GROSS ESTATE
1. Gross Estate. –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
the part of the entire gross estate which is
situated in the Philippines shall be included in his
taxable estate.
1.1. As a Filipino Decedent, whether resident
or not, or resident, whether citizen or not, to
the extent of his interest, the value at the
time of death of all real and personal
property, tangible and intangible (e.g. bank
deposit abroad) wherever situated,
regardless of any subsequent contingency
affecting value or any subsequent increase or
increase in value.
1.2. As to non-resident alien decedent, to the
extent of his interest, the value at the time
of his death of all real and tangible personal
property situated in the Philippines and
intangible personal property with a situs in
the Philippines unless exempted on the basis
of reciprocity.
2. Valuation of the Gross Estate - For the purpose of
1.3. The following, among others, are
intangible personal properties located in the
Philippines (statutory enumeration);
1.3.1. Franchise which must be exercised in
the Philippines;
1.3.2. Shares, obligations or bonds issued
by any corporation or sociedad
anonima organized or constituted in
the Philippines in accordance with its
laws;
1.3.3. Shares, obligations or bonds issued
by any foreign corporation eighty-
five percent (85%) of the business of
which is located in the Philippines;
1.3.4. Shares, obligations bonds issued by
any foreign corporation, if such
shares, obligations or bonds have
acquired a business situs in the
Philippines; and
1.3.5. Shares or right in any partnership,
business or industry in the
Philippines.
1.4. While as a general rule, intangible personal
property located in the Philippines is included
in the gross estate, under the exception
known as “reciprocity clause” in the estate
tax law, which applies only on the estate of a
non-resident alien, intangible personal
property located in the Philippines, will not
be included in the gross estate.
1.5. If the decedent at the time of his death was
a citizen and resident of a foreign country
which at the time of death did not impose a
transfer or death tax of any character in
respect of intangible personal property of
citizens of the Philippines not residing in that
foreign country
1.6. If the laws of the foreign country of which
the decedent was a citizen and resident at
the time of death allow similar exemption
from transfer taxes or death taxes of every
character in respect of intangible personal
property owned by citizens of the Philippines
not residing in that foreign country.
1.6.1. Notes or other claims held by the
decedent should be included in the
gross estate even though they are
canceled by the decedent’s will.
1.6.2. Accrued interest and rents, dividends
declared to stockholders of record on or
before the date of decedent’s death are
to be included in his estate although they
are not collected until after his death.
1.6.3. Various statutory provisions which
exempt bonds, notes, bills and the
certificates of indebtedness of the
government from taxation, are not
applicable to the estate tax since this tax
is excise tax on transfer and not on the
property transferred.
1.6.4. A business situs is place of business
wherein a taxing authority has acquired
jurisdiction to impose taxes.
1.7. Limitations in the application of the Principle of
Reciprocity
1.7.1. If it is inconsistent with the express
provision of law, and
1.7.2. If is shall disturb our own standard, the
application shall be limited to what we
adopt in our country, i.e., the lower
figure prevails.
computing the estate tax, it is necessary that the gross
estate of the decedent shall be appraised or valued at
the time of his death (Sec. 88 (B), NIRC). It is logical,
therefore, that the date of valuation is the time of
death because the transfer of properties from the
death to the living takes effect at the moment of death
(Art. 777, Civil Code of the Philippines).
2.1. Rules in the Valuation of the Gross Estate
2.1.1. In general, the gross estate shall be
valued at its fair market value at the
time of the decedent’s death (Sec. 88,
NIRC). The property is to be valued as
of the decedent’s death upon which date
the tax accrues regardless of any
subsequent contingency affecting the
estate.
2.1.2. Usufruct the value of the right of
usufruct, use or habitation, as well as
that of annuity, there shall be taken into
account the probable life of the
beneficiary in accordance with the latest
Basic Standard Mortality Table, to be
approved by the Secretary of Finance,
upon recommendation of the Insurance
Commissioner.
2.1.3. Real Properties should be valued at the
current fair market value (FMV) as
shown in the schedule of values fixed by
the Provincial/City Assessors, or the fair
market as determined by the
Commissioner of Internal Revenue,
whichever is higher (Sec. 88, NIRC).
2.1.4. Personal Properties should be reported
at the acquisition cost for the recently
acquired properties, or the current
market price for the previously acquired
properties.
2.1.5. Stocks, Bonds and Other Securities if
listed in the local stock exchange, the
value is the mean between the highest
and the lowest quoted selling prices on
the date of death or the nearest date
when there was sale.
2.1.5.1. Unlisted ordinary shares are
valued based on their book
value while unlisted preference
shares are valued at par value.
 2.1.5.2. For shares which had been
either suspended, delisted
or where no transactions
involving them have been
made, shall be valued at
their book value nearest
the valuation date which is
the date of decedent’s
death.
2.1.5.3. For shares which had been
found insolvent and presently
under liquidation may be given
a zero valuation for estate tax
purposes.
2.1.5.4. If not listed on an exchange, the
value should be the book value at
the date of death, [(Par value +
Retained Earnings)/ outstanding
shares issued] x the number of
shares included in the estate.

3. Composition of Gross Estate.

Citizen or Non-resident
Resident Alien
1. Real property in the Philippines Included Included
2. Real property outside in the Philippines Included Not included
3. Tangible personal property in the Philippines Included Included
4. Tangible personal property outside the Philippines Included Not included
5. Intangible personal property in the Philippines Included Included
6. Intangible personal property outside the Philippines Included Not included
7. Property subject of transfer in contemplation of death, revocable
transfer, or transfer under general power of appointment, if the
property was:
a. In the Philippines at the time of transfer but outside the Philippines
at the time of death Included Not included
b. Outside the Philippines at the time of transfer but in the Philippines
at the time of death Included Included
c. In the Philippines both at the time of Transfer and at the time of
death Included Included
d. Outside the Philippines at the time of transfer and at the time of
death Included Not included

NOTE: As a general rule, the situs of a property is the domicile or residence of the owner (51 Am. Jur.
494-495). However, such general rule is not applicable when a property has a situs other than the
domicile or residence of the owner, or when the rule is not consistent with the express provisions of the
statute. For example, share of stocks acquired by a non-resident alien from a domestic corporation. Such
shares of stocks are taxable in the Philippines.
NOTE: Bonds, mortgages and certificates of stocks are taxable at the place where they are physically
located.

Addition to the Gross Estate - In addition to the 4.1.6. Prior Interest- shall apply to the
properties and rights that are easily and physically transfers, trusts, estates, interests,
identifiable, there are still some rights or rights, power and relinquishment of
properties which are not physically located in powers, as severally enumerated and
the estate at the death, but are still to be described therein, whether made
included as part of the gross estate of the created, arising, existing, exercised
decedent. and relinquished before or after the
4.1. Decedent’s Interest- in general, decedent’s effectivity of this code.
interest is commonly thought of as a
4.2. Transfer in Contemplation of Death- The
person’s estate, the wealth that he would
thought of death must be the impelling cause
have possessed, enjoyed and disposed, had
of the transfer which includes the disposition
he lived. It also refers to the value of any
of the property for the purpose of avoiding
interest in property or rights accrued in favor
the tax and not merely in contemplation of
of the decedent on or before his death which
an imminent death.
have been received only after his death (Sec.
4.2.1. Exception: In case of a bona fide
85 (A), NIRC) such as:
sale for an adequate and full
4.1.1. Dividends declared on or before the
consideration in money or money’s
death of the stockholder, and
worth.
received by the estate after said
4.2.2. Transfer made NOT in contemplation
stockholder’s death.
of death:
4.1.2. Partnership’s profit earned prior to
4.2.2.1. To relieve the donor from
death of the partner, received by the
the burden of
estate after the partner’s death.
management;
4.1.3. Accrued interest and rents on or
4.2.2.2. To save income or property
before the time of death, but
taxes;
collected until after death.
4.2.2.3. To settle family litigated
4.1.4. Proceeds of life insurance policy
and unlitigated disputes;
payable to a revocable beneficiary.
4.2.2.4. To provide independent
4.1.5. Rights of usufruct if transferable to
income for dependents;
the heirs.
 4.2.2.5. To see the children enjoy
the property while the
donor is still alive;
4.2.2.6. To protect the family from
hazards of business
operations, and
4.2.2.7. To reward services
rendered.
4.3. Revocable transfer - Is a transfer where
the terms of enjoyment of the property may
be altered, amended, revoked or terminated
by the decedent. It is sufficient that the
decedent had the power to revoke, though
he did not exercise the power to revoke.
4.3.1. The donor retains the option to
relinquish such power in
contemplation of death.
4.3.2. This contemplates a situation where
the decedent transfers by trust or
otherwise the enjoyment of his
property to another, subject to his
right to revoke the transfer at will,
with or without notifying the
transferee, anytime before he dies.
4.3.3. The recoverability of the transfer is
not affected by the failure of the
decedent to exercise the power to
revoke during his lifetime or before
his death. If the notice has not been
given or the power to revoke
exercised before the date of death,
such notice or power shall be
considered to have been given or the
power exercised, on the date of
death.
4.3.4. Transfer with reservation of certain
rights – this kind of transfer allows
the transferor to continue enjoying,
possessing or controlling the
property (beneficial ownership)
because only the naked title has
been transferred. Only upon death of
the decedent shall both the naked
title and beneficial use be
consolidated on the transferee.
4.4. Property Passing Under General Power
of Appointment - A power of appointment
is a right to designate by will or deed
(executed in contemplation of, or intended to
take effect in possession or enjoyment at, or
after his death and 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 income of the property
there from; except in case of a bona fide sale
for an adequate and full consideration in
money or money worth) the person or
persons who are to receive certain property
from the estate of a prior decedent (Sec. 85
D, NIRC).
4.4.1. A power of appointment may either
general or limited (special).
4.4.1.1. A special power of appointment
is one that authorizes the donee
of holder of the power to appoint
only among a restricted class or
designated class of persons other
than him.
4.4.1.2. General power of
appointment means that the
decedent must have had a power
to exercisable in favor of himself,
his estate, or creditors of his
estate. Requisites for inclusion
of property passing under a
general power of appointment:
4.4.1.2.1. Existence of a general
power of appointment;
4.4.1.2.2. An exercise of such power
by the decedent by will or
by deed in certain cases;
and
4.4.1.2.3. The passing of the property
by virtue of such exercise.
4.4.1.2.4. If the power to consume,
or appropriate property
and/or income for the
benefit of the decedent is
limited to an ascertainable
standard of living
pertinent to his health,
education support or
maintenance, such favor
is not general power of
appointment but if a power
to use property for the
comfort, welfare, or
happiness of the holder of
the power is not considered
limited by an ascertainable
standard and, therefore,
constitutes a general
power of appointment.
4.5. Proceeds of Life Insurance with
Revocable Beneficiary- Proceeds of
insurance under policies taken out by the
decedent upon his life shall constitute part of
the gross estate if the beneficiary is:
4.5.1. The estate of the decedent, his
executor or administrator; or a third
person (i.e. a person other than the
estate, executor or administrator),
and the designation of the
beneficiary is revocable.
4.5.2. Under the Insurance Code of the
Philippines, a designation of
beneficiary is revocable, unless
stated expressly by the insured, and
indicated in the policy, that the
designation is irrevocable.
4.5.3. The proceeds of life insurance
payable to the person’s estate, on
which the premiums were paid by
the conjugal partnership, constitute
conjugal property, and the other half
pertains to the surviving spouse.
4.5.4. If the premiums were paid partly
with paraphernal and partly conjugal
funds, the proceeds are in like
portion paraphernal in part and
conjugal in part.
4.5.5. Where the insured transfers a life
insurance policy in contemplation of
death, the amount included in the
gross estate is the face value of the
policy and not the cash surrender
value. If the insured named a third
person as his beneficiary in his life
insurance policy, and that the policy
is IRREVOCABLE, the premium paid
is a GIFT from the insured to the
beneficiary, which may be subject to
 a donor’s tax. If the premium is paid
on installment, it is an additional gift
which may again be covered by a
donor’s tax.
4.5.6. Proceeds of insurance NOT includible
in the gross estate of the decedent:
4.5.6.1. When the policy is an
accident insurance policy;
4.5.6.2. Proceeds of group
insurance policy taken out
by a company for its
employees;
4.5.6.3. When the policy is
IRREVOCABLE and the
proceeds received by the
beneficiary;
4.5.6.4. Proceeds of insurance
issued by the GSIS to
government employees, or
by the SSS to employees in
the private sectors;
4.5.6.5. Proceeds of life insurance
payable to the heirs of the
deceased members of the
US and Phil. Army.
4.6. Transfer of Insufficient Consideration-If
the transfer is not a bona fide sale for
adequate and full consideration in money or
money’s worth, there shall be included in the
gross estate only the excess of the FMV of
the property at the time of death over the
value of the consideration received by the
decedent.
4.6.1. If an inter vivos transfer of the
decedent is proven to be fictitious,
the total value of the property at the
time of death shall be included in the
gross estate.
4.6.2. If the property transferred is a
CAPITAL ASSET, it is subject to the
6% CGT based on the selling price or
zonal value whichever is higher.
Since the tax is based on the gross
price of the entire property, there is
not need to bring the value of the
asset back to the estate for further
taxation.
4.6.3. If the property transferred is an
ORDINARY ASSET, the disposition
thereof for inadequate consideration
is subject to donor’s tax.
4.6.4. The value to be included in the gross
estate shall be determined under the
following rules:
4.6.4.1. If the transfer was in the
nature of a bona fide sale
for an adequate and full
consideration in money or
money’s worth, no value
shall be included in the
gross estate.
4.6.4.2. If the consideration
received is less than
adequate and full
consideration, the value to
be included in the gross
estate shall be the excess
of the fair market value of
the property at the time of
the decedent’s death over
the consideration received.
4.6.4.3. If there was no
consideration received on
the transfer (as in donation
mortis causa), the value to
be included in the gross
estate shall be the fair
market value of the
property at the time of the
decedent’s death.
4.6.4.4. If the transfer is not shown
to have been made in
contemplation of death or
to take effect upon the
decedent’s death, the
transfer is subject to
donor’s tax under Section
98 of the NIRC.
4.7. Claims against Insolvent Person- these
refer to receivables left by the decedent but
the court consequently found the related
debtor insolvent. A claim against insolvent
person (i.e., a person whose assets are not
sufficient to pay his liabilities) must be
reported as part of the gross estate in the
full amount of the receivable. The fact that it
is uncollectible in whole or in part will be
recognized as a deduction from the gross
estate for uncollectible portion.
4.7.1. This should be reported as exclusive
or conjugal property depending on
whether the claim is derived from an
exclusive or conjugal property.
4.8. Amount Received by Heirs under
Republic Act. No. 4917- the amount
received by the heirs from the decedent’s
employer as a consequence of the death of
the decedent-employee shall be included in
the gross estate of the decedent. This
amount is also allowed as a deduction from
gross estate (Sec. 86 [7], NIRC).
4.8.1. As a rule, the amount received by
the heirs under R.A. 4917 shall be
included as part of the gross estate
in order to allowed as part of
deductions from the decedent’s gross
estate.
4.9. Donation Mortis-Causa – are not subject to
donor’s tax but to estate tax because these
are considered transfers in contemplation of
death intended to take effect in the
possession and enjoyment after the donor’s
death. The law considers them as substitute
for testamentary dispositions. Although said
transfers are inter-vivos in form, they are
actually mortis causa in substance. In most
of this kind of transfers, the property
transferred remains substantially the
property of the transferor during his lifetime
and he remains in control of the same up to
the time of his death, retaining either the
naked title or the beneficial ownership to the
property. Thus, the value of the donation
shall still form part of the estate of the
decedent. The imposition of the tax is
intended to prevent evasion of the estate.
Exemptions from Estate Tax- it refers to properties,
rights or transfers that are specifically declared by
the law as free from the burden of estate tax.
As a rule, properties or transfers, which are
exempt by the law from estate tax, are not
considered in the determination of the gross
estate.
The following acquisitions and transmission shall
not be subjected to estate tax (Sec. 87,
NIRC).
5.2.1 The merger of usufruct the legal
right to use and enjoy the benefits
and profits of something belonging
to another) in the owner of naked
title. There is merger of the usufruct
in the owner of the naked title when
the naked ownership and usufruct
come to be held by the same person.
5.2.2 The transmission or delivery of the
inheritance or legacy by the fiduciary
heir or
5.2.3 legatee to the fideicommissary
(refers to a person designated who
has the real or beneficial interest in
an estate or refund, the title or
administration of which is temporary
confided to another). Fideicomissary
substitution is that by virtue of which
a testator institutes a first heir, and
charges him to preserve and
transmit the whole or part of
inheritance later on to a second
(whose relationship between the first
and second heir must be one degree
such that of a parent and child, vice
versa).
5.2.4 The transmission from the first heir,
legatee or donee in favor of another
beneficiary, in accordance with the
desire of the predecessor. This
exemption and the others (merger of
usufruct in owner of naked title and
transfer from fiduciary heir to the
fideicommissary) is premised on the
fact that there is only a single
transmission of property, i.e., from
testator-to the owner of the naked
title, or to fideicommissary, or to the
second beneficiary, as the case may
be. Hence the exemption from the
tax because the transfer was subject
previously thereto (De Leon,
Transfer and Business Taxation,
1995, p. 40).
5.2.5 All bequest, devises, legacies or
transfer to social welfare, cultural
and charitable institutions, no part of
the net income of which goes to the
benefit of any individual; provided
however, that not more than 30% of
the said bequests, devises, legacies
or transfers shall be used by such
institutions for administrative
purposes.
5.3. Donation made for public purposes are
allowed by the law as deduction from gross
estate (Sec. 86 [3], NIRC).
5.3.1 Exemptions under reciprocity clause
of estate tax law (Sec. 85 and 104 of
NIRC).
5.3.2 Exemptions under Special Laws such
as:
5.3.2.1 Benefits received from SSS
(PD 1161, as amended) or
GSIS (PD 1146, as
amended).
5.3.2.2 Benefit received from U.S.
Veterans Administration
(RA 360).
5.3.2.3 War benefits given by
Philippine government and
U.S. government due to
damages suffered during
the war (RA 227).
5.3.2.4 Grants and donations to
Intramuros Administration
(PD 1616).
5.3.3 A net estate with a value of
P200,000 or less (Sec. 84, NIRC).
5.3.4 h. Capital of the surviving spouse
(Sec. 85 [H], NIRC).