Professional Documents
Culture Documents
ESTATE TAX
A. Estate Tax Return
Estate Tax Return BIR Form No. 1801
B. Effectivity of Transfer
Effectivity of transfer After death of transferor (Mortis causa)
E. DEDUCTIONS ALLOWED
Deductions allowed Ordinary deductions
1. LITE*
a. Losses*
b. Indebtedness (Claims against the estate) *
c. Taxes*
d. Claims against insolvent debtor*
e. Unpaid mortgage*
2. Vanishing deduction
3. Transfer for public use
Special deductions
1. Family home
2. Standard deduction
3. Amount received under RA 4917
Other deduction
1. Share in the conjugal property
F. Administrative Provisions
1. Notice required Notice of Death Under TRAIN (effective January 1, 2018) – No longer required
c. Exercise: Resident alien decedent was married at the time of death. He was survived by his wife and children. Determine the taxable
gross estate (FMV at the time of death).
EXCL- CONJ- EXCL- COMM-
FMV CPOG CPOG ACOP ACOP
Cash in a Philippine bank owned by the decedent before the marriage P5,000,000
Real property, USA, inherited by the decedent during the marriage 6,000,000
Personal property, Philippines received by the wife as gift before the 400,000
marriage
Property, Philippines acquired by decedent with cash owned before the marriage 600,000
Personal effects, Philippines, of the decedent purchased with the exclusive
money of the wife 500,000
Jewelry, USA, purchased with cash of the surviving spouse earned before 1,000,000
marriage
Property, Philippines, unidentified when and by whom acquired 1,200,000
Cash representing income received during the marriage from exclusive property, 2,000,000
Philippines
Property, Philippines, acquired before marriage by the decedent who has
legitimate descendants by a former marriage 3,000,000
Share in Philippine partnership profits that accrued prior to the death of the
decedent-partner but received after his death (investment from exclusive
property of the decedent) 500,000
Dividends declared after the death of the decedent-stockholder and paid by
corporation 3 months after his death (investment from exclusive property of
the decedent) 300,000
Total
J. Exercises
4. Exercise: A decedent has the following properties. Check the appropriate box if included in the gross estate
Resident NRA-No NRA-With
decedent Reciprocity Reciprocity
House and lot, USA
Condominium unit, Philippines
Furniture and appliances, Philippines
Car, USA, recently purchased
Bonds, Philippines
Common shares of stock not traded in the local stock exchange, Philippine Corporation
Preferred shares of stock, foreign corporation, 85% of the business in the Philippines
Proceeds of life insurance, Philippines (administrator of the estate is irrevocable beneficiary)
L. TAXABLE TRANSFERS
1. Examples of taxable a. Transfer in contemplation of death – motivated by thought of death although death may not be
transfer imminent;
b. Revocable transfer – the enjoyment of the property may be altered, amended, revoked or terminated
by the decedent;
c. Transfer passing under general power of appointment;
d. Transfer with retention or reservation of certain rights;
e. Transfer for insufficient consideration.
2. Motives that preclude a a. To relieve donor from the burden of management;
transfer from the category b. To save income or property taxes;
of one made in c. To settle family litigated and un-litigated disputes;
contemplation of death d. To provide independent income for dependents;
e. To see the children enjoy the property while the donor is alive;
f. To protect the family from hazards of business operations; and
g. To reward services rendered.
Exercises: a. Determine whether or not the following fall under taxable transfers for estate tax purposes (Y/N)
Taxable transfer? Reason
1) Property transferred, transferor is of advanced age and thought of dying soon
2) Property transferred, transferor wanted to reward services rendered to him
3) Property transferred, transferor has the right to take the property back
4) Property transferred, transferor has the right to take the property back but waived the right
before he died
5) Property transferred under power of appointment which can be exercised in favor of
anybody
6) Property transferred under power of appointment which can be exercised in favor of a
person designated by the transferor of the power of appointment
7) Property transferred, the transferor has the right to the income of the transferred property
while still alive
O. EXEMPTIONS/EXCLUSIONS
1. Exemptions of certain a. The merger of usufruct in the owner of the naked title;
acquisitions and b. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
transmissions fideicommissary;
c. The transmission from the first heir, legatee or donee in favor of another beneficiary in accordance
with the desire of the predecessor; and
d. All bequest, devises, legacies or transfers to social welfare, cultural and charitable institutions, no
part of the net income of which inures to the benefit of any individual: Provided, however, that
not more than 30% of the said bequest, devises, legacies or transfers shall be used by such
institutions for administration purposes.
2. Exclusions from gross a. Amount received as war damages;
estate special laws b. Amount received from US Veterans Administration;
c. Benefits from GSIS and SSS.
d. Transfers of shares of stock, common or preferred, owned by a veteran with Philippine Veterans
Bank to his widow, orphan or compulsory heir by way of succession or donation mortis causa
(Sec. 2. RR 5-2022)
c. Unpaid taxes
Requisites for The tax must have accrued before the death of the decedent Unpaid taxes that accrued before the
deduction and decedent’s death but not including:
amount deductible a) any income tax upon income received
after the death of the decedent, or
b) property taxes not accrued before his
death,
c) or any estate tax.
e. Unpaid mortgage
Requisites for a) The fair market value of the mortgaged property without Amount of unpaid mortgage
deduction and deducting the mortgage indebtedness has been initially
amount deductible included as part of the gross estate;
b) The mortgage indebtedness was contracted in good faith
and for an adequate and full consideration.
f. Computation of Deductible Losses, Indebtedness, Taxes, Claims Against Insolvent and Unpaid Mortgage (LITE) For
Non-Resident Alien Decedent
Formula Philippine gross estate
Total gross estate x LITE = Deductible LITE
Answer:
34 Gross estate P30,000,000
35 Less: Ordinary deductions (30,000,000/50,000,000 x 6,000,000) 3,600,000
36 Estate after ordinary deductions 26,400,000
37 Less: Special deductions
37A Standard deduction 500,000
37B Family home -
37C Others -
37D Total special deductions 500,000
38 Net estate 25,900,000
39 Less: Share of surviving spouse -
40 Net taxable estate 25,900,000
17 Applicable tax rate 6%
18 Estate tax due P1,554,000
R. SPECIAL DEDUCTIONS
1. Family Home - The family home, constituted jointly by the husband and the wife or by an unmarried head of the family, is the
dwelling house where they and their family reside and the land on which it is situated.
Conditions for the allowance of family home deduction Amount deductible
1) The family home must be the actual residential home of the decedent 1) Exclusive property Full value included in the
and his family at the time of his death, as certified by the Barangay gross estate
Captain of the locality the family home is situated; 2) Conjugal/community One-half (1/2) of the value
2) The total value of the family home must be included as part of the property included in the gross estate
gross estate of the decedent; and 3) Partly exclusive Exclusive part (full value)
3) Allowable deduction must be in an amount equivalent to the property, partly Conjugal/community part
current fair market value of the family home as declared or included conjugal/community (1/2 x
in the gross estate, or to the extent of the decedent’s interest property value)
(whether conjugal/community or exclusive property), whichever is Note: In all three (3) cases, the maximum amount of
lower, but not exceeding P10,000,000 (old deduction was family home deduction is P10,000,000.
P1,000,000.)
4) Exercise: For year 2021, determine the amount to be included in the GE, decedent’s interest and the FH deduction
Gross estate Decedent’s interest Family home deduction
Case 1 – Family home is conjugal property,
P13,000,000
2 - Family home is conjugal property,
P25,000,000
3 – Family home is exclusive property,
P12,000,000
4 - Family home is exclusive property,
P8,000,000
5 - Family home is partly common, partly
exclusive
Exclusive lot – P5,000,000
Conjugal house – P8,000,000
S. OTHER DEDUCTIONS
1. Share of the Surviving Spouse
Gross conjugal/community properties P xxx
Less: Conjugal/community deductions xxx
Net conjugal/community properties (NCP) P xxx
Share of surviving spouse (1/2 x NCP) P xxx
4. Exercises:
a. Estate Tax: The estate of a decedent who dies January 1, 2018 has the following data (standard deduction already taken into
account):
Net estate, Philippines P1,200,000
Net estate, Country A (after P10,000 estate tax paid) 190,000
Net estate, Country B (before P14,000 estate tax paid) 200,000
Net estate, Country C (100,000)
Compute the estate tax payable if: 1) resident alien 2) non-resident alien
Exercise: Decedent died January 1, 2021. Determine whether or not notice of death, estate tax return or statement
certified by a CPA need to be filed (Y/N)
Notice of Estate tax Statement
death return certified by CPA
Case 1 – Gross estate is P16,000,000; Deductions, P11,000,000
2 – Gross estate is P4,000,000; Deductions, P6,000,000
3 – Gross estate is P2,000,000, Deductions, P600,000 (NRA decedent)
4– Gross estate is P15,00,000 comprising of car, land and shares of stock;
Deductions, P10,000,000
5 – Gross estate is P5,000,000; Deductions are P1,200,000 (NRA decedent)
6 – Gross estate is P5,500,000; Deductions are P1,000,000 (NRA decedent)
3. A non-resident alien decedent, single, died on January 1, 2018 left the following properties:
Car, Manila (inherited 4 years before he died, FMV, date of inheritance was P1,700,000) P1.500,000
Car, USA 2.600,000
Shares of stock, USA 900,000
Shares of stock, Manila 800,000
House and lot, USA 4,800,000
Bank deposit, PNB-Manila 1,000,000
Other tangible personal properties, Manila
500,000
The administrator claimed the following deductions:
Actual funeral expenses P40,000
Judicial expenses 30,000
Loss of certain tangible personal properties 25,000
Claims against the estate 20,000
Unpaid taxes, accrued before death 15,000
Claims against insolvent person 10,000
Transfer for public use 10,000
Medical expenses 50,000
END
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