduction
from the gross income of the trust
d. None ofthe above

“> Answer: D

15. Mr. Nag-aalangan created a trust naming his eldest son, Kadudaduda as beneficiary. If
the eldest son could not abide with the terms provided in the trust instrument, Me Nag-
aalangan has the Peyer to.cancel the trust agreement.
'

For the current taxable year, the trust earned a net income of P1,000,000. On the other
hand, Mr. Nag-aalangan earned a compensation income of P1,500,000 and business
income of P1,000,000.

The taxable income of the trust is

a. P1,000,000 c. P950,000
b. P980,000 d: nil

“+ Answer: D
£2 Ifthe trust agreement is revocable, its income shall be taxable to the grantor.

16. Based on the above data, how much is the taxable income of Mr. Nag-aalangan?

a. P3,450,000 c. P2,450,000
b. P3,500,000 d. nil
+,
*¢ Answer: B

Solution:

Gross income-trust P7,000,000

Compensation income 1,500,000
Business income 1,000,000
Ss —_
Net Taxable Income-Grantor P3,500,000

174

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 Chapter JS? Co-vnonershit Estates aid,’ Trusts

Taye Ra CREW aca) Ree RL Sas )

Use the following data for the next two (2) questions:
On January 1, 2023, Pedro established a trust fund for the benefit of his daughter, Ana. Pedro
appointed Atty. Abogado as the trustee. The property transferred to the trust is a piece of land
with a dormitory eaming rental income. During the year, the trust earned P40,000,000 revenues
and incurred expenses of P10,000,000, Out of the trust's income, Atty. Abogado transferred
P10,000,000 to Ana. During the year, Ana earned compensation income of P2,500,000.

17. How much is the taxable income of the trust?

a. P30,000,000 c. P19,980,000
b. P29,980,000 d. P20,000,000

“e Answer: D
Gross income-trist 40,000,000
Expenses ‘ (10,000,000)
Income of the trust given to Ana ‘_ (10,000,000)
Net Taxable Income-trust 20,000,000

18. How much is the taxable income of Ana?

a. P2,950,000 c. P13,000,000
b. P12,950,000 d. P11,450,000

“> Answer: C
Compensation income P2,500,000
Income of the trust distributed to Ana 10,000,000
Net Taxable Income-Ana ?12,500,000

19. The taxable income of the trust if it is administered abroad is

a. P30,000,000 c. P19,980,000
b. P29,980,000 d. P21,480,000

“+ Answer: A
Gross income-trust 40,000,000
Expenses (10,000,000)
Income of the trust given to Ana NA
Net Taxable Income-trust P30,000,000
£2 Incase of a trust administered in a foreign country, the amount of the income of the
estate or trust for the taxable year which is distributed currently by the fiduciary to the
beneficiaries is not deductible from the gross income of the estate or trust.

20. Based on the preceding number, the taxable income of Ana should be:
a, P2,950,000 c. P11,500,000
b. P2,500,000 d. P11,450,000

“* Answer:B. Compensation income only

175

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 Olepter SJ, Co-ounerlit Estates nid Trusts

FOBRE acy - : Republic of the Philippines

Use+s Orty* 3 tom Oi
Department of Finance
ot In | Revenue
BR Farm No. a
1701 ‘es Annual Income Tax Return -
In uals luding MIXED
Joramty 2018 ENCS) Eat at aut marron CAPVAL LETTERS cons UA Benes na ih
WO CONE RST De fied wih She BIS ard one hou by tine Tax Fier,
1
701 GI RENCE 1

ET: 12,0123] 2 Amended Return? « {_] Vea.” A) No 8 Short Period Return? "| ee Yes: x No’
A PART l= Backgre :
Tome eeieba Nabe *:19,7,7 pe Pe 0,000 “ofn im “ROO Code | To, 47
$ Taxpayer Type >! |_! Single Proprietor |_|. Professional { _}: Estate: Fal Fat -[_} Compensation Earnar
7 Alphanumenc Tax Code (Are) HOt? Bivens jroome Graded h Retes By: Sra Korhonen raat Rv “Wa red ree eae is
(Jers Saneereitin trcome’ [Tres Buscess ixcone' Pail Pate V1? tocome om Prteran 8% (7 Raw 1016 thkend comm «BMGT Pate
ah

8 Taxpayer's Name fast Nama firs ane Mclo MaTaveSTATE OF ee ease tne ee FACT (yet Nome Helttie Marne, Loxt Serray
TRUST, FAO: (ATTY ABUGADO, fy py ay pp
S Registered Address yxicoh worpere auass he Ropoiorend aches res Bor Ye. cir NA ates
alos 20D the RIND be uncahe re gioterad padres ty vary BI Form Nig 100%)
276) ¢ DUS
Ny GU, RA DO, SyT BRIG Vy PL ENA, GiSsAMiAy pp yp py
Me RA BON ere [ SAzIP Code | 4, 5,32
auacorniyyyg| 11 Email Address = ; ‘ ; i ey
1 12,3]3] 4, 8,7,8 a t,t, y,@e.ma,l l Lad
Le = err eat chal Ta Roe Tak umber ¢ eeaew :
Pia Ess Le INO Pete ed Lr
op * J 18 Gifoi Status @ socmane)
Gontact Number fLosdtnaGelphone PEPE RT Are te SET
0,2,8,4,2:2:9,0,8)9, » , pecs [XR] Singtel ef" F | married 55.0} Legaily Separated (C) widower
has income? = |) Ves “+ XI} No! [48 Filing Status Li Joint Fiing L_| Se se
8 income EXEMPT from tncome Tax? i} ¥es tXI No. SS et OEE Yes (Xi Ns-:
ct ALt activities per Tax Regi (PatXy| __ fit yes, #19 on atso.
us0
consol‘tanion oF ALL activities perTar
T Regime eee
Tax ; BA Method of Deduction (choos one! ;
Rate” Graduated Retes i hemizsd Deduction stionat Standard Deduction (OSD)
Pe emit = QIAp ifSec: SAAN) FARO} oO oe 1¥ Groas Someta Mi
HLL MBE
tJ 8% in Jieu of Graduated Rates under Sec. _24(A) & Percentage Tax under Seo. 116 of NIRC
Fores sates baneite and oer none snoreAo 1x8 eyonad Thien naiian peacs (E54) .
PART Il - Total Tax Payable we LOOTever Cert Santee os teem
Particulars = A. Taxpasyer/Filer 8. Spouse
Tax Due (From Part vi Item $) ° 1 1644,0;2,5,0,0] |) y pig 0
p3 Less: Total Tax Credits/Paymores (Fron Fad Vil ten 10) , ‘ oe Ee SO Nee goa 9-40
4 Tax PayabieQverps yment) (tem 22 Less der 23) 6, 4,0,2,50,0] ; , 4, 1 yy 4 0
Less: Potion of Tex Payzole Miowsd tor einsaaeert w bs pas on or belcte Odooer 15 .
; SON un nas olsen 29 De pp Op pe epg gO
Amount of Tax Payable/(Overpeyment) ( face 26 Loos Hem 25} , 6, 4,0;2, 5 Oi Ole i op po a pe 0

Add: Penatties 27 interest pee ge pe a hy e PD

28 Surcharge — . py OP ep py
233 29 Compromise _ fed ae tg tO
PPO Total Penalties (Sist of Xens 27 102 ra t Ol @ Se fe ew
pi Feil Macniad PiypSlaNOus papa) Gav dss ada \ S z, 0 3 5 0,0 123 11.0
Aggregate Amount Payablel(Overpayment)
(sum cf toms 214 and 318) | | ! ‘6 14,0 a § 0 ots ©
~_ if nerpe; Prats Cne (1) Oom ory. the chore |s mace 76 same is Krevocebie)
' :
To be refunded Te be tesued a Tax Credit Certificate (TCC) ; To be canled over as a tax credit fo! cext yearquarter
| declan wader the pensiies of pe qery that nig muse anc ad os ecectenents, heve deen made in good tech, veclifed
by mo, and lo the dest of my kaowige and botat, ere [rue and correct
I jorssasd fee proasona othe Nelongl lien Feoveeve Cade ey anended end the naquitlons iszined under euthorty thermet Further, I give my conse to ta procos:ing of my infoairefion as =
a ata Prvace
td 01 2087 (RA Wa SATS
for egtnaio tnd eet popes UR signed by: are Patnorzed Representative. locket TE ail attic aticrreline ketwr ~

A - ABOGADO 33 Number of Attachments’ I

Parked Narre and et of Texpayec/Arthorzed Represenicive ,
= | __ PART Ill - Details
of Payment SMe PN \ :
“aan Soaueay _ Number Date (MM/DD/VYTY) _- i. Amount.»
fiefs} | Gad Pia he oh 1 1 Si Lj) ef

13 ff ef ji} C= es biel L ic 1. f=) fh fh

eae tt dd ht tt a !
Pe. Lot ld bli

EI WARK RTS Ie te ee dd
wins ValidatiovRevenue Official Receqa Oetails (not fied wath an Authored Agent Bank) Stanyp of Recetnng Offce/AAB and Dale of Recep?
(ROs Signature/Bank Teter’s intial)

176°’

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 Chapter Se Co-amershity Estates ind Trusts

1701 Annual Income Tax Return

January 2018 (ENCS) Individuals (including MIXED Income Eotner), Estates and Trusts

48,7 1#10,0,0,0,0

aaTiane MAL aT s 0,0 c 0,0] 2 ROO Code

wre a ee Ses : vy ¢ Eamer
Aiphenumenc Tex Code (ATC) {|_| W012 Businens
income Graduated BOA nama tom Patection-Graduated
T Rates | _] 013 Mined ticonw-GraSiaied
TF Rites
‘ 1 Corpensation income’ echoes home -49411 Daw? D7 hee Pte = YT ae 1848 Mend 1 el Re

Claiming Foreign
Tax Cre das?

Dus
O Graduated Rates itemized Dedixtion Optionnt Stenderd Desuctén 1990)
Se oes Choose Mathod of Deena few 28 {80t SHAD MIRC} f (40%of Geoes SaiewReceleotlaeenmasFers (St, 402, meet
oO B% in lew Of Graduated Rates wider Sec & Percentage Tux under Sec 118 of NIRC -

4 Gross Compensaton Income (From Pan ¥ Sched 9 ery ¥otdSc)

§ Less. Nov-Te xable / Exempt Compensetoz
§ Taxable Compensation Income item 4 Less fem 5)
7 Tax Doe-Compensation income aes ox sopte wNetncose Ta Rite)
ee

B SadlesRevanuesReceipis/Fees .
$ Less: Sales Retums, Allowances and Discounts
Net SalesRevenuesfeceipts/Feas (tem 8 Less Rem 9)
Less, Cost of Seles/Services applicable
only U eveling Rema ed De
ductive)
Gross income/(Loss) from Operation (tem 10 Less Rem 14)

Ordinary Allowable Itemized Deductions (Fron Pat V Scheae 4 kem 18)

Special Aloweble itemized Deductions (from Fud V SAwdsle Sitan 3 andtrHam 6)
Fierce
for Mt Cp erating Lose Curry Cher (YOLOD} (Fromm Part V Scvazee & Lan 5 antiy Pan 14}
Total flamized Deductions (Sun
of ferns 13ta 45)

Optional Standard Daduction (OSD) (40%

of hem 10)
NetincomeLess) geared Hew 12 Less tem 1:02) tam t0Lesc¥en 17)

“eh Nees46 ant 23)

177.

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 Chapter Js Co-ounership Estates wel” Trusts

1701 Annual Income Tax Return

2018(ENCS) |, Individuals (including MIXED Income Earner), Estates and Trusts

9,7,7,4,8,7,2,9)4,0,0,0,0

SalesRevenuesRaceipts/Fees (net of sples rokena afowances

and discounts)

Total Income [Sum of Rems 26 and 27)

Taxabie Income@/{Lo
Ss) (Rem 28 Leas tem 29)
Tex Due-Business home (tes Nox ¢NF
bt cows Tax Rab)
‘Total Tax Dee
-Campemstion & Berbeess
inc ome (incr fat rave (Seed bees Bead by} (PoP ow 9

1 Amonrizatons
2 Bad Debts
3 Chamtable and Otner Contributions
4 Depistion
§ Depreciation
6 Entenainment, Amusement and Recreation
7 Fringe Benefits
8 interest
Losses
Pension Trusts :
11 Rertat j only)
12 Research and Development
13 Salaries, and Allowances
14 SSS, GSIS, Phitheatth, HDMF and Otver Contributions
16 Taxes and Licenses
46 Transportaton and Travel

_ 8 | Janitorial and Messengerial Services

b | Professional Fees : 5,0,0,0,0,0 ,0
¢ | Secunty Services (Sample only) - 5, 0,0 0,0 ,0
é
18 Tota Crdinary owas bemiaed Deductons (enc tems 11011) (To Pat V Schade 3 A tern 13)

Total Special Allowable Lemized Dec.ctions Taxpeyerffiter (Sum of Rerrs 4 and 2) (To Pat V Schedule 3.A Rem 4 4A)

Tolal Special Allowable itemized Deductions-Spouse (Sumot items 4 and §) (To Pat V Scheqe 3.A item 148)

1 Gross Income :
Less Ordinary Allowable Itemized Deduciions
Net Operating Loss (awn? Less ten 2)(10 Schutte 6A 1 Bun TA Loy Schedite 6 A2 tem 172A)

, - _B.NOLCO Appted . ; 3 D.NOLCOA

-&. Amount - Previousyeais |S NOLCOExpred | Curentyee Year) ~

178

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 Chapter J: Co-cnonershiy Estates dd Trusts

1701 Annual Income Tax Return fl DMA

2018 (ENCS) Individuals (including MIXED Income Earner), Estates and Trusts h
1701 OV BENCS
é

~B. NOLCO Applied ‘ ¢ 2

Previous Year's C. NOLCO Expired 2 : 2 ae

* Vv

Rete-income Tex Due (From Pat V, Ether Rem 25 or fom

Rate—Income Tax Due (From Part X Ren 178/177)
Less: Share of Other Government # tothe
Net Rate—Income Tax Qus/Shareof National Govt 2Lecs femY
of tems 1 & @ (To Pati kem29
Total Income Tax Dus (Sun

Prior Year's Excess Credits

Tex for the First Three (3) Quarters
Ciediable Tax Withheld for the First Threé @) Quarters
Creditable Tax Wihheld per BIR Form No. 2307 for the 4™ Quarter
Credtabis Tax Withheldper BIR Form No 2316 (From Part V Scheduk 1 Rein 340359)
Tax Paid in Return Previously Filed, if this is an Amended Return
Tax Credits, fappicabe
Special Tex Credits, # anpscable (To Pat Vil Rem
Other Tax Credas/Payments )
40 Total Tax {Sumot hers f to 9) (To Past if Rem 23)

Tax Othervese Due (Pat X tern 165 Ler bare 16F Xapphcatia caper name ts x rata)
Incorne
Tax Rebel on Speca Allowable temired Deductions
Sub-Total- Tax Relief hems f and 2}
Less: Income Tex Due (From Pec X Rem 178 andice Remt
3 Less Rem
Tax Relief Availment Before Special Tax Credit (her
Add: Special Tax Credit, if any (From Part Vil Rem 8}
Total Tax Relief Availment- SPECIAL items 5 and

Iicome Tax Cthernwise Due (Pat X fern 164 hor 16 X

Tax Pate on Specia Alovable temized Osdictons
40 Tota! Tax Retiel Avaiiment- EXEMPT (Suma hers 5 and

iNet

2
3
4
6 Total (Sam
of ems 7 to

$
7

8
9
10 Total hens 6
$1 Net Taxable income/{Loss) (am 5 Less hem 10)

179

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 Fe 3bap bp sige Co-vwoners \

hip Estates an Trusts

INCOME TAX OF A TRUST - CONSOLIDATED ITR

Use the following data for the next two (3) questions;

In 2023, Juan Dela Cruz created two (2) trusts for his minor son, Chiz. During the year, the
two trusts eamed net income as follows: NV.

Trust 1 P4,000,000
Trust 2 6,000,000 .

21. How much is the total income tax due of the two Trusts?.
a. P2,902,500 c. P3,152,200
b. P3,165,000 d. nil

“+ Answer: A

Solution:

Net income-Trust 1 4,000,000

Net income-Trust 2 : 6,000,000
Consolidated Taxable Net Income P10,000,000

‘ =* Consolidated Income Tax Due (Using Tax Table for 2023):

1st P8,000,000 P2,202,500
In excess of P8M @ 35%; (P2M x 35%) 700,000
Consolidated Income Tax Due ~_-P2,902,500
22. How much is the income tax due of Trust 1?
a. P1;263,440 c. P1,161,000
i b. P1,266,000 d. nil

+ Answer: C

Solution:

Consolidated Income Tax Due 2,902,500

ALLOCATION:
Trust 1 = 4/10x P2,902,500 P1,161,000
Trust 2= 6/10 x P2,902,500 1,741,500
r Consolidated tax due P2,902,500

23. How much is the income tax due of Trust 2?

a. P1,895,160 c, P1,891,320
b. P1,899,000 d. P1,741,500

“* Answer: D

- 180

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