Estate Taxation Introduction

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INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC

ALIMANNAO HILLS, PENABLANCA, CAGAYAN
ESTATE TAXATION
INTRODUCTION TO ESTATE TAX
A. Transfer Taxes - are taxes imposed upon the gratuitous disposition of private properties or
rights. Gratuitous transfer is one that neither imposes burden nor requires consideration from
transferee or recipient. The transfer of ownership is free because of the absence of financial
consideration.
B. Types of Transfer Taxes
1. Estate Tax – Tax imposed on gratuitous transfer or donation that takes effect at the time
of death of the donor (also known as “donation mortis causa”).
2. Donor’s Tax – Tax imposed on gratuitous transfer or donation that takes effect during the
lifetime of both the donor and the done (also known as “donation inter vivos”).
C. Nature of Estate Tax – It is a tax on the right to transfer property at death (succession)
and on certain transfers which are made by law the equivalent of testamentary disposition
and is measured by the value of the property.
• It is an excise tax, the object of which is the shifting of economic benefits and enjoyment
of property from the dead to the living.
• It accrues as of the death of the decedent, notwithstanding the postponement of the
actual possession or enjoyment of the estate by the beneficiary.
• The taxpayer in the estate taxation is the estate of the decedent represented by the
administrator, executor or legal heirs.
D. Concept of Succession - is a mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance, of a person are transmitted through
his death to another or others either by will or by operation of law (Art. 774, Civil Code of
the Philippines).
• Will- an act whereby a person is permitted with the formalities prescribed by law, to
control to a certain degree the disposition of his estate, to take effect after his death
(Art. 783, CCP) from the moment of the death of the decedent, the rights to the
succession are transmitted, and the possession of the hereditary property is deemed
transmitted to the heir (Art. 777, CCP).
• Kinds of Wills:
1. Notarial or Ordinary or Attested Will – is one which is executed in accordance with the
formalities prescribed by Art. 804 to 808 of the New Civil Code. It is a will that is
created for the testator by a third party, usually his lawyer, follows proper form, signed
and dated in front of the required number of witnesses (3 or more witnesses) and
acknowledged by the presence of a notary public.
2. Holographic Will–is a written will which must be entirely written, dated and signed by
the hand of the testator himself, without the necessity of any witness. This kind of will
does not need formalities because many people can recognize his handwriting and it
can be verified by a penmanship expert.
Codicil – a supplement or addition to a will, made after the execution of a will and
annexed to be taken as a part thereof, by which any disposition made in the original
will is explained, added to or altered.
Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

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E. Elements of Succession
a. Decedent - the person whose property is transmitted through succession, whether or
not he left a will (Art. 775, CCP).
b. Heir - the person called to the succession either by the provision of a will or by operation
of law (Art. 782, CCP).
c. Estate - refers to all the property, rights and obligations of a person which are not
extinguished by his death (Art. 776, CCP).
F. Kinds of Succession
1) Testamentary - succession which results from the designation of an heir, made in a will
executed in the form prescribed by law (Art. 779, CCP).
• While the decedent may dispose of his properties in a last will and testament, he must,
however, reserve compulsory or forced heirs.
• Kinds of successors in a testamentary succession
1. Legatee, an heir to a particular personal property given by virtue of a will.

2. Devisee, an heir to a particular real property given by virtue of a will.
• Executor is the person nominated by a testator to carry out the directions and request
in his will and to dispose of his property according to his testamentary provisions after
his death.
• Compulsory or Forced Heirs:
1. legitimate children and descendants
2. In default of the foregoing, legitimate parents or ascendants
3. Widow or widower; and
4. Illegitimate children
• Under testamentary succession, the mass of properties left by the decedent

may be classified into:
1. Legitime is the portion of the testator’s property which could not be disposed of
freely because the law has reserved it for the compulsory heirs. (Art. 886, CCP).
2. Free portion is that part of the whole estate which the testator could dispose of
freely through written will irrespective of his relationship to the recipient.
2) Legal or Intestate - transmission of properties where there is no will, or if there is a
will, the same is void or lost its validity, or nobody succeeds in the will.
In intestate succession, the entire estate of the decedent is distributed to the heirs. The
compulsory heirs in testamentary succession are also heirs in intestate succession.
However, intestate heirs include, brothers and sisters, collateral relatives within the fifth
civil degree, and the state.
• Administrator is a person appointed by the court, in accordance with the governing
statute, to administer and settle intestate estate and such testate estate as no
competent executor was designated by the testator.
3) Mixed - transmission of properties, which is effected partly by will and partly by operation
of law.

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G. FORMAT OF COMPUTATION
1) SINGLE DECEDENT
Gross Estate Pxxx

Ordinary Deductions (xxx)
Special Deductions (xxx)
Net Taxable Estate Pxxx
Multiply by: Estate Tax % 6%
Estate Tax Due Pxxx
Less: Tax Credit (xxx)
Estate Tax Payable Pxxx
2) MARRIED DECEDENT
Exclusive Common Total
Gross Estate Pxxx Pxxx Pxxx
Less: Ordinary (xxx) (xxx) (xxx)
Deductions
Pxxx Pxxx** Pxxx
Less: Share of
Surviving
Spouse (Net
Common
Estate**/2) (xxx)
Special (xxx)
Deductions
Net Taxable Pxxx

Estate
Multiply by: 6%
Estate Tax %
Estate Tax Due Pxxx
Less: Tax Credit (xxx)
Estate Tax Pxxx
Payable
GROSS ESTATE
A. Gross Estate Defined – consists of all properties and interests in properties of the decedent
at the time of his death as well as properties transferred during lifetime (only in form), but in
substance was only transferred at the time death.
B. Classification of Decedent
1) Citizen or Resident (RC/NRC/RA)

2) Non-resident Alien (NRA)
i. With reciprocity
ii. Without reciprocity
C. Reciprocity Clause – No tax shall be imposed with respect to intangible personal

properties of a NRA situated in the Philippines:
1) When the foreign country, where such NRA is a resident and citizen, does not impose
transfer tax with respect to intangible personal properties of Filipino citizens not residing
in that country; or

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2) When the foreign country imposes transfer taxes, but grants similar exemption with
respect to intangible personal properties of Filipino citizens not residing in that country.
D. Intangible Properties considered Located in the Philippines:
1) Franchise which must be exercised in the Philippines;
2) Shares, obligations or bonds issued by any corporation or sociedad anonima

organized or constituted in the Philippines;
3) Shares obligations or bonds issued by any foreign corporation, at least 85% of the
business of which is located in the Philippines;
4) Shares, obligations, or bonds issued by any foreign corporation if such shares,
obligations, or bonds have acquired a business situs (used in the furtherance of its
business in the Philippines) in the Philippines;
5) Shares or rights in partnership, business or industry established in the Philippines.
E. Components of the Gross Estate

1) Properties existing at the time of death such as:
a. Real Property
b. Tangible Personal Property
c. Intangible Personal Property
2) Decedent’s Interest – Refers to the extent of equity or ownership participation of the

decedent on any property physically existing and present in the gross estate, whether or
not in his possession, control or dominion. It also refers to the value of any interest in
property owned or possessed by the decedent at the time of his death (interest having
value or capable of being valued, transferred)
Example:
• Dividends declared before his death but received after death.
• Partnership profit which have accrued before his death
• Usufructuary rights, etc.
3) Properties transferred gratuitously during lifetime, but in substance, transferred upon

death: (CRRIG)
a. Transfer in contemplation of death – the thought of death must be the impelling cause of
the transfer.
EXCEPTION (NOT IN CONTEMPLATION OF DEATH):
2. To relieve the donor from the burden of management.
3. To save income or property taxes.
4. To settle family litigated and un-litigated disputes.
5. To provide independent income for dependents.
6. To see the children enjoy the property while the donor is still alive.
7. To protect the family from the hazards of business operations.
8. To reward services rendered.
b. Transfer with retention or reservation of certain right – allows the transferor to continue
enjoying, possessing or controlling the property (beneficial ownership) because only the
naked title has been transferred.
c. Revocable transfer – decedent transfers the enjoyment of his property to another, subject
to his right to revoke the transfer at will, with or without notifying the transferee, any time
before he dies.
d. Property passing under general power of appointment

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e. Transfers for insufficient consideration – sale of property below fair market value (FMV)
under the cases in letter a to d above.
v Amount included in gross estate:
FMV at the time of death PXXX

Less: Selling Price (XXX)
Included in Gross Estate PXXX
4) Proceeds from life insurance – the following are included in the gross estate:
a. Whether REVOCABLE or IRREVOCABLE, when the beneficiary is the:
i. Estate of the deceased
ii. His executor; or
iii. Administrator
b. When the beneficiary is a third person, only if REVOCABLE
F. Valuation of Gross Estate – the items comprising the gross estate shall be valued at the
time of death or date nearest such date.
1) Usufruct – based on latest Basic Mortality Table to be approved by the Secretary of
Finance, upon recommendation of the Insurance Commissioner.
2) Real Property – the higher amount between:
a. Fair Market Value
b. Zonal Value
3) Personal Properties – Fair market value
4) Shares of stock
a. Traded in the Local Stock Exchange (LSE) – mean between the highest and lowest
quotations, at a date nearest the date of death, if none is available at the date of
death itself (RR 2-2003/RR 12-2018).
b. Not traded in the local stock exchange:
i. Common (ordinary) shares – Book value
ii. Preferred (preference) shares – Par Value
c. Units of participation in any association, recreation or amusement club (such as golf,

polo, or similar clubs) – bid price nearest the date of death published in any newspaper
or publication of general circulation.
G. Exemptions and Exclusions from Gross Estate
1) Under Section 85 and 86, NIRC

a. Capital or exclusive property of the surviving spouse
b. Properties outside the Philippines of a non-resident alien decedent
c. Intangible personal property in the Philippines of a non-resident alien when the rule of
Reciprocity applies.
2) Under Section 87, NIRC
a. The merger of the usufruct (right to use) in the owner of the naked title (without right
to use).
b. The transmission or delivery of the inheritance or legacy of the fiduciary heir or legatee
to the fideicommissary.
c. The transmission from the first heir, legatee or donee in favor of another beneficiary, in
accordance with the will of the predecessor.

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d. All bequests, devices, legacies or transfers to social welfare, cultural and charitable
institutions, provided:
• No part of the net income of said institutions inure to the benefit of any individual;
• Not more than 30% of such transfers shall be used for administration purposes.
3) Under Special Laws
a. Proceeds of life insurance and benefits received by members of the GSIS (RA728).
b. Benefits received by members from the SSS by reason of death (RA1792).
c. Amounts received from Philippine and United States governments for war damages.
d. Amounts received from United States Veterans Administration.
e. Benefits received from the Philippines and US government for damages suffered during
World War II (RA227).
f. Retirement benefits of officials/employees of a private firm (RA4917).
g. Payments from the Philippines of US government to the legal heirs of deceased of World
War II
Veterans and deceased civilian for supplies/services furnished to the US and Philippine
Army (RA136).
h. Personal Equity and Retirement Account (PERA) asset of the decedent-contributor
(Section 14, RA 9505)
GROSS ESTATE BASED ON CITIZENSHIP & RESIDENCE

REAL PROPERTY TANGIBLE INTANGIBLE
DECEDENT PERSONAL PERSONAL
PROPERTY PROPERTY
WITHIN WITHOUT WITHIN WITHOUT WITHIN WITHOUT
CITIZEN OR √ √ √ √ √ √
RESIDENT
NRA √ X √ X √ X
WITHOUT
RECIPROCITY
NRA WIT √ X √ X X X
RECIPROCITY
PROPERTY RELATIONSHIP BETWEEN SPOUSES
A. COMPONENTS OF GROSS ESTATE OF A MARRIED DECEDENT
Exclusive Properties of the Decedent Pxxx

Add: Common Properties (100%) xxx
Gross Estate Pxxx
NOTE: Exclusive properties of the surviving spouse are excluded in computing gross estate.
B. PROPERTY RELATIONSHIP BETWEEN SPOUSES
1) Conjugal Partnership of Gains (CPG)
>Exclusive Properties:
a. That which is brought to the marriage as his or her own;
b. That which each acquires during marriage by gratuitous title;
c. That which is acquired by right of redemption, by barter or by exchange with property

belonging to any one of the spouses; and
d. That which is purchased with exclusive money of the wife or of the husband.

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>Conjugal Properties:
a. Those acquired by onerous title during marriage at the expense of the common fund,
whether the acquisition be for the partnership, or for only one of the spouses;
b. Those obtained from labor, industry, work or profession of either or both spouses;
c. The fruits, natural or industrial, or civil, due or received during marriage from common
property, as well as the net fruits from the exclusive property of each 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. Those acquired through occupation such as fishing or hunting;
f. Livestock existing upon dissolution of the partnership in excess of the number of each
kind brought to the marriage by either spouse; and
g. Those acquired by chance, such as winnings from gambling or betting. However, losses
therefrom shall be borne exclusively by the loser-spouse.
2. Absolute Community of Property (ACP)

>Community Properties:
a. All properties owned by the spouses at the time of celebration of the marriage; or
b. That which each acquires during marriage by gratuitous title;
>Exclusive Properties:
a. Property acquired during marriage by gratuitous title by spouse, and the fruits as well as the
income thereof.
EXCEPTION: unless it is expressly provided by the donor, testator or grantor that they shall
form part of the community property.
b. Property for personal and exclusive use of either spouse.
EXCEPTION: jewelry shall form part of the community property.
c. Property acquired before the marriage by either spouse who has legitimate descendants by
the former marriage, and the fruits as well as the income, if any of such property.
C. Similarities between CPOG and ACOP
PROPERTY CPG ACOP

Property inherited or received as Exclusive Exclusive
donation during marriage
Property acquired during marriage Conjugal Community

(other than inheritance or donation)
Property acquired from labor, Conjugal Community

industry, work or profession of
spouses
Fruits or income due or derived Conjugal Community

during the marriage coming from
common property

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D. Difference between CPOG and ACOP
PROPERTY CPG ACOP
Property before marriage or Exclusive Community

brought to the marriage
Fruits or income due or derived Conjugal Exclusive
during the marriage coming from
exclusive property
E.RULES IN DETERMINING THE PROPERTY RELATIONSHIP
The system of property relationships applicable only to married persons. It is used

to distinguish a conjugal or community property from an exclusive property. Under article 74of
the New Family Code (as amended) the property relationship between husband and wife shall be
governed in the ff order:
1) By marriage settlements executed before the marriage
2) By provision
3) By local custom
TYPES OF PROPERTY RELATIONS (ARTICLE 75 NFC)
The future spouses may, in the marriage settlements, agree upon the following systems of
property relationship:
1) Absolute community of property
2) Conjugal partnership of gains
3) Complete separation of property
4) Any other regime
If NO agreement on marriage settlement
Date of marriage Regime
Before August 3, 1988 CPG
On or after August 3, 1988 ACOP
DEDUCTIONS
I. ALLOWABLE DEDUCTIONS DEFINED

❖ Deductions are items which the law on estate tax allows to be subtracted from the value
of the gross estate in order to arrive at the net taxable estate.
❖ As a rule, deductions from the gross estate are presumed to be common deduction unless
specifically identified as exclusive.
II. CLASSIFICATION OF DEDUCTIONS
1) Ordinary deductions- classified as exclusive or common
a) LOSSESS, INDEBTEDNESS, TAXES
❖ Casualty losses
Requisities, Incurred during settlement of the estate; arising from fires, storms,
shipwreck or other casualties, or from robbery, theft, or embezzlement; not
compensated by insurance, not claimed as deduction for income tax purposes;
incurred not later than the last day for the payment of estate tax
❖ Claims against insolvent person
Requisites, value of the claims is included inthegross estate and the insolvency of
the debtor must be established.
❖ Claims against the estate

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Requisites, Personal debt of the decedent existing at the time of his death,
Contracted in good faith; Must be valid in law and enforceable in court; Must not
have been condoned by the creditors; Must not have prescribed; Debt instrument
must be notarized; Debt instrument must be notarized; If the loan was contracted
3 years before death submit statement showing the disposition of the proceeds.
❖ Unpaid Mortgage
Requisites, The fair market value of the mortgaged property undiminished by the
mortgage indebtedness ; Contracted in good faith; For an adequate and full
consideration.
❖ Unpaid Taxes
Requisites, the tax must have accrued before the death of the decedent.
The following are not deductible: Any income tax upon income received after
death, Property taxes not accrued before death, Estate tax from the transmission
of his estate.
b) TRANSFER FOR PUBLIC USE

Requisites,
• Given to the Government of the Philippines;
• Must be testamentary in character or By way of donation mortis causa executed
by the decedent before his death;
• Exclusively for public purpose.
c) PROPERTY PREVIOUSLY TAXED/VANISHING DEDUCTION

Requisites,
• The decedent died within 5 years from receipt of the property from a prior
decedent or donor;
• The property on which the vanishing deduction is being claimed is located in
the Philippines.
• The property must have formed part of the taxable estate of the prior decedent
or the IV. taxable gift of the donor and the transfer tax relative thereto had
been paid;
• The property on which vanishing deduction is being taken must be identified
as the one received from the prior decedent, or from the donor, or
something acquired in exchange therefore;
• No vanishing deduction on the property was allowable to the estate of the
prior decedent.
> Amount deductible:
PROFORMA INTERVAL RATE

COMPUTATION within1 year 100%
Initial Value Pxxx
Less: Mortgage paid by present More than 2 years but not 80%
decedent (xxx) more than 3 years
More than 3 years but not 60%
Initial Basis (IB) Pxxx
more than 4 years
Less: Proportional Deduction
[(IB/GE) x (LIT+TPU)] (xxx) More than 4 years but not 40%
Final Basis Pxxx more than 5 years
Rate % More than 5 years 20%
Vanishing
Deduction Pxxx

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CLASSIFICATION OF COMMON OR EXCLUSIVE

ORDINARY DEDUCTIONS
FOR MARRIED DECEDENT
Claims Against insolvent C/E

person
Claims against estate C/E
Unpaid mortgage C/E
Unpaid taxes C/E
Transferfor public use E
Vanishing deductions UNDER CPG- EXCLUSIVE
UNDER ACP- EXCLUSIVE OR
COMMON
2) SPECIAL DEDUCTIONS
a. Standard Deduction – the amount deductible without any required

substantiation is:
i. Decedent is a citizen or resident = P5,000,000
ii. Decedent is NRA = P500,000
b. Family Home Allowance
❖ Allowed only to citizen and resident decedents
❖ Requisites:
a. The decedent is married or head of a family;
b. 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 Brgy. Captain of the locality the family home is
situated;
c. It is located in the Philippines;
d. The value of the family home is included in the gross estate; and
e. Must not exceed the limit set by law.
❖ Amount Deductible:
a. Actual Interest vs. whichever
b. Limit is lower
LIMIT = P10,000,000
Rule in Determining Actual Interest

Exclusive Property 100%
Common Property 50%
3) Amount Received by heirs under R.A. 4917 Requisite – Include such amount in the
gross estate.
>Amount Deductible – amount received by the heirs from the decedent’s employer as a
consequence of the death of the decedent-employee
❖ Allowed only to citizen and resident decedents

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4) SHARE OF THE SURVIVING SPOUSE – applicable only to married decedents.
>Amount Deductible:
Common Properties Pxxx

Common Deductions (xxx)
Net Common Properties Pxxx
5
0
Multiply by: %
50%
Share of the Surviving Spouse Pxxx
SUMMARY RULES ON DEDUCTIBILITY BASED ON RESIDENCE AND/OR CITIZENSHIP
Decedent is Nonresident
Decedent is Resident Alien
Items of Deduction or Citizen
LIT (Losses, Indebtedness
1. and Deductible Phil. GE x LIT WORLD
Taxes) Total GE
2. Vanishing Deduction Deductible Deductible
3. Transfer for Public Purpose Deductible Deductible
5. RA 4917 Deductible Non-Deductible
6. Share of the Surviving Spouse Deductible Deductible
7. Family Home Deductible Non-Deductible
8. Standard Deduction Deductible (5M) Deductible (500,000)
RATES OF ESTATE TAX
❖ If decedent died on or after Jan. 1, 2018, estate tax due is equivalent to 6% of

Taxable Net Estate.
TAX CREDIT FOR ESTATE TAX PAID TO A FOREIGN

COUNTRY
I. Who can claim?

Only resident or citizens can claim tax credit.
II. Amount Deductible:
a. Actual estate tax paid abroad

whichever is
b. Limit lower
III. Limit:
a. Only one foreign country is involved
Net Estate,
foreign
X Philippine Estate Tax

World Net Estate

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b. Two or more foreign countries are involved (whichever is lower of the

following):
Limit A – Per Foreign Country
Net Estate, per foreign Philippine Estate

X Tax
World Net Estate
Limit B – By Total
Net Estate, all foreign
countries Philippine
X
World Net Estate Estate Tax
COMPLIANCE REQUIREMENTS
ESTATE TAX RETURN
I. When is it required?
1. In all cases of transfer subject to estate tax;
2. Regardless of the amount of the gross estate, where it consists of registered or
registrable property.
II. Who shall file?

1. Executor
2. Administrator
3. Any of the legal heirs
III. When is the deadline?

❖ Within one year after death. Can be extended not exceeding 30 days if authorized by
the BIR Commissioner.
IV. When shall certification by a Certified Public Accountant (CPA) needed?

❖ It shall be supported with a statement duly certified to by a CPA when the estate tax
return shows a gross value exceeding P5,000,000.
V. Place of filing the return:
a. In case of a resident decedent:
In case of a resident decedent, the administrator or executor shall register the estate
of the decedent and secure a new TIN therefor from the Revenue District Office where
the decedent was domiciled at the time of his death.
b. In case of a 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 (if executor or administrator is not registered)
c. Office of the BIR Commissioner (RDO No. 39
– South Quezon City) if the estate does not have an executor or administrator in the
Philippines.
The foregoing provision, not withstanding, the Commissioner of Internal Revenue may
continue to exercise his power to allow a different venue/place in the filing of tax returns.

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VI. Payment of Estate Tax

❖ Estate tax shall be paid at the time the return is filed (Pay as you file)
❖ Allowed extension:
a. 5 years if settled judicially
b. 2 years if settled extra-judicially
❖ Place of payment:
a. Authorized agent bank;
b. Revenue District Officer;
c. Collection Officer; or
d. Duly authorized Treasurer of the city or municipality in which the decedent was
domiciled at the time of his death.
VII. Payment of the estate tax by installment and partial disposition of estate.
In case of insufficiency of cash for the immediate payment of the total estate tax due, the
estate may be allowed to pay the estate tax due through the following options, including
the corresponding terms and conditions:
1) Cash installment
• The cash installments shall be made within two (2) years from the date of filing of the
estate tax return;
• The estate tax return shall be filed within one
• year from the date of decedent’s death;
• The frequency (i.e., monthly, quarterly, semi-annually or annually), deadline and amount
of each installment shall be indicated in the estate tax return, subject to the prior approval
by the BIR;
• In case of lapse of two years without the payment of the entire tax due, the remaining
balance thereof shall be and demandable subject to the applicable penalties and
• interest reckoned from the prescribed deadline for filing the return and payment of the
estate tax; and
• No civil penalties or interest may be imposed on estates permitted to pay the estate tax
due by installment. Nothing in this provision, however, prevents the Commissioner from
executing enforcement action against the estate after the due date of estate tax.
1) Partial disposition of estate and application of its proceeds to the estate tax due
• The disposition , for purposes of this option, shall refer to the conveyance of property,
whether real, ` personal or intangible property, with the equivalent cash
consideration;
• The estate tax return shall be filed within one year from the date of decedent’s death;
• The written request for the partial disposition of the estate shall be approved by the BIR.
The said request shall be filed, together with a notarized undertaking that the proceeds
thereof shall be exclusively used for the payment of the total estate tax due;
• The computed estate tax due shall be allocated in proportion to the value of each property;
• The estate shall pay to the BIR the proportionate estate tax due of the property intended
to be ` disposed of.
• An electronic Certificate Authorizing Registration (eCAR) shall be issued upon presentation
of the proof of payment of the proportionate estate tax due of the property intended to
be disposed. Accordingly, eCARs shall be issued as many as there are properties intended
to be disposed to cover the total estate tax due, net of the proportionate estate tax(es)
previously paid under this option; and
• In case of failure to pay the total estate due out from the proceeds of the said disposition,
the estate tax due shall be immediately due and demandable subject to the applicable
penalties and interest reckoned from the prescribed deadline for filing the return and
payment of the estate tax, without prejudice of withholding the issuance of eCAR(s) on

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the remaining properties until the payment of the remaining balance of the estate tax due,
including penalties and interest.
VIII. Request for Extension of Time, Installment Payment and Partial Disposition of
Estate.
The request for extension of time to file the return, extension of time to pay estate tax
and payment by installment shall be filed with the Revenue District Officer (RDO) where
the estate is required to secure its TIN and file the estate tax return. This request shall be
approved by the Commissioner or his duly authorized representative.
A. Duties of Certain Officers and Persons
• No judge shall authorize the executor or judicial administrator to deliver a distributive

share to any party interested in the estate, unless a certification from the Bureau of
Internal Revenue (BIR) that the estate tax has been paid is shown.
• Register of Deeds shall not register in the registry of property any transfer of real property
or real rights therein, or any mortgage, by way of donation mortis causa or inheritance,
without a certification from the BIR of payment of estate tax, and they shall immediately
notify the BIR of non-payment of tax discovered by them.
• Any lawyer, notary public or any government officer who, by reason of his official duties,
intervenes in the preparation or acknowledgment of documents regarding partition or
disposal of donations inter vivos or mortis causa, legacy or inheritance shall furnish the
BIR with copies of such documents and any information whatsoever which may facilitate
the collection of the estate tax.
• There shall not be transferred to any new owner in the books of any corporation, sociedad
anonima, partnership, business, or industry organized or established in the Philippines any
share, obligation, bond or right by way of gift inter-vivos or mortis causa, legacy or
inheritance, unless an eCAR is issued by the Commissioner or his duly authorize
representative.
• If bank has knowledge of the death of a person who maintained a bank account alone, or
jointly with another, it shall allow the withdrawal from said deposit account, subject to a
final withholding tax of 6% of the amount to be withdraw, provided, that the withdrawal
shall only be made within one year from the date of said decedent.
• In all cases, the final tax withheld shall not be refunded, or credited on the tax due,
on the net taxable estate of the decedent.
• In instances where the deposit accounts have been duly included in the gross estate
of the decedent and the estate tax due thereon paid, the executor, administrator, or
any of the legal heirs shall present the eCAR issued for the said estate prior to
withdrawing from the bank deposit account. Such withdrawal shall no longer be
subject to the withholding tax imposed under this section.
MULTIPLE CHOICE QUESTIONS
1. Which of the following statements is false? Transfer tax is

a. Imposed upon gratuitous transfer of property
b. Of two kinds: estate tax and donors’ tax
c. Classified as national tax
d. None of the above

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2. The object of estate tax is:

a. Right to transmit c. Properties of the decedent
b. Decedent d. Beneficiaries
3. It is a mode of acquisition by virtue of which, the property,

rights and obligations, to the extent of the value of the inheritance, of a person are transmitted
through his death to another either by his will or by operation of law.
a. Succession c. Prescription
b. Donation d. Exchanges
4. Which of the following could legally effect transfer of properties through succession?
I. By virtue of a will
II. By operations of law
III. By onerous transfer
a. I only c. I and III only

b. I and II only d. I, II and III
5. An act whereby a person is permitted, with the formalities prescribed by law, to control to a
certain degree the disposition of his estate, to take effect after his death.
a. Contract c. Will
b. Trust d. Legacy
6. The following are the elements of succession, except:

a. Decedent c. Heir
b. Estate d. Executor
7. Succession which results from the designation of an heir, made in a will executed in the form
prescribed by law is known as:
a. Legal or intestate succession
b. Testamentary succession
c. Mixed succession
d. Ordinary succession.
8. The portion of the decedent’s estate which the law reserves to his compulsory heir is called:
a. Legitime c. Legacy
b. Free portion d. Bequest
9. Which of the following is a valid will?

a. That which reduces the legitime of compulsory heirs.
b. That which increase the share of one heir without impairing the legitime of the other
heirs.
c. That which transfer the legitime of one heir to the other heir.
d. That which impair the legitime of compulsory heirs.
10. A person who inherits specific personal property thru a will:

a. Devisee c. Heir
b. Legatee d. Successor
11. A person who inherits specific real property thru a will:

a. Devisee c. Heir
b. Legatee d. Successor
12. Estate tax is

a. A property tax because it is imposed on the property transmitted by the decedent to
his heirs.
b. An indirect tax because the burden of paying the tax is shifted on the executor or any of
the heirs of the decedent

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c. An excise tax because the object of which is the shifting of economic benefits and
enjoyment of property from the dead to the living
d. A poll tax because it is also imposed on residents of the Philippines whether Filipino
citizens or not
13. Estate tax accrues from:
a. The moment of death of the decedent
b. The moment the notice of death is filed
c. The moment the estate tax return is filed
d. The moment the properties are delivered to the heirs
14. The taxpayer in estate tax is:
a. The decedent c. The heirs or successors
b. The estate as a juridical entity d. The administrator or executor
15. Who has the personal liability to pay estate tax?

a. The decedent c. The heirs or successors
b. The estate as a juridical entity d. The administrator or executor
16. One of the following is subject to estate tax on properties situated within the Philippines only
a. resident citizen c. nonresident citizen
b. resident alien d. nonresident alien
17. The personal properties of a non-resident, not citizen of the Philippines, would not be included
in the gross estate if:
a. The intangible personal property is in the Philippines
b. The intangible personal property is in the Philippines and the reciprocity clause of the
estate tax law applies
c. The tangible personal property is in the Philippines
d. The personal property is shares of stock of a domestic corporation 80% of whose
business is in the Philippines.
18. All of the following are considered intangible in the Philippines, except:
a. Franchise which must be exercised in the Philippines
b. Shares, obligations or bonds issued by any corporation or sociedad anonima organized
or constituted in the Philippines in accordance with its laws
c. Shares, obligations or bonds by any foreign corporation 75% of the business of which is
located in the Philippines
d. Shares, obligations of bonds issued by any foreign corporation if such shares,
obligations or bonds have acquired a business situs in the Philippines;
19. Lina Lamay, Filipina, died in Syria leaving the following properties:
House and Lot in Syria 1,000,000
Vacant Lot in Manila 2,000,000
Shares of stock in a domestic corp., 100,000
60% of the business is located in the
Philippines
Shares of stock in a foreign corp.,
70% 200,000
of the business is located in the
Philippines
Car in Manila 500,000
How much is the gross
estate?
a. P3,800,000 c. P2,500,000
b. P2,600,000 d. P2,000,000

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20. Based on the preceding number, but assuming the decedent is a non-resident alien, the
gross estate is:
a. P3,800,000 c. P2,500,000
b. P2,600,000 d. P2,000,000
21. Continuing the preceding number and assuming the rule on reciprocity applies, the gross
estate is:
a. P3,800,000 c. P2,500,000
b. P2,600,000 d. P2,000,000
22. Part of the estate left by A are preference shares of MERALCO. The shares are listed and
traded in the Philippine Stock Exchange. Which of the following rules of valuation is correct?
a. The preference shares will be valued using the arithmetic mean between the highest
and lowest quotation at the date nearest the date of death, if none is available on the
date of death itself.
b. The preference shares will be valued based on their fair market value as determined by
the Commissioner of Internal Revenue
c. The preference shares will be valued based on their par value.
d. The preference shares will be valued based on their fair market value as determined by
the Commissioner of Internal Revenue
23. Binat died on April 13, 2018, leaving the following properties:
Common stocks of Sunchamp Corporation (2,000 shares) - listed in the Philippine Stock
Exchange (highest - P40; lowest - P39).
Common stocks of AgriNurture Corporation (1,500 shares) - not listed in the stock exchange.
Cost - P50 per share; book value - P45 per share.
Preferred stocks of Greenergy Inc. (3,000 shares) – not listed in the stock exchange. Cost -
P70 per share; book value - P60 per share; par value – P50 per share
Car (cost - P600,000; book value - P350,000; market value - P400,000)
Real properties (zonal value - P120,000; assessed value - P72,000)
The gross estate of Binat is –
a. P817,500 c. P824,000
b. P816,500 d. P846,500
24. One of the following donations is not included as part of gross estate
a. Revocable transfers
b. Transfers with reservation of certain rights
c. Transfers under special power of appointment
d. Transfers in contemplation of death
25. Statement 1: Aguinaldo devised in his will a piece of land; naked title to Bonifacio and usufruct
to Rizal for as long as Rizal lives, thereafter to Bonifacio. The transmission from Aguinaldo to
Bonifacio and Rizal is subject to estate tax but the merger of the usufruct and the naked title
to Bonifacio upon the death of Rizal is exempt.
Statement 2: Erap devised in his will real property to his brother Alfredo who is entrusted
with the obligation to preserve and transmit the property to Isko, son of Alfredo, when Isko
becomes of age. The transmission from Alfredo to his son Isko is subject to tax.
a. Only statement 1 is correct c. Both statements are correct
b. Only statement 2 is correct d. Both statements are incorrect
26. Pedro, decedent, owns a property valued at P1,500,000 at the time of his death. The said
property was sold by Pedro during his lifetime to Juan for P700,000 when its

Page 17 of 21
value was P1,200,000. It was agreed by Pedro and Juan that the former will enjoy the income
of the property as long as he lives. For Philippine estate tax purposes, how much will be
included in determining gross estate?
a. P500,000 c. P800,000
b. P1,200,000 d. P0
27. Based on the preceding number, if the fair market value of the property at the time of death
is only P600,000, how much will form part of gross estate?
a. P500,000 c. P800,000
b. P1,200,000 d. P0
28. Vlad died on October 20, 2018. During his lifetime, upon knowing that he had Stage 4 cancer,
sold his Lamborghini car to his son for P4,000,000. The fair market value of the car at the
time of sale is P3,000,000 while it is already valued at P5,000,000 at the time of death. The
amount that will be added to gross estate is:
a. P1,000,000 c. P2,000,000
b. P5,000,000 d. nil
29. Based on the preceding number, if the consideration is fictitious, how much will form part of
gross estate?
a. P1,000,000 c. P2,000,000
b. P5,000,000 d. nil
30. Which of the following life insurance proceeds shall not be included in the computation of
gross estate?
a. Beneficiary is the estate, executor or administrator and the designation of the
beneficiary is revocable;
b. Beneficiary is the estate, executor or administrator and the designation of the beneficiary
is irrevocable;
c. Beneficiary is other than the estate, executor or administrator and the designation of the
beneficiary is revocable;
d. Beneficiary is other than the estate, executor or administrator and the designation of the
beneficiary is irrevocable.
31. The list provided below is not included in the gross estate of a decedent, except:
a. Share in common properties of the surviving spouse;
b. Exclusive property of the surviving spouse;
c. Properties outside the Philippines of a non-resident alien decedent;
d. Intangible personal property in the Philippines of a non-resident alien when the rule of
Reciprocity applies.
32. Statement 1: In the absence of marriage settlements executed before the marriage, the
property relationship between husband and wife shall be governed by local custom and by
the provisions of law, respectively.
Statement 2: Claims against insolvent persons may be charged against exclusive property
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
33. One of the following is a conjugal property of the spouses

a. That which is brought to the marriage as his or her own.
b. That which each acquires during the marriage by inheritance.
c. The fruits of an exclusive property.
d. That which is purchased with the exclusive property of the wife.
34. One of the following is not a community property of the spouses
a. Property inherited by the husband before marriage

Page 18 of 21
b. Winnings from gambling

c. Fruits of property inherited during the marriage
d. Fruits of property inherited before the marriage
Use the following data for the next two questions:

Pedro, married to Susan, died leaving the following:
Car acquired before marriage by Pedro P300,000
Car acquired before marriage by Susan 450,000

House and lot acquired during
marriage 1,500,000
Jewelries of Susan 100,000

Personal properties inherited by Pedro 250,000
during marriage
Land inherited by Susan during
marriage 1,000,000
Rental income on land inherited by 200,000
Susan (25% of which was earned after
Pedro’s death)
Benefits from SSS 350,000
Retirement benefits 480,000

Proceeds of group insurance taken by 175,000
Juan’s employer
35. How much is the correct gross estate if the property relationship is conjugal partnership of
gains?
a. P1,950,000 c. P2,600,000
b. P2,200,000 d. P3,600,000
36. How much is the correct gross estate if the property relationship is absolute community of
property?
a. P1,950,000 c. P2,600,000
b. P2,200,000 d. P3,600,000
37. All of the following, except one, are not deductible from the gross estate of a non-resident
alien:
e. Casualty losses
f. Death benefits under RA 4917
g. Family home allowance
h. Standard deduction
38. One of the following cannot be claimed as deduction from the gross estate of a non-resident
alien decedent:
a. Vanishing deduction
b. Family home allowance
c. Share of surviving spouse
d. Transfer for public use
39. In computing the estate tax, which of the following shall not be allowed to claim tax credit
for taxes paid abroad?
a. Resident alien decedent
b. Non-resident alien decedent

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c. Resident citizen decedent

d. Non-resident citizen decedent
40. Jiraiya, non-resident Japanese, died on May 1, 2018

leaving the following:
Exclusive properties, Philippines P5,600,000
Allowable Deductions 6,400,000 2,200,000

(excluding standard
deduction)
Estate tax paid - 150,000
How much is the estate tax payable in the Philippines assuming the decedent is a non-
resident citizen?
a. P168,000 c. P150,000
b. P132,000 d. P300,000
41. How much is the estate tax payable in the Philippines assuming the decedent is a non-
resident alien?
a. P168,000 c. P150,000
b. P438,000 d. P300,000
42. Lola Trining died in 2019 leaving a gross estate amounting to P150,000 only. No estate tax is
due based on the tax code. The gross estate is composed of a second hand car worth P80,000,
shares of stocks valued at P50,000 and P20,000 time deposit. The administrator believes that
only notice of death should be filed since the value of the gross estate is exempt from tax.
What will you tell him?
a. Notice of death and estate tax return have to be filed because the gross estate exceeds
P20,000 and when the gross estate consists of registered or registrable properties, estate
tax is required to be filed regardless of the value of the gross estate.
b. Only notice of death is required to be filed because the gross estate exceeds P20,000.
Estate tax return is required to be filed only when the gross estate exceeds P200,000
and/or there is estate tax due.
c. Neither notice of death nor estate tax return need to be filed in this particular case.
d. Only estate tax return has to be file

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HQ 2

Page 21 of 21

Estate Taxation Introduction

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Estate Taxation Introduction

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HQ 1

INTERNATIONAL SCHOOL OF ASIA AND THE PACIFIC

INTRODUCTION TO ESTATE TAX

Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

• Kinds of successors in a testamentary succession

1. Legatee, an heir to a particular personal property given by virtue of a will.

• Under testamentary succession, the mass of properties left by the decedent

Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

Gross Estate Pxxx

Net Taxable Pxxx

1) Citizen or Resident (RC/NRC/RA)

C. Reciprocity Clause – No tax shall be imposed with respect to intangible personal

Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

1) Franchise which must be exercised in the Philippines;

2) Shares, obligations or bonds issued by any corporation or sociedad anonima

E. Components of the Gross Estate

2) Decedent’s Interest – Refers to the extent of equity or ownership participation of the

3) Properties transferred gratuitously during lifetime, but in substance, transferred upon

Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

FMV at the time of death PXXX

b. When the beneficiary is a third person, only if REVOCABLE

3) Personal Properties – Fair market value

c. Units of participation in any association, recreation or amusement club (such as golf,

1) Under Section 85 and 86, NIRC

2) Under Section 87, NIRC

Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

GROSS ESTATE BASED ON CITIZENSHIP & RESIDENCE

PROPERTY RELATIONSHIP BETWEEN SPOUSES

A. COMPONENTS OF GROSS ESTATE OF A MARRIED DECEDENT

Exclusive Properties of the Decedent Pxxx

1) Conjugal Partnership of Gains (CPG)

c. That which is acquired by right of redemption, by barter or by exchange with property

Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

e. Those acquired through occupation such as fishing or hunting;

2. Absolute Community of Property (ACP)

C. Similarities between CPOG and ACOP

PROPERTY CPG ACOP

Property acquired during marriage Conjugal Community

Property acquired from labor, Conjugal Community

Fruits or income due or derived Conjugal Community

Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

D. Difference between CPOG and ACOP

PROPERTY CPG ACOP

Property before marriage or Exclusive Community

E.RULES IN DETERMINING THE PROPERTY RELATIONSHIP

The system of property relationships applicable only to married persons. It is used

I. ALLOWABLE DEDUCTIONS DEFINED

1) Ordinary deductions- classified as exclusive or common

a) LOSSESS, INDEBTEDNESS, TAXES

❖ Claims against insolvent person

❖ Claims against the estate

Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

b) TRANSFER FOR PUBLIC USE

c) PROPERTY PREVIOUSLY TAXED/VANISHING DEDUCTION

> Amount deductible:

PROFORMA INTERVAL RATE

Knowledge Engineer: Mark John D. Gonzales,CPA,CTT,MPBM INTEGRATED TAXATION

CLASSIFICATION OF COMMON OR EXCLUSIVE

Claims Against insolvent C/E

a. Standard Deduction – the amount deductible without any required

b. Family Home Allowance

❖ Allowed only to citizen and resident decedents