Partnerships, Estates, and Trusts

Badiola | Busto | Chiong | De Guzman | Negre | Yu

BUSINESS
GUARDIAN
TRUST
DEDUCTION
INCOME
PARTNERSHIP
 OUTLINE
A. Business Partnership
B. General Professional Partnership
C. Estates and Trusts
1. Application of tax
2. Exception
3. Computation and Payment
a. In general
b. Consolidation of income of two or more trusts
4. Taxable Income
5. Exemption allowed to estates and trust
6. Revocable trusts
7. Income for benefit of grantor
Business Partnership

GENERAL PROFESSIONAL
PARTNERSHIP
Business Partnership
SEC. 22 (B) NIRC

Taxable as a corporation
 Not considered as a taxable entity

GENERAL PROFESSIONAL
PARTNERSHIP
SEC. 26 NIRC
Application of tax
ESTATES AND TRUSTS
Taxes imposed on individuals shall apply to:

Income Estates

Any kind or property held in trust

Application of tax
ESTATES AND TRUSTS
Income accumulated for unborn or unascertained person(s)
with contingent interest; income accumulated for future
distribution under the terms

Income to be distributed currently by fiduciary; income

collected by guardian of an infant

Income received by estates by a deceased person during

the period of settlement

Income with the discretion of the fiduciary to distribute or

accumulate
Exception
ESTATES AND TRUSTS
Sec. 60 (B), NIRC
Shall not apply to employee’s trust which
forms part of a pension, stock bonus or
profit-sharing plan of an employer for the
benefit of some or all of his employees
Exception

Provided:
ESTATES AND TRUSTS
•  Contributions made by employer, employee, or both is
for the purpose of distributing to such employees the
earnings and principal of the fund accumulated.

•  Impossible, any time prior to the satisfaction of all liabilities

with respect to employees, any part of the corpus or income to
be (within the taxable year or thereafter) used for, or diverted
to, purposes other than for the exclusive benefit of his
employees.
Exception
ESTATES AND TRUSTS
Any amount actually
distributed to any
employee or distributee
shall be taxable to him in
the year in which so
distributed to the extent
that it exceeds the
amount contributed by
such employee or
distributee.
Computation and payment Sec 60 (C), NIRC

General rule
Computed upon the taxable income of
the estate or trust, and will be paid by
the fiduciary.
Computation and payment Sec 60 (C), NIRC

Exceptions
Revocable trusts and income for the benefit of
the grantor, where income of such
part of the trust shall be included in computing
the taxable income of the grantor.
Computation and payment Sec 60 (C) (2), NIRC

Consolidation of income of two or more trusts

Requirements:
•  Two or more trusts
•  Creator of the trust is the same
person
•  Beneficiary of both trusts
referred to herein is the same
•  Taxable income of all trusts
shall be consolidated and the
tax will be computed on such
consolidated income. After
which, the proportion of such
will be collected from each
trustee.
Taxable income Sec 61, NIRC

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

Taxable income Sec 61, NIRC - Exceptions

There will be a deduction in

taxable income for the amount
of income that is to be
distributed currently to the
beneficiaries or to the guardian
of an infant.

Any amount so allowed as

deduction is to be included in
the taxable income of the
beneficiaries, whether
distributed or not. Applying this
deduction will proscribe the use
of the second exception.
Taxable income Sec 61, NIRC - Exceptions

Income received by estates

during the period of settlement
of the estate may be either
distributed to the beneficiary or
accumulated.

The amount which is properly

paid or credited during such
year to any legatee, heir or
beneficiary shall be allowed as
an additional deduction, but any
such deduction will be included
in the computing the taxable
income of the legatee, heir or
beneficiary.
.
Taxable income Sec 61, NIRC - Exceptions

For trusts administered

in a foreign country, the
two previous deductions
shall not be allowed,
provided that any
income of the trust shall
not be included in
computing the income of
the beneficiaries.
Exemptions allowed to estates and trusts Sec 62, NIRC

For the purpose of the tax

provided for in this Title, there
shall be allowed an
exemption of Twenty
thousand pesos (P20,000)
from the income of the estate
or trust.
Exemptions allowed to estates and trusts Sec 35, NIRC

If the taxpayer dies during

the taxable year, his
estate may still claim the
personal and additional
exemptions for himself
and his dependent(s) as if
he died at the close of
such year.
Revocable trusts Sec 63, NIRC

Definition
A trust wherein the
grantor, or any person not
having a substantial
adverse interest, has the
power to change or revest
any part of the trust terms.
Revocable trusts Sec 63, NIRC

Rule
Income of the trust is included
in computing the taxable
income of the grantor. The
grantor is liable for the
income of a revocable trust.
The trust does not pay any
income taxes, but the grantor
should pay the income taxes.
Income for benefit of grantor Sec 64, NIRC

Definition
A trust wherein the trust is setup
for the benefit of the grantor, and
the grantor has the discretion to
decide what to do with the trust.
•  Future distribution to the
grantor,
•  Distributed to the grantor
•  A p p l i e d t o p a y m e n t o f
premiums of life insurance of
the grantor
Income for benefit of grantor Sec 64, NIRC

Rule
Income of the trust is
included in computing the
taxable income of the
grantor.
THANK YOU
Badiola | Busto | Chiong | De Guzman | Negre | Yu