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Estate tax (Inheritance tax)  Provide independent income for

dependents
- Imposed on the gratuitous transfer of properties
 Protect family from hazards of
on account of death.
business operations
- Properties are acquired through succession or
 To rewards services rendered.
transfer (mortis causa)
- Revocable transfer
o Effective upon death of decedent
o Transfer of properties with the retention
- Include
or reservation of rights over the property
o Real properties
while he still lives. (right to revoke or
o Tangible personal properties
option to relinquish power)
o Intangible personal properties
- Transfer under GPA (right of transfer)
- Computation
- Proceed of life insurance with revocable life
o Gross estate
insurance policy
o Deductions from the gross estate
o If wife, child, 3rd person ben:
o Net estate subject to tax
 Proceeds are taxable if revocable
Resident or Citizen include o Estate, executor, admin:
 Taxable whether ire or revocable
- Real properties located within and outside the o Transferred in contemplation of death
Philippines  Face value is used
- Tangible personal properties within and outside o 3 person beneficiary and irrevocable
rd
the Philippines  Premium subject to donor’s tax
- Intangible personal properties within and outside o Proceeds payable to estate and
the Philippines premiums paid from conjugal properties
Non-resident Alien of gain:
 A conjugal property and half to
- Real properties within the Philippines the surviving spouse
- Tangible properties within the Philippines o Paid partly with paraphernal and partly
- Intangible properties within the Philippines conjugal funds, considered paraphernal
subject with reciprocity and conjugal in part.
o Franchise o Absence of indication is treated as
o Bonds revocable
o Shares o NOT INCLUDED:
o Obligations  Accident insurance policy
o Foreign Corporation (85% inside Ph.)  Group insurance policy taken out
Still included in gross estate by company for its employees
 Irrevocable life insurance policy
- Transfer in contemplation of Death received by beneficiary
o Properties that are not physically  GSIS or SSS
available in the estate at the time of  Insurance payable to the heirs of
death in anticipation of his death the deceased
o Transfer or donation take only upon - Interest accruing to decedent at the time of
death death
o Donated or transferred while alive while o Accrued before death and collected after
enjoying the fruits (or designated death is included
somebody) o Proceeds of insurance payable to a
o EXCEPT: revocable beneficiary
 Bonafide sale o Rights of usufruct if transferable to the
 Relieve donor from burden of heirs
management
 Save income and property taxes
 Settle family litigated and
unlitigated disputes
- Claims against insolvent person - Shares of stock, bonds and securities
o Full receivable included o Listed in the stock exchange – FMV
o Also shall be deducted o Unlisted
o Can be conjugal or exclusive  Common shares – book value
- Transfer of insufficient consideration (appraisal surplus not included)
o Bonafide sale not included (10k diff)  Preferred – par value (value
o Partial payment, excess of FMV over time assigned not included)
value of consideration on death be - Insolvent shares or under liquidation
included o Zero valuation for estate tax purposes
o No considerations, FMV on time of death
PROPERTY RELATIONSHIP OF SPOUSES
shall be included
o Transfer not in donation or Conjugal partnership of gains (on or before August 3, 1988)
contemplation of death included as
donor’s tax - Exclusive properties of the decedent
o Intervivos proven fictitious, total value of o Properties brought to marriage as own
property on time of death included o Acquired by gratuitous title during
o Transferred is a capital asset, included in marriage
Capital gains tax, FMV or SP whichever is o Acquired or paid from exclusive property
higher and not included o Acquired by right of redemption by
- Amount received by heirs under R.A. 4917 barter or exchange with property
o Retirement and separation pay on belonging to one
consequence of death in accordance with o Spouses retain ownership and everything
RA included but also whole amount of their exclusive properties
would be treated as an allowable - Conjugal properties
deduction o Acquired by onerous title during
marriage at the expense of common fund
Tax exempted persons o Obtained from labor or profession of
either spouses
- Merger of usufruct in owner of naked title
o Fruits from common property during
- From fiduciary to fideicommissary
marriage and net fruits from exclusive
- SPA
property
- Transfers to social welfare, charitable institutions
o Hidden treasure
provided not more than 30% used by institution
o Acquired through occupation such as
for administration purposes
fishing and hunting
Valuation of properties o Livestock existing upon dissolution in
excess of each kind brought to the
- General rule
marriage
o FMV on the time of death
o Winnings from gambling and betting,
- Real properties
loses are exclusive
o FMV or Zonal value whichever is higher
except appraised value Absolute community of properties
- Usufruct
- The exclusive properties
o Approved by secretary of finance
o Inherited or acquired during marriage
recommendation of insurance
and fruits unless stated to be community
commissioner
o Exclusive and personal use except
- Personal properties
jewelry
o Recently acquired – acquisition cost
o Acquired before marriage by either who
o Previously acquired – current market
has legitimate descendants by former
price
marriage and fruits of it
o Exclusive is always exclusive
- Conjugal properties
o Properties owned before marriage
o Acquired before marriage  It is included in the gross estate
o Donation is prohibited without consent that’s why it is needed to be
of other deducted
o Acquired not clearly identified exclusive o Unpaid mortgages – to be deductible, the
is conjugal mortgage must be part of gross estate at
o Transfer of properties with the retention FMV.
or reservation of rights over the property - Taxes (unpaid) – before death is deductible
while he still lives. (right to revoke) - Transfer for public use
o Other than the phil. Government is not
Complete separation of property
deductible
- Everything is exclusive o Must be through testamentary
succession
DEDUCTIONS FROM GROSS ESTATE - Deductions allowed - Amount received by heir under RA 4917
only by the law to arrive at the net estate o has been in service for 10 years
Ordinary deductions o not less than 50 years of age
o availed only once
- Expenses - Vanishing deductions
o Funeral – actual expenses or 5% of gross o Must be within the Philippines
estate whichever is lower (not exceeding o Decedent died within 5 years from the
200,000) if exceeding 200,000 the 200k receipt of property through gratuitous
will be the deduction transfer
o Judicial – for administration, inventory o Must came from prior decedent
taking of assets, and settlement of the  100% within 1 year
estate. If in favor for the heirs, legatees,  80% within 1-2nd year
devisees is not a deduction  60% 2-3rd year
 Fees of exec or admin  40% 3-4th year
 Attorneys fee  20% 4-5th year
 Court fees o Computation
 Accountant fee  Estate in prior compared estate
 Appraisers fee in present whichever is lower
 Clerk hire  Less mortgage paid
 Cost of preserving and  Above/gross estate X
distributing estate Deductibles(include mortgage
 Cost of storing or maintaining unpaid)
property of the estate  Answer from 2nd less answer
 Brokerage fees for selling from 3rd
- Casualty losses  Rate of years
o Incurred during the settlement the o Share of surviving spouse
estate.  conjugal properties X 50%
o Must not be compensated for by any
settlement or extrajudicial settlement Special deductions
- Indebtedness - Family home
o Claims against the estate o 50% of conjugal residential lot
 Liability unpaid by reason of o Add exclusive residential house
death o Total deduction must not exceed 1M
 Liability incident to death such as - Medical expenses
funeral, not deductible o Must be within 1 year prior to death
 Must be a debt or claim which is o Excess of 500,00 is no longer deducted
valid in law and enforceable - Standard deduction
 If condoned by claimer, not o Amounts to 1M for everyone
deductible
o Claims against insolvent person
Allowable deductions for Non-resident alien

- Allowed deductions
- Allowable deductions = World ELIT x (PGE/TGE)
- Transfer for public use
- Vanishing deductions