Classification of TRUSTs
1. Ordinary trusts - the income and corpus of the trust do not revert to the
grantor. Under the Tax Code ordinary trust is any of the following trusts:
○ A trust where the income is accumulated or held for future distribution under
the terms of a will trust
○ A trust where the income is to be distributed currently by the fiduciary to the
beneficiaries.
○ A trust where the income is accumulated for the benefit of unborn or
unascertained person or persons with contingent interest.
○ A trust where the income collected by a guardian of a infant is held or
distributed as the court may direct; and
○ A trust where the income, is at the discretion of fiduciary, may be either
distributed to the beneficiaries or accumulated
Classification of TRUSTs
2. Revocable Trust - Where at any time the power to revest in the grantor,
title to any part of the corpus of the trust is vested:
○ in the grantor either alone or in conjunction with any person not having a
substantial adverse interest in the disposition of such part of the corpus or
the income therefrom, or
○ in any person not having a substantial adverse interest in the disposition of
such part of the corpus or the income therefrom, the income of such part of
the trust shall be included in computing the taxable income of the grantor.
Classification of TRUSTs
3. Employee’s Trust - Income tax shall not apply to employee’s trust which
forms part of pension, stock bonus, or profit-sharing plan of an employer
for the benefit of some or all of his employees [Section 60(B)-NIRC]
Requisites or Conditions for Exemptions of Employee’s Trust
○ The employee’s trust must form part of a pension, stock bonus, or profit-sharing
plan of an employer for the benefit of some or all of his employees;
○ Contributions are made to the trust by such employer, or employees, or both;
○ The contributions are made for the purpose of distributing to such employees the
earnings and principal of the fund accumulated by the trust in accordance with
such plan;
○ It is impossible at anytime prior to the satisfaction of all liabilities with respect to
employees under the trust, for any part of the corpus or income to be used for, or
diverted to, purposes other than for the exclusive benefit of his employees.
Consolidated Income Tax
Property Ben
Trustee 1 efit
(Taxable trust 1) s
Returns (Two or More trusts)
Same grantor
Property Same Beneficiary
e fits
(Taxable trust 2) Trustee 2 Ben
Where two or more trusts is created by the same trustor or grantor and the beneficiary is the
same person, the following rules shall apply:
1. The taxable income of all the trusts shall be consolidated and the tax computed on such
consolidated income.
The format of computation follows (Tax Apportionment):
Tax Approportioned = Taxable income of the trust x Consolidated
to a Trust Taxable income of all trusts income tax
2. Such proportion of said tax shall be assessed and collected from each trustee which the
taxable income of the trust administered by him bears to the consolidated income of several
trusts.
Income Tax apportioned to a trust Pxxx
Less: Income tax already paid (xxx)
Income tax payable Px
Filing of Income tax Return
The following persons acting in any fiduciary capacity shall file the
income tax return for an estate or trust (Section 65-NIRC):
● Guardians
● Trustees
● Executors/administrators
● Receivers
● Conservators
● All other persons or corporations acting in any fiduciary capacity
In case of two or more joint fiduciaries, return filed by one of them
shall be a sufficient compliance with the requirements of the Tax
Code.
