Philippine Accountancy Review For Excellence: A. Format of Computation (Bir Form 1801)

PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE
RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST.

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TEL # (02) 244 6342
TAXATION E.J. GARCIA / J. CO
A. FORMAT OF COMPUTATION (BIR form 1801)

Exclusive Common Total
Real properties excluding family home P xxx P xxx P xxx
Personal properties xxx xxx Xxx
Family home xxx xxx Xxx
Taxable transfers xxx xxx Xxx
Gross estate P xxx P xxx P xxx
Less: Deductions ( xxx ) ( xxx ) ( xxx )
Estate after deductions xxx xxx Xxx
Less: Special deductions
Family home ( xxx )
Standard deduction ( xxx )
Medical expenses ( xxx )
Others ( xxx )
Net Estate Xxx
Less: Share of Surviving Spouse (Net Conjugal Estate divided by 2) ( xxx )
Taxable net estate P xxx
Tax due P xxx

Less: Tax credits/payments
Foreign estate tax paid (tax credit) ( xxx )
Tax paid in return previously filed (if this is an amended return) (xxx )
Tax payable Xxx
B. ESTATE TAX RATES

If the net estate is:
Over But not over The tax shall be Plus Of excess over
P 200,000 Exempt
P 200,000 500,000 0 5% P 200,000
500,000 2,000,000 P 15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 1,215,000 20% 10,000,000
C. COMPOSITION OF THE GROSS ESTATE OF A DECEDENT

Gross estate (SEC. 85) - The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all
property, real or personal, tangible or intangible, wherever situated: Provided, however, that in the case of a non-resident decedent who at the time
of his death was not a citizen of the Philippines, only that part of the entire gross estate which is situated in the Philippines shall be included in his
taxable estate.
1. Properties owned and possessed by the decedent

a. Types of properties Examples
1) Real or immovable property Land, building or similar structures, or improvements, which are fixed more or less permanently on
the ground such as monument.
2) Tangible personal property Equipments, furniture, machines, paintings, jewelry items, and similar property.
3) Intangible personal property Receivables or claims against another, bills and coins, bank deposits, shares of stock, bonds or
Rights and claims of the decedent certificates of indebtedness, franchise and similar property or rights.
existing at the time of death
b. Classification of Decedent Properties located in the Philippines Properties located in a Foreign Country
Tangible
Intangible personal Tangible personal Intangible personal
Real properties personal Real properties
properties properties properties
properties
Resident Citizen / / / / / /
Non-Resident Citizen / / / / / /
Resident Alien / / / / / /
Non-Resident Alien / / /* X X X
c. Rule of reciprocity (Non-resident Alien)*
1) Properties covered by reciprocity. Intangible personal property situated in the Philippines owned by non-resident alien decedent.
Reciprocity can take place when the foreign country where the nonresident alien was a citizen and resident:
- Does not have any kind of death taxes
- Has death tax but allows exemption to non-resident Filipinos
2) Basic Rules
When there is reciprocity - The intangible personal property of non-resident alien situated in the Philippines are not included in the gross estate
TAX 101 ESTATE TAX-ANS Page 1 of 17
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When there is no reciprocity - The intangible personal property of non-resident alien situated in the Philippines are included in the gross estate
3) Intangible properties considered situated in the Philippines

The following shall be considered as situated in the Philippines (among others):
a) Franchise which must be exercised in the Philippines;

b) Shares, obligations or bonds issued by any corporation or sociedad anonima organized and constituted in the Philippines in accordance with its
law;
c) Shares, obligations or bonds issued by any foreign corporation 85% of the business of which is located in the Philippines;
d) Shares, obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the
Philippines;
5) Shares or rights in any partnership, business or industry established in the Philippines.
2. Properties transferred (Taxable Transfers)

a. Transfer in Contemplation of Death
To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise,
1) in contemplation of or
2) intended to take effect in possession or enjoyment at or after death, or
3) of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period which does not in
fact end before his death
a). the possession or enjoyment of, or the right to the income from the property, or
b) the right, either alone or in conjunction with any person, to designate the person who shall possess or enjoy the property or the income
therefrom; except in case of a bonafide sale for an adequate and full consideration in money or money's worth
Examples of motives that preclude a transfer from the category of one made in contemplation of death (Motives associated with life)
1) To relieve donor from the burden of management
2) To save income or property taxes
3) To settle family litigate and un-litigated disputes
4) To provide independent income for dependents
5) To see the children enjoy the property while the donor is alive
6) To protect the family from hazards of business operations, and
7) To reward services rendered
b. Revocable Transfer.
1) To the extent of any interest therein, of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and
full consideration in money or money's worth) by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any
change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or by the decedent in conjunction with any
other person (without regard to when or from what source the decedent acquired such power), to alter, amend, revoke, or terminate, or where
any such power is relinquished in contemplation of the decedent's death.
2) For the purposes of revocable transfer , the power to alter, amend or revoke shall be considered to exist on the date of the decedent's death even
though the exercise of the power is subject to a precedent giving of notice or even though the alteration, amendment or revocation takes effect
only on the expiration of a stated period after the exercise of the power, whether or not on or before the date of the decedent's death notice has
been given or the power has been exercised. In such cases, proper adjustment shall be made representing the interests which would have been
excluded from the power if the decedent had lived, and for such purpose if the notice has not been given or the power has not been exercised on
or before the date of his death, such notice shall be considered to have been given, or the power exercised, on the date of his death.
c. Property Passing Under General Power of Appointment

To the extent of any property passing under a general power of appointment exercised by the decedent: (1) by will, or (2) by deed executed in
contemplation of, or intended to take effect in possession or enjoyment at, or after his death, or (3) by deed under which he has retained for his life
or any period not ascertainable without reference to his death or for any period which does not in fact end before his death
1. the possession or enjoyment of, or the right to the income from, the property, or
2. the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income
therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth.
d. Transfers of Insufficient Consideration

If any one of the transfers, trusts, interests, rights or powers enumerated and described in letters (b), (c) and (d) is made, created, exercised or
relinquished for a consideration in money or money's worth, but is not a bona fide sale for an adequate and full consideration in money or money's
worth, there shall be included in the gross estate only the excess of the fair market value, at the time of death, of the property otherwise to be
included on account of such transaction, over the value of the consideration received therefor by the decedent
e. Transfer with retention or reservation of certain rights (possession or enjoyment of, or the right to the income from the property, or the right to
designate a person who may exercise such right)
3. Other items
a. Proceeds of Life Insurance
1). The amount receivable by the estate of the deceased, his executor, or administrator, as insurance under policies taken out by the decedent upon
his own life, irrespective of whether or not the insured retained the power of revocation, or to the extent of the amount receivable by any
beneficiary designated in the policy of insurance, except when it is expressly stipulated that the designation of the beneficiary is irrevocable.

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2) The following are also not taxable:

a) proceeds/benefits coming from SSS
b) proceeds/benefits coming from GSIS.
b) the proceeds coming from group insurance.
3) When the designation of the beneficiary is not stated or is not clear, the Insurance Code assumes revocable designation.
b. Claims against insolvent persons

1) Claims of the deceased against insolvent persons where the value of decedent's interest therein is included in the value of the gross estate
2) The full amount of the claims is included in the gross estate.
3) The uncollectible amount of the claims is deducted from the gross estate.
c. Amount received by heirs under R.A. No. 4917

1). Any amount received by the heirs from the decedent - employee as a consequence of the death of the decedent-employee in accordance with
Republic Act No. 4917: It shall also be allowed as deduction from the gross estate provided, that such amount is included in the gross estate of
the decedent.
2) R.A. No. 4917 is entitled ‘An Act Providing That Retirement Benefits of Employees of Private Firms Shall Not be Subject to Attachment, Levy,
Execution, or Any Tax Whatsoever’.
d. Family Home
The family home refers to the dwelling house , including the land on which it is situated, where the husband and the wife, or an unmarried person
who is the head of the family and members of the family reside, as certified by the Barangay Captain of the locality.
e. Decedent’s Interest
Refers to the value of any interest in property or rights accrued in favor of the decedent on or before his death which have been received only after
his death. (Sec. 85 (A) NIRC)
As a rule, the interest must exist at the time of the decedent’s death to be included as part of the gross estate.
Examples
1. Dividends declared on or before the death of the stockholder, and received by the estate after said stockholder’s death.
2. Partnership’s profit earned prior to death of the partner, received by the estate after the partner’s death.
3. Accrued interest and rents on or before the time of death, but collection was made after death.
f. Prior Interests
Exercises:
a. Determine which of the following cases are taxable transfers.
Taxable transfer?
1) Property transferred inter vivos, transferor is of advanced age and died within 3 years after the date of transfer. TT
2) Property sold for adequate and full consideration, transferor/seller died after one day because of incurable disease.
3) Property sold for P1, 000,000. The FMV of the property sold was P 1,100,000. TT
4) Property transferred, transferor has the right to take back the property. TT
5) Property transferred, transferor has the right to take back the property. The transferor has waived the right before he died.
6) Property transferred, the transferee has the power to appoint or transfer to anybody the said property. TT
7) Property transferred, the transferee has the power to appoint or transfer to anybody the said property as designated by the
transferor.
8) Property transferred, the transferor has the right to the income the property transferred while still alive. TT
b. Determine the value to be included in the gross estate for each of the cases below.
Case FMV, time of transfer Consideration received FMV, time of death Amount included in the
gross estate
1 P2,000,000 P 1,500,000 P1,700,000 P200,000
2 P2,000,000 P 2,000,000 P1,000,000 -
3 P2,000,000 None P1,700,000 P1,700,000
4 P2,000,000 P 3,000,000 P3,500,000 -
5 P2,000,000 P 1,500,000 P1,200,000 -
c. Identify which of the following cases of proceeds of life insurance will be included in the gross estate.
1) Proceeds from life insurance, daughter of the insured was irrevocably designated as beneficiary. N
2) Proceeds from life insurance, wife of the insured was revocably designated as beneficiary. I
3) Proceeds of life insurance, the beneficiary’s designation was not stated in the insurance policy. I
4) Proceeds of life insurance, the administrator of the estate was revocably designated as beneficiary. I
5) Proceeds of life insurance, the executor of the estate was irrevocably designated as beneficiary. I
6) Benefits received from SSS, beneficiary was irrevocably designated as beneficiary. N
7) Benefits from GSIS, beneficiary was revocably designated as beneficiary. N
8) Proceeds of life insurance, the estate was designated as beneficiary. I
9) Proceeds of life insurance from group insurance.. N

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D. GROSS ESTATE OF MARRIED DECEDENTS
1. Properties included in the gross estate of the married decedent

Conjugal partnership of gains Absolute community of properties
Exclusive properties of the decedent Included Included
Exclusive properties of the surviving spouse Not included Not included
Common properties Included Included
2. Common types of property regimes:

a. Absolute separation of property (ASP)- All properties of the spouses are separate properties, except those properties which they may acquire
jointly.
b. Conjugal partnership of gains (CPG)- All properties that accrues as fruit of their individual or joint labor or fruits of their properties during the
marriage will be common properties of the spouses.
c. Absolute community of property (ACP)- All present properties owned by the spouses at the date of celebration of the marriage shall become
common properties of the spouses including future fruit of their separate or joint industry or fruits of
their common properties.`
3. In the absence of pre-nuptial agreement - (Date of Marriage):

Before August 3, 1988 On or after August 3, 1988
Conjugal partnership of gains Absolute community of properties
4. Separate property of the Husband and Wife

Capital Property Property owned solely by the husband
Paraphernalia Property Property owned solely by the wife
Capital/ Paraphernalia Property (exclusive property) of surviving spouse – The capital/ paraphernalia of the surviving spouse of a decedent
shall not be deemed a part of the gross estate of the decedent.
5. Conjugal partnership of gains

Exclusive Properties Conjugal Properties
a. Properties brought into the marriage as either of the spouse’s own. a. Properties acquired by onerous title during the marriage at the
expense of the common fund, whether the acquisition is for the
partnership or for only one of the spouses.
b. Properties acquired by gratuitous (or lucrative) title during b. Properties obtained from labor, industry, work or profession of
marriage. either or both of the spouses.
c. Properties acquired by right or redemption or by exchange with c. The fruits, natural, industrial or civil, due or received during the
other property belonging to only one of the spouses. marriage from the common property, as well as the net fruits from
the exclusive property of each spouse.
d. Properties acquired with the exclusive money of either spouse. d. The share of either spouse in the hidden treasure which the law
awards to the finder or owner of the property where the treasure is
found.
e. Properties acquired through occupation such as fishing and
hunting.
f. Livestock existing upon the dissolution of the partnership in excess
of the number of each kind brought to the marriage by either
spouse.
g. Properties acquired by chance, such as winnings from gambling
and betting.
6. Absolute community of properties

Exclusive Properties Community Properties
a. Properties acquired during the marriage by gratuitous (or a. All properties owned by spouses at the time of the celebration of
lucrative) title by either spouse, and the fruits as well as the marriage or acquired thereafter.
income thereof, if any, unless it is specifically provided by the
donor, testator or grantor that they shall form part of the
community.
b. Property for personal and exclusive use of either spouse, however,
jewelry shall form part of the community property.
c. Property acquired before the marriage by either spouse who has
legitimate descendants by a former marriage and the fruits as
well as the income, if any, of such property.
7.Summary: Similarities between Conjugal Partnership of Gain (CPOG) and Absolute Community of Property
(ACOP)
Property CPOG ACOP
a. Property inherited or received as donation during marriage Exclusive property Exclusive property
b. Property acquired during the marriage (other than inheritance or donation) Conjugal property Community property
c. Property acquired from labor, industry, work or profession of spouses Conjugal property Community property
under ACOP, “JEWELRY” shall be considered community property even if they are for the exclusive use of either spouse.

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8. Difference between Conjugal Partnership of Gains (CPOG) and Absolute Community of Property (ACOP)
Property CPOG ACOP
a. Property before marriage or brought to the marriage Exclusive property Community property
b. Fruits or income due or derived during the marriage coming from exclusive property Conjugal property Exclusive property
Exercise:
a. Mr. Hames , a married decedent left the following properties. Determine the taxable gross estate of Mr. Hames.
EXCL-CPG CONJ- EXCL- COMM-
CPG ACP ACP
1. Cash owned by his wife before the marriage. P2,000,000 - - - P2,000,000
2. Cash owned by Mr. Hames before the marriage. 5,000,000 P5,000,000 - - 5,000,000
3. Real property inherited by Mr. Hames during the marriage. 6,000,000 6,000,000 - P6,000,000 -
4. Real property inherited by his wife during the marriage. 4,000,000 - - - -
5. Personal property received by his wife as gift before the marriage. 400,000 - - - 400,000
6. Personal property received by Mr. Hames as gift before the marriage. 2,000,000 2,000,000 - - 2,000,000
7. Property acquired by Mr. Hames using his cash owned before the 600,000 600,000 - - 600,000
marriage.
8. Clothes of Mr. Hames purchased with his wife’s exclusive money. 500,000 - - 500,000 -
9. Jewelry purchased with the exclusive cash of the surviving spouse. 1,000,000 - - - 1,000,000
10. Jewelry inherited during the marriage by the surviving spouse. 1,000,000 - - - -
11. Jewelry inherited before the marriage by the the surviving spouse. 1,000,000 - - - 1,000,000
12. Unidentified property. 1,200,000 - P1,200,000 - 1,200,000
13. Cash representing the income earned during the marriage from the 2,000,000 - 2,000,000 2,000,000 -
exclusive property of Mr. Hames.
14. Cash representing the income earned during the marriage from the 2,000,000 - 2,000,000 - 2,000,000
common property of the spouses.
Total P13,600,000 P5,200,000 P8,500,000 P15,200,000
E. EXCLUSIONS AND EXEMPTIONS FROM THE GROSS ESTATE
1. EXCLUSIONS
a. The merger of the usufruct in the owner of the naked title.
1) When the same person becomes a usufructuary and owner of the naked title, it makes him/her the absolute owner of the property.
2) USUFRUCT – the legal right to use and enjoy the benefits and profits of something belonging to another.
3) Two persons involved in usufruct:
 USUFRUCTUARY – the person who has the right of enjoying the use and the fruits of the property belonging to another.
 OWNER OF THE NAKED TITLE – the person who is vested the ownership, dominion, or title of the property under the usufruct
agreement. He is NOT the absolute owner of the property with respect to the right of the usufructuary.
b. The transmission or delivery of the inheritance or legacy of the fiduciary heir or legatee to the fideicommissary.
1) The transfers from fiduciary heir to the fedeicommissary
2) LEGACY– a gift or bequest by WILL of a person.
3) DEVISEE – a TESTAMENTARY disposition of real property.
4) LEGATEE –the person to whom a legacy in a will is given of personal property.
5) FIDUCIARY HEIR – the FIRST HEIR of the property.
6) FIDEICOMMISSARY – the SECOND HEIR whose relationship to the fiduciary heir must be one degree of generation (a parent and a child)
c. The transmission from the first heir, legatee, or donee infavor of another beneficiary, in accordance with the will of the predecessor.
 The second transfer as desired by the predecessor
 There is only one transfer from the testator
d. All bequest, devices, legacies or transfer to social welfare, cultural and charitable institutions, provided that:
1) no income or part of their income inures or pass on to the benefit of any private individuals and
2) not more than 30% of such bequest, legacies or transfer shall be used for administrative purpose.
The government agency which is empowered to determine the exemption is the BIR. To enable it to exercise such power, the value of transfer to social
welfare, cultural and charitable institutions should be included in the gross estate. While the Tax Codes includes this item in the exempt acquisition
and transmissions, it is actually considered a deduction from the gross estate.
2. Exemptions
a. Amounts received for war damages
b. Amounts received from the United States Veterans Administration
c. Benefits received from the GSIS
d. Benefits received from the SSS
e. Retirement benefits of employees of private firm (R.A. 4917)
f. Intangible personal property of a non-resident alien decedent under the reciprocity clause
g. Grants and donations to the Intramuros Administration.
F. DETERMINATION OF THE VALUE OF THE ESTATE

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1. Usufruct
Usufruct is valued In accordance with the latest Basic Standard Mortality Table, to be approved by the Secretary of Finance, upon the
recommendation of the Insurance Commissioner.
2. Property
a. Generally it is valued at its fair market value at the time of decedent’s death
b. Real property is valued at the Higher between the zonal value (BIR) vs. assessed value (Provincial and City assessor)
c. Personal properties –
Recently purchase – Purchase price
Not recently purchase – Pawn value x 3
d. Securities (Shares of stock)
1. Shares of stock traded in the local stock exchange- Mean between the highest and lowest quotations on valuation date or on a
date nearest the valuation date.
2. Shares of stock not traded in the local stock exchange
a. Common (ordinary) share – book value per share of issuing corporation.

b. Preferred (preference) share – Par Value
Exercise
a. A decedent died leaving the following properties. Determine the Philippine gross estate:
Resident NRA-No NRA-With
decedent Reciprocity Reciprocity
House and lot, USA, FMV, time of death P4,000,0000, cost, P2.000,000 P4,000,000
House and lot, Philippines, FMV, time of death, P2,500,000; 2,500,000 P2,500,000 P2,500,000
Value per tax declaration, time of death, P2,000,000
Furniture and appliances, Philippines, Pawn value time of death, P500,000 1,500,000 1,500,000 1,500,000
Car, Japan, purchase price, P1,800,000 1,800,000
Preference Shares, Philippines, sold for P300,000 1 day before death, FMV, date of sale,
P250,000 Par value, date of death, P350,000 (Reason of death, car accident).
Bonds, Philippine Corporation, cost, P450,000; 450,000 450,000
Ordinary shares of stock, foreign corporation, 80% of the business in the Philippines, par
value, time of death, P500,000; book value, time of death, P600,000 600,000
Proceeds of life insurance, Philippines (the estate is the designated beneficiary) , P1,800,000 1,800,000 1,800,000
Total P12,650,000 P6,250,000 P4,000,000
G. DEDUCTIONS FROM THE GROSS ESTATE:

1. Ordinary Deductions
Items of Deductions Resident alien or citizen decedent Non-resident alien decedent
a. Expenses, losses, indebtedness, taxes, etc Deductible Deductible:
(ELITE) Phil. GE x ELITE
World GE
b. Transfer for public purpose Deductible Deductible
c. Property previously taxes (Vanishing Deductible Deductible
Deductions)
2. Special Deductions
Items of Deductions Resident alien or citizen decedent Non-resident alien decedent
a. Family home Deductible Not Deductible
b. Standard deduction Deductible Not Deductible
c. Medical expenses Deductible Not Deductible
d. Amount received under R.A. 4917 Deductible Not Deductible
3. Others
Item/s of Deductions Resident alien or citizen decedent Non-resident alien decedent
a. Share of Surviving Spouse Deductible Deductible
H. DEDUCTIONS AMPLIFIED
1. Expenses, Losses, Indebtedness, Taxes, Etc. (ELITE)
Deductions Requisites for deductibility Amount and items deductible Deducted
from
A. Actual Funeral expenses a. Incurred up to the time of interment Amount of actual funeral expenses, or Common
b. Not borne or defrayed by relatives and property
Actual funeral expenses (whether friends An amount equivalent to 5% of gross estate
paid or unpaid) refers to expenses c. Supported by receipts or invoices or whichever is lower,
paid out of the estate. other evidence
but in no case to exceed P200,000
Any amount of funeral expenses in excess
of the P200,000 threshold, whether the same Included in the term funeral expenses
had actually been paid or still payable, shall
not be allowed as a deduction. a. Mourning apparel of the surviving spouse
and unmarried minor children of the
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from
Neither shall the unpaid portion of the deceased bought and used on the occasion of
funeral expenses incurred the burial
which is in excess of the P200,000 b. Expenses for the deceased’s wake,
threshold be allowed to be claimed as a including foods and drinks
deduction under “claims against the estate” c. Publication charges for death notices
d. Telecommunication expenses incurred in
informing relatives of the deceased
e. Cost of burial plot, tombstones, monument
or mausoleum but not their upkeep. In case
the deceased owns a family estate or several
burial lots, only the value corresponding to the
plot where he is buried is deductible
f. Interment and cremation fees and charges
g. All other expenses incurred for the
performance of the rites and ceremonies
incident to interment
b. Judicial expenses a. Incurred during the settlement of the Expenses incurred in: Common
estate property
Judicial expenses of the b. Incurred not beyond the last day a. Inventory taking of assets comprising the
testamentary or intestate prescribed by law, or the extension gross estate
proceedings. thereof, for the filing of estate tax return b. Their administration
(6 months). In meritorious cases c. Payment of debts of the estate
extension of not exceeding 30 days. d. Distribution of the estate among heirs
c. Incurred for the benefit of the estate
d. Supported by receipts or invoices or by a Included in judicial expenses
sworn statement of account issued and a. Fees of executor or administrator
signed by the creditor b. Attorney’s fees
c. Court fees
Judicial Expenses d. Accountants fees
e. Appraiser fees
Period for f. Clerk hire
filing g. Cost of preserving and distributing the
estate

h. Cost of restoring or maintaining property of
Not
the estate
Deductible Deductible
i. Brokerage fees for selling property of the
estate
Settlement of
estate
 The amount deductible is limited
to expenses incurred within the
period for filing the estate tax
return, or the extension thereof.
c. Losses a. It is incurred during the settlement of the Value of the property lost Common
estate. property if
b. It arose from fires, storms, shipwreck, or connected to
other casualties, or from robbery, theft, common
or embezzlement.
c. It is not compensated for by insurance or Exclusive
otherwise. property if
d. It must not have been claimed as connected to
deduction for income tax purposes in an exclusive
income tax return.
e. It is incurred not later than the last day
for the payment of the estate tax
Losses
Date of Death
Losses
incurred
Before After
death death
d. Indebtedness (Claims against a. The liability represents a personal Debts or demands of pecuniary nature which Common
the estate) obligation of the deceased existing at the could have been enforced against the deceased property if
time of his death in his lifetime and could have been reduced to connected to
This is the obligations of the b. The liability was contracted in good faith simple money terms common
decedent which is enforceable and for adequate and full consideration
against him while still alive can be in money or money’s worth Exclusive
enforced against his estate upon c. The claim must be a debt or claim which property if

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from
his death. is valid in law and enforceable in court connected to
d. The indebtedness must not have been exclusive
condoned by the creditor or the action to
collect from the decedent must not have
prescribed.
Claims against the estate or indebtedness in

respect of property may arise out of the
following sources:
1. Contract
2. Tort
3. Operation of law
e. If the claim was based on a debt

instrument, such instrument must be
NOTARIZED. (Except loans granted
by financial institutions where
notarization is not part of the business
practice of the financial institution
lender.)
f. If a loan was incurred within 3 years

before the decedent death, the
administrator, or executor is required to
render a statement showing the
disposition of the loan proceeds.
e. Unpaid taxes The tax must have accrued before the death Unpaid taxes that accrued before the Common
of the decedent decedent’s death but not including: property if
connected to
Unpaid Taxes a. Any income tax upon income received after common
the death of the decedent, or
Date of Death b. Property taxes not accrued before his death, Exclusive
Unpaid or property if
taxes c. Any estate tax connected to
Before After exclusive
death death
Taxes which have accrued as of the death of

the decedent which were unpaid as of the
time of death. This deduction will not
include income tax upon income received
after death, or the estate tax due from the
transmission of his estate.
f. Claims against insolvent a. The value of the claims is included in the Claims that are not collectible Common
persons gross estate. property if
b. The debtors are incapable of paying their connected to
This shall be deductible but debts. common
the full amount of the claim
must first be included in the Exclusive
gross estate. Only the property if
uncollectible portion shall be connected to
allowed as deductions. exclusive
g. Unpaid mortgage a. The fair market value of the mortgaged Amount of unpaid mortgage Common
property undiminished by such property if
mortgage or indebtedness has been connected to
included as part of the gross estate common
b. The mortgage indebtedness was
contracted in good faith and for an Exclusive
adequate and full consideration property if
connected to
exclusive
2. Transfer for Public Use

a. Amount deductible Amount of all bequest, legacies, devises or transfer to or for the use of the Government of the Philippines, or any
political subdivision for exclusively public purpose.
b. Requisites for deduction 1. The disposition must be
a. testamentary in character (in the last will and testament) or
b. by way of donation mortis causa (should take effect after death)
c. executed by the decedent before his death.
2. In favor of the Government of the Philippines or any of its political subdivisions.
3. Exclusive for public purpose.

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4. The value of the property given is included in the gross estate.
c. Deducted from Exclusive property
3. Property Previously Tax (Vanishing Deduction) - This is a deduction derived from a property that was previously taxes.
a. Requisites for deduction
1. Death The present decedent must have died within five() years from the receipt of the property from a
prior decedent or donor.
2. Identity of the Property The property involved must have been a property transferred by a prior decedent or donor to the
present decedent or the property acquired in exchange for the original property so received.
3. Inclusion of the Property The property must have formed part of the prior decedent’s gross estate situated in the
Philippines or been included in the total amount of the gifts of the donor made within 5
years prior to the present decedent’s death.
4. Previous taxation of the property The estate tax on the prior succession must have been finally determined and paid by the
prior decedent. The same applies to gifts, in that donors must have taken care of the donor’s
tax.
5. No previous vanishing deduction on the The vanishing deduction on the property must not have been claimed by the previous estate
property involving the same property.
– If the present decedent died within the following period after the
b. Rates of vanishing deduction
date of prior decedent’s death or after the date of donation:
More than But not more than The rate is
- 1 year 100%
1 year 2 years 80%
2 years 3 years 60%
3 years 4 years 40%
4 years 5 years 20%
5 years - 0%
c. Format of computation
Value to take*** Xxx
Less Mortgaged paid by the current decedent (xxx)
Initial basis Xxx
Less: Proportional Deductions(ELITE and property transferred for public used) (Initial basis / Gross estate x ELITE plus TPU) (xxx)
Final Basis Xxx
Multiply by Rate of Vanishing Deduction %
Vanishing Deduction Xxx
*** Value taken is the LOWER between the fair market value of the property in the gross estate of the prior decedent or the fair market value of the
gift and the fair market value of the same property in the gross estate of the present decedent.
Notes:
1. Under conjugal partnership of gains vanishing is a deduction from exclusive property.
2. Under absolute community of property, vanishing deduction may be deducted from exclusive property or community property.
Exercise:
a. Mr. Christopher Gaya, single, died leaving properties he inherited 3 ½ years ago with a fair market value of P800,000. During his father’s death,
and at the time of inheritance it had a value of 750,000, and an unpaid mortgage of P100,00. P50,000 of it was paid by the present decedent
Properties other than the inherited property in his gross estate had fair market value of P1,300,000. The total expenses, losses, indebtedness,
taxes, etc.(ELITE) and transfer for public purpose amounted to P300,000.
How much was the vanishing deduction?
Inherited Property
Value to take*** P 750,000
Less Mortgaged paid by the current decedent 50,000
Initial basis 700,000
Less: Proportional Deductions (P700,000/P2,100,000 xP300,000) 100,000
Final Basis 600,000
Multiply by Rate of Vanishing Deduction 40%
Vanishing Deduction P240,000
I. SPECIAL DEDUCTIONS
1. Family Home - The family home refers to the dwelling house, including the land on which it is situated, where the husband and the wife, or an
unmarried person who is the head of the family and members of the family reside, as certified by the Barangay Captain of the locality.

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Conditions for the allowance of family home deduction from the gross estate:
a. The family home must be the actual residential home of the decedent and his family at the time of his death, as certified by the Barangay Captain
of the locality the family home is situated
b. The total value of the family home must be included as part of the gross estate of the decedent, and
c. Allowable deduction must be in an amount equivalent to the current fair market value of the family home as declared or included in the gross
estate, or to the extent of the decedent’s interest (whether conjugal/community or exclusive), whichever is lower, but not exceeding P1,000,000.
Deductible amount
Classification of family home Amount deductible
a. Exclusive property Full value included in the gross estate or P1,000,000 whichever is lower
b. Conjugal/community property One-half (1/2) of the value included in the gross estate or P1,000,000 whichever
is lower
c. Partly exclusive property, partly conjugal/community property Exclusive part (full value included in the gross estate) xxx
Conjugal/Community part (1/2 x value included in the gross estate) xxx
Total xxx
Total or P1,000,000 whicherver is lower
Exercise:
FMV at the Time of Death of the Decedent Deductible Amount
1. Exclusive family home P 800,000 P 800,000
2. Exclusive family home P 1,200,000 P 1,000,000
3. Common family home P 1,200,000 P 600,000
4. Common family home P 3,600,000 P 1,000,000
5. Exclusive family home (Decedent is single) P 800,000 -
5. Exclusive lot P 400,000
Common house P 800,000 P 800,000
2. Standard Deduction-
Amount deductible
 The amount deductible is P1,000,000 without any required substantiation
3. Medical Expenses
Amount deductible
 All medical expenses incurred (Whether paid or unpaid), provided the total amount does not exceed P500,000
Requisites for deduction
1. Incurred within one (1) year before the death of the decedent
2. Duly substantiated with official receipts for services rendered by the decedent’s attending physicians, invoices, statements of account duly
certified by the hospital and such other supporting documents
Included in Medical Expenses
1. Cost of medicines
2. Hospital bills
3. Doctors’ fees
Exercise:
Determine the deductible medical expenses in the following cases:
Deductible
Total actual medical
expenses
Case A –Medical fees, unpaid, incurred for the last15 months before death ( amount incurred equally for 15 P300,000 P240,000
months)
Professional fees of Doctors, paid only during the date of death of the decedent, incurred 13 months
before death (50% with official receipt) 200,000 -
Hospital bills, incurred within 12 months before death (only 50% was paid) 200,000 200,000
Total P700,000 P440,000
Allowed P440,000
Case B – Doctors’ fees, incurred 12 months before death (without receipts) P200,000 -
Hospital bills, unpaid, incurred 12 months before death 700,000 700,000
Cost of medicine, paid 3 months after death and incurred 14 months before death
800,000 -
Total P1,700,000 700,000
Allowed P500,000
Case C – Cost of medicine, unpaid, incurred 15 months before death P100,000 -
Hospital bills, paid, incurred 13 months before death (60% with receipts) 200,000 -
Doctors’ fees, incurred and unpaid within 12 months before death 100,000 100,000
Total P700,000 P100,000
Allowed P100,000
4. Amount Received by Heirs Under R.A. No. 4917

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Amount deductible and Requisites
 Any amount received by the heirs from the decedent’s employer as a consequence of the death of the decedent employee in accordance
with Republic Act No. 4917 is allowed as deduction provided that the amount of the separation benefit is included as part of the gross
estate of the decedent
Amount Received By Heirs Under R.A. No. 4917
1. RA No. 4917 is entitled “an act providing the retirement benefits of employees of private firms shall not be subject to attachment, levy,
execution, or any tax whatsoever”
2. The amount received by heirs from decedent’s employer as a consequence of the death of the decedent employee is included in the
gross estate of the decedent
3. The amount above is also allowed as deduction from gross estate
J. OTHER DEDUCTIONS
1. Share of the Surviving Spouse- applicable only to married decedents
Gross Conjugal / community properties Xxx
Less: Conjugal / community deductions (xxx)
Net conjugal/community properties (NCP) Xxx
Share of surviving spouse (1/2 x NCP) Xxx
Excercise
a. George James a non-resident Chinese citizen died testate and left the following properties:
Car, Philippines ( received as donation 2 years before death, FMV, date of donation was P1,500,000) P1,000,000
Car, Shanghai, China 900,000
Bonds, Philippines 1,000,000
Shares of stock, Shanghai, China 600,000
House and lot, China (Mortgaged for P200,000) 1,800,000
Cash deposit, BDO-Sampaloc, Manila 1,200,000
Other tangible personal properties, Manila 500,000
Franchise exercised in the Philippines 2,500,000
Shares of stock issued by a foreign corporation 1,500,000
His cousin, Lebron, was assigned as the executor of the last will and testament of George and initially presented you the list of deductions as
follows:
Actual funeral expenses (defrayed by relatives) P100,000
Judicial expenses (Extra judicial settlement) 300,000
Loss of certain tangible personal properties 250,000
Claims against the estate 100,000
Unpaid taxes, accrued after death 150,000
Claims against insolvent person 100,000
Transfer for public use 100,000
Medical expenses 600,000
How much was the total Philippine gross estate, allowable deductions and taxable net estate in the Philippines?
.
Gross Estate* P6,300,000.00

Less: Ordinary Deductions** 1,358,022.31
Estate After Deduction P4,941,997.69
Less: Special Deductions*** -
Net estate P4,941,997.69
Less: Share of Surviving Spouse -
Taxable Net Estate P4,941,997.69
Estate Tax Due P 458,619.75
Less: Estate Tax Credit**** -
Estate Tax Payable P 458,619.75
Properties Within Without World/Total

Car, Philippines P1,000,000 P1,000,000
Car, Shanghai, China 900,000 900,000
Bonds, Philippines P1,000,000 P1,000,000
Shares of stock, Shanghai, China 600,000 600,000
House and lot, China (Mortgaged for P200,000) 1,800,000 1,800,000
Cash deposit, BDO-Sampaloc, Manila 1,200,000 1,200,000
Other tangible personal properties, Manila 500,000 500,000
Franchise exercised in the Philippines 2,500,000 2,500,000
Shares of stock issued by a foreign corporation - 1,500,000 1,500,000
Total Gross Estate P6,300,000 P4,800,000 P11,100,000

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Funeral expenses (5%x11,100,000) or (Zero) -
Judicial expenses P300,000
Loss of certain tangible personal properties 250,000
Claims against the estate 100,000
Unpaid mortgage 200,000
Total ELITE/Prorated ELITE (P6,300,000/P11,100,000 x P950,000) P950,000 P539,189.19
Transfer for public use 100,000.00
Vanishing deductions*** 718,833.12
Total deductions allowed for NRA P1,358,022.31
*** Vanishing Deductions

Value to take*** P1,000,000
Less Mortgaged paid by the current decedent -
Initial basis P1,000,000
Less: Proportional Deductions (1,000,000/6,300,000) x(639,189.19) 101,458.60
Final Basis P898,541.40
Multiply by Rate of Vanishing Deduction 80 %
Vanishing Deduction P718,833.12
K. DEDUCTIONS FROM THE EXCLUSIVE OR CONJUGAL/COMMUNAL RPOPERTY UNDER THE

FAMILY CODE
a. Support of spouses, their common children and legitimate children of either spouse Conj/Comm
b. All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the conjugal Conj/Comm
partnership of gain or community, or by both spouses, or by one spouse with the consent of the other.
c. Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have been Conj/Comm
benefited
d. All taxes, liens, charges and expenses, including major and minor repairs, upon the conjugal/community property Conj/Comm
e. All taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse used by the Conj/Comm
family
f. Expenses to enable either spouse to commence or complete a professional or vocational course, or other activity for self- Conj/Comm
employment
g. Ante nuptial debts of either spouse insofar as they have rebounded to the benefit of the family Conj/Comm
h. Value of what is donated or promised by both spouses in favor of their legitimate children for the exclusive purpose of Conj/Comm
commencing or completing a professional or vocational course or other activity for self-improvement
i. Expenses of litigation between the spouses unless the suit is found to be groundless Conj/Comm
j. Ante-nuptial debts of either spouse that did not redound to the benefit of the family Exclusive
k. Support of illegitimate children of either spouse Exclusive
l. Liabilities incurred by either spouse by reason of crime or quasi-delict Exclusive
m. Loss during the marriage in any game of chance, betting, Sweepstakes, or any other kind of gambling whether permitted or Exclusive
prohibited by law
L. NET DISTRIBUTABLE ESTATE
1. Net distributable estate vs Net taxable estate
Net distributable estate Net taxable estate

The result after the reduction of the gross estate by actual expenses or The result of the application of the law under estate taxation
payments
Variance between them can be traced to deductions which do not involve

payment like vanishing deductions, standard deduction, and family
home. Where the actual amount of payment or expenses is higher than
allowed like funeral expenses or medical expenses. Net Taxable Estate Distributable Net Estate
Gross estate:
Real or immovable property Included Included
Tangible personal property Included Included
Intangible personal property Included Included
Transfer in contemplation of death Included Not included
Revocable transfers Included Not included
Transfer under the general power of appointment Included Not included
Proceeds of life insurance Included Included
Exclusion such as SSS, GSIS, etc Not included Included
Allowable deductions:
Funeral expenses With limit Actual
Judicial Actual * Actual

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Unpaid taxes Actual Actual
Claims against the estate Actual Actual
Claims against insolvent person Actual Actual
Losses Actual * Actual
Transfer for public purpose Actual Actual
Vanishing deduction As computed Not considered
Standard deduction P1,000,000 Not considered
Family home With limit Not considered
Medical expenses With limit Actual
Amount received under RA 4917 Actual Not considered
Share of surviving spouse As computed As computed
NET TAXABLE ESTATE Pxxx
Estate Tax Due Pxxx (xxx)
DISTRIBUTABLE NET ESTATE Pxxx
* within the settlement period only
The rules in classifying property into conjugal and exclusive property are the same for purposes of computing the net distributable estate. For net
taxable estate purposes, medical expenses is a special deduction, which means that it is neither conjugal nor exclusive deduction. For net
distributable estate purposes, it is a conjugal deduction.
M. TAX CREDIT FOR ESTATE TAX PAID TO A FOREIGN COUNTRY
o A tax credit is allowed to the estate of a citizen or resident alien decedent for estate tax paid to foreign countries pertaining to properties
which are part of the present estate.
1. Entitled to tax credit
Resident alien or Citizen decedents
2. Deducted from estate tax due
The estate tax imposed in the Tax Code shall be credited with the amounts of any estate tax imposed by the authority of a foreign country.
3. Limitations on credit Amount Deductible
a. ActualWhichever
Estate tax paidisabroad
b. Limit lower
Limit
Only one foreign country is involved
Net Estate, foreign

World Net Estate x Philippine Estate Tax
Two or more foreign countries are involved (whichever is lower of the following):
Limit A- Per Foreign Country

Whichever World Net Estate x Philippine Estate Tax
is lower
Limit B- All Foreign Country
World Net Estate x Philippine Estate Tax
Exercise
The following data are made available from the estate of a resident citizen decedent:
Net estate, Philippines P2,500,000
Net estate, USA(after paying P32,000 estate tax) 268,000
Net estate, Korea(before paying P20,000 estate tax) 300,000
Net estate,Australia (100,000)
1. How much is the allowable estate tax credit?
2. Assuming that the net estate in Australia is P400,000 and estate taxes paid was 60,000, How much is the allowable estate tax credit?
3. Assuming that all foreign net assets are located in only one foreign country and foreign estate tax paid was P800,000, How much is the allowable
estate tax credit?
N. ADMINISTRATIVE PROVISIONS
1. Notice of Death
a. When is notice of death required to be filed?
1) In all cases of transfer subject to tax;
2) Where, though exempt from tax, the gross value of the gross estate exceeds P20,000.
b. Who will file?
1) Executor
2) Administrator
3) Any of the legal heirs
c. When is the notice of death filed?
No Judicial Proceedings - Within 2 months after the decedent’s death.

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With Judicial Proceedings – Within 2 months from the time executor or administrator qualifies.
2. Estate Tax Returns

a. Tax form BIR Form 1801 – Estate Tax Return
b. Estate tax returns are filed 1. In all cases of transfer subject to tax;
2. Where, though exempt, the gross value of the estate exceeds P200,000;
3. Where the said estate consists of registered or registrable property (regardless of the value of the gross
estate).
a) Registered Property
b) Motor Vehicle
c) Shares of Stock
c. Person/s who will file the returns
1. Executor
2. Administrator
3. Any of the legal heirs
d. Items shown in the returns
1. The value of the gross estate of the decedent at the time of his death, or in case of non-resident alien of that part of his gross estate situated
in the Philippines
2. The deductions allowed from the gross estate
3. Such part of such information as may at the time be ascertainable and such supplemental data as may be necessary to establish the correct
taxes
e. Period when the returns are filed
Within 6 months after the decedent’s death
f. Returns to be supported with statements certified by a CPA
When the estate tax returns show a gross value exceeding P2,000,000
g. Contents of the statements certified by a CPA
1. Itemized assets of the decedent with their corresponding gross value at the time of his death, or in case of non resident alien, of that part of
his estate situated in the Philippines
2. Itemized deductions
3. The amount of tax due whether paid or still due and outstanding
h. Period when a certified copy of the schedule of partition and the order of the court ordering the same be filed
Within 30 days after the promulgation of such order
i. Extension period for filing the returns
The commissioner can, in meritorious cases, extend the filing of returns for a period not exceeding 30 days
j. Place where the returns can be filed
1) In case of resident decedent:
a) Accredited agent bank
b) Revenue district office
c) Collection officer
d) Duly authorized Treasurer of the city of municipality where the decedent was domiciled at the time of death
2) In case of non-resident decedent:
a) Revenue District Office where the executor or administrator is registered;
b) Revenue District Office having jurisdiction over the executor or administrator’s legal residence
c) Office of the Commissioner [Office of the BIR Commissioner (RDO No. 39- South Quezon City) if the estate does not have
an executor or administrator in the Philippines]
3. Payment of Tax
a. Time of payment of estate tax
At the time the estate tax returns are filed
b. Extension of time of payment od estate tax
1) Estate is settled through the courts – not to exceed 5 years
2) Estate is settled extra-judicially – not to exceed 2 years
c. Extension of payment of estate tax not allowed
When there is:
1. Negligence
2. Intentional disregard of rules and regulations
3. Fraud on the part of the taxpayer
d. Liability for payment
1. The estate tax shall be paid by the executor or administrator before the delivery of the distributive share in the inheritance to any heir or
beneficiary.
2. Where there are two or more executors or administrators, all of whom are severally liable for the payment of tax.
3. The executor or administrator of an estate has the primary obligation to pay the estate tax but the heir or beneficiary has subsidiary
liability for the payment of that portion of the estate tax which his distributive share bears to the value of the total net asset.
4. Acts Requiring Certification from the Commissioner that the Estate Tax has been Paid
Acts requiring certification
1. Delivery of distributive shares to the heirs.
2. Registration in the registry of Deeds of transfer of inherited real property or real rights.
3. Payments of debt by decedent’s debtor to the heirs, legatees, executor or administrator of the creditor-decedent.
4. Transfer of inherited shares, rights or bonds.
5. Withdrawal from decedent’s bank deposit (except when the amount does not exceed P20,000 where only an authorization from the
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Commissioner is required).
5. Civil Penalties and Interest

Subject to interest but not to Any amount paid after the statutory due date of the tax, but within the extension period, shall be subject to
surcharge interest but not to surcharge.
25% surcharge Penalty of 25% if there is no false or fraudulent intent on the taxpayer.
50% surcharge Penalty of 50% if there is false, malice, fraudulent intent on the taxpayer.
20% interest Interest of 20% on the unpaid amount of tax from the date computed until fully paid.
Comprehensive Problem (Adapted)

Mr. Antonio Gayab, Filipino residing in Cavite, died testate on August 11, 2015. You were appointed as the executor of the estate of Mr.
Gayab. His wife presented you the list of properties left by him in the Philippines.
Rice field(1,200 sq. m.) donated by his brother on June 15, 2013; FMV per tax declaration, P2,900,000; zonal value, P5,000 per sq. m.;
Car inherited from the father who died on August 1, 2012 , FMV, P900,000; Cost, P1,200,000;
Jewelries acquired before the marriage, FMV, P100,000;
Jewelries acquired during the marriage by the wife using cash inherited by her during the marriage, FMV, P2100,000;
Jewelries donated to Mrs.Gayab by her sister before marriage, FMV, 3100,000;
House and lot acquired during the marriage (family home), FMV, P5,500,000; assessed value, P4,400,000;
Household furniture acquired during the marriage, FMV, P500,000;
Household appliances acquired during the marriage, , FMV, P1,500,000;
Amount received by heirs (under R.A. 4917) from decedent’s employer, P2,000,000
Other personal properties including cash, FMV, P1,800,000.
The spouses also owned a real property in the USA with fair market value of P2,500,000. It was mortgaged by Mr. Gayab for P1,500,000
and paid P1,200,000 before he died. The estate of Mr. Gayab paid P500,000 estate tax to the USA Government.
Last year, the spouses also bought a Land in Japan at a cost of P 5,000,000. The estate of Mr Gayab paid an estate tax amounting to
P100,000.
The following were considered as deductions from the gross estate in the Philippines:
Actual funeral expenses (50% paid by relatives), P800,000;
Judicial expenses incurred up to January 31, 2016,P100,000;
Last quarter of 2015 unpaid realty tax on donated rice field, P50,000;
Jewelry acquired before marriage, lost on December 8, 2015 due to theft, P90,000;
Other claims against the conjugal properties, P500,000;
Claims against insolvent persons, P50,000;
Transfer to the Province of Cavite for public purpose, P300,000;
Unpaid medical expenses, P720,000.
During the time of donation his brother paid the donor’s tax based of a fair market value of P3,000,000. The estate of the decedent’s
father paid the estate tax on the car, based of its purchase price of P1,200,000. During the marriage, Mr. Gayab mortgaged the rice field
donated to him for P 900,000 for the benefit of the family. He paid P300,000 before he died.
Questions
1 – How much is the total taxable gross conjugal property?
2 – How much is the total exclusive property of the decedent?
3 - How much is the total allowable deductions from the gross estate
4 - How much is the total special deductions from the gross estate
5 - How much is the total allowable estate tax credit?
6 - How much is the taxable net estate and the tax payable?
7 - How much is the share of the surviving spouse?
Foreign Countries Philippines World

Exclusive Conjugal Total Exclusive Conjugal Total Total
Gross Estate* P7,500,000 P7,500,000.00 7,000,000.00 11,350,000 18,350,000.00 P25,850,000.00
Less: Ordinary Deductions** 300,000 300,000.00 2,417,005.79 1,450,000 3,867,005.79 4,167,005.79
Estate After Deduction P7,200,000 P7,200,000.00 P4,582,994.21 P9,900,000 14,482,994.20 21,682,994.20
Less: Special Deductions*** 290,135.40 3,209,864.60 3,500,000.00
Net estate P6,909,864.60 P11,273,129.60 18,182,994.20
Less: Share of Surviving Spouse 3,600,000.00 4,950,000.00 8,550,000.00
Taxable Net Estate P3,309,864.60 P6,023 ,129.60 9,632,994.20
Estate Tax Due 1,159,949.13
Less: Estate Tax Credit**** P220,810.30
Estate Tax Payable P939,138.83

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*Gross Estate
Property Exclusive Conjugal Total Exclusive Conjugal Total Total
Rice field donated by his brother 6,000,000 6,000,000
Car inherited from the father 900,000 900,000
Jewelries acquired before the 100,000 100,000
marriage
Jewelries acquired during the
marriage by the wife
Jewelries donated to Mrs. Gayab
House and lot acquired during the 5,500,000 5,500,000
marriage (family home)
Household furniture acquired during 500,000 500,000
the marriage
Household appliances acquired 1,500,000 1,500,000
during the marriage,
Amount received by heirs (under R.A. 2,000,000 2,000,000
4917)
Other personal properties 1,800,000 1,800,000
Claims against insolvent persons 50,000 50,000
Real property in the ,USA 2,500,000 2,500,000
Land in Japan 5,000,000 5,000,000
Total Gross Estate 7,500,000 7,500,000 7,000,000 11,350,000 18,350,000 25,850.000
**Ordinary Deductions
ELITE Exclusive Conjugal Total Exclusive Conjugal Total Total
Actual funeral expenses (400,000)
or (5% of 25,850,000) or
(200,000) 200,000.00 200,000.00 200,000.00
Judicial expenses incurred up to
January 31, 2016 100,000.00 100,000.00 100,000.00
Last quarter of 2015 unpaid realty
tax on donated rice field 50,000.00 50,000.00 50,000.00
Jewelry acquired before marriage,
lost on December 8, 2015 90,000.00 90,000.00 90,000.00
Other claims against the conjugal
properties 500,000.00 500,000.00 500,000.00
Claims against insolvent persons P50,000.00 P50,000.00 P50,000.00
Unpaid mortgage-Land in USA 300,000.00 300,000.00 300,000.00
-Rice field (mortgaged it for the
benefit of the family) 600,000.00 600,000.00 600,000.00
Total Elite 300,000.00 300,000.00 140,000.00 1,450,000.00 1,590,000.00 P1,890,000.00
Transfer for Public Purpose

Transfer to the Province of Cavite
for public purpose P300,000.00 P300,000.00 P300,000.00
Vanishing Deductions++
Rice field 1,647,504.83 1,647,504.83 1,647,504.83
Car 329,500.96 329,500.96 329,500.96
Total Ordinary Deductions 300,000.00 300,000.00 2,417,005.79 1,450,000.00 3,867,005.79 P4,167,007.74
++Vanishing Deductions
Rice field Car
Value to take*** 3,000,000 900,000
Less Mortgaged paid by the current decedent - -
Initial basis 3,000,000 900,000
Less: Proportional Deductions (3M/25.85M x 2.19M)* (900,000/25.85M x2.19M)* 254,158.61 76,247.58
Final Basis 2,745,841.39 823,752.42
Multiply by Rate of Vanishing Deduction 60% 40%
Vanishing Deduction 1,647,504.83 329,500.96

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*World ELITE+ World TPU (P1,890,000.00+ P300,000.00)=P2,190,000
Special Deductions***
Foreign
Countries Philippines Total
Family home P1,000,000.00 P1,000,000
Special Deduction (7.5M / 25.85M x1M) (18.35M / 25.85M x 1M) 290,135.40 709,864.60 1,000,000
Medical Expenses 500,000.00 500,000
Amount received by heirs (under R.A. 4917) (P2,000,000 / 2 since it is a conjugal gross estate) 1,000,000.00 1,000,000
Total 290,135.40 3,209,864.60 P3,500,000
Estate Tax Credit****

Limit A
Country Net Estate Actual Taxes Limit Allowed
Philippines P6,323,129.60
U.S.A. P1,003,288.20+++ P500,000 (P1,003,288.20/ P9,632,994.20) P1,159,949.13= P120,810.13 P120,810.13
Japan P2,306,576.40+++ P100,000 (P2,306,576.40/P9,632,994.20)P1,159,949.13=P277,744.51 P100,000.00
Total P9,632,994.20 P220,810.13
Limit B
Total Foreign Countries P3,309,864.60 P600,000 (P3,309,864.60/ P9,632,994.20)* P1,159,949.13=P398,554.64 P398,554.64
+++
Foreign Country Gross Estate Ordinary Deduction Special Deduction Share of the Surviving Taxable Net Estate
(a) (b) (c) Spouse (d) (a- b –c - d)
U.S.A. P2,500,000.00 P300,000.00 P 96,711.80 **P1,100,000.00 P1,003,288.20
Japan P5,000,000.00 P193.423.60 **P2,500,000.00 P2,306,576.40
Total P7,500,000.00 P300,000.00 290,135.40 P3,600,000.00 P3,309,864.60
*U.S.A. (P2.5M/P7.5M x P290,135.4)
**Japan (P5M/P7.5M x P290 135.4)

Philippine Accountancy Review For Excellence: A. Format of Computation (Bir Form 1801)

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Philippine Accountancy Review For Excellence: A. Format of Computation (Bir Form 1801)

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PHILIPPINE ACCOUNTANCY REVIEW FOR EXCELLENCE

RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST.

A. FORMAT OF COMPUTATION (BIR form 1801)

Tax due P xxx

B. ESTATE TAX RATES

C. COMPOSITION OF THE GROSS ESTATE OF A DECEDENT

1. Properties owned and possessed by the decedent

c. Rule of reciprocity (Non-resident Alien)*

3) Intangible properties considered situated in the Philippines

a) Franchise which must be exercised in the Philippines;

2. Properties transferred (Taxable Transfers)

c. Property Passing Under General Power of Appointment

d. Transfers of Insufficient Consideration

TAX 101 ESTATE TAX-ANS Page 2 of 17

2) The following are also not taxable:

b. Claims against insolvent persons

c. Amount received by heirs under R.A. No. 4917

TAX 101 ESTATE TAX-ANS Page 3 of 17

D. GROSS ESTATE OF MARRIED DECEDENTS

1. Properties included in the gross estate of the married decedent

2. Common types of property regimes:

3. In the absence of pre-nuptial agreement - (Date of Marriage):

4. Separate property of the Husband and Wife

5. Conjugal partnership of gains

6. Absolute community of properties

TAX 101 ESTATE TAX-ANS Page 4 of 17

E. EXCLUSIONS AND EXEMPTIONS FROM THE GROSS ESTATE

F. DETERMINATION OF THE VALUE OF THE ESTATE

a. Common (ordinary) share – book value per share of issuing corporation.

G. DEDUCTIONS FROM THE GROSS ESTATE:

TAX 101 ESTATE TAX-ANS Page 7 of 17

Claims against the estate or indebtedness in

e. If the claim was based on a debt

f. If a loan was incurred within 3 years

Taxes which have accrued as of the death of

2. Transfer for Public Use

TAX 101 ESTATE TAX-ANS Page 8 of 17

How much was the vanishing deduction?

TAX 101 ESTATE TAX-ANS Page 9 of 17

4. Amount Received by Heirs Under R.A. No. 4917

Gross Estate* P6,300,000.00

Properties Within Without World/Total

TAX 101 ESTATE TAX-ANS Page 11 of 17

*** Vanishing Deductions

K. DEDUCTIONS FROM THE EXCLUSIVE OR CONJUGAL/COMMUNAL RPOPERTY UNDER THE

L. NET DISTRIBUTABLE ESTATE

1. Net distributable estate vs Net taxable estate

Net distributable estate Net taxable estate

Variance between them can be traced to deductions which do not involve

TAX 101 ESTATE TAX-ANS Page 12 of 17

M. TAX CREDIT FOR ESTATE TAX PAID TO A FOREIGN COUNTRY

Only one foreign country is involved

Net Estate, foreign

Limit A- Per Foreign Country

TAX 101 ESTATE TAX-ANS Page 13 of 17

2. Estate Tax Returns

5. Civil Penalties and Interest

Comprehensive Problem (Adapted)

Foreign Countries Philippines World

TAX 101 ESTATE TAX-ANS Page 15 of 17

Transfer for Public Purpose

Total Ordinary Deductions 300,000.00 300,000.00 2,417,005.79 1,450,000.00 3,867,005.79 P4,167,007.74