Tax 2 Notes Finals 3

SEC. 84. RATES OF ESTATE TAX.
- There shall be levied, assessed, collected and paid upon the TRANSFER OF
THE NET ESTATE as determined in accordance with Sections 85 and 86 of every decedent, whether resident or
nonresident of the Philippines, a tax BASED ON THE VALUE OF SUCH NET ESTATE, as computed in accordance
with the following schedule
Over
P200k
P500k
P2m
P5m
P10m
But not over

P200k
P500k
P2m
P5m
P10m
The tax shall

be
Exempt
0
P15k
P135k
P465k
P1.215m
Plus
Of the Excess
Over
5%
8%
11%
15%
20%
P200k
P500k
P2m
P5m
P10m
Properties in the Estate

SEC. 85. 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 NONRESIDENT 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.
(A) DECEDENT'S INTEREST. - To the extent of the INTEREST therein of the decedent at the time of his death;
For estate tax purposes, residence - refers to the domicile of the person.
For RESIDENTS and CITIZENS, GROSS ESTATE includes ALL properties, real or personal,
tangible or intangible, WHEREVER situated.
For NON-RESIDENT ALIENS, gross estate includes only properties those SITUATED in
the Philippines.
Except with respect to INTANGIBLE personal property,
its inclusion to the gross estate is the subject to the rule of RECIPROCITY. If the
FOREIGN COUNTRY of the NRA:
DOES NOT IMPOSE A TRANSFER TAX of any character on the intangible
personal property (IPP) of Filipinos not residents of that foreign country; or
ALLOWS A SIMILAR EXEMPTION from transfer tax in respect of IPP owned
by Filipinos not residents of that foreign country,
Then IPPs of the non-resident alien here are EXEMPT from the estate tax.
o
o
Reciprocity must be total. If any of the two states or countries collects or imposes
and does not exempt any transfer, death, legacy, or succession tax of any
character, reciprocity does not apply. (CIR v Fisher)
Reciprocity in exemption does not require the foreign country to possess
international personality. (CIR v Campos Rueda)
The following, among others, are IPPs LOCATED IN THE PHILIPPINES:

1. FRANCHISE which must be EXERCISED IN THE PH
2. SHARES, OBLIGATIONS or BONDS
a issued by any corporation or sociedad anonima organized or
constituted in the Philippines in accordance with its laws
b issued by any foreign corporation 85% of the business of which is
located in the Philippines
c issued by ay foreign corporation if such shares, obligations or bonds
have acquired a business situs in the Philippines, and
3. Shares or rights in any partnership, business or industry in the Philippines.
PROPERTIES NOT IN THE ESTATE
There may be properties, which at the time of the decedent s death are not in the estate
because they were TRANSFERRED by him DURING HIS LIFETIME.
These transfers are:
1. Transfers in CONTEMPLATION of DEATH,
2. REVOCABLE transfers,
3. Transfers under a GENERAL POWER of APPOINTMENT, and
4. Transfers for an INSUFFICIENT CONSIDERATION.
o The values of these properties will be included in the determination of the gross
estate for estate tax purposes.
As such, the gross estate, for purposes of the estate tax, may exceed the actual value of
his assets at the time of his death as it includes the value of transfers of property by him
during his lifetime that partake of the nature of testamentary dispositions.
These kinds of transfers have the following in common:
o They are OSTENSIBLE transfers, usually with the purpose to evade the estate tax
o They are EXTENSION of INTERESTS
*If the transfers are in fact for a bona fide consideration,
then they will not form part of the gross estate (this proviso is present in all the
provisions regarding these transfers)
GROSS ESTATE:
A. As to RESIDENT or FILIPINO decedent if the decedent was a resident or citizen
of the PH, the Gross Estate shall INCLUDE, to the extent of his INTEREST, the VALUE
at the time of his death of ALL:
1. REAL property wherever situated;
2. TANGIBLE personal property wherever situated; &
3. INTANGIBLE personal property wherever situated.
B. As to NRA decedent in case of a NRA decedent who at the time of his death, was
NOT a CITIZEN of the PH, it shall INCLUDE to the extent of his INTEREST, the VALUE
at the time of his death of ALL:
1. REAL property situated in the PH;
2. TANGIBLE personal property situated in the PH;
3. INTANGIBLE personal property w/ a SITUS in the PH unless exempted on the
basis of reciprocity.
The law ensures the inclusion of every type of property interest transmitted from the
dead to the living.
The gross estate shall be valued as of the time of the death of the decedent
regardless of any subsequent increase/decrease in value because the R to the
succession are transmitted from the moment of death of the decedent (777 CC).
SITUS of INTANGIBLE PERSONAL PROPERTY (IPP)

IPP, such as credits, bills receivable, bank deposits, bonds, promissory notes, judgments,
corporate stocks, does NOT admit of actual location.
GR: The situs is at the RESIDENCE (domicile) of the owner.
: Exceptions: This principle is n/a
1. When it is inconsistent w/ express provisions of law
2. When justice does not demand that it shld be, as where the property has in fact a
situs elsewhere. Thus, shares of stock of a domestic corp of a NRA is taxable in the
PH.
The GROSS ESTATE of a decedent for purposes of Estate Tax (ET) is not limited to & may
exceed the actual value of his assets at the time of his death. INCLUDED in the taxable
estate are the FF:
1. INTEREST in PROPERTY POSSESSED the value of any interest in property w/c @
the time of the decedents death are in his actual/constructive possession/enjoyment;
2. INTEREST in PROPERTY OWNED the value of any interest in property w/c the
decedent owned @ the time of his death; &
3. PROPERTY or INTEREST TRANSFERRED in addition for the purpose of
preventing tax avoidance, the value of transfers of property or interest in property
made by the decedent during his lifetime w/c partake of the nature of testamentary
dispositions.
SPECIFIC ITEMS INCLUDIBLE in GROSS ESTATE
1. REAL & PERSONAL PROPERTY, whether tangible or intangible, or mixed, wherever
situated
* PROVIDED that where the decedent/donor was a NRA @the time of his
death/donation, his real & personal property so transferred but w/c are situated
OUTSIDE the PH shall NOT be included
2. FRANCHISE w/c must be exercised in the PH;
3. SHARES, OBLIGATIONS or BONDS
a. Issued by any DOMESTIC corp
b. Issued by any FOREIGN corp 85% of the business of w/c is located in the PH
c. Issued by any FOREIGN corp, IF such have acquired a business SITUS in the PH
(if they are used in the furtherance of its business in the PH by the foreign
corp)
4. SHARES/RIGHTS in any partnership, business or industry established in the PH.
Transfers in contemplation of death
(B) 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,
a. in CONTEMPLATION of or intended TO TAKE EFFECT in possession or enjoyment AT OR AFTER
DEATH, or
b. 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
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 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.
A transfer in contemplation of death - is a transfer motivated by the thought of death,

although death may not be imminent. Ex. Survivorship agreement
The following are examples of circumstances which may be taken into consideration in
determining whether the transfer was made in contemplation of death:
o We can look at the age and state of health of the decedent at the time of the
transfer (is he terminally ill ?)
o Length of time between the transfer and the date of the death.
o Concurrent making of a will or making of a will within a short time after the transfer.
But again, in the case of a BONA FIDE SALE FOR AN ADEQUATE AND FULL
CONSIDERATION in money or moneys worth,
the value of the property transferred will NOT be CONSIDERED in determining the
gross estate.
INTER VIVOS TRANSFERS SUBJECT to ESTATE TAX
The GE extends to gratuitous transfers made by the decedent during his lifetime w/c are
treated by law as substitutes for testamentary dispositions (inter vivos transfers in form
but mortis causa in substance).
1. Transfers in CONTEMPLATION of DEATH
2. Tranfers w/ RETENTION or RESERVATION of certain rights;
3. REVOCABLE transfers
4. Transfers of property arising under a GENERAL POWER of APPOINTMENT
5. Transfers for INSUFFICIENT CONSIDERATION.
Transfers by virtue of a BONA FIDE sale of property for an ADEQUATE & FULL
CONSIDERATION in money/moneys worth excluded (not taxable)
Donation MORTIS CAUSA
Made in consideration of death, without the
donors intention to lose the thing of its free
disposal in case of survival
A TRANSFER mortis causa, being
testamentary in nature, should be embodied
in a will. It is not a contract (unlike a
donation mortis causa). It is in reality a
legacy.
If not embodied in a will void.
Transfer conveys not title or ownership to the
transferee before the death of the transferor,
Donation INTER VIVOS

made without such consideration but out of
the donors generosity, although delivery
may be made post mortem
Its effect is produced while the donor is still

alive.
or the transferor retains the ownership of the

property conveyed; It is the donors death
that determines the acquisition of, or the R
to the property.
Transfer is revocable before the transferors
death & revocability may be provided
indirectly by means of the reserved power in
the donor to dispose of the property
conveyed.
Transfer is void if the transferor survived the
transferee.
Donations being in the form of a will, are
Acceptance is a requirement.
never accepted by the donees during the
donors lifetime.
GR: Donations inter vivos are subject to donor's tax, whereas donations mortis causa are
subject to estate tax.
: in the case of the so-called Substitutes for testamentary dispositions.
Revocable transfers
(C) 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 exerciseable) 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:
a. alter,
b. amend,
c. revoke, or
d. terminate, or
e. where any such power is relinquished in contemplation of the decedent's death.
(2) For the purpose of this Subsection, the POWER to alter, amend or revoke shall be CONSIDERED TO EXIST on the
date of the decedent's death even though
a. the exercise of the power is SUBJECT to a precedent giving of NOTICE or
b. 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.
A revocable transfer - is a transfer where the terms of the 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.
* Again, the same rule with bona fide sales applies.
TRANSFER with RETENTION or RESERVATION of CERTAIN RIGHTS
This contemplates cases where the owner transfers his property during life but still retains
the economic benefits the possession or enjoyment of the property, or the power to
designate persons who may exercise such rights. By reason of the restriction or
encumbrance, the transferee is incapable of freely enjoying & disposing of the property
until the transferors death, & the transfer may be regarded as having been intended to
take effect in possession or enjoyment @ the time of the transferors death.
PROPERTY COVERED by the TRANSFER
The GE shall INCLUDE any interest in property of w/c the decedent has @ any time made a
transfer by trust or otherwise
1. Transfer WITHOUT RETENTION of interest, but EFFECT POSTPONED a transfer
intended to take effect in possession or enjoyment @ or after his death (donations
mortis causa).
2. Transfer WITH RETENTION of interest to INCOME or w/ RIGHT to DESIGNATE persons
who will enjoy income/property a transfer under w/c a person has retained for his
life or for any period not ascertainable without reference to his death of for any
period w/c does not in fact end before his death: (example pp. 33-44)
a. The possession/enjoyment of or the R to the income of the property or
b. The R (either alone/in conjunction w/ any person) to designate the persons

who shall possess/enjoy the property/income.
REVOCABLE TRANSFERS
Also to be included in the GE is the interest in property of w/c the decedent has @ any time
made a transfer by trust or otherwise:
1. With RESERVED POWER to ALTER, etc where the enjoyment thereof was subject @
the date of his death to any CHANGE through the exercise of a power (in whatever
capacity exercisable) by the decedent (alone or in conjunction w/ another) without
regard to when or from what source the decedent acquired such power, to ALTER,
AMEND, REVOKE or TERMINATE, or
2. w/ such POWER RELINQUISHED where any such power w/c would bring the property
in the taxable estate, is relinquished in contemplation of the decedents death.
The POWER to ALTER, AMEND or REVOKE shall be considered to exist on the date of
the decedents death even though:
o The exercise of the power is subject to a precedent of giving NOTICE; or
o The alteration, amendment or revocation TAKES EFFECT only on the expiration
of a STATED PERIOD after the exercise of the power.
If the NOTICE has NOT been GIVEN, or the POWER has NOT been EXERCISED
on/before the date of decedents death
such NOTICE or the POWER shall be
considered to given or exercised on the date of his death. (85 C,2).
Transfers Under a General Power of Appointment

(D) 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
a. in contemplation of, or
b. 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:
(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 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.
Power of APPOINTMENT - the right to designate the person or persons who will succeed
the property of a prior decedent.
A GENERAL power of appointment - is one which may be exercised in favor of anybody.
o Carles donated property to Andres, with a provision that Andres can transfer
the property to anyone. Andres transferred it to Iker. The property should be
included in the gross estate of Andres.
A LIMITED power of appointment - one which may be exercised only in favor of a certain
person or persons designated by the prior decedent.
o Carles donated property to Andres, with a provision that Andres should transfer
the property to Iker, and only Iker. The value of the property should not be
included in the gross estate of Andres.
In order that property passing under a power of appointment may be included in the
gross estate of the transferor, the power of appointment must be a general power of
appointment.
Again, the bona fide sale rule applies.
TRANSFER of PROPERTY under GENERAL POWER of APPOINTMENT
Also included in the GE is property arising under a general power of appointment exercised
by the decedent:
a. By WILL or
b. By DEED executed IN CONTEMPLATION of or intended to TAKE EFFECT in
possession/enjoyment @ or after his death; or
c. By DEED under w/c he has RETAINED
a. for his life or
b. any period not ascertainable w/o reference to his death or

c. for any period w/c does not in fact end before his death a) the POSSESSION/ENJOYMENT of, or the R to the INCOME from the property, or
b) the RIGHT (either alone/in conjunction w/ another), to DESIGNATE the persons who
shall enjoy or possess the property or the income therefrom.
Life Insurance Proceeds

(E) PROCEEDS OF LIFE INSURANCE. - To the EXTENT OF 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.
Proceeds of life insurance are paid by the insurance company directly to the 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:
1. The ESTATE of the decedent, his EXECUTOR or ADMINISTRATOR; or
2. A THIRD PERSON (not those in #1), and the DESIGNATION of the beneficiary is
REVOCABLE. The Insurance Code states that the designation of a beneficiary is generally
revocable.
Except of course, when the policy states that the designation is irrevocable.
In such cases, the proceeds are not considered as part of the decedents
estate.
So, GROSS ESTATE is made up of:
1. The DECEDENTS INTERESTS at the time of his death
2. TRANSFERS made during his LIFETIME (
1 in contemplation of death,
2 revocable, and
3 under a GPA, and
3. Life insurance PROCEEDS
4. Some other stuff required by law to be included in the gross estate in order to allow
deductions (claims against insolvent persons, unpaid mortgage, value of the family
home, and the retirement benefits under RA 4917)
PROCEEDS of LIFE INSURANCE
When TAXABLE (INCLUDED)
1. Beneficiary is the ESTATE of the
decedent the amt receivable by the
estate of the deceased, his
EXECUTOR/ADMIN as insurance under
policies taken out by the decedent upon
his OWN LIFE, irrespective of whether or
NOT TAXABLE (NOT INCLUDIBLE)

1. ACCIDENT insurance proceeds unless one of the risks insured against
is the death of the insured by accident
2. GROUP insurance policy takent out by
a company for its ees
3. Amt receivable by any beneficiary
not the insured retained the power of

revocation; &
2. Beneficiary is OTHER than the
decedent the amt receivable by any
beneficiary DESIGNATED in the policy
except when it is expressly stipulated
that the designation of the beneficiary is
irrevocable.
GR: insurance proceeds are revocable
includible
irrevocable & taxable only where
the insured reserved to himself the
power to change or revoke the name
of the beneficiary during his lifetime,
whether or not he has during his
lifetime exercised such power of
revocation.
IRREVOCABLY designated in the

policy by the insured because the
transfer is absolute & insured did not
retain any legal interest in the
sinsurance.
4. GSIS
5. sss
Prior Interests
(F) PRIOR
Section
1.
2.
3.
4.
5.
6.
7.
INTERESTS. - Except as otherwise specifically provided therein, Subsections (B), (C) and (E) of this
shall apply to the
transfers,
trusts,
estates,
interests,
rights,
powers and
relinquishment of powers, as severally enumerated and described therein, whether made, created,
arising, existing, exercised or relinquished before or after the effectivity of this Code.
(G) TRANSFERS OF INSUFFICIENT CONSIDERATION. - If any one of the transfers, trusts, interests, rights or
powers enumerated and described in Subsections (B), (C) and (D) of this Section 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.
In the transfers in contemplation of death, revocable transfer, or transfer under a GPA,

the value to include in the gross estate will be determined under the following rules:
o If the transfer was in the nature of a bona fide sale for an ADEQUATE and full
consideration in money or moneys worth,
no value will be included in the gross estate;
o If the consideration received on the transfer was LESS THAN ADEQUATE and full,
the value to include in the gross estate will be the EXCESS of the fair market
value at the time of the decedents death over the consideration received;
o If there was NO CONSIDERATION received on the transfer (donation mortis
causa),
the value to include in the gross estate will be the FAIR MARKET VALUE of the
property at the time of the decedents death.
When looking at transaction, ask yourself, was the consideration insufficient?
a. If yes, then add the balance of the FMV at the time of death and the
consideration.
b. If no, then it was a bona fide sale. Dont add the value to the gross estate.
When it comes to TRANSFERS DONE DURING THE LIFETIME of a decedent,
there is a disputable presumption that the transfers are in contemplation of death if
the RECIPIENTS are compulsory heirs.
o The government presumes that one is transferring property beforehand to
escape the estate tax, and instead pay the lower donors tax.
o The case of Zapanta showed that the presumption is disputable. There, the Court
considered the gifts as not advances even if the recipients were compulsory
heirs. The reason for this was the condition imposed upon the recipients by the
decedent (they had to pay the decedent a certain amount of rice and money
during his lifetime). It showed that the transfer was not in contemplation of
death, because the decedent in fact, would benefit from the transfer.
o The presence of a will also plays a part. In the cases of Tuason and Vidal de
Roces, the Court considered the transfers as advances because a will was made
making the transferees legatees. This played a part in the Courts impression
that there was an intention of the decedent to minimize his gross estate.
o Thus, when looking at cases like these, the totality of all the factors and facts
must be taken into consideration.
Does the government always want to consider a transfer an advance (to be covered by
the estate tax)? Not necessarily. There are instances where they will argue for it to be
considered under the donors tax.
Capital of the Surviving Spouse
(H) CAPITAL of the SURVIVING SPOUSE The capital of the surviving spouse of a decedent shall NOT for the
purpose of this Chapter, be deemed part of his/her gross estate.
If the decedent was married his GE would consist of:

1. his exclusive properties &
2. his share in the conjugal or community properties.
Computation of Net Estate

Sec. 86. COMPUTATION of the NET ESTATE
For the purpose of the tax imposed in this Chapter, the VALUE of the NET ESTATE shall be determined:
(A) DEDUCTIONS, ALLOWED to the ESTATE of a CITIZEN or a RESIDENT of the PH, by DEDUCTING from the value of
the NET ESTATE:
1) EXPENSES, LOSSES, INDEBTEDNESS & TAXES (ELIT). Such amounts
a) For actual FUNERAL expenses or in amount equal to 5% of the GE, (w/chever is LOWER, but in no
case to exceed P200k);
b) For JUDICIAL EXPENSES of the testamentary or intestate proceedings;
c) For CLAIMS against the ESTATE;
Provided: that
i.
@ the time the indebtedness was incurred the DEBT INSTRUMENT was duly NOTARIZED
&
ii.
if the loan was contracted w/in 3yrs before the death of the decedent, the ADMIN or
EXECUTOR shall submit a STATEMENT showing the DISPOSITION of the proceeds of the
loan;
d) For CLAIMS of the DECEASED against INSOLVENT persons where the value of the DECEDENTS
INTEREST therein is INCLUDED in the GE; &
e) For UNPAID MORTGAGES upon, or any INDEBTEDNESS in respect to, PROPERTY where the value of
the DECEDENTS INTEREST therein, undiminished by such mortgage or indebtedness, is
INCLUDED in the value of the GE,
but NOT including any
i.
INCOME TAX upon income received after the death of the decedent, or
ii.
PROPERTY TAXES not accrued before his death, or
iii.
any ESTATE TAX.
The DEDUCTION herein allowed in the case of claims against the estate, unpaid mortgages, or any
indebtedness, shall, when founded upon a PROMISE or AGREEMENT, be LIMITED to the EXTENT that they were
CONTRACTED BONA FIDE & for an ADEQUATE & FULL CONSIDERATION in money or moneys worth.
There shall also be DEDUCTED, LOSSES incurred during the settlement of the estate, arising form
i.
fires, storms, shipwreck, or other casualties
ii.
robbery, theft or embezzlement
when
i.
such losses are NOT COMPENSATED for by INSURANCE or otherwise, &
ii.
if @the time of the filing of the return (up to 6 months after the death), such losses have NOT BEEN
CLAIMED as a DEDUCTION for INCOME TAX purposes in an ITR, &
iii.
provided that such losses were INCURRED NOT later than the last day for the payment of the estate tax as
prescribed in Subsection (A) of Sec. 91.
2)
PROPERTY PREVIOUSLY TAXED

An amount equal to the VALUE specified below of any PROPERTY forming part of the GE situated in the PH
of any person who DIED w/in 5yrs prior to the death of the decedent or TRANSFERRED to the DECEDENT by
GIFT 5yrs prior to his death, where such property can be IDENTIFIED as
a. having BEEN RECEIVED by the decedent by
a) Gift
b) Bequest
c) Devise or
d) Inheritance,
b. Or having been AC QUIRED in EXCHANGE for PROPERTY so received:
100% of the value if the PRIOR DECEDENT died or PROPERTY was TRANSFERRED to the DECEDENT by
GIFT w/in 1yr prior to the death of the decedent
80% of the value if more than 1yr up to 2yrs
60% of the value if more than 2 yrs up to 3yrs
40% of the value if more than 3yrs up to 4yrs
20% of the value if more than 4yrs up to 5yrs.
These deductions shall be allowed only where

i.
a DONORS TAX or ESTATE TAX imposed under this Title was FINALLY DETERMINED & PAID by or on
behalf of such DONOR, or the ESTATE of such PRIOR DECEDENT as the case may be, &
ii.
only in the AMOUNT FINALLY DETERMINED as the value of such property in determining the value
of the gift, or the GE of such prior decedent &
iii.
only to the extent that the value of such property is INCLUDED in the decedents GE &
iv.
only if in determining the value of the estate of the prior decedent, NO DEDUCTION was allowable
under Par. 2 in respect of the property or properties given in EXCHANGE therefor.
Where a DEDUCTION was allowed of any mortgage or other lien in determining the DONORS TAX, or the
ESTATE TAX of the PRIOR DECEDENT, w/c was paid in whole or in part prior to the decedents death, then
the DEDUCTION ALLOWABLE under said Subsection shall be REDUCED by the amount so paid.
Such DEDUCTION allowable shall be REDUCED by an amount w/c bears the SAME RATIO to the amounts
allowed deductions under paragraphs 1 & 3 of this Subsection as the amount otherwise deductible under
said paragraph 2 bears to the value of the decedents estate.
Where the property referred to CONSISTS of 2/more items, the AGGREGATE value of such items shall be
used for the purpose of computing the deduction.
3)
TRANSFERS for PUBLIC USE

The amount of ALL bequests, legacies, devises or transfers to or for the use of the GOVT of the PH, or any
political subd, for EXCLUSIVELY PUBLIC PURPOSES.
4)
The FAMILY HOME

An amount equivalent to the CURRENT FMV of the decedents family home.
PROVIDED HOWEVER, that if said current FMV exceeds P1m the EXCESS shall be subject to ET.
As a sine qua non condition for the exemption or deduction, said family home must have been the
decedents family home as CERTIFIED by the Brgy. Captain of the locality.
5)
STANDARD DEDUCTION P1m
6)
MEDICAL EXPENSES
Medical expenses INCURRED by the decedent W/IN 1 YR PRIOR TO HIS DEATH w/c shall be duly
SUBSTANTIATED by receipts.
Provided, P500k maximum.
7)
AMOUNT RECEIVED by HEIRS under RA 4917

Any amount received by the heirs form the DECEDENTs ER as a consequence of death of the decedent-EE
in accdance w/ RA 4917 (Retirement benefits of ees of private firms).
Provided that such amt is INCLUDED in the GE of the decedent.
(B) DEDUCTIONS ALLOWED to NONRESIDENT ESTATES
In the case of a NR not a citizen of the PH, by DEDUCTING from the value of that part of his GE w/c @the time of his
death is SITUATED in the PH:
1) EXPENSES, LOSSES, INDEBTEDNESS & TAXES
That proportion of the deductions specified in (A) Par.1 w/c the value of such part bears to the value of his
entire GE wherever situated
2) PROPERTY PREVIOUSLY TAXED
An amt equal to the value specified below of any property forming part of the GE situated in the PH of any
person who DIED w/in 5yrs prior to the death of the decedent, or TRANSFERRED to the decedent by gift
w/in 5yrs prior to his death, where such property can be IDENTIFIED as
c. having BEEN RECEIVED by the decedent by
e) Gift
f)
Bequest
g) Devise or
h) Inheritance,
d. Or having been AC QUIRED in EXCHANGE for PROPERTY so received:
3)
TRANSFERS for PUBLIC USE

political subd, for EXCLUSIVELY PUBLIC PURPOSES
(C) SHARE in the CONJUGAL PROPERTY

The NET SHARE of the SURVIVING SPOUSE in the Conjugal Partnership Property (CPP) as DIMINISHED by the
obligations properly chargeable to such property shall, for the purpose of this section,
be DEDUCTED from the NET ESTATE of the decedent.
(D) MISCELLANEOUS PROVISIONS
NO DEDUCTION shall be allowed in the case of a NONRESIDENT not a citizen of the PH,
unless the EXECUTOR, ADMIN or anyone of the HEIRS as the case may be, INCLUDES in the RETURN required to be
filed under Sec 90 the value @ the time of his death of that part of the GE of the nonresident not situated in the
PH.
(E) TAX CREDIT for ESTATE TAXES PAID to a FOREIGN COUNTRY
1) In GENERAL
The tax imposed by this Title shall be CREDITED w/ the amounts of any ESTATE TAX imposed by the
authority of a FOREIGN COUNTRY.
2) LIMITATIONS on CREDIT
The AMOUNT of CREDIT taken under this Sec. shall be subject to each of the FF LIMITATIONS:
a) The amount of the CREDIT in respect to the TAX paid to any country shall NOT EXCEED the same
proportion of the tax against w/c such credit is taken, w/c the decedent net estate situated w/in
such country taxable under this Title bears to his ENTIRE NET ESTATE; &
b) The TOTAL AMOUNT of CREDIT shall NOT EXCEED the same proportion of the tax against w/c such
credit is taken, w/c the decedent net estate situated outside the PH taxable under this Title bears
to his ENTIRE NET ESTATE.
PROCEDURE for COMPUTING NET ESTATE & ESTATE TAX DUE

STEP 1:
Get the GROSS ESTATE
STEP 2:
SUBTRACT from the GE the ALLOWABLE DEDUCTIONS = NET ESTATE
STEP 3:
DEDUCT the net share of the surviving spouse from properties w/c
are conjugal/community & the family home allowance;
STEP 4: DEDUCT the P200k EXEMPTION (&other exemptions) as allowed by law =
TAXABLE NET ESTATE
STEP 5: APPLY the tax rates = ESTATE TAX
Gross estate (exclusive & conjugal/community)
Less: Allowable (ordinary & special) deductions
=
Estate after deductions
Less: Net share of surviving spouse in conjugal/community property (if

applicable)
=
Net Estate of the Decedent
Less: P200k (& other exemptions)
=
Net Taxable Estate
x
=
Tax Rate (Sec 84)

Estate Tax Due
Important:
1. The FUNERAL expenses & other ordinary deductions, not including the special
deductions, are SUBTRACTED from the CONJUGAL/COMMUNITY properties from w/c as
diminished shall be taken the o the surviving spouse.
2. The NET TAXABLE ESTATE is the difference bet the GE & the sum of the TOTAL
(ordinary & special) DEDUCTIONS (including exemptions) & the share of the
surviving spouse
3. If the NET ESTATE is less than P500k, the P200k exemption must be deducted to get
the taxable net estate. In the schedule, it is already deducted where the Taxable Net
estate is P500k or above; hence it should not be deducted anymore. Thus, using the
schedule, if the net estate is P400k, the tax is P10k (5% of P200k); if P600k, the tax is
P23k:
4. The FF deductions have CEILINGS:
Funeral expenses
Actual funeral expenses, or
Whichever is the
LOWEST
5% of the gross estate; or

P200k
Medical expenses
Actual medical expenses, or
Whichever is LOWER
P500k
Family home
FMV, or
Whichever is LOWER
P 1 million
5. The VALUE of the estate is determined @ the time of decedents death. Therefore,
taxes accruing to the property after the death is not allowable as a deduction.
Valuation of the gross estate
SEC. 88. DETERMINATION OF THE VALUE OF THE ESTATE. (A) USUFRUCT. - To determine 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.
(B) PROPERTIES. - The estate shall be APPRAISED at its FAIR MARKET VALUE as of the time of death. However, the
appraised value of real property as of the time of death shall be, WHICHEVER IS HIGHER of:
(1) The fair market value as determined by the Commissioner, or
(2) The fair market value as shown in the schedule of values fixed by the Provincial and City Assessors.
The properties comprising the gross estate shall be valued based on the FMV as of the
time of death.
In case of real property, the fair market value shall be:
1. The FMV as determined by the Commissioner; or
2. The FMV as shown in the schedule of values fixed by the Provincial and City
Assessors
o Whichever is HIGHER
In case of personal property recently acquired by the decedent, the purchase price may
indicate the FMV.
o In case of personal property not recently acquired, there should be some
evidence of the FMV.
For shares of stock, the FMV shall depend on whether the shares are isted or unlisted in
the stock exchange.
o If unlisted
Common shares based on their book value
Preferred shares based on their par value
o If listed
The mean between the highest and lowest quotation on the date of death;
If none, then the date nearest the death.
For use of usufruct, there 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.
Computation for the net estate

The basic equation to determine the net taxable estate is (gross estate deductions)
The complication arises when the decedent is married at the time of his death. We ll tackle
that later.
First, lets take a look at the deductions.
Deductions
The deductions from the gross estate are:
1. Ordinary deductions
a. Expenses, losses, indebtedness, taxes, etc:
i. Funeral expenses
ii. Judicial expenses of testamentary or intestate proceedings
iii. Claims against the estate
2. Court fees
3. Accountants fees
4. Appraisers fees
5. Clerk hire
6. Costs of preserving and distributing the estate
7. Costs of storing or maintaining property of the estate
8. Brokerage fees for selling property of the estate
Expenses on extrajudicial settlement of the estate are allowed as deductions. They

come within the meaning of administration expenses.
The notarial fee paid for the extrajudicial settlement is deductible since such
settlement effected a distribution of the decedents estate to his lawful heirs. (CIR
v CA & Pajonar)
1 In that case, the notarial fees and the guardianship fee of the attorney were
considered deductibles.
Expenditures incurred for the individual benefit of the heirs, devisees or legatees
are not deductible.
Expenses for the improvement and renovation of the decedents residential house
were allowed as a deductible. (Testate Estate of Felix de Guzman v de GuzmanCarillo)
Admin expenses should be those which are necessary for the management of the
estate, for protecting it against destruction or deterioration, and possible for the
production of fruits.
Attorneys fees paid by the heirs to their respective lawyers arising from conflicting
claims are not deductible as judicial expenses. These shall be separately borne by
them.
So, gross estate is made up of:

1. The decedents interests at the time of his death
2. Transfers made during his lifetime (in contemplation of death, revocable, and under a
GPA), and
3. Life insurance proceeds
4. Some other stuff required by law to be included in the gross estate in order to allow
deductions (claims against insolvent persons, unpaid mortgage, value of the family
home, and the retirement benefits under RA 4917)
Claims against the estate

c) For claims against the estate: Provided, That at the time the indebtedness was incurred the debt instrument was
duly notarized and, if the loan was contracted within three (3) years before the death of the decedent, the
administrator or executor shall submit a statement showing the disposition of the proceeds of the loan;
Claims means debts or demands of a pecuniary nature, which could have been enforced
against the deceased in his lifetime and could not have been reduced to simple money
judgments.
o In other words, if enforceable against him when he was alive, the obligations will be
claims against his estate when he shall be dead.
o So, an obligation that has prescribed during his lifetime, or that was unenforceable
against him, will not be a claim against his estate when he shall be dead.
Requisites:
1. The liability must represent a PERSONAL OBLIGATION OF THE DECEASED at the
time of his death (except unpaid obligations incurred incident to his death and
unpaid medical expenses classified as a deduction),
2. The liability was CONTRACTED IN GOOD FAITH and for ADEQUATE and FULL
CONSIDERATION,
3. The claim must be a DEBT OR CLAIM WHICH IS VALID in law and enforceable in
court
4. The indebtedness must NOT HAVE BEEN CONDONED by the creditor during the
lifetime of the decedent, or the actions to collect must NOT HAVE PRESCRIBED.
Regarding the 4th requisite, if the debts were condoned AFTER the decedents death, the
debts are deductible, following the date-of-death valuation rule. (Dizon v CTA)
If the claim arose out of a debt instrument, the debt instrument must be notarized.
1 EXCEPT for loans granted by financial institutions where notarization is not part of
the business practice or policy of the institution.
If the loan was contracted within 3 years before the death of the decedent, the admin or
executor must submit a statement showing the disposition of the proceeds of the loan.
If a monetary claim against the decedent did not arise out of a debt instrument, the
requirement of a notarized debt instrument does not apply.
There is no requirement to add the amount to the gross estate (as compared to claims
against insolvent persons/mortgage). This is a DIRECT DEDUCTION.
CLAIMS AGAINST the DECEDENTs ESTATE
Claims debts or demands of a pecuniary nature w/c could have been enforced against the
deceased in his lifetime & could have been reduced to simple money judgments. Claims
against the estate or indebtedness in respect of property may arise out of contract, tort or
operation of law.
REQUISITES to be DEDUCTIBLE:
1. They were contracted in GF & for an ADEQUATE & FULL consideration in money or
moneys worth;
2. They must REPRESENT UNPAID PERSONAL OBLIGATION of the deceased existing at the
time of his death;
3. They must be VALID & ENFORCEABLE
4. They must be REASONABLY CERTAIN in amount;
5. At the time the indebtedness was incurred, the DEBT INSTRUMENT was duly
NOTARIZED
& if the loan was contracted w/in 3yrs before the death of the decedent, the
admin/executor shall submit a STATEMENT showing the disposition of the proceeds of
the loan.
Hence, an indebtedness that has been condoned by the creditor or the action to collect w/c
has prescribed, may NOT be claimed as a deduction.
however, where a lien claimed against the estate was certain & enforceable on the
date of the decedents death, the fact that the creditor subsequently settled for a
lesser amount does not prevent the estate from deducting the entire amount of the
claim for estate tax purposes.
Unpaid obligations of the deceased incurred incident to his death are classified
under a different category of deduction (funeral or medical).
Unpaid taxes such as income & real estate taxes that accrued AFTER the death of
the decedent are NOT deductible as they are properly chargeable to the income of
the estate.
Claims against insolvent persons

(d) For claims of the deceased against insolvent persons where the value of decedent's interest therein is included in
the value of the gross estate;
Claims against insolvent persons are deductions from the gross estate
1. SUBJECT to the condition that the full amounts of the receivables are first included
in the gross estate.
The deduction from the gross estate will be the uncollectible portion.
CLAIMS AGAINST INSOLVENT PERSONS In order that claims of the deceased against
insolvent persons (bad debts) may be deductible, it is essential that:
1. The AMOUNT of said claims has been INITIALLY INCLUDED as part of his GT; &
2. The INCAP of the DEBTOR to PAY is PROVEN;
Since the debts are uncollectible, they are worthless, & it is therefor both unfair &
unreasonable for the heir to pay taxes on them.
Unpaid mortgage or indebtedness on property
e) For UNPAID MORTGAGES upon, or any INDEBTEDNESS in respect to, PROPERTY where the value of the DECEDENTS
INTEREST therein, undiminished by such mortgage or indebtedness, is INCLUDED in the value of the GE,
but NOT including any
iv.
INCOME TAX upon income received after the death of the decedent, or
v.
PROPERTY TAXES not accrued before his death, or
vi.
any ESTATE TAX.
The DEDUCTION herein allowed in the case of claims against the estate, unpaid mortgages, or any
indebtedness, shall, when founded upon a PROMISE or AGREEMENT, be LIMITED to the EXTENT that they were
CONTRACTED BONA FIDE & for an ADEQUATE & FULL CONSIDERATION in money or moneys worth.
When a person leaves property encumbered by a mortgage or indebtedness, his gross estate must include the fair
market value of the property, undiminished by the mortgage or indebtedness.
The mortgage or indebtedness will be claimed as a deduction from the gross estate.
1 Pique died leaving real property with a FMV of P1m, subject to a mortgage in the
amount of P600k. Before he can deduct the P600k, he has to include the total FMV
of his property to the gross income.
If the loan is merely an accommodation loan, where the proceeds of the loan went to
another person, the value of the unpaid loan must be included in the receivable of the
estate.
In the cases of claims against insolvent persons and unpaid mortgage/indebtedness on
property, it is imperative that the values of each are first added to the gross estate.
These are called ZERO-SUM COMPUTATIONS. They dont really benefit the heirs
because these transactions werent supposed to be part of the gross estate anyway.
Taxes
Taxes are deductions from the gross estate if such taxes accrued prior to the decedents
death.
Those that accrued after the decedents death are not deductions from gross estate.
These taxes CANNOT be deducted:
1. Income tax on income received after death
2. Property taxes not accrued before death
3. Estate tax
CONDITIONS: - in order that any unpaid mortgage indebtedness of a decedent may be
deducted, the ff must be complied w/:
1. FMV of the property mortgaged (without deducting the mortgage indebtedness) has
been INCLUDED as part of the GE;
2. The mortgage indebtedness was contracted in GF & for an ADEQUATE & FULL
CONSIDERATION in money/moneys worth.
Example: X, decedent, mortgaged during his lifetime his real property worth P200k to Y to
secure an indebtedness of P150k, w/c remains unpaid at his death.
The value of the real property (P200k) should be included first in the GE in order that the
P150k may be deducted.
However, where the MORTGAGOR is a NRA, indebtedness secured by mortgage of real

property situated OUTSIDE the PH may not be deducted where such property is not
includible in the GE.
UNPAID TAXES taxes owed by the decedent & unpaid at the time of death, being debts in
favor of the GOVT, are also DEDUCTIBLE as a claim against the estate.
except: The ff taxes are chargeable to the INCOME of the ESTATE.
1. Income taxes upon income received AFTER the death
2. Property taxes not accrued BEFORE his death
3. Any estate tax due from the TRANSMISSION of his estate.
Losses
There shall also be deducted losses incurred during the settlement of the estate arising from fires, storms, shipwreck,
or other casualties, or from robbery, theft or embezzlement, when such losses are not compensated for by insurance
or otherwise, and if at the time of the filing of the return such losses have not been claimed as a deduction for the
income tax purposes in an income tax return, and provided that such losses were incurred not later than the last day
for the payment of the estate tax as prescribed in Subsection (A) of Section 91.
Losses are deductible from the gross estate if:

a. Arising from fire, storm, shipwreck, or other casualty, robbery, theft or
embezzlement
b. Not compensated by insurance or otherwise
c. Not claimed as a deduction in an income tax return of the estate subject to
income tax
d. Occurring during the settlement of the estate, and
e. Occurring before the last day for the payment of the estate tax (6 months after
the decedents death, or the allowed extension)
Example: Dude died January 1, 2010. A fire razed his house on March 1, 2010. His
estate was settled January 1, 2012. He can claim a deduction (within 6 months!)
Dude died January 1, 2010. A fire razed his house on January 1, 2011. He
cant claim a deduction.
CASUALTY LOSSES include all losses incurred during the settlement of the estate arising
from fires, storms, shipwreck or other casualties, or from robbery, theft or embezzlement.
REQUISITES for DEDUCTIBILITY:
1. There must be a LOSS arising from any of the causes given above;
2. Such loss is NOT COMPENSATED for by insurance or otherwise;
3. Such loss has NOT BEEN CLAIMED as a DEDUCTION for INCOME TAX purposes;
4. The VALUE of the property lost must have been INCLUDED in the GE.
Transfers for public use
(3) TRANSFERS FOR PUBLIC USE. - The amount of all the bequests, legacies, devises or transfers to or for the use of
the Government of the Republic of the Philippines, or any political subdivision thereof, for exclusively public purposes.
Transfers for public use - mean dispositions in a last will and testament, or a transfer to
take effect after death, in favor of the GOVERNMENT of the Philippines, or any political
subdivision thereof, for exclusively PUBLIC PURPOSES.
You can deduct the value of the property transferred to the government.
Transfer must be TESTAMENTARY in character. Oral transfers are NOT deductible.
VANISHING DEDUCTIONS
An amount equal to the VALUE specified below of any PROPERTY forming part of the GE situated in the PH of
any person who DIED w/in 5yrs prior to the death of the decedent or TRANSFERRED to the DECEDENT by
GIFT 5yrs prior to his death, where such property can be IDENTIFIED as
e. having BEEN RECEIVED by the decedent by
i)
Gift
j)
Bequest
k) Devise or
l)
Inheritance,
f.
Or having been AC QUIRED in EXCHANGE for PROPERTY so received:
These deductions shall be allowed only where

v.
a DONORS TAX or ESTATE TAX imposed under this Title was FINALLY DETERMINED & PAID by or on
behalf of such DONOR, or the ESTATE of such PRIOR DECEDENT as the case may be, &
vi.
only in the AMOUNT FINALLY DETERMINED as the value of such property in determining the value of
the gift, or the GE of such prior decedent &
vii.
only to the extent that the value of such property is INCLUDED in the decedents GE &
viii.
only if in determining the value of the estate of the prior decedent, NO DEDUCTION was allowable
under Par. 2 in respect of the property or properties given in EXCHANGE therefor.
Where a DEDUCTION was allowed of any mortgage or other lien in determining the DONORS TAX, or the
ESTATE TAX of the PRIOR DECEDENT, w/c was paid in whole or in part prior to the decedents death, then
the DEDUCTION ALLOWABLE under said Subsection shall be REDUCED by the amount so paid.
Such DEDUCTION allowable shall be REDUCED by an amount w/c bears the SAME RATIO to the amounts
allowed deductions under paragraphs 1 & 3 of this Subsection as the amount otherwise deductible under
said paragraph 2 bears to the value of the decedents estate.
Where the property referred to CONSISTS of 2/more items, the AGGREGATE value of such items shall be
used for the purpose of computing the deduction.
Property may change hands within a very short period of time by reason of the early death
of the owner who received it by inheritance or by donation (gift).
To provide relief to the burdened taxpayer, vanishing deductions are allowed to reduce the
gross estate.
Vanishing deductions are allowed when:
a. The present decedent DIED within 5 years from receipt of the property from a prior
decedent or donor;
b. The PROPERTY on which the vanishing deduction is being claimed must be LOCATED
IN THE PH
c. The PROPERTY must have formed PART of the taxable ESTATE of the PRIOR
DECEDENT, or of the taxable GIFT of the DONOR
d. The ESTATE TAX on the PRIOR SUCCESSION or the DONORS TAX on the GIFT must
have been FINALLY DETERMINED & PAID
e. The PROPERTY must be IDENTIFIED as the one RECEIVED from the PRIOR DECEDENT
OR DONOR, or something ACQUIRED IN EXCHANGE therefor
F. NO VANISHING DEDUCTION on the property was allowable to the estate of the PRIOR
decedent
HOW DO WE COMPUTE?
Step 1: Get the basis. Either the value of the property in the prior estate/value used for
donors tax purposes OR the value of the property in the present estate, whichever is
LOWER.
Step 2: The Step 1 value will be reduced by any payment made by the present decedent on
any mortgage or lien on the property (when such mortgage/lien was used as a
deduction on the prior dead guys estate, or gift of the donor)
Step 3: The Step 2 value shall be further reduced by:
Step 2 value
x
Expenses, losses, indebtedness, taxes and transfers for
Gross Estate
public use
This is done to prevent double deduction.
Step 4: Look at the chart below and multiply to get the value which you can actually deduct.
%
If received by inheritance or gift
100
Within one year prior to death of the decedent
80
More than one year but not more than two years
60
More than two years but not more than 3 years
40
More than 3 years but not more than 4 years
20
More than 4 years but not more than 5 years
Example
Che inherited land from his pop with a fmv of P500k when inherited. Two and a half
years later, Che died. The FMV of the land was P600k at that time. The gross estate, on
which the land was part, was P2m. deductions from the gross estate (not including the
family home, medical expenses, standard deduction or RA 4917 receivable) amounted
to P400k. Whats the vanishing deduction?
Step 1: Get the lower value. - P500k
Step 2: No mortgage mentioned, so
P500k
Step 3: P500k
x
P400k =
P100k
P2m
Basis of the vanishing deduction (500k-100k) = P400k
Vanishing deduction (60% of P400k)
= P240
VANISHING DEDUCTION of PROPERTY PREVIOUSLY TAXED

INHERITED or DONATED PROPERTY PREVIOUSLY TAXED commonly referred to as
VANISHING DEDUCTION, is an amount allowed to reduce the taxable estate of a decedent,
where property:
a. RECEIVED by him from a PRIOR DECEDENT by gift, bequest, devise or inheritance, or
b. TRANSFERRED to him by gift, has been the object of previous transfer taxation.
CONDITIONS:
1. There are 2 deceased persons & the 1st is the donor; &
2. The 2nd decedent DIES w/in 5yrs AFTER the death of the prior decedent, or
in case of GIFT, the decedent-donee dies w/in the same period after the date of the
gift.
RATE of DEDUCTION the rate gradually diminishes & entirely vanishes depending on the
time interval between the 2 successive transfers.
The vanishing deduction is allowable to the GE situated in the PH of a resident or
Filipino decedent as well as to the GE of a NRA decedent.
REQUISITES for VANISHING DEDUCTION:

1. DEATH the present decedent died w/in 5yrs from the date of death of the prior
decedent or date of gift;
2. IDENTITY of the property the property can be identified as
a. the one received from prior decedent or from the donor, or
b. as the property acquired in exchange for the original property so received.
3. INCLUSION of the property the property must have formed part of the GE situated in
the PH of the PRIOR DECEDENT, or have been INCLUDED in the total amount of the
gifts of the donor made w/in 5yrs prior to the present decedents death.
4. PREVIOUS TAXATION of the property the estate tax on the prior succession, or the
donors tax on the gift, must have been FINALLY DETERMINED & PAID by the prior
decedent or by the donor, as the case may be, &
5. NO PREVIOUS VANISHING DEDUCTION on the property no such deduction on the
property or the property given in exchange therefor, was allowed in determining the
value of the net estate of the prior decedent.
LIMITATIONS upon the AMOUNT of DEDUCTION ALLOWABLE
1. VALUE of PROPERTY the deduction is limited by
a. the value of the property previously taxed or
b. the aggregate value of such property if more than one item, as finally
determined for the purpose of the prior estate tax (or gift tax) or
c. the value of such property in present decedents GE,
whichever is LOWER
2. DEDUCTION for MORTGAGE or OTHER LIEN the initial value in #1 above shall be
REDUCED by the total amount paid, if any, by the present decedent, on any mortgage
or other lien on the property where a deduction was allowed, by reason of the
payment, of such mortgage or other lien from the GE of the prior decedent, or gift of
the donor, in determining the estate tax of the prior decedent or donors tax.
3. DEDUCTION for EXPENSES, etc the value as reduced in #2 above shall be further
reduced by an amount w/c bears the same ratio to the amounts allowed as deductions
for
a. Expenses, losses, indebtedness & taxes (ordinary deductions) &
b. Transfers for public use
As the amount otherwise deductible for property previously taxed bears to the
value of the decedents GE &
4. PERCENTAGE of DEDUCTIONS The vanishing deduction shall be the VALUE (final
basis) in #3 multiplied by the ff percentage of deduction:
%
If received by inheritance or gift
Within one year prior to death of the
100
decedent
More than one year but not more than
80
two years
More than two years but not more than 3
60
years
More than 3 years but not more than 4
40
years
More than 4 years but not more than 5
20
years
COMPUTATION:
1)
Value Taken of PPT
Less:
Mortgage debt (or other lien) Paid, if any (1st deduction)
=
Initial basis
2)
Initial basis
x
Expenses, etc =
Value of GE
& transfer for
of present decedent
public purposes
(2nd deduction)
3)
Less:
=
x
=
Initial basis
2nd deduction
Final basis
Rate of deduction (86 A,2)
Vanishing deduction
*If there is no mortgage debt paid, the value taken of PPT would be the initial basis.
*If only part of the mortgage is paid, then only that part is deductible.
SPECIAL DEDUCTIONS
Family Home
(4) THE FAMILY HOME. - An amount equivalent to the current fair market value of the decedent's family home:
Provided, however, That if the said current fair market value exceeds One million pesos (P1,000,000), the EXCESS
SHALL BE SUBJECT TO ESTATE TAX. As a sine qua non condition for the exemption or deduction, said family home
must have been the decedent's family home as CERTIFIED by the barangay captain of the locality.
The deduction is an amount equivalent to the current FMV of the decedents family
home.
o BUT the maximum is P1m only.
Do not forget to add the amount of the family home to the gross estate. Kasama yan!
1 Zero-sum? Yes, but only to the extent of P1m. Lugi yung rich folk.
The deduction will be allowed when the famly home is certified to be as such by the
barangay captain of the locality where it is located.
For a person married at the time of death, and who was under a system of conjugal
partnership or absolute community, the deduction for the family home is of the FMV,
but should not exceed P1m, if such family home was conjugal property or community
property. (Remember this!)
Family Home the dwelling HOUSE, including the LAND on w/c it is situated, where the H&W
or an unmarried person who is the head of the family & members of their family reside, as
CERTIFIED by the Brgy Captain of the locality.
A person may constitute only one family home.
AMOUNT DEDUCTIBLE from the GE: - amount equivalent to the current FMV of the decedents
family home, the total value of w/c has been included as part of his GE. However, if the said
FMV exceeds P 1 million, the EXCESS shall be subject to estate tax.
REQUISITES for DEDUCTIBILITY:
1. The family home must be the ACTUAL residential home of the decedent & his family @
the time of his death, as CERTIFIED by the Brgy Capt of the locality;
2. The TOTAL VALUE of the family home must be INCLUDED as part of the GE;
3. Allowable deduction must be in an amount equivalent to the current FMV as declared
or included in the GE or the extent of the decedents interest (whether CP or AC
property), whichever is LOWER, but NOT exceeding P 1 million.
Standard deduction
(5) STANDARD DEDUCTION. - An amount equivalent to One million pesos (P1,000,000).
Do not forget to deduct P1m every time! Its standard!

Medical expenses
(6) MEDICAL EXPENSES. - Medical Expenses incurred by the decedent within one (1) year prior to his death
which shall be duly substantiated with receipts: Provided, That in no case shall the deductible medical expenses
exceed Five Hundred Thousand Pesos (P500,000).
All medical expenses incurred (whether paid or unpaid) within ONE YEAR before the
death of the decedent shall be allowed as a deduction, PROVIDED,
o that the same are duly substantiated with official receipts, and
o The total amount, whether paid or unpaid, does NOT exceed P500k.
If its more than P500k, can you deduct it as a claims against the estate? No. See
requisites of claims against the estate.

MEDICAL EXPENSES
MAXIMUM AMOUNT All medical expenses incurred (whether paid or unpaid) w/in one yr
before the death of the decedent shall be allowed as a deduction, PROVIDED that the
same are duly substantiated w/ receipts & other documents.
The TOTAL AMOUNT thereof, whether paid/unpaid, must NOT EXCEED P500k.
Any amount of medical expenses incurred w/in one year before the death in EXCESS of
500k shall no longer be allowed as a deduction. Neither can any unpaid amount
thereof in excess of the 500k threshold nor any unpaid amount for medical expenses
incurred prior to the one-yr period from the date of death be allowed to be deducted
from the GE as claim against the estate.
CONDITIONS Medical expenses incurred by the decedent to be deductible form his GE:
1. They were INCURRED w/in one year prior to his death;
2. Duly substantiated w/ receipts
3. Shall not exceed 500k.
Amounts receivable under RA 4917
(7) AMOUNT RECEIVED BY HEIRS UNDER REPUBLIC ACT NO. 4917. - 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: Provided, That such amount is included in the gross estate of the decedent.
Retirement benefits received by employees of private firms in accordance with a

reasonable benefit plan maintained by the employer are EXEMPT from all taxes,
provided that the retiring employee has been in the services of the same employer for
at least 10 years and is not less than 50 years old at the time of his retirement.
The amount must:
o have been received by the heirs of the decedent-employee as a consequence of
the latters death, and
o included in the gross estate of the descendent. (important!)
Deductions from the gross estate with ceilings
Funeral expenses
Actual funeral expenses, or
Whichever is the LOWEST
5% of the gross estate; or
P200k
Medical expenses
Actual medical expenses, or
Whichever is LOWER
P500k
Family home
FMV, or
Whichever is LOWER
P1m
DEDUCTIONS
In case of a CITIZEN/RESIDENT of the PH, the deductions from the GE may be classified as
follows:
1. ORDINARY DEDUCTIONS they consist of expenses, losses, indebtedness & taxes or
more specifically:
i.
Funeral expenses (not to exceed P200k)
ii.
Judicial expenses of proceedings;
iii.
Claims against the estate;
iv.
Claims against insolvent persons;
v.
Unpaid mortgages
vi.
Unpaid taxes &
vii.
Casualty losses (86 A,1 )
2. SPECIAL DEDUCTIONS other deductions provided by law
i.
Property previously taxes (Vanishing Deduction)
ii.
Transfers for public use
iii.
Value of Family Home (not to exceed P 1 million)
iv.
Standard deduction (P 1 million)
v.
Medical expenses (not to exceed P500k) &
vi.
Retirement benefits received by heirs under RA 4917 (Sec 86 A, 2-7)
3. SHARE of SURVIVING SPOUSE it refers to the NET () share of the surviving

spouse in the CP or AC Property as diminished by the obligations property chargeable
to the property (86 C).
FUNERAL EXPENSES actual funeral expenses, whether paid/unpaid those actually
incurred in connection w/ the interment/burial of the deceased & paid from the estate of the
deceased. Must be duly supported by receipts/invoices/other evidence.
A. DEDUCTIBLE:
1) The mourning apparel of the surviving spouse & unmarried minor children bought &
used on the occasion of the burial
2) Expenses of the wake, including food & drinks
3) Publication charges for death notices
4) Telecommunication expenses in informing relatives
5) Cost of burial plot, tombstones, monument or mausoleum their upkeep. In case
deceased owns a family estate/several burial plots, only the value corresponding to the
ploy where he is buried is deductible;
6) Interment &/or cremation fees & charges
7) All other expenses incurred for the performance of the rites & ceremonies incident to
interment.
* If the deceased is one of the spouses, the funeral expenses including the construction of a
tombstone shall be chargeable to the CP/AC Property.
B. NOT DEDUCTIBLE expenses incurred after the interment such as for prayers,
entertainment or the like. Any portion of the funeral & burial expenses borne or defrayed
by relatives & friends of the deceased, such as contributions.
JUDICIAL EXPENSES of TESTAMENTARY or INTESTATE PROCEEDINGS
A. DEDUCTIBLE those incurred in the inventory-taking of assets comprising the GE,
including their administration & collection, payment of debts & distribution of the
property to persons entitled to the estate.
In short, these deductible items are expenses incurred during the settlement of
the estate but NOT beyond the last day prescribed by law or the extension
thereof, for the filing of the estate tax return.
Any unpaid amount under judicial expenses should be supported by a statement
of account issued & signed by the creditor.
In case the estate is settled EXTRAJUDICIALLY a reasonable amount for legal
fees & accounting expenses may be allowed.
B. NOT DEDUCTIBLE on the other hand, expenses NOT ESSENTIAL to the proper
settlement of the estate but incurred for the individual benefit of the heirs, legatees or
devisees are NOT allowed as deductions
Deductions for a NON-RESIDENT, NOT CITIZEN of the Philippines
(B) DEDUCTIONS ALLOWED to NONRESIDENT ESTATES
In the case of a NR not a citizen of the PH, by DEDUCTING from the value of that part of his GE w/c @the time of
his death is SITUATED in the PH:
4) EXPENSES, LOSSES, INDEBTEDNESS & TAXES
That proportion of the deductions specified in (A) Par.1 w/c the value of such part bears to the value of
his entire GE wherever situated
An amt equal to the value specified below of any property forming part of the GE situated in the PH of
any person who DIED w/in 5yrs prior to the death of the decedent, or TRANSFERRED to the decedent by
gift w/in 5yrs prior to his death, where such property can be IDENTIFIED as
g. having BEEN RECEIVED by the decedent by
m) Gift
n) Bequest
o) Devise or
p) Inheritance,
h. Or having been AC QUIRED in EXCHANGE for PROPERTY so received:
100% of the value if the PRIOR DECEDENT died or PROPERTY was TRANSFERRED to the DECEDENT
by GIFT w/in 1yr prior to the death of the decedent

6) TRANSFERS for PUBLIC USE
political subd, for EXCLUSIVELY PUBLIC PURPOSES
A non-resident decedent who was not a citizen of the Philippines at the time of death, with
properties within and outside the Philippines, is subject to tax only on his estate within the
Philippines.
Due to this, the estate in the Philippines is allowed deductions for:
1. Expenses, losses, indebtedness, taxes, etc, computed by:
Gross Estate, Philippines x
World expenses, losses, indebtedness,
Gross Estate, World
taxes, funeral expenses, judicial
expenses, etc
It does not matter where the expenses are paid or incurred. On the total of the
items, the formula provided by law will be applied.
Moreover, it also doesnt matter if you can pinpoint specifically where the
expenses were incurred, you have to use the formula.
2. Transfers for public use of property in the Philippines
3. Vanishing deduction on property in the Philippines.
A non-resident, not citizen is NOT allowed:
1. Deduction for family home
2. Standard deduction
3. Deduction for medical expenses
4. Deduction for amount receivable under RA 4917
DEDUCTIONS ALLOWED to NONRESIDENT ESTATES
A. SAME DEDUCTIONS as to CITIZENS & RESIDENTS The deductions allowed to
estates of a deceased NRA, w/c @the time of his death are SITUATED in the PH, are the
ff:
1. ELIT (expenses, losses, indebtedness & taxes)
2. PPT (property previously taxed)
3. TPU (transfers for public use).
The NET SHARE of the surviving spouse in the CP/AC Property as diminished by obligations
properly chargeable to such property shall be DEDUCTED from the NET ESTATE of the
decedent.
B. As to ELIT in the case however of the deductions for ELIT, the amount of the
allowable deduction is LIMITED only to that proportion of such deductions w/ the value
of such part of his GE w/c at the time of his death, is SITUATED in the PH, bears to the
value of his ENTIRE GE wherever situated. (86, B,1 ).
PH Gross estate
Entire GE wherever
Situated
Deductions claimed =
for ELIT
Allowable deduction of
NR Estate
C. REQUIREMENT for DEDUCTION: - it is indispensable as a prerequisite to the deduction,

in case of NRA, that the executor/admin or anyone of the heirs, as the case may be,
INCLUDES in the RETURN required to be filed under Sec 90, the value @the time of his
death of that part of the GE of the NR NOT SITUATED in the PH. This requirement is
necessary to determine the RATABLE PORTION of the deduction for ELIT.
If no statement of the net asset situated outside the PH is attached to the return, then
no deduction for ELIT shall be allowed.
MISCELLANEOUS PROVISIONS. - No deduction shall be allowed in the case of a nonresident not a citizen of the
Philippines, unless the executor, administrator, or anyone of the heirs, as the case may be, includes in the return
required to be filed under Section 90 the value at the time of his death of that part of the gross estate of the
nonresident not situated in the Philippines.
No deduction shall be allowed for a non-resident alien unless the executor, administrator
or anyone of his heirs, includes in the return required to be filed under Sec. 90 the value at
the time of the decedents death that part of his gross estate not situated in the
Philippines. (Needed for the formula specified above)
Net Estate Computation of Married Persons

Section 85 (H) CAPITAL OF THE SURVIVING SPOUSE. - The capital of the surviving spouse of a decedent shall
not, for the purpose of this Chapter, be deemed a part of his or her gross estate.
Share in the CONJUGAL PROPERTY

Section 86 (C) SHARE IN THE CONJUGAL PROPERTY. - the net share of the surviving spouse in the conjugal
partnership property as diminished by the obligations properly chargeable to such property shall, for the purpose of
this Section, be DEDUCTED from the net estate of the decedent.
Gross estate
The gross estate of a decedent who was married and who was under the system of
absolute community of property during the marriage consists of:
1. The EXCLUSIVE properties of the decedent, and
2. The
COMMUNITY
properties
The EXCLUSIVE PROPERTIES are:
1. Property
acquired
during
the
marriage
by
GRATUITOUS
TITLE
(inheritance/donation) by either spouse, and the FRUITS as well as the INCOME
thereof
Unless the donor, testator or grantor states that they will be part of the
community property
2. Property for PERSONAL & EXCLUSIVE USE of either spouse
But jewelry will form part of the community property
3. Property ACQUIRED BEFORE the MARRIAGE by either spouse who have
LEGITIMATE DESCENDANTS by a former marriage, and the FRUITS as well as the
INCOME of such property
COMMUNITY PROPERTY will consist of all properties owned by the spouses at the time of
the celebration marriage or acquired thereafter (presumed to belong to the community)
o The family home constituted by the husband and wife is community property.
Proceeds of life insurance taken out by the decedent on his own life, when includible in the
gross estate, will be exclusive property if the premiums were paid out of exclusive funds.
o They will be community property if the premiums were paid out of community funds.
A claim against an insolvent person will be included in the gross estate as exclusive or
community depending on whether the claim is for exclusive or community property.
DEDUCTIONS FROM GROSS ESTATE
The same rules and ceilings which were discussed on the part of deductions will apply
The following are the COMMUNITY/CONJUGAL DEDUCTIONS:
1. Funeral expenses and judicial expenses
2. Special deductions of
a. family home,
b. standard deduction,
c. medical expenses and
d. amounts receivable under RA 4917
3. Those obligations contracted during the marriage which are presumed to have
benefited the family (debts incurred during the marriage, etc)
The following are EXCLUSIVE DEDUCTIONS:
1. Debts before the marriage by either spouse that did NOT redound to the benefit of
the family
2. SUPPORT of the ILLEGITIMATE CHILDREN of either spouse
3. Liabilities incurred by either spouse of a CRIME
So, how do we get the net estate of a married person?

Step 0: Know which are community/conjugal and which are exclusive
Step 1: Get the net conjugal estate (gross conjugal estate conjugal deductions)
Step 2: Get the decedents share (net conjugal estate 2)
Step 3: Get the gross estate of the decedent (decedents share + exclusive properties)
Step 4: Get his net estate (gross estate of the decedent exclusive & special deductions)
Step 5: Once you reach step 4, yun na yon! Thats the decedents taxable estate.
Mao, a citizen and resident of the Philippines, was married under the system of absolute
community of property during the marriage. He died leaving the following properties and
obligations:
Real properties inherited from his father 10 years ago and before the marriage
P200k
Real property received as a gift from the mother 7 years ago,
during the marriage
P1.115m
Cash income from the property received as gift
P5k
Real property owned by Mrs. Mao before the marriage
P300k
The family home
P500k
Medical expenses
P70k
Funeral expenses
P50k
Judicial expenses for settlement of estate
P100k
Obligations incurred during the marriage
P150k
Debt of Mao before the marriage
P120k
Step 0: Determine what are conjugal/community and what are exclusive
Step 1: Get the net conjugal estate (gross conjugal estate conjugal deductions)
(P200k1 + P300k2 +500k3) - (P50k4 + P100k5 + P150k6) = P700k
Step 2: Get the decedents share (Step 1s NCE/2)

P700k/2 = P350k
Step 3: Get the gross estate of the decedent (decedents share + exclusive properties)
P350k + P1.115m7 + P5k8 = P1.47m
Step 4: Get his net estate (Gross estate decedent exclusive deductions & special
deductions)
P1.47m (P120k9 + P250k10 + P70k11 + P1m12) = P30k
1
Real property inherited from the father

Real property owned by Mrs. Mao before the marriage
3
Value of the family home
4
Funeral expenses
5
Judicial expenses
6
Obligations incurred during the marriage
7
Real property gift from mom during marriage
8
Income from the gift
9
debt before marriage
10
the value of the family home
11
Medical expenses
12
Standard deduction! Dont forget!
2
Step 5: The net taxable estate is P30k. Check the schedular rate, and youll find out that his
estate is tax exempt!
Tips:
Do not forget the limitations and ceilings imposed by the general rule of deductions.
o Family home only up to P1m.
o Funeral expenses only up to P200k whatevers lower of the actual expense and 5%
of the gross estate (exclusive + conjugal)
o Medical expenses not to exceed P500k
Remember that only of the family home is counted as a special deduction (since half
belongs to the still living spouse).
o And also remember that if the value of the family home (once halved) is above P1m,
the deduction allowed is still P1m because of the ceiling imposed by law.
Dont forget to subtract the standard deduction. Its not usually given as part of the facts
but you still have to deduct that.
Medical expenses are special deductions and are deducted from the gross estate of the
decedent. Funeral deductions are conjugal deductions and are deducted from the gross
conjugal/community estate.
EXCLUSIONS:
The exclusive property of the surviving spouse is NOT deemed part of the GE of the decedent
spouse. If the decedent was married, his GE would consist of his exclusive properties & his
share in the conjugal/community properties (85 H).
EXCLUSIVE PROPERTY of EACH SPOUSE
A. ABSOLUTE COMMUNITY of PROPERTY in the absence of marriage settlement
executed before the celeb of the M or when the regime agreed upon is void, System
of ACP shall govern
a. COMMUNITY PROPERTY shall consist of
i. ALL the property OWNED by the spouses @the time of the celeb of the
Marriage or
ii. ACQUIRED thereafter
b. EXCLUDED from the Community Property
i. Property ACQUIRED by GRATUITOUS TITLE by either spouse, its FRUITS &
INCOME, if any
it is expressly provided by the donor/testator/grantor that they shall
form part of the community property
ii. Property for PERSONAL & EXCLUSIVE USE of either spouse
jewelry part of community property
iii. Property ACQUIRED before the marriage by either SPOUSE who has
LEGIT DESCENDANTS by a FORMER MARRIAGE & its FRUITS & INCOME

* Property ACQUIRED during the M presumed to belong to the community
unless it is proved that it is excluded
B. CONJUGAL PARTNERSHIP of GAINS
a. CONJUGAL PROPERTIES
i. the PROCEEDS, PRODUCTS, FRUITS & INCOME from their SEPARATE
properties, &
ii. those ACQUIRED by either/both spouses through their EFFORTS or by
CHANCE,
*Upon dissolution of the M or partnership, the NET GAINS/benefits obtained by
either/both spouses shall be DIVIDED EQUALLY between them.
b. EXCLUSIVE PROPERTY of EACH SPOUSE
i. That w/c is BROUGHT to the M as his/her OWN;
ii. That w/c each ACQUIRES during the M by GRATUITOUS TITLE;
iii. That w/c is ACQUIRED by R of REDEMPTION, by BARTER or by EXCHANGE
w/ property belonging to only one of the spouses;
iv. That w/c is PURCHASED w/ EXCLUSIVE MONEY of the W/H.
Property bought on INSTALLMENTS paid partly from funds of either/both spouses &
partly from conjugal funds belongs to the BUYER/s if FULL OWNERSHIP was
VESTED before the M, subject to REIMBURSEMENT advanced by the CP Funds or by
either/both spouses.
Whenever an AMOUNT/CREDIT PAYABLE within a period of time belongs to one of
the spouses, the sums collected during the M in partial payments or by
installments on the principal are considered the EXCLUSIVE property of the spouse.
However, interests falling due during the M on the principal belong to the CP
All property ACQUIRED during the M whether the acquisition appears to have been
made, contracted or registered in the name of one/both spouses, is presumed to
belong to the CP Unless it be proved that it pertains exclusively to the h/w.
C. SEPARATION of PROPERTY may refer to present or future property or both. It may
be total/partial. In partial, the property not agreed upon as separate shall pertain to
absolute community. To each spouse shall belong all earnings from his/her profession,
business, industry & all fruits (natural, civil, industrial) due or received during the M
from his/her separate property.
NET SHARE in the CONJUGAL (or COMMUNITY) PROPERTY of the SURVIVING SPOUSE
(p. 76)
A. DEDUCTIBLE from the NET ESTATE the net share of the surviving spouse in the CP
or AC Property as diminished by the obligations properly chargeable to such property is
also DEDUCTIBLE from the net estate of the decedent.
In other words, where the decedent was married:
1. The CP or AC Property shall first be determined
2. Then, all obligations (ordinary deductions) properly chargeable to the CP/AC
property shall be deducted from it.
3. From the balance (Net Conjugal/community estate), the NET SHARE ( thereof)
of the surviving spouse shall be deducted from the net estate of the decedent
for purposes of imposing the estate tax.
4. The amount of the SPECIAL DEDUCTIONS is NOT SUBTRACTED from the value of
the CP/AC property. It is not taken into account in determining the Net
Conjugal/Community Estate from w/c is deducted the share of the surviving
spouse.
B. WHERE DECEASED SPOUSE was a FILIPINO CITIZEN or RESIDENT or NRA
a. Deceased spouse was a RESIDENT/CITIZEN of the PH the net share of the
surviving spouse in real property or personal property situated ABROAD
belonging to the conjugal property shall be DEDUCTED from the GE.
b. Deceased spouse was a NRA only the share in real & tangible personal
property situated in the PH & intangible property w/ SITUS in the PH unless
exempted on the basis of reciprocity, are DEDUCTIBLE.
In either case, the value of the CP/AC property must have been INITIALLY INCLUDED
in the GE.
Exemption from Estate Tax

SEC. 87. EXEMPTION OF CERTAIN ACQUISITIONS AND TRANSMISSIONS. - The following shall NOT be taxed:
(A) The MERGER OF USUFRUCT in the owner of the naked title;
(B) The transmission or delivery of the inheritance or legacy by 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 desire of the predecessor; and
(D) All bequests, devises, legacies or transfers to SOCIAL WELFARE, CULTURAL and CHARITABLE INSTITUTIONS, no part of
the net income of which insures to the benefit of any individual:
Provided, however, That NOT more than thirty percent (30%) of the said bequests, devises, legacies or transfers shall
be used by such institutions for administration purposes.
The following are EXEMPT from ESTATE TAX:

1. MERGER of USUFRUCT in the owner of the naked title
2. TRANSMISSION or delivery of the inheritance or legacy by the fiduciary heir or legatee
to the FIDEICOMMISARY.
3. TRANSMISSION from the 1st heir, legatee or donee in favor of ANOTHER BENEFICIARY in
accordance with the desire of the predecessor, and
4. All bequests, devises, legacies or transfers to SOCIAL WELFARE, CULTURAL &
CHARITABLE INSTITUTIONS, no part of the net income inures to the benefit of any
individual, PROVIDED that NOT MORE THAN 30% of the said bequests, devises,
legacies or transfers shall be USED by such institutions for the ADMINISTRATION
purposes
* The above specific exemptions are IN ADDITION to the P200k exemption under 84.
Tax Credit for Foreign Estate Tax

E) TAX CREDIT FOR ESTATE TAXES PAID TO A FOREIGN COUNTRY. In General. - The tax imposed by this Title shall be credited with the amounts of any estate tax imposed by the
authority of a foreign country.
Limitations on Credit. - The amount of the credit taken under this Section shall be subject to each of the following
limitations:
(a) The amount of the credit in respect to the tax paid to any country shall not exceed the same proportion of the tax
against which such credit is taken, which the decedent's net estate situated within such country taxable under this
Title bears to his entire net estate; and
(b) The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken,
which the decedent's net estate situated outside the Philippines taxable under this Title bears to his entire net estate.
To minimize the onerous effect of taxing the same property twice, a tax credit against
Philippine estate tax is allowed for estate taxes paid to foreign countries.
One foreign country
What you paid to the foreign country
Tax Credit Limit = Net foreign estate x Tax here in the Philippines Entire Net
Estate
Between what you paid to the foreign country and the tax credit limit here, you choose
whatevers lower as what you can credit.
See example in donors tax part.
If tax is paid to 2 or more foreign countries:
Limitation A: see above
Limitation B: Tax Credit Limit = Total foreign net estate x Tax here in the Philippines Entire Net
Estate
Between limitation A and B, you choose whatevers lower as your credit.
Admin Provisions
SEC. 89. NOTICE OF DEATH TO BE FILED. - In all cases of transfers subject to tax, or where, though exempt from
tax, the gross value of the estate exceeds Twenty thousand pesos (P20,000), the executor, administrator or any of the
legal heirs, as the case may be, within two (2) months after the decedent's death, or within a like period after
qualifying as such executor or administrator, shall give a written notice thereof to the Commissioner.
A notice of death must be filed within two months after the decedents death:
o In all cases of transfers subject to tax, or
p When exempt, the value of the estate exceeds P20,000
Estate Tax Returns

SEC. 90. ESTATE TAX RETURNS. A. REQUIREMENTS. - In
1. all cases of transfers subject to the tax imposed herein, or
2. where, though exempt from tax, the gross value of the estate exceeds P2OOk or
3. regardless of the gross value of the estate, where the said estate consists of REGISTERED or
REGISTRABLE property such as real property, motor vehicle, shares of stock or other similar property for
which a clearance from the BIR is required as a condition precedent for the transfer of ownership thereof
in the name of the transferee, the executor, or the administrator, or any of the legal heirs, as the case
may be,
shall file a RETURN under oath in duplicate, SETTING FORTH:
(1) The value of the GE of the decedent at the time of his death, or
in case of a NRA, of that part of his gross estate situated in the Philippines;
(2) The DEDUCTIONS allowed from gross estate in determining the estate as defined in Section 86;
and
(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.
Provided, however, That estate tax RETURNS showing a GROSS VALUE EXCEEDING P2M
shall be supported with a statement duly certified to by a CPA containing the following:
(a) ITEMIZED ASSETS of the decedent with their corresponding GROSS VALUE at the time of his death,
or in the case of a NRA, of that part of his gross estate situated in the Philippines;
(b) ITEMIZED DEDUCTIONS from gross estate allowed in Section 86; and
(c) The amount of TAX DUE whether paid or still due and outstanding.
B.
TIME FOR FILING. - For the purpose of determining the estate tax provided for in Section 84 of this Code, the
estate tax return required under the preceding Subsection (A) shall be filed within six (6) months from the
decedent's death.
A certified copy of the
1.
2.
schedule of partition and o
rder of the court approving the same

shall be furnished the Commissioner within 3Odays after the promulgation of such order.
C.
D.
EXTENSION OF TIME. - The Commissioner shall have authority to grant, in meritorious cases, a reasonable
extension not exceeding 30 days for filing the return.
PLACE OF FILING. - Except in cases where the Commissioner otherwise permits, the return required under
Subsection (A) shall be filed with an
a)
b)
c)
d)
authorized agent bank, or

Revenue District Officer,
Collection Officer, or
duly authorized Treasurer of the city or municipality in which the decedent was domiciled at the
time of his death or if there be no legal residence in the Philippines, with the Office of the
Commissioner.
An estate tax return is required to be filed when the estate is:

1 Subject to estate tax,
2 Exempt from estate tax, but the gross estate exceeds P200,000
3 Regardless of the amount of the gross estate, where the said gross estate consists of
registered or registrable property, motor vehicle or shares of stock, or other similar
property for which clearance from the BIR is required as a condition precedent for the
transfer of ownership thereof in the name of the transferee.
The return shall be under oath and shall include the following:
1. Value of the gross estate at the time of the decedent (for non-resident aliens, the value
of the gross estate here in the Philippines)
2. Deductions allowed from the gross estate
3. Whatevers necessary to establish the correct estate tax
If the estate tax return shows that the gross estate exceeds P2,000,000, it should be
accompanied by a statement certified by a CPA.
The estate tax return should be filed WITHIN 6 MONTHS AFTER THE DECEDENTS DEATH.
1 The BIR can extend this, but not more than 30 days.
A return need not be complete in all particulars. It is sufficient if it complies substantially
with the law. There is SUBSTANTIAL COMPLIANCE when:
1. The return is made in good faith and is not false or fraudulent;
2. It covers the entire period involved; and
3. It contains information as to the various items of income, deductions and
credits with such definiteness as to permit the computation and assessment of
the tax. (CIR v Gonzales)
Where the return was made on the wrong form, it was held that the filing thereof did not start
the running of the period of limitations, and where the return was very deficient, there was no
return at all. (same case)
NOTICE of DEATH & FILING of RETURN
WHEN NOTICE of DEATH to be FILED
In all cases of transfers subj to tax, or where though exempt from tax, the gross value of the
estate exceeds (twenty thousand) P20k,
the executor/admin or any of the legal heirs as the case may be, w/in 2months (60days)
after the decedents death, or w/in a like period after qualifying as such executor/admin,
shall give a WRITTEN NOTICE thereof to the CIR.
WHEN & by WHOM FILING of RETURN REQUIRED
In all cases of transfers subj to tax, or where though exempt from tax, the gross value
of the estate exceeds two hundred thousand (P200k) or regardless of the gross value
of the estate where the said estate is registered/registerable property such as real
property, motor vehicle, shares of stock or other similar property for w/c a CLEARANCE
from the BIR is required as a condition precedent for the transfer of ownership thereof
in the name of the transferee,
an ESTATE TAX RETURN must be filed in duplicate under oath. (90, A)
The executor, admin or any of the legal heirs, as the case may be, is required to file
the ETR.
CONTENTS of RETURNS
A. ORDINARILY:
1. The value of the GROSS ESTATE of the decedent @the time of his death, or
In case of a NRA, of that part of his GE situated in the PH;
2. The DEDUCTIONS allowed from GE in determining the Net Estate;
3. Such part of such information as may at the time be ascertainable & such
supplemental data as may be necessary to establish the correct taxes.
B. ADDITIONAL REQUIREMENTS where GROSS VALUE of the estate EXCEEDS P2M
it must be supported w/ a STATEMENT, duly CERTIFIED by a CPA, containing the ff:
1. ITEMIZED ASSETS of the estate of the decedent w/ their corresponding GROSS
VALUE @ the time of his death or in case of a NRA, of that part of his GE
situated in the PH;
2. ITEMIZED DEDUCTIONS allowed from GE; &
3. The amount of TAX DUE whether paid/unpaid or still due & outstanding.
TIME for FILING RETURN
The ETR must be filed w/in 6months from the decedents death.
o A CERTIFIED COPY of the schedule of partition & the order of the court
approving the same shall be furnished the CIR w/in 30days after the
promulgation of such order.
The CIR shall have authority to grant in meritorious cases, a reasonable EXTENSION
not exceeding 30days for filing the return.
PAYMENT of TAX
SEC. 91. PAYMENT OF TAX. A. TIME OF PAYMENT. - The estate tax imposed by Section 84 shall be paid at the TIME THE RETURN IS FILED
by the executor, administrator or the heirs.
B. EXTENSION OF TIME. - When the Commissioner finds that the payment on the due date of the estate tax
or of any part thereof would IMPOSE UNDUE HARDSHIP upon the estate or any of the heirs,
he may EXTEND the time for payment of such tax or any part thereof NOT TO EXCEED
a.
5 YEARS, in case the estate is settled through the COURTS, or
b. 2 YEARS in case the estate is settled EXTRAJUDICIALLY.
In such case, the amount in respect of which the extension is granted shall be PAID on or before the date of
the expiration of the period of the extension, and the running of the Statute of Limitations for assessment
as provided in Section 203 of this Code shall be suspended for the period of any such extension.
Where the taxes are assessed by reason of
a. negligence,
b. intentional disregard of rules and regulations, or
c. fraud on the part of the taxpayer,
no extension will be granted by the Commissioner.
If an EXTENSION IS GRANTED, the Commissioner may require the executor, or administrator, or beneficiary,
as the case may be, to furnish a BOND in such amount, NOT EXCEEDING DOUBLE the AMOUNT of the TAX
and with such SURETIES as the Commissioner deems necessary, conditioned upon the payment of the said
tax in accordance with the terms of the extension.
C.
LIABILITY FOR PAYMENT. - The estate tax imposed by Section 84 shall be paid by the EXECUTOR or
ADMINISTRATOR before delivery to any beneficiary of his distributive share of the estate.
Such BENEFICIARY shall to the EXTENT OF HIS DISTRIBUTIVE SHARE of the estate, be SUBSIDIARILY LIABLE
for the payment of such portion of the ESTATE TAX as his distributive share bears to the value of the total
net estate.
For the purpose of this Chapter, the term "executor" or "administrator" means the
a. executor or administrator of the decedent, or
b. if there is no executor or administrator appointed, qualified, and acting within the Philippines, then
any person in actual or constructive possession of any property of the decedent
Estate tax shall be paid at the time the return is filed.

The Commissioner may extend the payment of such tax.
It should not exceed 5 years in case of judicial settlement, and 2 years if extrajudicial
settlement.
The running of the period of limitation for assessment shall be suspended for the
period of such extension.
The estate tax shall be paid by the executor or administrator BEFORE delivery to any
beneficiary of his distributive share of the estate.
Where there are two or more executors, all of them are severally liable for the
payment of the estate tax. (CIR v Gonzales)
The inheritance tax, although charged against the account of each beneficiary, should
be paid by the executor or administrator.
Such beneficiary shall be subsidiarily liable for the payment of such tax to the extent of
his share.
Claims for income tax need not be filed with the committee on claims and appraisals in
the course of testate proceedings, and the amount thereof may be collected after the
distribution of the decedents estate among his heirs, who shall be liable in proportion to
their share in the inheritance.
The government, in collecting unpaid taxes accruing before the death of the decedent, has
two ways of collecting the said taxes. (CIR v Pineda)
1. FILING of ACTION - By going after all the heirs and collecting from each one of them
the amount of the tax proportionate to the inheritance received.
2. ENFORCEMENT of TAX LIEN - By subjecting said property of the estate, which is in the
hands of an heir or transferee to the payment of the tax due the estate. (or, go against
one heir for the entire tax, subject to the heirs right of contribution from his co-heirs.)
Miscellaneous Provisions
SEC. 92. DISCHARGE OF EXECUTOR OR ADMINISTRATOR FROM PERSONAL LIABILITY. - If the executor or
administrator makes a WRITTEN APPLICATION to the Commissioner for DETERMINATION of the amount of the
ESTATE TAX and DISCHARGE from PERSONAL LIABILITY therefor,
the Commissioner (as soon as possible, and in any event
1.
2.
within one (1) year after the making of such application, or
if the application is made before the return is filed, then within one (1) year after the return is filed, but not
after the expiration of the period prescribed for the assessment of the tax in Section 203)
shall NOTIFY the executor or administrator of the amount of the tax.
The EXECUTOR or administrator, UPON PAYMENT of the amount of which he is notified, shall be
1.
2.
DISCHARGED FROM PERSONAL LIABILITY for any DEFICIENCY in the tax thereafter found to be due and
entitled to a RECEIPT or WRITING showing such discharge.
SEC. 93. DEFINITION OF DEFICIENCY. - As used in this Chapter, the term "deficiency" means:
(1) The amount by which the TAX imposed by this Chapter EXCEEDS the AMOUNT SHOWN AS THE TAX by the executor,
administrator or any of the heirs upon his return;
BUT the amounts so shown on the return shall first be
1. INCREASED by the amounts PREVIOUSLY ASSESSED (or collected without assessment) as a DEFICIENCY
and
2. DECREASED by the amount PREVIOUSLY ABATED, REFUNDED or otherwise REPAID in respect of such tax; or
(2) If NO AMOUNT IS SHOWN AS THE TAX by the executor, administrator or any of the heirs upon his return, or if NO
RETURN IS MADE by the executor, administrator, or any heir,

then the AMOUNT BY WHICH THE TAX EXCEEDS THE AMOUNTS PREVIOUSLY ASSESSED (or collected without
assessment) as a DEFICIENCY; but such amounts previously assessed or collected without assessment shall FIRST
be DECREASED by the amounts PREVIOUSLY ABATED, REFUNDED or otherwise REPAID in respect of such tax.
SEC. 94. PAYMENT BEFORE DELIVERY BY EXECUTOR OR ADMINISTRATOR. - 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 Commissioner that the estate tax has been paid is shown.
SEC. 95. DUTIES OF CERTAIN OFFICERS AND DEBTORS.
1.
2.
3.
REGISTERS OF DEEDS - shall NOT REGISTER in the Registry of Property ANY DOCUMENT TRANSFERRING
REAL PROPERTY or REAL RIGHTS therein or any CHATTEL MORTGAGE, by way of GIFTS inter vivos or mortis
causa, LEGACY or INHERITANCE, unless a CERTIFICATION from the Commissioner that the TAX fixed in this
Title and actually due thereon had been PAID is shown, and they shall immediately NOTIFY the
Commissioner, Regional Director, Revenue District Officer, or Revenue Collection Officer or Treasurer of the
city or municipality where their offices are located, of the NON PAYMENT of the 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
DONATION inter vivos or mortis causa, LEGACY or INHERITANCE, shall have the DUTY of FURNISHING the
Commissioner, Regional Director, Revenue District Officer or Revenue Collection Officer of the place where
he may have his principal office, with COPIES of SUCH DOCUMENTS and any INFORMATION whatsoever
which may facilitate the collection of the aforementioned tax.
DEBTOR of the DECEASED shall NOT PAY his DEBTS to the heirs, legatee, executor or administrator of his
creditor, unless the CERTIFICATION of the Commissioner that the TAX fixed in this Chapter had been PAID is
shown; but he MAY PAY the executor or judicial administrator WITHOUT said CERTIFICATION if the CREDIT is
INCLUDED in the INVENTORY of the ESTATE of the deceased.
SEC. 96. RESTITUTION OF TAX UPON SATISFACTION OF OUTSTANDING OBLIGATIONS. - If after the payment
of the estate tax,
1.
2.
NEW OBLIGATIONS of the DECEDENT shall appear, and

the persons interested shall have satisfied them by order of the court,
they shall have a right to the RESTITUTION of the PROPORTIONAL PART of the TAX PAID.
SEC. 97. PAYMENT OF TAX ANTECEDENT TO THE TRANSFER OF SHARES, BONDS OR RIGHTS . - 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
1.
2.
3.
4.
share,
obligation,
bond or
right
by way of GIFT inter vivos or mortis causa, LEGACY or INHERITANCE, unless a CERTIFICATION from the
Commissioner that the TAXES fixed in this Title and due thereon have been PAID is shown.
If a BANK has KNOWLEDGE of the DEATH of a person, who maintained a bank deposit account alone, or jointly with
another,
it shall NOT ALLOW any WITHDRAWAL from the said deposit account, unless the Commissioner has CERTIFIED that
the taxes imposed thereon by this Title have been PAID:
Provided, however, That the ADMINISTRATOR of the ESTATE or any one (1) of the HEIRS of the decedent may, upon
authorization by the Commissioner, WITHDRAW an amount not exceeding Twenty thousand pesos (P20,000) without
the said certification.
For this purpose, all WITHDRAWAL SLIPS shall contain a STATEMENT to the effect that all of the joint depositors are
still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by
the said depositors.
DONORS TAX
Donation/gift an act of liberality whereby a person (donor) disposes gratuitously of a
thing/right in favor of another (donee) who accepts it. It is a voluntary transfer of property
from one person to another without any consideration or compensation therefor.
- There is also a donation when a person gives to another a thing or right on account of the
latters merits or services rendered to the donor, provided they do not constitute a
demandable debt, or when the gift imposes upon the done a burden w/c is less than the
value of the thing given.
- For TAX purposes: (wider meaning): it extends to sales, exchanges or other transfers for LESS
than the adequate & full consideration in money or moneys worth. (Sec 100)
FORMAL REQUISITES of DONATION
A. MOVABLE
1. An oral donation requires the simultaneous delivery of the thing or of the
document representing the right donated.
2. If the value of the personal property donated exceeds P5k the donation &
acceptance must be in writing, otherwise void.
B. IMMOVABLE
1. It must be made in a public document, specifying therein the property donated
& the value of the charges w/c the donee must satisfy.
2. The acceptance may be made in the same deed of donation of in a separate
3.
public instrument but it shall not take effect unless it is done during the lifetime
of the donor.
If the acceptance is made in a separate instrument, the donor shall be notified
thereof in authentic form & this step shall be noted in both instruments.
NATURE of DONORs TAX an excise tax imposed on the privilege of the donor to give
NATURE of TRANSFER to be TAXABLE
- INCLUDES not only the transfer of ownership in the fullest sense but ALSO the transfer
of any RIGHT/INTEREST in the PROPERTY, but less than a title
- Becomes COMPLETE & taxable only when the DONOR has DIVESTED himself of ALL
BENEFICIAL INTEREST in the property transferred & has NO POWER to REVEST any
such interest in himself.
- The law contemplates the passage of control over the ECONOMIC BENEFITS of the
property, rather than the mere technical changes in the title.
ESSENTIALS of a TAXABLE GIFT
1. CAPACITY of the DONOR
All persons who may contract & dispose of their property may make a donation.
But the donee, unlike the donor, need not be capacitated.
MINORS & others who cannot enter into a contract may become donees. The
acceptance, however, shall be done through their parents/legal reps.
Donations may even be made to CONCEIVED/UNBORN CHILDREN & the same
may be accepted by those persons who would legally represent them if they
were already born.
Donation made to a TRUSTEE for the benefit of the beneficiary is gift to the
latter.
Donors tax applies to both NATURAL & JURIDICAL persons.
2. Donative INTENT
Donative intent must be present in a DIRECT GIFT of property in order that the
donors tax can be assessed & collected. Such intent, followed by a DONATIVE
ACT is essential to constitute a gift.
The transfer of properties from one corp to a subordinate corp or to a local
org is NOT subj to donors tax for lack of donative intent.
A donative intent, however, is NOT ALWAYS essential to constitute a gift.
o Transfer for LESS than an adequate & full consideration. Where
property (real prop subjected to CGT) is transferred for less than an
adequate & full consideration in money/moneys worth, then the
amount by w/c the FMV of the property exceeded the value of the
actual consideration, for purpose of donors tax, be deemed a gift, &
shall be included in computing the amt of gifts made during the
calendar yr.
o Where purchase price PAYABLE in INSTALLMENTS @ a certain rate of
INTEREST a sale, exchange, or any transfer of property for less
than an adequate & full consideration constitutes an INDIRECT GIFT
to the extent of the difference where there is no donative intent to
make a gift.
o However, where the purchase price is payable in installments @
certain rate of interest, the difference bet the purchase price & the
FMV of the property when the purchase price was paid in full is NOT
subject to donors tax. The parties are boiund by the agreed
purchase price.
Where the owner was COMPELLED to SELL to minimize his losses Real
property may be sold for less than adequate consideration for a bonafide
business purpose as where the owner was compelled to sell the property
even at a price less than its FMV to minimize his losses. In such event,
where there is no showing of donative intent, dealings done in the ordinary
course of business remain as arms length transactions nOT subj to
donors tax.
3.
4.
CONSIDERATION for transfer FICTITIOUS where the consideration is

fictitious, the entire value of the property transferred shall be subj to
donors tax.
DELIVERY, whether actual/constructive, of the subject matter of the gift
ACCEPTANCE of the gift by the donee.
FORGIVENESS of INDEBTEDNESS
The cancellation & forgiveness of indebtedness may amount to payment of income, to a gift,
or a capital transaction, depending upon the circumstances.
a) If an individual performs services for a creditor, who in consideration thereof cancels
the debt income to that amount is realized by the debtor as compensation for his
services.
b) If however, a creditor merely desires to benefit a debtor & w/o any consideration
therefor cancels the debt the amt of debt is a gift from the creditor to the debtor &
need not be included in the latters GI.
c) If a corp to w/c a stockholder is indebted forgives the debt,the transaction has the
effect of payment of a dividend.
d) A condonation/write-off of the advances to a company w/c has ceased its business
operations & corporate existence, & its shares have a negative book value, showing
that the debt is worthless & uncollectible not considered a donation subj to donors
tax due to lack of donative intent.
e) A renunciation by the surviving spouse of his/her share in the CP/AC after the
dissolution of the marriage in favor of the heirs of the deceased spouse or any other
person/s is subj to donors tax.
f)
But a renunciation by an heir, including the surviving spouse, of his/her share in the
hereditary estate left by the decedent is NOT subj to donors tax unless specifically
& categorically done in favor of identified heir/s to the exclusion/disadvantage of other
co-heirs in the hereditary estate.
SEC. 98. IMPOSITION OF TAX. A. There shall be levied, assessed, collected and paid upon the TRANSFER by any PERSON, resident or nonresident,
of the property by GIFT, a tax, computed as provided in Section 99.
B.
The tax shall apply

a. whether the TRANSFER is in trust or otherwise,
b. whether the GIFT is direct or indirect, and
c. whether the PROPERTY is real or personal, tangible or intangible.
Gifts and donors tax will be levied, assessed, collected and paid upon the transfer by any
person, resident or nonresident, of property by gift
The PROPERTY can be real or personal, tangible or
intangible
The TRANSFER can be in trust or otherwise
The GIFT can be direct or indirect
The donors tax shall NOT APPLY unless and until there is a COMPLETED GIFT.
The TRANSFER of property by gift is PERFECTED from the moment the donor knows of the
acceptance by the donee;
It is COMPLETED by the DELIVERY, either actually or constructively, of the donated property to
the donee.
Thus, the law in force at the time of the perfection/completion of the donation shall govern the
imposition of the donors tax. (RR 02-03)
A gift that is incomplete because of reserved powers, becomes complete when either:
a. The donor renounces the power
b. His R to exercise the reserved power ceases because of the happening of some event
or contingency or the fulfillment of some condition, other than donors death.
RATES of TAX PAYABLE by DONOR

SEC. 99. RATES OF TAX PAYABLE BY DONOR. -
A.
IN GENERAL. - The tax for each calendar year shall be computed on the BASIS of the TOTAL NET GIFTS MADE
DURING THE CALENDAR YEAR in accordance with the following schedule:
If the net gift is:
Over
P100k
200k
500k
1m
3m
5m
10m
But not over

P100k
200k
500k
1m
3m
5m
10m
The tax shall be

Exempt
0
2k
14k
44k
204k
404k
1.004m
Plus
Of Excess over
2%
4%
6%
8%
10%
12%
15%
P100k
200k
500k
1m
3m
5m
10m
B.
TAX PAYABLE BY DONOR IF DONEE IS A STRANGER. - When the donee or beneficiary is stranger,
the tax payable by the donor shall be THIRTY PERCENT (30%) of the NET GIFTS.
For the purpose of this tax, a "STRANGER", is a person who is NOT a:
(1) Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal descendant; or
(2) Relative by consanguinity in the collateral line within the fourth degree of relationship.
C.
Any CONTRIBUTION in cash or in kind to any

a. candidate,
b. political party or
c. coalition of parties
for CAMPAIGN PURPOSES shall be governed by the ELECTION CODE, as amended.
The TAX RATE for donors are illustrated in the table above.
However, if DONEE or beneficiary is a STRANGER,
the tax payable by the donor shall be 30% of the NET GIFTS.
A stranger is a person who is NOT a:
a. Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal
descendant, or
b. Relative by consanguinity in the collateral line within the 4 th degree of relationship.
Donation made between business organizations and those made between an individual and
a business organization shall be considered as donation made to a stranger. (RR 02-03)
COMPUTATION
The donors tax is computed on the basis of the TOTAL NET GIFTS made during the calendar
year, meaning the total amount of gifts after deducting the exemptions & allowable
deductions.
GR: Schedular Rate
: 30% of the net gifts, if the donee is a STRANGER, (not a bro/sis (half/full blood), not a
spouse, ancestor or lineal descendant, or not a relative by consanguinity in the collateral line
w/in the 4th degree of consanguinity.
in-laws are treated as strangers
an adopted child is NOT a stranger treated by law as a legitimate child
donation made bet corps considered as a donation made to strangers
POLITICAL CONTRIBUTIONS
Political contribution is NOT intended by the giver/contributor as a return of value or
made because of any intent to repay another his due, but bestowed only because of
personal affection or regard, or from general motives of philanthropy or charity. On the

other hand, the recipient-donee does not regard himself as exchanging his services or
his product for the money contributed. But more importantly, he receives financial
advantages gratuitously.
Unutilized/excess campaign funs shall be considered subject to income tax.
PROCEDURE for COMPUTING NET GIFTS & DONORS TAX DUE

Formerly, the rates of the donors & donees taxes were levied on a cumulative basis
including the prior yrs. PD 1773 simplified the method of computation by applying it to
the total net gifts made during the year w/o reckoning the net gifts made in the prior
yrs. Thus, all donations made in one yr are taxed @ the same rate as if they had been
made at one time, and a new computation of donors tax is made for gifts given at
each succeeding yr.
Less:
=
Less:
=
x
=
Gross gift/s during the yr

Allowable deductions
Net Gifts
P 100k exemption
Taxable net gift/s
Tax Rate (Sec 99)
Donors Tax due
GR: Husband & wife are considered as SEPARATE & distinct taxpayers for purposes of
donors tax.
: However, if what was donated is a CONJUGAL/COMMUNITY property, & only the
husband signed the deed of donation, there is only 1 donor for tax purposes, w/o
prejudice of the wife to question the validity of the donation w/o her consent.
The basic tax formula is as follows:

On the first donation of a calendar year
Less:
X
Gross gifts
Deductions from these gross gifts
Net Gifts
Donors tax rate
Donors tax due on the net gifts
On a subsequent donation in the same calendar year

Less:
Plus:
Less:
Gross gifts made on this date

Deductions from these gross gifts
Net gifts made on this date
All prior net gifts given with the same calendar year
Aggregate net gifts
Donors tax on aggregate net gifts
Donors tax on all prior net gifts within the same calendar year
Donors tax due on the net gifts of this date
Example
Mr. and Mrs. Lumbat are Filipino residents. On Jan 3, 2010, they donated a lot with a
FMV of P2m to their child, Zombie, and his wife, Honka Monka on account of their
marriage. On June 3, 2010, they donated P200k to Mr. Lumbats brother, Piggie Boy.
Jan 3, 2010
Gross
gifts
made:
To Zombie,
To Honka Monka,
Total
Deduction:
For
marriag
account of e
Net gifts made
Donors tax
Mr. Lumbat
Non-stranger Stranger
500k
500k
10k
490k
13,600
(use
schedule)
Total
Mrs. Lumbat
Non-stranger
Stranger
Total
500k
500k
1m
10k
990k
163,600
500k
500k
0
500k
500k
1m
10k
500k
10k
500k
500k
0
500k
150,000
990k
163,600
490k
13,600
500k
150,000
(use schedule)
(use 30%)
(use 30%)
500k
June 3, 2010
Gross
Gifts made
To Piggie Boy
Total
Deduction:
100k
100k
0
Net
gifts made 100k
on this date
Add: All prior net
490k
gifts
within the
100k
100k
0
500k
100k
100k
100k
100k
100k
100k
100k
490k
500k
year
Aggregate
net 590k
gifts
Donors
Tax
on
19,400
aggregate
net
gifts
Less: Donors tax
13,600
on all
prior
net
gifts
w/in the year
5,80
Donors Tax Due
0
500k
490k
600k
150,000
13,600
180,000
150,000
13,600
150,000
5,80
0
30,000
30,000
Transfers for insufficient consideration

SEC. 100. TRANSFER FOR LESS THAN ADEQUATE AND FULL CONSIDERATION.
Where PROPERTY, (other than real property referred to in Section 24(D) (Real property subj to CGT/capital asset) , is
TRANSFERRED for LESS THAN an ADEQUATE and full consideration in money or money's worth,
then the amount by which the FMV of the property EXCEEDED the value of the CONSIDERATION shall, for the
purpose of the tax imposed by this Chapter, be DEEMED a GIFT, and shall be INCLUDED in computing the amount of
gifts made during the calendar year.
A transfer of real/personal property will be considered a donation/gift and subject to the

donors tax when:
1. The transfer was for LESS than adequate and full CONSIDERATION,
2. Such transfer was effective during his life time (INTER VIVOS), and
3. Other than real property in Sec 24 (d), i.e. the property was not subject to final
capital gains tax (capital asset).
In cases like this, the amount by which the value of the property exceeded the
consideration received shall be considered a donation.
o Mos sold to Jango for P100k a property which had a FMV of P280k. the P180k will be
considered a donation and thus subject to the tax.
With re: #3, what are the implications if the real property sold was a capital asset as
against an ordinary asset?
o For example, the real property had a cost of P100, a FMV of P200, but sold for only
P170.
If it were classified as a capital asset, it will be taxed 6% of the FMV (remember,
the base is either the consideration or the FMV, whichever is higher).
If it were classified as an ordinary asset, it will be taxed twice. First, it will be
taxed for income tax purposes (tax base of P70). Second, it will be taxed for
donors tax (tax base of P30). In this case, donors tax will be attracted
unwittingly.
Cancellation of indebtedness
If a creditor desires to benefit a debtor, and without any consideration therefor, cancels
the debt (and the debtor accepts), the amount of the debt is a donation by the creditor
to the debtor.
Deductions from gross gifts

SEC. 101. EXEMPTION OF CERTAIN GIFTS. - The following gifts or donations shall be EXEMPT from the tax
provided for in this Chapter:
(A) IN THE CASE OF GIFTS MADE BY A RESIDENT. 1. DOWRIES or gifts made ON ACCOUNT OF MARRIAGE and before its celebration or within one year thereafter
BY PARENTS to each of their
a. legitimate,
b. recognized natural, or
c. adopted CHILDREN
to the extent of the FIRST TEN THOUSAND PESOS (P10,000):
2.
3.
Gifts made to or for the use of the NATIONAL GOVERNMENT or any ENTITY CREATED by any of its AGENCIES
which is NOT CONDUCTED FOR PROFIT, or to any POLITICAL SUBDIVISION of the said Government; and
Gifts in favor of an
1) EDUCATIONAL and/or
2) CHARITABLE,
3) RELIGIOUS,
4) CULTURAL or
5) SOCIAL WELFARE corporation OR institution,
6) accredited NGO, trust or philanthropic organization or
7) research institution or organization:
Provided, however, That NOT MORE THAN THIRTY PERCENT (30%) of said GIFTS shall be USED by such donee
for ADMINISTRATION purposes.
For the purpose of the exemption, a
'non-profit educational and/or charitable corporation, institution, accredited nongovernment organization,
trust or philanthropic organization and/or research institution or organization' - is a school, college or
university and/or charitable corporation, accredited nongovernment organization, trust or philanthropic
organization and/or research institution or organization, incorporated as a
1) NONSTOCK entity,
2) paying NO DIVIDENDS,
3) governed by trustees who receive no compensation, and
4) devoting all its income, whether students' fees or gifts, donation, subsidies or other forms of
philanthropy, to the accomplishment and promotion of the purposes enumerated in its Articles of
Incorporation.
These exemptions of certain gifts should be taken to mean the DEDUCTIONS allowed by
law to arrive at the taxable net gifts.
The DEDUCTIONS ALLOWED for a RESIDENT or CITIZEN DONOR:
o DOWRIES or gifts made on account of MARRIAGE and before its celebration, or within
one year thereafter, by PARENTS to each of their legitimate, recognized natural or
adopted CHILDREN
Only to the extent of P10,000
Remember, this article only covers gifts of a parent to his/her CHILD, (NOT a
parent to his future son-in-law/daughter-in-law).
If the gift is given to a future son-in-law/daughter-in-law, no deductions will be
allowed because the latter are considered strangers. (ouch naman!)
o Gifts made to or for the use of the National Government or any entity created by any
of its agencies which is not conducted for profit
o Gifts in favor of educational and/or charitable, religious, cultural or social welfare
corporations, institutions, accredited NGOs, trust or philanthropic organizations,
research institutions or organizations, provided that not more than 30% of said gifts
shall be used by such donee for administration purposes
The entity must be:
Non-stock
Paying no dividends
Governed by trustees who receive NO compensation
Devoting ALL its income to the accomplishment of the purpose

enumerated in its AOI
DEDUCTIONS FROM THE GROSS GIFTS BY HUSBAND AND WIFE

For deductions from gross gifts made by husband and wife, OUT OF COMMUNITY/CONJUGAL
PROPERTY,
each donor has his or her own deductions. Their donations will be DISTRIBUTED EQUALLY
among them. (1/2)
HOWEVER, if what was donated is a conjugal or community property and only the
husband signed the deed of donation, there is only one donor for donors tax
purposes, without prejudice to the right of the wife to question the validity of the
donation without her consent pursuant to the pertinent provisions of the Civil
Code of the Philippines and the Family Code of the Philippines.
EACH of the spouses is entitled to a maximum deduction of P10,000 for donation
on account of marriage.
Example Husband and wife donated P400k to son and daughter-in-law, on account of
marriage out of community property. How do we break this down?
Gross gift
Gross gift to
Deduction
Kind
of
Net Gift
Tax Rate
Donors
(see
by
donee
Father
Son P100k
Tax
P10k
Non-
90k
Exempt
None
stranger
Stranger
100k
30%
30k
P10k
Non-
90k
exempt
100k
30%
30k
P200k
Daughter-in-
schedule)
law P100k
Mother
Son P100k
P200k
stranger
Daughter-in-law @
P100k
none
Stranger
Deductions for a non-resident, not citizen donor

(B) IN THE CASE OF GIFTS MADE BY A NONRESIDENT NOT A CITIZEN OF THE PHILIPPINES. 1) Gifts made to or for the use of the
A) NATIONAL GOVERNMENT or
b) any entity created by any of its agencies which is not conducted for profit, or
c) to any political subdivision of the said Government.
2)
Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation,
institution, foundation, trust or philanthropic organization or research institution or organization: Provided,
however, That NOT MORE THAN THIRTY PERCENT (30%) of said gifts shall be used by such donee for
ADMINISTRATION purposes.
Same as the resident or citizen donor EXCEPT that they arent allowed deductions for gifts on
account for marriage
Other deductions
The BIR ahs allowed the following as deductions from gross gifts to arrive at net gifts:
a. Encumbrance on the property donated, if assumed by the donee
b. Those specifically provided by the donor as a diminution of the property donated.
Example Lhizavhel donated land which was subject to a mortgage to Chlahrihvel. The FMV
of the land was P1m, but the mortgage was P400k. Chlahrihvel agreed to assume the
mortgage, hence the deduction of P400k is allowed. The net gift is P600k.
Donors tax credit

(C) TAX CREDIT FOR DONOR'S TAXES PAID TO A FOREIGN COUNTRY. 1. IN GENERAL.
The tax imposed by this Title upon a DONOR WHO WAS A CITIZEN OR A RESIDENT at the time of donation
shall be CREDITED with the AMOUNT of any DONOR'S TAX of any character and description IMPOSED
by the authority of a FOREIGN COUNTRY.
2.
LIMITATIONS ON CREDIT. - The amount of the credit taken under this Section shall be subject to each of
the following limitations:
(a) The amount of the credit in respect to the tax paid to any country shall NOT EXCEED the SAME
PROPORTION OF THE TAX AGAINST WHICH SUCH CREDIT IS TAKEN, which the NET GIFTS SITUATED
WITHIN SUCH COUNTRY taxable under this Title BEARS to his ENTIRE NET GIFTS; and
(b) The TOTAL AMOUNT OF THE CREDIT shall NOT EXCEED THE SAME PROPORTION of the TAX AGAINST
WHICH SUCH CREDIT IS TAKEN, which the DONOR'S NET GIFTS SITUATED OUTSIDE the Philippines
taxable under this title BEARS to his ENTIRE NET GIFTS.
Only resident or citizen donors are allowed donors tax credit.

Why? Because they are the only ones taxed worldwide. A non-resident non-citizen is not
taxed for his donations in foreign jurisdictions.
For a foreign donors tax paid to a foreign country, a credit is allowed to reduce the
Philippine donors tax to pay, under the formula:
Foreign donors tax paid = xxxx
Limit:
Net foreign gifts
Net gifts, worldwide
Philippine Donors Tax
= xxxx
Allowed tax credit is WHICHEVER IS LOWER of the FOREIGN DONORS TAX PAID and
the LIMIT.
Example
Mr. Aquino donated property to Jojo here in the Philippines, net gift value of P200k.
He also donated to Pele in Brazil, net gift value of P300k. In Brazil, he paid a tax of
P10k. They are both relatives of Mr. Aquino.
Foreign donors tax paid = P10k
Donors tax supposed to be paid worldwide, without the credit = P14,000.
Credit is:
300k
500k
P14,000 = 8,400
So choose whats lower between the tax paid abroad and the credit limitation. So, its P8,400.
Thats the tax credit.
Mr. Aquino has to pay P5,600 na lang.
If two foreign countries
LIMITATION A: Foreign donors tax paid to the foreign country
Net gifts, foreign country x Philippine donors tax
Net gifts, world
Allowed tax credit = whatevers lower
Limitation B (by totals)
Total of foreign donors taxes paid to the foreign countries
Net gifts, outside the Phil
Net gifts, world
x Philippine donors tax
Allowed tax credit = whatevers lower

Tax credit to apply is whatever is lower between Limitation A and Limitation B
TAX CREDIT for DONORs TAXES PAID to a FOREIGN COUNTRY
1. GR: The donors tax imposed by the Tax Code upon a donor who was a
CITIZEN/RESIDENT @ the time of the donation shall be CREDITED w/ the amount of any
donors taxes (of any character & description) imposed by the authority of a FOREIGN
COUNTRY.
2. LIMITATIONS on CREDIT The amount of CREDIT taken under the Tax Code shall be
SUBJECT to each of the ff:
a. For Donors Tax Paid to ONE FOREIGN COUNTRY the amount of the
CREDIT in respect to the tax paid to any country shall NOT EXCEED the SAME
PROPORTION of tax against w/c credit is taken w/c the net gifts situated w/in
such country taxable under the Tax Code bears to his ENTIRE gift.
Net Gifts situtated in foreign country
Credit Limit
Entire Net Gifts
Ph donors tax
= Tax
b. For Donors tax paid to 2 or MORE FOREIGN COUNTRIES the TOTAL amt
of the CREDIT shall NOT EXCEED the same proportion of the tax against w/c
such credit is taken w/c the donors net gifts situated outside the Ph is taxable
under the Tax Code bears to his entire net gifts.
Net gifts situated Outside the Ph
Credit Limit
Entire Net Gifts
Ph donors tax
= Tax
Value of the gifts

SEC. 102. VALUATION OF GIFTS MADE IN PROPERTY.
If the GIFT is made IN PROPERTY,
the FMV thereof AT THE TIME OF THE GIFT shall be considered the amount of the gift.
In case of real property, the provisions of Section 88(B) shall apply to the valuation thereof.
The fair market value of the property donated/given at the time of the donation shall be
the value of the gross gifts.
VALUATION of PARTICULAR GIFTS
a. PERSONAL Property FMV @ the time of the gift
b. REAL Property FMV considered is whichever is HIGHER of:
a. Current FMV as shown in the schedule of values fixed by provincial & city
assessors; or
b. FMV as determined by the CIR
c. CASH the amount thereof
Donors Tax Return

SEC. 103. FILING OF RETURN AND PAYMENT OF TAX. A. REQUIREMENTS. - ANY INDIVIDUAL who makes any transfer by gift (except those which, under Section 101,
are exempt from the tax provided for in this Chapter)
shall, for the purpose of the said tax, make a RETURN under OATH in DUPLICATE.
The return shall se forth:
(1) EACH GIFT MADE during the calendar year which is to be INCLUDED in computing NET GIFTS;
(2) The DEDUCTIONS claimed and allowable;
(3) Any PREVIOUS NET GIFTS MADE during the SAME calendar year;
(4) The name of the DONEE; and
(5) Such FURTHER INFORMATION as may be required by rules and regulations made pursuant to law.
B. TIME AND PLACE OF FILING AND PAYMENT. - The RETURN of the donor required in this Section shall be
FILED within thirty (30) days after the date the gift is made and the tax due thereon shall be
PAID at the time of filing.

Except in cases where the Commissioner otherwise permits,
the RETURN shall be FILED and the TAX PAID to
a) an authorized agent bank,
b)
c)
d)
e)
the Revenue District Officer,

Revenue Collection Officer or
duly authorized Treasurer of the city or municipality where the donor was domiciled at the time of the
transfer, or
if there be no legal residence in the Philippines, with the Office of the Commissioner.
In the case of GIFTS MADE BY A NONRESIDENT, the return may be FILED with
a) the Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer, or
b) directly with the Office of the Commissioner.
The donors tax return must be filed within 30 days after the date of the donation.
On all donations of one date, only one donors tax return is required.
In case of husband and wife as donors the donors tax return of the husband will be
APART from the donors tax return of the wife.
When and where to pay? The donors tax will be paid at the time the return is filed, and
with the office where the return is filed.
RETURN by DONOR
1. FORM Any individual who makes any transfer by gift (except those w/c under the
Tax code are exempt from tax), shall, for the purpose of said tax make a DONORs TAX
RETURN under oath & in duplicate.
2. CONTENTS the return shall set forth the ff:
a. Each gift made during the calendar yr w/c is to be included in computing net
gifts
b. The deductions claimed & allowable
c. Any previous net gifts made during the same calendar yr
d. Such further information as may be required by regulations pursuant to law.
Rev regs added the ff:
o Name of the donee
o Relationship of donor to donee
o Such other info as the Commissioner may require.
GROSS GIFTS
SEC. 104. DEFINITIONS. - For purposes of this Title, the terms
"GROSS ESTATE" and "GIFTS" - include real and personal property, whether tangible or intangible, or mixed, wherever
situated:
Provided, however, That where the decedent or donor was a NRA at the time of his death or donation, as the case
may be,
his real and personal property so transferred but which are situated OUTSIDE the Philippines shall NOT be
INCLUDED as part of his "gross estate" or "gross gift":
Provided, further, That
1.
2.
FRANCHISE which must be exercised in the Philippines;
3.
SHARES, OBLIGATIONS or BONDS by any FOREIGN CORPORATION eighty -five percent (85%) of the business of
which is located in the Philippines;
4.
SHARES, OBLIGATIONS or BONDS issued by any corporation or sociedad anonima organized or constituted in
the PHILIPPINES in accordance with its laws;
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,

shall be considered as situated in the Philippines:
Provided, still further, that NO TAX shall be COLLECTED under this Title in respect of INTANGIBLE PERSONAL
PROPERTY:
a)
if the DECEDENT at the time of his death or the DONOR at the time of the donation was a CITIZEN and
RESIDENT of a FOREIGN country which at the time of his death or donation DID NOT IMPOSE A TRANSFER
TAX of any character, in respect of intangible personal property of citizens of the Philippines not residing in
that foreign country, or
b)
if the LAWS OF THE FOREIGN COUNTRY of which the DECEDENT or DONOR was a CITIZEN & RESIDENT at the
time of his death or donation ALLOWS A SIMILAR EXEMPTION FROM TRANSFER OR DEATH TAXES of every
character or description in respect of INTANGIBLE PERSONAL PROPERTY owned by citizens of the Philippines
not residing in that foreign country.
There are TWO KINDS OF DONORS (similar to estate tax):

1)
2) The resident or citizen of the Philippines, and
3) The non-resident, not citizen of the Philippines
If the donor is a RESIDENT or a CITIZEN of the Philippines, GROSS GIFTS would consist of:
1. REAL estate, regardless of location
2. TANGIBLE personal property, regardless of location
3. INTANGIBLE personal property, regardless of location
If the donor is NON-RESIDENT, NOT CITIZEN of the Philippines, gross gifts would consist of:
1. REAL estate located in the PHILIPPINES
2. TANGIBLE personal property located in the PHILIPPINES
3. INTANGIBLE personal property located in the PHILIPPINES, subject to the RECIPROCITY
CLAUSE (Similar to the rules for estate tax, see discussion there for what constitutes
intangible property)
If donor at the time of the donation was a citizen and resident of a FOREIGN country which at
the time of the donation DID NOT IMPOSE A TRANSFER TAX of any character in respect of
intangible personal property of Filipino citizens not residing in that country, or
If the LAWS OF THE FOREIGN COUNTRY of which the donor was a citizen and resident at the
time of donation allow a SIMILAR EXEMPTION FROM TRANSFER TAXES of every character in
respect of intangible personal property owned by citizens of the Philippines not residing in
that country
A donation made by a corporation to the heirs of a deceased office out of gratitude for his
past services is subject to the donees gift tax. It is not subject to deduction for the value of
said services which do not constitute a recoverable debt. (Pirovano v CIR, the heirs here
wanted to consider it remuneratory so it wont be taxed as a gift. In this case, the donees
were the ones who were made liable to pay, not the donor)
Prior to RA 7166, a donation for a political candidate was subject to donors tax. (ACCRA v CIR,
wherein the ACCRA partners claimed that political and electoral contributions were not
subject to donors tax)
o But now, under RA 7166, contributions duly reported to the BIR are not subject to
any donors tax.13
o Segue to election taxes: so what happens to the money given to the candidate? (RR
7-2011, Feb 8, 2011)
1 GR: The money given to the candidate will NOT go into his
taxable income, as long as it is utilized in his campaign.
HOWEVER, unutilized/excess campaign funds shall be subject to
income tax.
2 Moreover, any candidate (winner or loser) must file with the
COMELEC his/her statement of expenditures. If not, he/she will be
precluded from using such expenditures as deductions from
his/her campaign contributions. As such, the entire amount of
such contributions will be
directly subject to income tax.
(1) Any provision of law to the contrary notwithstanding, any contribution in cash or in
kind to any candidate or political party or coalition of parties for campaign
purposes, duly reported to the Commission shall not be subject to the payment of
any gift tax. (RR 8-2009, Oct 22, 2009)
1 Any provision of law to the contrary notwithstanding, any contribution in cash
or in kind to any candidate or political party or coalition of parties for campaign
purposes, duly reported to the Commission shall not be subject to the payment
of any gift tax. (RR 8-2009)
Also to be considered as gifts are the following:
Transfers for insufficient consideration
Cancellation of indebtedness

Tax 2 Notes Finals 3

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SEC. 84. RATES OF ESTATE TAX.

But not over

The tax shall

Properties in the Estate

The following, among others, are IPPs LOCATED IN THE PHILIPPINES:

SITUS of INTANGIBLE PERSONAL PROPERTY (IPP)

A transfer in contemplation of death - is a transfer motivated by the thought of death,

Donation INTER VIVOS

Its effect is produced while the donor is still

or the transferor retains the ownership of the

b. The R (either alone/in conjunction w/ any person) to designate the persons

Transfers Under a General Power of Appointment

b. any period not ascertainable w/o reference to his death or

Life Insurance Proceeds

NOT TAXABLE (NOT INCLUDIBLE)

not the insured retained the power of

IRREVOCABLY designated in the

In the transfers in contemplation of death, revocable transfer, or transfer under a GPA,

If the decedent was married his GE would consist of:

Computation of Net Estate

PROPERTY PREVIOUSLY TAXED

These deductions shall be allowed only where

TRANSFERS for PUBLIC USE

The FAMILY HOME

STANDARD DEDUCTION P1m

AMOUNT RECEIVED by HEIRS under RA 4917

TRANSFERS for PUBLIC USE

(C) SHARE in the CONJUGAL PROPERTY

PROCEDURE for COMPUTING NET ESTATE & ESTATE TAX DUE

Less: Net share of surviving spouse in conjugal/community property (if

Tax Rate (Sec 84)

5% of the gross estate; or

Computation for the net estate

Expenses on extrajudicial settlement of the estate are allowed as deductions. They

So, gross estate is made up of:

Claims against the estate

Claims against insolvent persons

However, where the MORTGAGOR is a NRA, indebtedness secured by mortgage of real

Losses are deductible from the gross estate if:

These deductions shall be allowed only where

VANISHING DEDUCTION of PROPERTY PREVIOUSLY TAXED

REQUISITES for VANISHING DEDUCTION:

Do not forget to deduct P1m every time! Its standard!

requisites of claims against the estate.

Retirement benefits received by employees of private firms in accordance with a

3. SHARE of SURVIVING SPOUSE it refers to the NET () share of the surviving

60% of the value if more than 2 yrs up to 3yrs

C. REQUIREMENT for DEDUCTION: - it is indispensable as a prerequisite to the deduction,

Net Estate Computation of Married Persons

Share in the CONJUGAL PROPERTY

So, how do we get the net estate of a married person?

Step 2: Get the decedents share (Step 1s NCE/2)

Real property inherited from the father

LEGIT DESCENDANTS by a FORMER MARRIAGE & its FRUITS & INCOME

Exemption from Estate Tax

The following are EXEMPT from ESTATE TAX:

Tax Credit for Foreign Estate Tax

Estate Tax Returns

schedule of partition and o

rder of the court approving the same

authorized agent bank, or

An estate tax return is required to be filed when the estate is:

Estate tax shall be paid at the time the return is filed.

within one (1) year after the making of such application, or