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ESTATE TAX

A. Principles and Definition p256

B. Rates and Value

SEC 84: Rates of Estate Tax p256
SEC 88:Determination of the Value of the Estate p257

C. Gross Estate
SEC 85: Gross Estate p258
 RC, NRC, RA = the value at the time of his death of all property, real or personal, tangible or
intangible, wherever situated
 NRAETB, NRANETB = only that part of the entire gross estate which is situated in the Philippines

ESTATE & DONORS TAX

Decedent Within Without
RC YES YES
NRC (OCW) YES YES
RA YES YES
NRAETB YES NO
NRANETB YES NO

Sec 85 A Decedent's Interest p258

 Properties NOT in the estate (but still to be included in the gross estate) p260
o Transfers in contemplation of death – Sec 85B p260
o Revocable transfers– Sec 85C p262
o Transfers under a general power of appointment; and - Sec 85D p263
o Transfers for an insufficient consideration - Sec 85G p265
 EXP: Bona Fide Sale (no need to add in gross estate)
 Sec 85E: Proceeds of Life Insurance – p263
 Sec 85H: Capital of the Surviving Spouse (of a decedent shall not be deemed a part of the
decedent’s gross estate) p265
o Table p266

D. Computation of NET Estate (Sec 86) p267

Gross Estate
(LESS) Deductions
Net Estate
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Deductions from Gross Estate are:

1. Ordinary Deductions (RC, NRC, RA, NRAETB and NRANETB)

a. Expenses, Losses, Indebtedness, and Taxes
i. Funeral Expenses p268
1. Amount p268
ii. Judicial (and Extra Judicial) Expenses of the testamentary or intestate
proceedings p269
iii. Claims against the estate (debts of decedent when still alive) p270
1. Requisites p271
iv. Claims against insolvent persons p272
v. Unpaid mortgage or indebtedness on property p272
vi. Taxes Paid (tax accrued prior to death) p273
vii. Losses p273
1. Requisites p273
b. Transfer for Public Use p274
c. Vanishing Deductions (Property Previously Taxed – Sec 86A2) p274
1. Requisites p275
2. Computation p276
2. Special Deductions (RC, NRC, RA only)
a. Family Home up to 1M p277
b. Standard Deduction of 1M p278
c. Medical Expenses up to 500K p278
1. Requisites p278
d. Amount Received by Heirs under RA 4917 (Retirement Benefits)
1. Requisites p279
2. Ceilings p279

NOTE: Zero-Sum Computation p272 (Add First to Gross Estate and Then Deduct)
1. Funeral Expenses IF covered by a memorial plan. MP included in Gross Estate. Otherwise, noo
need to add.
2. Claims against insolvent persons
3. Unpaid mortgage or indebtedness on property
4. Family Home up to 1M only. Excess not to be added to Gross Estate. Only ½ of FMV if married at
the time of death but not to exceed 1M p278
5. Amount Received by Heirs under RA 4917 (Retirement Benefits)

Miscellaneous Provision
NRAETB & NRANETB: No deduction shall be allowed unless the executor, administrator, or anyone of
the heirs, as the case may be, includes in the return required to be filed under Section 90 the value at
the time of his death of that part of the gross estate of the nonresident not situated in the Philippines.
(because it is needed for the formula)

Gross Estate Phil X World Expenses, losses, indebtedness, taxes, funeral expenses, etc
Gross Estate World

= Allowable Deductions for Estate in Phil

Net Estate Computation for Married Persons

Note Sec 85H and 86C p283

Gross Estate of Married Persons p283

Composition:
1. EXCLUSIVE property of Decedent and
2. COMMUNITY properties (absolute community of prop & conjugal partnership of gains)
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 Exclusive Properties p283

 Proceeds of Life Insurance/Claim against Insolvent Persons: Exclusive vs Community Property
p284
 Deductions from Gross Estate of Married Individuals p284
o Community/Conjugal Deductions
o Exclusive Deductions
o Formula & Example (very important)

SEC 87: 8 Exemptions (from Estate Tax) of Certain Acquisitions and Transmissions p287
SEC 89: Notice of Death to be Filed p289
SEC 90: Estate Tax Returns p289
 (A) Requirements p289
 (B) Time for Filing p290
 (C) Extension of Time p290
 (D) Place of Filing p290
SEC 91: Payment of Tax p291
 (A) Time of Payment p291 (pay as you file)
 (B) Extension of Time p292
 (C) Liability for Payment p292

Miscellaneous Provisions
SEC 92: Discharge of Executor or Administrator from Personal Liability p293
SEC 93: Definition of Deficiency p293
SEC 94: Payment before Delivery by Executor or Administrator p294
SEC 95: Duties of Certain Officers and Debtors p294
SEC 96: Restitution of Tax Upon Satisfaction of Outstanding Obligations p294
SEC 97: Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights p294
 Duty of Banks p294

DONOR’S TAX

SEC 98: Imposition of Tax P296

 Perfection/ Completion p296
 Implications of Renunciation p297

Gross Gift
SEC 104: Definitions p298

DONORS TAX
Donor Within Without
RC YES YES
NRC (OCW) YES YES
RA YES YES
NRAETB YES NO
NRANETB YES NO

DC YES YES
RFC YES YES
NRFC YES NO

 Badges of Donation p 299

 Also Considered as Gifts p299
o Transfers for Insufficient Consideration
o Cancellation of Indebtedness