TAX-101
ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 44  October 2022 CPA Licensure Examination
TAXATION
A. TAMAYO  E. BUEN  G. CAIGA  C. LIM  K. MANUEL
ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
A.
BIR Form No.
Estate Tax
Donor’s Tax
BIR Form No. 1801
Tax Return
BIR Form No. 1800
B. Effectivity of Transfer
Estate Tax
Effectivity of transer
C.
Donor’s Tax
Inter vivos
Mortis causa
Tax rate
Estate Tax
Donor’s Tax
There shall be levied, assessed, collected
and paid upon the transfer of the net
estate of every decedent, whether
resident or nonresident of the
Philippines, a tax at the rate of six percent
(6%) based on the value of such net
estate.”
Tax rate
The tax for each calendar year shall be
six percent (6%) computed on the
basis of the total gifts in excess of
Two hundred fifty thousand pesos
(P250,000) exempt gift made during
the calendar year.
D. Composition of Gross Estate/Gross Gift
Real properties
Personal properties
Taxable transfers
E.
Estate Tax
Res/Cit Decedent
NRA Decedent
Donor’s Tax
Res/Cit Donor
NRA Donor
Wherever situated
Wherever situated
Wherever situated
Wherever situated
Wherever situated
Not applicable
Situated in the Phils.
Situated in the Phils.
Situated in the Phils.
Situated in the Phils.
Situated in the Phils.
Not applicable
DEDUCTIONS ALLOWED
Deductions allowed
Estate Tax
Ordinary deductions
1, Losses*
2. Indebtedness (Claims against the estate)*
3. Taxes*
4. Claims against insolvent debtor*
5. Unpaid mortgage*
6. Vanishing deduction
7. Transfer for public use
Special deductions
1. Family home
2. Standarrd deduction
3. Amount received under RA 4917
Other deduction
1. Share in the conjugal property
Donor’s Tax
Found in the Tax Code Under TRAIN
1. 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
2. Gifts in favor of an educational and/or charitable,
religious, cultural or social welfare corporation,
institution, accredited nongovernment organization,
trust or philanthropic organization or research
institution or organization.
Not found in the Tax Code
1. Encumbrance on the property donated if assumed
by done
2. Those specifically provided by donor as a
diminution from the property donated
Note: When decedent is NRA:
Phil. GE x LITE*
World GE
F.
Administrative Provisions
Estate Tax
1. Notice required
Notice of Death Under TRAIN (effective
January 1, 2018) – No longer required
2. Tax Returns filed
1) In all cases of transfer subject to tax;
2) Where the said estate consists of registered
or registrable property (regardless of the
value of the gross estate)
3. Persons to file
returns
1) Executor
2) Administrator or
3) Any of the legal heirs
Page 1 of 11
Donor’s Tax
The donor engaged in business shall give a notice
of donation on every donation worth at least
P50,000 to the RDO which has jurisdiction over his
place of business within 30 days after receipt of the
qualified donee institution’s duly issued Certificate
of Donation, which shall be attached to the said
Notice of Donation, stating that not more than 30%
of the said donations/gifts for the taxable year shall
be used for administration purposes.
Any person who makes any transfer by gift (except
those which are exempt from donor’s tax) shall, for
the purpose of donor’s tax, make a return under
oath at least in duplicate (triplicate per BIR Form
No. 1800)
1) Donor
2) Authorized representative
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TAX-101
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
4. Information shown
in the returns
5. Time of filing
returns
6. Returns to be supported
with statements certified
to by a CPA
7. Contents of the
statements certified to
by a CPA
8. Filing of certified copy of
the schedule of partition
and the order of the court
ordering the same
9. Extension for filing the
returns
10. Place of filing of the
returns
G.
1) The value of the gross estate of the
decedent at the time of his death, or in
case of non-resident alien of that part of
his gross estate situated in the Philippines;
2) The deductions allowed from the gross
estate;
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;
Within one year from decedent’s death
When the estate tax returns show a gross
value exceeding P5,000,000
The return shall set forth:
a. Each gift made during the calendar year which
is to be included in computing net gifts;
b. The deductions claimed and allowable;
c. Any previous net gifts made during the same
calendar year;
d. The name of the donee; and
e. Such other information as may be required by
rules and regulations made pursuant to law.
The donor’s tax return shall be filed within thirty
(30) days after the date the gift is made or
completed.
Not applicable
1) Itemized assets of the decedent with their
corresponding gross value at the time of
his death, or in case of non-resident alien,
of that part of his estate situated in the
Philippines;
2) Itemized deductions;
3) The amount of tax due whether paid or still
due and outstanding
Within 30 days after the promulgation of such
order
Not applicable
The Commissioner can, in meritorious cases,
extend the filing of returns for a period not
exceeding 30 days.
1) In case of resident decedent:
a) Accredited agent bank;
b) Revenue District Officer;
c) Collection Officer, or
d) Duly authorized Treasurer of the city or
municipality where the decedent was
domiciled at the time of death.
2) In case of non-resident decedent:
a) Revenue District Office where the executor
or administrator is registered;
b) Revenue District Office having jurisdiction
over the executor or administrator’s legal
residence (if executor or administrator is
not registered);
c) Office of the Commissioner (RDO No. 39
– South Quezon City) (if the estate does
not have an executor or administrator in
the Philippines)
No extension
Not applicable
a. In case of resident donors:
1) Authorized agent bank;
2) Revenue District Officer;
3) Revenue Collection Officer;
4) Duly authorized Treasurer of the city or
municipality where the donor was domiciled at
the time of the transfer.
b. In case of non-resident donors:
1) Philippine Embassy or Consulate where he is
domiciled at the time of the transfer, or
2) Office of the Commissioner (RDO No. 39 –
South Quezon City)
Note: Returns filed with Philippine Embassy or
Consulate shall be paid thereat.
Payment of Tax
Estate Tax
1. Time of payment
2. Extension of time of
payment
3. Requirement of bond if
extension is granted
4. Extension of payment not
allowed
5. Liability for payment
Page 2 of 11
At the time the estate tax returns are filed
1) Estate is settled through the courts – not to
exceed 5 years
2) Estate is settled extra-judicially – not to
exceed 2 years
If an extension is granted, the Commissioner or
his duly authorized representative
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.
When there is negligence, intentional disregard of
rules and regulations and fraud on the part of the
taxpayer.
1) The estate tax shall be paid by the executor
or administrator before the delivery of the
distributive share in the inheritance to any
heir or beneficiary;
2) Where there are two or more executors or
administrators, all of them are severally
liable for the payment of tax;
Donor’s Tax
At the time the donor’s tax returns are filed
No extension
Not applicable
Not applicable
No specific provision
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TAX-101
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
6. Payment in installment
7. Modes of payment
3) The executor or administrator of an estate
has the primary obligation to pay the estate
tax but the heir or beneficiary has subsidiary
liability for the payment of that portion of
the estate tax which his distributive share
bears to the value of the total net asset.
1) In case the available cash of the estate is
insufficient to pay the total estate tax due,
payment by installment shall be allowed
within two (2) years from statutory date for
its payment without civil penalty and
interest..
2) In case of lapse of two years without the
payment of the entire tax due, the
remaining balance thereof shall be due and
demandable subject to the applicable
penalties and interest reckoned from the
prescribed deadline for filing the return and
payment of the estate tax.
No civil penalties or interest may be imposed
on estates permitted to pay the estate tax
due by installment. Nothing, however,
prevents the Commissioner from executing
enforcement action against the estate after
the due date of the estate tax provided that
all the applicable laws and required
procedures are followed/observed.
1) Payment through Authorized Agent Bank
(AAB)
(a) Over-the-counter cash payment –
Maximum amount per tax payment
not to exceed P10,000.00
(b) Bank debit system – taxpayer has
bank account with AAB
( c) Checks – indicate “PAY TO THE
ORDER OF:
1) Presenting/collecting bank or the
bank where the payment is to be
coursed and
2) FAO (for account of) Bureau or
Internal Revenue as payee; and
3) Under the “ACCOUNT NAME” of the
taxpayer identification number
(TIN)
Notes: i. Accommodation checks,
second endorsed checks, stale
checks, postdated checks,
unsigned checks and checks
with alterations/erasures are not
acceptable.
ii. Checks to cover one tax type for
one return period only
2) Payment through Tax Debit Memo (TDM)
(not acceptable as payments for
withholding taxes, fringe benefit tax, and
for taxes, fees and charges collected under
special schemes or procedures or programs
of the Government or BIR)
3) Payment through E-Payment System
4) Payment directly to the BIR
Payment through creditable withholding
taxes
H.
No specific provision
1) Payment through Authorized Agent Bank (AAB)
(a) Over-the-counter cash payment – Maximum
amount per tax payment not to exceed
P10,000.00
(b) Bank debit system – taxpayer has bank
account with AAB
(c) Checks – indicate “PAY TO THE ORDER OF:
1) Presenting/collecting bank or the bank
where the payment is to be coursed and
2) FAO (for account of) Bureau or Internal
Revenue as payee; and
3) Under the “ACCOUNT NAME” of the
taxpayer identification number (TIN)
Notes: i. Accommodation checks, second
endorsed checks, stale checks,
postdated checks, unsigned
checks and checks with
alterations/erasures are not
acceptable.
ii. Checks to cover one tax type for one
return period only
2) Payment through Tax Debit Memo (TDM) (not
acceptable as payments for withholding taxes,
fringe benefit tax, and for taxes, fees and
charges collected under special schemes or
procedures or programs of the Government or
BIR)
3) Payment through E-Payment System
4) Payment directly to the BIR
Payment through creditable withholding taxes
Accomplishing Tax Returns
a. BIR Form No. and number
of copies
Page 3 of 11
Estate Tax
BIR Form No. 1801 shall be filed in triplicate
(per the BIR form.)
Donor’s Tax
BIR Form No. 1800 shall be filed in triplicate (per BIR
Form)
1) A separate return shall be filed by each donor for
each gift (donation) made on different dates during
the year reflecting therein any previous net gifts
made in the same calendar year.
2) Only one return shall be filed for several gifts
(donations) by a donor to the different donees on
the same date.
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TAX-101
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
b. Payment and issuance of
Revenue Official Receipt
1) Upon filing of Estate Tax Return, the estate
tax due shall be paid to the Authorized
Agent Bank (AAB) where the return is filed.
2) In places where there are no AABs,
payment shall be made directly to the
Revenue Collection Officer or duly
authorized City or Municipal Treasurer who
shall issue Revenue Official Receipt (BIR No.
2524).
3) Where the return is filed with an AAB, the
lower portion of the return must be properly
machine-validated and stamped by AAB to
serve as the receipt of payment.
4) The machine validation shall reflect the date
of payment, amount paid and transaction
code, and the stamp mark shall show the
name of the bank, branch code, teller’s
name and teller’s initial.
5) The AAB shall also issue an official receipt or
bank debit advice or credit document,
whichever is applicable, as additional proof
of payment.
3) If the gift (donation) involves conjugal/community
property, each spouse shall file separate return
corresponding to his/her share in the
conjugal/community property. This rule shall likewise
apply in the case of co-ownership over the property
being donated
1) Upon filing of Donor’s Tax Return, the total amount
payable shall be paid to the Authorized Agent Bank
(AAB) where the return is filed.
2) In places where there are no AABs, payment shall be
made directly to the Revenue Collection Officer or
duly authorized City or Municipal Treasurer who shall
issue Revenue Official Receipt (BIR No. 2524).
3) Where the return is filed with an AAB, the lower
portion of the return must be properly machinevalidated and stamped by AAB to serve as the
receipt of payment.
4) The machine validation shall reflect the date of
payment, amount paid and transaction code, and
the stamp mark shall show the name of the bank,
branch code, teller’s name and teller’s initial.
5) The AAB shall also issue an official receipt or bank
debit advice or credit document, whichever is
applicable, as additional proof of payment.
I. GROSS ESTATE OF MARRIED DECEDENTS
Conjugal partnership of gains
(CPOG)
Exclusive properties of the decedent
Included
Common properties
Included
Exclusive properties of the surviving
Not included
spouse
Absolute community of properties
(ACOP)
Included
Included
Not included
J. COMPOSITION OF THE GROSS ESTATE OF MARRIED DECEDENTS
a. Conjugal Partnership of Gains (Relative Community of Properties) (Married before August 3, 1988)
Exclusive properties
Conjugal properties
a. Properties brought into the marriage as either of
a. Properties acquired by onerous title during the marriage at the expense of the
the spouse’s own;
common fund, whether the acquisition be for the partnership, or for only one of the
spouses;
b. Properties acquired by gratuitous (or lucrative)
b. Properties obtained from labor, industry, work or profession of either or both of the
title during the marriage;
spouses;
c. Properties acquired by right of
c. The fruits, natural, industrial or civil, due or received during the marriage from the
redemption or by exchange with other property
common property, as well as the net fruits from the exclusive property of each
belonging to only one of the spouses;
spouse;
d. Properties acquired with exclusive money of
d. The share of either spouse in the hidden treasure which the law awards to the finder
either spouse.
or owner of the property where the treasure is found;
e. Properties acquired through occupation such as fishing and hunting;
f. Livestock existing upon the dissolution of the partnership in excess of the number of
each kind brought to the marriage by either spouse;
g. Properties acquired by chance, such as winnings from gambling and betting.
b. Absolute Community of Properties (Married on or after August 3, 1988)
Exclusive properties
Community Properties
a. Properties acquired during the
a. All properties owned by spouses at the time of the celebration of
marriage by gratuitous (or lucrative) title by
marriage or acquired thereafter.
either spouse, and the fruits as well as the
income thereof, if any, unless it is specifically
provided by the donor, testator or grantor that
they shall form part of the community;
b. Property for personal and exclusive use of either
spouse, however, jewelry shall form part of the
community property;
c. Property acquired before the
marriage by either spouse who has legitimate
descendants by a former marriage, and the
fruits as well as the income, if any, of such
property.
Page 4 of 11
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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
TAX-101
c. Exercise: The decedent was married at the time of death. He was survived by his wife and children. Determine the taxable gross estate
(FMV at the time of death).
EXCLCONJEXCLCOMMFMV
CPOG
CPOG
ACOP
ACOP
Cash owned by the decedent before the marriage
P5,000,000
Real property inherited by the decedent during the marriage
6,000,000
Personal property received by the wife as gift before the marriage
400,000
Property acquired by decedent with cash owned before the marriage
600,000
Personal effects of the decedent purchased with the exclusive money of the wife
500,000
Jewelry purchased with cash of the surviving spouse earned before marriage
1,000,000
Property unidentified when and by whom acquired
1,200,000
Cash representing income received during the marriage from exclusive property
2,000,000
Property acquired before marriage by the decedent who has legitimate
descendants by a former marriage
3,000,000
Total
K. Exercises
The decedent, resident citizen, is a married man with a surviving spouse with the following data dies on January 1, 2021:
Conjugal real and personal properties
P
14,000,000
Conjugal family home
9,000,000
Exclusive properties
5,000,000
Conjugal ordinary deductions (including P200,000 funeral
expenses and P100,000 judicial expenses)
2,300,000
Medical expenses
500,000
Using BIR Form 1801 compute the following:
a. Line 34 page 2 (Gross estate)
b. Line 35 page 2 (Ordinary deductions)
c. Line 37D page 2 (Total special deductions
d. Line 40 page 2 (Net taxable estate)
e. Line 18 page 1 (Estate tax due)
L. RULE OF RECIPROCITY (NON RESIDENT ALIEN DECEDENT/DONOR)
1. Properties covered by
Intangible personal property situated in the Philippines owned by non-resident alien
reciprocity
decedent/donor
2. Basic rules
When there is reciprocity – The intangible personal property of non-resident alien situated in the
Philippines are not included in the gross estate.
When there is no reciprocity – The intangible personal property of non-resident alien situated in
the Philippines are included in the gross estate.
3. Properties considered
The following shall be considered as situated in the Philippines (among others):
situated in the Philippines
b. Franchise which must be exercised in the Philippines;
c. Shares, obligations or bonds issued by any corporation or sociedad anonima organized
and constituted in the Philippines in accordance with its law;
d. Shares, obligations or bonds issued by any foreign corporation 85% of the business of
which is located in the Philippines;
e. Shares, obligations or bonds issued by any foreign corporation if such shares, obligations
or bonds have acquired a business situs in the Philippines;
f. Shares or rights in any partnership, business or industry established in the Philippines.
4. Exercise: A decedent or a donor ahs the following properties. Check the appropriate box if included in the gross estate
Resident
NRA-No
NRA-With
decedent
Reciprocity
Reciprocity
House and lot, USA
Condominium unit, Philippines
Furniture and appliances, Philippines,
Car, USA, recently purchased,
Bonds, Philippines
Common shares of stock not traded in the local stock exchange, Philippine Corp.
Preferred shares of stock, foreign corporation, 85% of the business in the Philippines,
Proceeds of life insurance, Philippines (administrator of the estate is irrevocable
beneficiary
M. TAXABLE TRANSFERS
1. Examples of taxable
transfer
2. Motives that preclude a
transfer from the
category of one made in
contemplation of death
Page 5 of 11
a. Transfer in contemplation of death – motivated by thought of death although death may not be
imminent;
b. Revocable transfer – the enjoyment of the property may be altered, amended, revoked or
terminated by the decedent;
c. Transfer passing under general power of appointment;
d. Transfer with retention or reservation of certain rights;
e. Transfer for insufficient consideration.
a. To relieve donor from the burden of management;
b. To save income or property taxes;
c. To settle family litigated and un-litigated disputes;
d. To provide independent income for dependents;
e. To see the children enjoy the property while the donor is alive;
f. To protect the family from hazards of business operations; and
g. To reward services rendered.
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TAX-101
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
Exercise: Determine whether or not the following fall under taxable transfers for estate tax purposes (Y/N)
Taxable transfer?
Reason
1) Property transferred, transferor is of advanced age and thought of dying soon
2) Property transferred, transferor wanted to reward services rendered to him
3) Property transferred, transferor has the right to take the property back
4) Property transferred, transferor has the right to take the property back but waived the
right before he died
5) Property transferred under power of appointment which can be exercised in favor of
anybody
6) Property transferred under power of appointment which can be exercised in favor of a
person designated by the transferor of the power of appointment
7) Property transferred, the transferor has the right to the income of the transferred
property while still alive
N. TRANSFER FOR INSUFFICIENT CONSIDERATION
Estate Tax
Applicable rule
Where property, other than a real property that has
been subjected to the final capital gains tax, is
transferred for less than an adequate and full
consideration in money or money’s worth, then the
amount by which the fair market value of the
property at the time of the execution of the Contract
to Sell or execution of the Deed of Sale which is not
preceded by a Contract to Sell exceeded the value of
the agreed or actual consideration or selling price
shall be included in computing the amount of gross
estate.
Donor’s Tax
Where property, other than a real property that has
been subjected to the final capital gains tax, is
transferred for less than an adequate and full
consideration in money or money’s worth, then the
amount by which the fair market value of the property
at the time of the execution of the Contract to Sell or
execution of the Deed of Sale which is not preceded by
a Contract to Sell exceeded the value of the agreed or
actual consideration or selling price shall be deemed a
gift, and shall be included in computing the amount of
gifts made during the calendar year.
A sale, exchange, or other transfer of property made in
the ordinary course of business (a transaction which
is a bona fide, at arm’s length, and free from any
donative intent), will be considered as made for an
adequate and full consideration in money or money’s
worth.”
Exercise: Determine what value shall be included in the gross estate
FMV, time of
Consideration
FMV, time of
transfer
received
death/donation
Case 1
P1,000,000
P 800,000
P1,200,000
2
P1,500,000
P 900,000
P1,000,000
3
P2,000,000
None
P1,500,000
4
P2,500,000
P3,000,000
P3,500,000
5
P2,200,000
P1,500,000
P1,200,000
Amount included in the
gross estate/gross gift
O. OTHER ITEMS (INTANGIBLE PERSONAL PROPERTY)
1. Proceeds of life insurance
Generally taxable, except when:
a. A third person is irrevocably designated as beneficiary;
b. The proceeds/benefits come from SSS or GSIS;
c. The proceeds come from group insurance.
Assumption when designation
When the designation of the beneficiary is not stated or is not clear, the Insurance Code assumes
is not stated
revocable designation.
2. Claims against insolvent
a. The full amount of the claims is included in the gross estate.
persons
b. The uncollectible amount of the claims is deducted from the gross estate.
3. Amount received by heirs a. R.A. No. 4917 is entitled ‘An Act Providing That Retirement Benefits of Employees of Private Firms
under R.A. No. 4917
Shall Not be Subject to Attachment, Levy, Execution, or Any Tax Whatsoever’.
b. The amount received by heirs from decedent’s employer as a consequence of the death of the
decedent-employee is included in the gross estate of the decedent.
c. The amount above is also allowed as deduction from gross estate.
4. Exercise
a. Determine whether or not the following proceeds of life insurance shall be included in the gross estate (Y/N)
Included?
Reason
1) Proceeds from life insurance, third person is irrevocably designated as beneficiary
2) Proceeds from life insurance, third person is revocably designated as beneficiary
3) Proceeds of life insurance, the beneficiary’s designation is not clear
4) Proceeds of life insurance, administrator of the estate is irrevocably designated as beneficiary
5) Proceeds of life insurance, executor of the estate is revocably designated as beneficiary
6) Benefits received from SSS, third person is irrevocably designated as beneficiary
7) Benefits from GSIS, third person is revocably designated as beneficiary
Page 6 of 11
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TAX-101
ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
P. EXEMPTIONS/EXCLUSIONS
1. Exemptions of certain
a. The merger of usufruct in the owner of the naked title;
acquisitions and
b. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
transmissions
fideicommissary;
c. The transmission from the first heir, legatee or donee in favor of another beneficiary in accordance
with the desire of the predecessor; and
d. All bequest, devises, legacies or transfers to social welfare, cultural and charitable institutions, no part
of the net income of which inures to the benefit of any individual: Provided, however, that not more
than 30% of the said bequest, devises, legacies or transfers shall be used by such institutions for
administration purposes.
2. Exclusions from gross
a. Amount received as war damages;
estate/gross
gift
under b. Amount received from US Veterans Administration;
special laws
c. Benefits from GSIS and SSS.
Q.
DETERMINATION OF THE VALUE OF THE ESTATE/GIFT
Estate Tax
1. Usufruct
In accordance with the latest Basic Standard Mortality Table, to be
approved by the Secretary of Finance, upon the recommendation
of the Insurance Commissioner.
2. Properties
a. Generally – Fair market value at the time of
decedent’s death;
b. Real property – Higher between fair market value, BIR (zonal
value) and fair market value, Provincial and City assessor
(assessed value);
c. Personal properties – Recently purchased – Purchase price
d. Personal property tot recently purchased – Pawn value x 3
d. Securities (shares of stock)
1) Traded in the local stock exchange – Mean between the
highest and lowest quotations on valuation date or on a
date nearest the valuation date;
2) Not traded in the local stock exchange
a) Common (ordinary) shares – Book value on valuation
date or on a date nearest the valuation date;
b) Preferred (preference) shares – Par value
Donor’s Tax
No specific provision
a. Generally - Fair market value at the time
of the gift
b. Real property - Provisions in estate tax
shall apply to the valuation of said real
property
3. Exercise: Determine the value to be included in the gross estate/gross gift
a. Real property, zonal value, time of death/donation, P1,500,000; value per tax declaration, time of death/donaton,
P1,200,000
b. Real property, zonal value, 6 months before death/donation, P1,500,000; assessed value, time of death/donation,
P1,200,000
c. Personal property, recently purchased, FMV, time of death/donation, P700,000; purchase price, P800,000
d. Personal property, recently purchased, purchase price, P800,000
e. Personal property, not recently purchased, pawn value, P80,000
f. 10,000 shares of stock, traded in the local stock exchange, par value, P20/share; mean between highest and lowest
quotation, P15/share
g. 5,000 common shares, not traded in the local stock exchange, FMV, time of death P2/share; par value, P5/share
h. 5,000 common shares, not traded in the local stock exchange, par value, P5/share; book value, P4/share
i. 10,000 preferred shares, not traded in the local stock exchange par value, P10/share; book value, P15/share
R. Deductions Amplified (Estate Tax)
ORDINARY DEDUCTIONS
a. Losses
Requisites for
a) Incurred during the settlement of the estate;
deduction and
b) Arising from fires, storms, shipwreck, or other casualties, or from
amount deductible
robbery, theft or embezzlement;
c) Not compensated for by insurance or
otherwise;
d) Not claimed as deduction for income tax
purposes in an income tax return;
e) Incurred not later than the last day for the
payment of the estate tax.
b. Indebtedness (Claims against the estate)
Requisites for
a) The liability represents a personal obligation of the deceased
deduction and
existing at the time of his death;
amount deductible
b) The liability was contracted in good faith and for adequate and
full consideration in money or money’s worth;
c) The claim must be a debt or claim which is valid in law and
enforceable in court;
d) The indebtedness must not have been condoned by the
creditor or the action to collect from the decedent must not
have prescribed.
e) At the time the indebtedness was incurred the debt instrument
was duly notarized; and
f) 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
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Actual amount of loss
Debts or demands of pecuniary nature which
could have been enforced against the
deceased in his lifetime and could have been
reduced to simple money terms
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ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
c. Unpaid taxes
Requisites for
deduction and
amount deductible
The tax must have accrued before the death of the decedent
Unpaid taxes that accrued before the
decedent’s death but not including:
a) any income tax upon income
received after the death of
the decedent, or
b) property taxes not accrued
before his death,
c) or any estate tax.
d. Claims against insolvent persons
Requisites for
a) Value of claims is included in the gross estate;
deduction and
b) The incapacity of the debtors to pay their
amount deductible
obligation is proven.
e. Unpaid mortgage
Requisites for
deduction and
amount deductible
Claims that are not collectible
a) The fair market value of the mortgaged property without
deducting the mortgage indebtedness has been initially
included as part of the gross estate;
b) The mortgage indebtedness was contracted in good faith and
for an adequate and full consideration.
Amount of unpaid mortgage
f. Computation of Deductible Losses, Indebtedness, Taxes, Claims Against Insolvent and Unpaid Mortgage (LITE) For
Non-Resident Alien Decedent
Formula
Philippine gross income
Total gross income
x LITE = Deductible LITE
g. Transfer for Public Use
Requisite for deductibility
The transfer must be testamentary in character or by
way of donation mortis causa executed by the
decedent before his death
Amount deductible
Amount of all bequest, legacies, devises, or
transfers to or for the use of the Government
of the Philippines, or any political subdivision
for exclusively public purpose
h. Property Previously Taxed (Vanishing Deduction) (For Estate Tax)
Rates (based on time gap)
Requisites for deduction
a. The date of death of the present
100% - if not more than 1
decedent must not exceed 5 years from the date
year
of death of the prior decedent or date of donation.
b. The property can be identified as the one received
80% - if more than 1 year but
from prior decedent, or from the donor, or the
not more than 2 years
property acquired in exchanged for the original
property so received.
60% - if more than 2 years
c. The property must have formed part of the prior
but not more than 3 years
decedent’s gross estate situated in the Philippines
or been included in the total amount of the gifts of
40% -if more than 3 years but
the donor made within 5 years prior to the present
not more than 4 years
decedent’s death.
d. The estate tax must have been finally determined
20% - if more than 4 years
and paid by the prior decedent or the donor’s tax
but not more than 5 years
must have been paid by the donor
e. No vanishing deduction was allowed in determining
the value of the net estate of the prior decedent
Deducted from
Exclusive property
Format of computation
Value to take
P xxx
Less: Mortgage paid by present
decedent
xxx
Initial basis
xxx
Less: Proportional deduction
(Initial basis/Gross estate
x Deductions)
xxx
Final basis
xxx
Rate
xxx
Vanishing deduction
xxx
Notes:
1) Under conjugal partnership of gains
vanishing is a deduction from exclusive
property.
2) Under absolute community of property, vanishing
deduction may be deducted from exclusive
property or community property.
i. Exercise on vanishing deduction
a. Decedent was a citizen of the Philippines who was single at the time of death. Compute the vanishing deduction based on the
following information that were made available:
Properties inherited two-and-a-half years before death:
Located outside the Philippines
P3,000,000
Located in the Philippines
FMV, when inherited
6,500,000
FMV, time of death
7,000,000
Unpaid mortgage on the property when inherited
1,500,000
Unpaid mortgage on the property at the time of death
1,000,000
Property acquired through own labor
2,000,000
Expenses, losses, indebtedness, taxes, etc. (excluding the unpaid mortgage of P1,000,000)
800,000
Transfer for public use
970,000
Medical expenses
800,000
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ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
j. Exercise of deductions allowed to non-resident alien decedent
1. Mr. Poh Ma Naw, a single and a non-resident alien, died of a heart attack in 2021, leaving the following properties in favor of his
heirs:
Gross estate within the Philippines
P 30,000,000
Gross estate outside of the Philippines
20,000,000
Funeral expense
500,000
Judicial and administrative expenses
2,000,000
Claims against the estate
5,000,000
Loss due to theft
1,000,000
Medical expenses
500,000
His gross estate includes family home valued at
8,000,000
Compute the following using BIR Form No. 1801:
a. Line 34 page 2 (Gross estate)
b. Line 35 page 2 (Ordinary deductions)
c. Line 37D page 2 (Total special deductions
d. Line 40 page 2 (Net taxable estate)
e. Line 18 page 1 (Estate tax due)
SPECIAL DEDUCTIONS
1. Family Home - The family home, constituted jointly by the husband and the wife or by an unmarried head of the family, is the
dwelling house where they and their family reside and the land on which it is situated.
Conditions for the allowance of family home deduction
Amount deductible
1) The family home must be the actual residential home of the
1) Exclusive property
Full value included in the
decedent and his family at the time of his death, as certified by the
gross estate
Barangay Captain of the locality the family home is situated;
2) Conjugal/community
One-half (1/2) of the value
2) The total value of the family home must be included as part of the
property
included in the gross estate
gross estate of the decedent; and
3) Partly exclusive
Exclusive part (full value)
3) Allowable deduction must be in an amount equivalent to the
property, partly
Conjugal/community part
current fair market value of the family home as declared or included
conjugal/community
(1/2 x value)
in the gross estate, or to the extent of the decedent’s interest
property
(whether conjugal/community or exclusive property), whichever is
Note: In all three (3) cases, the maximum amount of
lower, but not exceeding P10,000,000 (old deduction was
family home deduction is P10,000,000.
P1,000,000.)
4) Exercise: For year 2021, determine the amount to be included in the GE, decedent’s interest and the FH deduction
Gross estate
Decedent’s interest
Family home deduction
Case 1 – Family home is conjugal property,
P13,000,000
2 - Family home is conjugal property,
P25,000,000
3 – Family home is exclusive property,
P12,000,000
4 - Family home is exclusive property,
P8,000,000
5 - Family home is partly common, partly
exclusive
Exclusive lot – P5,000,000
Conjugal house – P8,000,000
2. Standard Deduction Under TRAIN (effective January 1, 2018)
Resident/citizen decedent
Amount deductible
P5,000,000
3. Amount Received by Heirs Under R.A. No. 4917
Requisite for deduction
The amount of the separation benefit is included as part of the
gross estate of the decedent
Non-resident alien decedent
P500,000
Amount deductible
Any amount received by the heirs from decedent’s employer as a
consequence of the death of the employee-decedent
4. Charges Against Exclusive or Conjugal/Communal Property Under the Family Code
a. Support of spouses, their common children and legitimate children of either spouse
b. All debts and obligations contracted during the marriage by the designated administrator-spouse for the
benefit of the conjugal partnership of gain or community, or by both spouses, or by one spouse with the
consent of the other
c. Debts and obligations contracted by either spouse without the consent of the other to the extent that the
family may have been benefited
d. All taxes, liens, charges and expenses, including major and minor repairs, upon the conjugal/community
property
e. All taxes and expenses for mere preservation made during the marriage upon the separate property of either
spouse used by the family
f. Expenses to enable either spouse to commence or complete a professional or vocational course, or other
activity for self-improvement
g. Ante nuptial debts of either spouse insofar as they have redounded to the benefit of
the family
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CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
CONJ/COMM
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h.
Value of what is donated or promised by both spouses in favor of their legitimate children for the exclusive
purpose of commencing or completing a professional or vocational course or other activity for selfimprovement
i. Expenses of litigation between the spouses unless the suit is found to be groundless
j. Ante-nuptial debts of either spouse that did not redound to the benefit of the family
k. Support of illegitimate children of either spouse
l. Liabilities incurred by either spouse by reason of crime or quasi-delict
m. Loss during the marriage in any game of chance, betting, Sweepstakes, or any other kind of gambling whether
permitted or prohibited by law
CONJ/COMM
CONJ/COMM
EXCLUSIVE
EXCLUSIVE
EXCLUSIVE
EXCLUSIVE
OTHER DEDUCTIONS
1. Share of the Surviving Spouse
Gross conjugal/community properties
Less: Conjugal/community deductions
Net conjugal/community properties (NCP)
Share of surviving spouse (1/2 x NCP)
S.
P xxx
xxx
P xxx
P xxx
Tax Credit for Estate/Donor’s Tax Paid to a Foreign Country
Estate Tax
1. Entitled to tax credit
2. Deducted from estate tax due
3.
Limitations on credit
a. Only one foreign country
b.
Two or more foreign
countries are involved
Donor’s Tax
Resident or citizen decedents
The estate tax imposed in the Tax Code
shall be credited with the amounts of any
estate tax imposed by the authority of a
foreign country.
Resident or citizen donor
The donor’’s tax imposed in the Tax Code
shall be credited with the amounts of any
donor’s tax imposed by the authority of a
foreign country.
Limit: Net estate, foreign/Entire net estate
x Philippine estate tax or
Actual foreign estate tax,
whichever is lower
Limit (a) – Per foreign country : Net estate,
per foreign country/Entire net
estate x Philippine estate tax
due or
Limit (b) – By total: Net estate (all foreign
countries)/Entire net estate x
Phil. estate tax due
Limit: Net gift, foreign/Entire net gift x
Philippine donor’s tax or
Actual foreign estate tax,
whichever is lower
Limit (a) – Per foreign country : Net estate,
per foreign country/Entire net
estate x Philippine estate tax
due or
Limit (b) – By total: Net estate (all foreign
countries)/Entire net estate x
Phil. estate tax due
whichever is lower
whichever is lower
4. Exercises:
a. Estate Tax: The estate of a decedent who dies January 1, 2018 has the following data (standard deduction already taken into
account):
Net estate, Philippines
P1,200,000
Net estate, Country A (after P10,000 estate tax paid)
190,000
Net estate, Country B (before P14,000 estate tax paid)
200,000
Net estate, Country C
(100,000)
Compute the estate tax payable if : 1) resident alien 2) non-resident alien
Exercise: Decedent died January 1, 2021. Determine whether or not notice of death, estate tax return or statement certified by
a CPA need to be filed (Y/N)
Notice of
death
Estate tax
return
Statement
certified by CPA
Case 1 – Gross estate is P16,000,000; Deductions, P11,000,000
2 – Gross estate is P4,000,000; Deductions, P6,000,000
3 – Gross estate is P2,000,000, Deductions, P600,000 (NRA decedent)
4– Gross estate is P15,00,000 comprising of car, land and shares of stock;
Deductions, P10,000,000
5 – Gross estate is P5,000,000; Deductions are P1,200,000 (NRA decedent)
7 – Gross estate is P5,500,000; Deductions are P1,000,000 (NRA decedent)
T.
Acts Requiring Certification from the Commissioner that the Estate Tax Has been Paid Under TRAIN (effective
1. 2018)
Acts requiring
certification
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January
1. Delivery of distributive shares to the heirs;
2. Registration in the Registry of Deeds of transfer of inherited real property or real rights;
3. Payments of debt by decedent’s debtor to the heirs, legatees, executor or administrator of the creditordecedent;
4. Transfer of inherited shares, rights or bonds;
5. Withdrawal from decedent’s bank deposit (allowed subject to final withholding tax of 6%, withdrawal slip
shall contain a statement that all 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 depositor)
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ESTATE TAX (with COMPARISONS of TRANSFER TAXES)
Additional Cases
Estate Tax
1. The resident decedent is a married man with a surviving spouse with the following data died on January 15, 2021:
Conjugal real properties
P
6,000,000
Conjugal family house
1,000,000
Exclusive family lot
400,000
Other exclusive properties
4,500,000
Conjugal ordinary deductions (including P200,000 funeral expenses and
P300,000 judicial expenses)
1,500,000
Exclusive ordinary deductions
500,000
Medical expenses
600,000
Compute the following using BIR Form No. 1801:
a. Line 34 page 2 (Gross estate)
b. Line 35 page 2 (Ordinary deductions)
c. Line 37D page 2 (Total special deductions
d. Line 40 page 2 (Net taxable estate)
e. Line 18 page 1 (Estate tax due)
2. The citizen decedent is unmarried head of the family with the following data died on March 1, 2021:
Real and personal properties (including P1,500,000 bank deposit, P500,000 of which was withdrawn
and subjected to 6% withholding tax)
Family home
Ordinary deductions (including P100,000 funeral expenses and P200,000 judicial expenses)
Medical expenses
P 14,000,000
9,000,000
2,000,000
300,000
Compute the following using BIR Form No. 1801:
a. Line 34 page 2 (Gross estate)
b. Line 35 page 2 (Ordinary deductions)
c. Line 37D page 2 (Total special deductions)
d. Line 40 page 2 (Net taxable estate)
e. Line 18 page 1 (Estate tax due)
Estate Tax: A non-resident alien decedent, single, died on January 1, 2018 left the following properties:
Car, Manila (inherited 4 years before he died, FMV, date of inheritance was P1,700,000)
Car, USA
Shares of stock, USA
Shares of stock, Manila
House and lot, USA
Bank deposit, PNB-Manila
Other tangible personal properties, Manila
The administrator claimed the following deductions:
Actual funeral expenses
Judicial expenses
Loss of certain tangible personal properties
Claims against the estate
Unpaid taxes, accrued before death
Claims against insolvent person
Transfer for public use
Medical expenses
P1.500,000
2.600,000
900,000
800,000
4,800,000
1,000,000
500,000
P40,000
30,000
25,000
20,000
15,000
10,000
10,000
50,000
Compute the following using BIR Form No. 1801:
a. Line 34 page 2 (Gross estate)
b. Line 35 page 2 (Ordinary deductions)
c. Line 37D page 2 (Total special deductions
d. Line 40 page 2 (Net taxable estate)
e. Line 18 page 1 (Estate tax due)
END
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