Taxation 2: Business and Transfer Taxation
Unit 1. Transfer Taxation
Chapter 1: Transfer Taxation
I. Concept and Types of Transfers
Onerous Transfer of property-
refers to the exchange of property
for a monetary consideration or a
transfer of goods or services in
return for something of equal value
like sales or barter
Gratuitous Transfer of property- is
a conveyance of property without
any consideration involved in
exchange for the property given
away.
Transfer Taxes- are those that are
imposed on gratuitous transfers of
property, either through succession
(Estate Tax) or donation (Donor’s
Tax). These are considered “excise
tax” as to subject matter since they
are imposed on the privilege or right
to transfer property gratuitously.
II. Bilateral, Unilateral, and Complex
Transfer
Include
sales and
barter
Include
inheritance
or donation
III. Rationale of Transfer Taxation
A. Justification of Estate Tax
1. Redistribution of Wealth
Theory
- This Theory views that the
inheritance received by the
heir contributes to the
unequal distribution of
wealth and earnings
because the heir has not
actually worked for it.
- The imposition of Estate tax
helps to distribute some of
the economic benefits which
should have been solely
enjoyed by the heir.
2. Benefit-Received Theory
- Government collects
equivalent compensation for
giving protection and
services to individual
persons, properties or rights
who gained from the
benefits.
3. Privilege or state
partnership theory
- The state is a “passive and
silent partner” in the
accumulation of wealth as it
protects every individual
within its territory. Hence, it
has the right to collect the
share which is properly due
to it.
4. Ability to Pay Theory
- The effect of inheritance
increases the wealth of the
heir thereby creating an
ability to pay the tax and
Bilateral Unilateral Complex
Subject to Subject to Subject to
income tax transfer tax both income
and transfer
tax
