I.

DEFINITION AND PURPOSE OF ESTATE TAX Estate tax is a tax on the right of the deceased person to transmit his estate to his a!f" heirs and #eneficiaries. It is not a tax on propert$. Estate tax is he d to #e an excise tax imposed on the pri%i ege of transmitting propert$ "pon the death of the o!ner. The estate tax is generated #$ the death and accr"es at the time of death. It is go%erned #$ the a! in force at the time of death not!ithstanding the postponement of the act"a possession or en&o$ment of the estate #$ the #eneficiar$. Tax rates prescri#ed "nder RA '()( app $ to estate taxes fa ing d"e or ha%e accr"ed #eginning *an"ar$ +, +--', the effecti%it$ of the said a! other!ise .no!n as /The 0a! Reform Act of +--12 Aside from the reason that transfer taxes pro%ide income to the go%ernment, there are other &"stifications for their imposition. First is the #enefit 3 recei%ed theor$ that recogni4es the ro e of the State in the distri#"tion of the estate of a decedent to the heirs !hether it is in accordance !ith the decedent5s !i or #$ operation of a!. Next is the pri%i ege theor$. Inheritance is a pri%i ege granted #$ the State. Estate ac6"ired and acc"m" ated is "nder the State5s protection. The next theor$ is the a#i it$ to pa$ theor$ that asserts that the heirs #eca"se of the inheritance the$ recei%ed are a# e and capa# e to pa$ the taxes d"e the State. 0ast is the redistri#"tion of !ea th theor$ that red"ces the propert$ recei%ed #$ the heirs thro"gh taxes.

II.

7ROSS ESTATE Estate tax app ies to citi4en, resident, and Non 3 resident A ien decedent !ith properties in the Phi ippines. Resident decedent inc "des that resident a ien decedent. According to the definition in an Estate Tax Ret"rn form, 7ross Estate for citi4ens and resident a iens sha inc "de a the propert$ of the decedent at the time of death, rea or persona , tangi# e or intangi# e, !here sit"ated #"t exc "ding the exc "si%e properties of the s"r%i%ing spo"se. For Non8resident a ien, it sha inc "de the propert$ sit"ated in the Phi ippines. A. 7ross Estate of 9iti4en and Resident Decedent +. Rea Propert$ ocated !ithin and !itho"t the Phi ippines ). Tangi# e persona propert$ ocated !ithin and !itho"t the Phi ippines :. Intangi# e persona propert$ ocated !ithin and !itho"t the Phi ippines

A. 7ross Estate of a Non 3 Resident A ien Decedent +. Rea Propert$ ocated !ithin the Phi ippines ). Tangi# e persona propert$ ocated !ithin the Phi ippines :. Intangi# e persona propert$ ocated !ithin the Phi ippines "n ess there is reciprocit$ in !hich case is not taxa# e in the Phi ippines SITUS OR PLACE OF TAXATION Propert$ has a sit"s or ocation or a &"risdiction for tax p"rposes. Sit"s is decisi%e in determining the estate of a deceased person taxa# e in the Phi ippines. The sit"s of a rea propert$ is the co"ntr$ !here it is sit"ated; !hi e in tangi# e persona propert$, the sit"s is the co"ntr$ !here s"ch is act"a $ ocated at the time of the death of the decedent. In intangi# e persona propert$, the fo o!ing are considered as intangi# e persona properties sit"ated in the Phi ippines< =for non 3 resident a ien decedent !ith propert$ !ithin the Phi ippines> a> Franchise !hich m"st #e exercised in the Phi ippines #> Shares and o# igations or #onds iss"ed #$ an$ corporation organi4ed in the Phi ippines c> Shares and o# igations or #onds iss"ed #$ an$ foreign corporation '?@ of the #"siness of !hich is ocated in the Phi ippines d) Shares and o# igations or #onds iss"ed #$ a foreign corporation if s"ch shares ha%e ac6"ired a #"siness sit"s in the Phi ippines e> Shares or rights in an$ partnership #"siness or ind"str$ esta# ished in the Phi ippines Properties inc "di# e in the 7ross Estate Decedent5s Interest sha inc "de a properties, rights and interest !hich the decedent o!ns at the time of death. It sha inc "de< +. Properties o!ned #$ the decedent act"a $ and ph$sica $ present in his estate at the time of his death s"ch as and, #"i dings, shares of stoc., %ehic es, #an. deposit, etc. 2. The %a "e of an$ interest in propert$ o!ned or possessed #$ the decedent at the time of his death s"ch as di%idends dec ared #efore his death #"t recei%ed after his death, partnership profits !hich ha%e accr"ed #efore his death, "s"fr"ct"ar$ rights, etc. :. The %a "e of propert$, right or interest in the propert$, transferred #$ the decedent d"ring his ifetime !hich, "nder the a!, are in the nat"re of testamentar$ disposition s"ch as ins"rance proceeds in fa%o"r of re%oca# e #eneficiar$.

TRANSFER IN CONTEMPLATION OF DEATH Impe ed #$ the tho"ght of death, or the moti%ating factor or contro ing moti%e for transfer of the propert$ is the tho"ght of death !itho"t regard to the state of hea th of the transferor. Donation Mortis Causa Ta.es effect "pon the death of the donor. Its characteristics are< a. There is no con%e$ance of tit e or o!nership to the done or transferee #. The transfer is re%oca# e #$ the donor at !i d"ring his ifetime c. The transfer sha #e %oid if the donor s"r%i%es the done REVOCABLE TRANSFER Ahere the en&o$ment of the propert$ transferred ma$ #e a tered, amended, re%o.ed or terminated #$ the decedent. The re%oca#i it$ is not affected #$ the fai "re of the decedent to exercise the po!er to re%o.e d"ring his ifetime. If the notice has not #een gi%en, the po!er to re%o.e has not #een exercised on or #efore the date of his death, s"ch notice sha #e considered to ha%e #een gi%en, or the po!er exercised on the date of his death. PROPERTY PASSING UNDER GENERAL POWER OF APPOINTMENT The r" e is the gross estate sha inc "de an$ propert$ passing or transferred "nder genera po!er of appointment exercised #$ the decedent a. B$ !i #. B$ deed to ta.e effect in possession or en&o$ment at or after his death c. B$ deed "nder !hich he has retained for his ife or an$ period not ascertaina# e !itho"t reference to his death or for an$ period !hich does not in fact end #efore his death d. The possession or en&o$ment of, or the right to the income from the propert$ e. The right either a one, or in con&"nction !ith an$ person to designate the persons !ho sha possess or en&o$ the propert$ or the income therefrom The donee of a genera po!er of appointment ho ds the appointed propert$ !ith a the attri#"tes of o!nership th"s, the appointed propert$ sha form part of the gross estate of the donee of the po!er "pon his death.

These fo o!ing transfers do not act"a $ con%e$ f" o!nership o%er the propert$ transferred hence the propert$ sti remains part of the gross estate of the transferor<
1. Transfers !ith Retention and Reser%ation of 9ertain Rights o%er

the income or en&o$ment of the propert$ transferred ). Transfers !here the donor reser%es the right to the income of the propert$ "nti death; or 3. Transfers !here the donor reser%es the right to the possession or en&o$ment of the propert$ "nti death Trans !r or Insu i"i!nt Consi#!ration
1. If the transfer is a #ona fide sa e for ade6"ate and f"

consideration in mone$ or mone$5s !orth, no %a "e sha #e inc "ded in the gross estate. 2. If the transfer is not a #ona fide sa e for an ade6"ate and f" consideration in mone$ or mone$5s !orth, there sha #e inc "ded in the gross estate on $ the excess of the fair mar.et %a "e of the propert$ at the time of death o%er the %a "e of the consideration recei%ed #$ the decedent$ 3. If an inter %i%os transfer of the decedent is pro%en to #e fictitio"s, the tota %a "e of the propert$ at the time of death sha #e inc "ded in the gross estate. PROCEEDS OF LIFE INSURANCE Proceeds of ife ins"rance "nder po icies ta.en o"t #$ the decedent "pon his o!n ife sha #e inc "ded in his gross estate in the fo o!ing cases< +. !hen the #eneficiar$ is the estate of the deceased, his exec"tor or administrator !hether or not the deceased retained the po!er of re%ocation ). !hen the #eneficiar$ is other than the estate of the deceased, his exec"tor or administrator and the decedent retained the po!er of re%ocation

CLAIMS AGAINST INSOLVENT PERSONS

Are recei%a# es d"e or o!ing from persons !ho are not financia $ capa# e of meeting theiro# igations. The recei%a# es sha #e inc "ded in the gross estate at their f" amo"nt. CAPITAL OF THE SURVIVING SPOUSE The gross estate of a married decedent sha consist of the fo o!ing< +. con&"ga or comm"nit$ properties ). exc "si%e properties The capita of the s"r%i%ing spo"se sha not #e deemed part of the gross estate. I. CA0UATION OF 7ROSS ESTATE +. Ca "ation Date 8 time of death ). Basis of Ca "ation 8 fair mar.et %a "e, !hich is the price !hich a propert$ !i #ring !hen it is offered for sa e #$ one !ho desires, #"t is not o# igated to se and is #o"ght #$ one !ho is "nder not necessit$ of #"$ing it :. Ca "ation of Us"fr"ct8 pro#a# e ife of the #eneficiar$ in accordance !ith the atest Basic Standard Dorta it$ Ta# e (. Ca "ation of Rea Propert$ 3 a> FDC as determined #$ the 9ommissioner; or #> FDC as sho!n in the sched" e of %a "es fixed #$ the Pro%incia or 9it$ Assessors +. Ca "ation of Persona Properties8 FDC at the time of the decedent5s death ). Ca "ation of Shares of Stoc. a. Un isted Shares i. 9ommon 3 #oo. %a "e ii.Preferred 3 par %a "e #. 0isted Shares The %a "e is the arithmetic mean #et!een the highest and o!est 6"otation at a date nearest the date of death, if none is a%ai a# e on the date of death itse f.

I.

EXEDPTIONS FROD ESTATE TAX +. The merger of the "s"fr"ct in the o!ner of the na.ed tit e 2. The transmission or de i%er$ of the inheritance or egac$ #$ the fid"ciar$ heir or egatee to the fideicommissar$

3. The transmission from the first heir, egatee or donee in fa%or of

another #eneficiar$ in accordance !ith the desire of the predecessor (. A #e6"ests, de%ises, egacies or transfers to socia !e fare, c" t"ra and charita# e instit"tions, no part of the income of !hich in"res to the #enefit of an$ indi%id"a ; Pro%ided, ho!e%er, that no more than :E@ of the said #e6"ests, de%ices, egacies or transfers sha #e "sed #$ s"ch instit"tions for administration p"rposes.

I.

PROB0EDS +. Ade6"ac$ of 9onsideration for Transfer For each case, determine the %a "e to inc "de in the gross estate comp"tation<

9ases A
9onsideration recei%ed #$ transferor decedent at the time of transfer Fair mar.et %a "e at the time of transfer Fair mar.et %a "e at the time of death of transferor CA0UE TO IN90UDE IN 7ROSS ESTATE +EEE, EEE +EEE, EEE +)?E, EEE E

B
?EE, EEE +EEE, EEE +)?E, EEE 1?E, EEE

9
E +EEE, EEE +)?E, EEE +)?E, EEE

9ases A
Fair mar.et %a "e at the time of death of transferor Fair mar.et %a "e at the time of transfer 9onsideration recei%ed #$ transferor decedent at the time of transfer CA0UE TO IN90UDE IN 7ROSS ESTATE -EE, EEE 'EE, EEE E -EE, EEE

B
-EE, EEE 'EE, EEE ?EE, EEE (EE, EEE

9
-EE, EEE 'EE, EEE 'EE, EEE E

2. Sit"s and 7ross Estate

Determine the sit"s of each propert$ and for each t$pe of decedent, #e a# e to comp"te the gross estate of Dr. To if he eft the fo o!ing propert$< a. #. c. d. e. Resident citi4en Non 3 resident citi4en Resident A ien Non 3 resident a ien, !ith reciprocit$ f. Non 3 resident a ien !itho"t reciprocit$

Ca "e +. Ban. deposit at 9hina Ban., A$a a A%e., Da.ati 9it$ ). Fo"se G ot in Thai and :. B"i ding G and on !hich it stands in Pasa$ 9it$ (. Trees, p ants, gro!ing fr"its G and on !Hh the$ are p anted in Bag"io 9it$ ?. 9ar in the Phi ippines I. App iances in ho"se G ot in the Phi ippines 1. App iances in ho"se G ot in Thai and
8. *e!e r$ in the Phi ippines 9. *e!e r$ in Thai and

IN

)?EE, EEE

OUT +?EE, EEE IN IN IN IN OUT IN OUT ?EEE, EEE )?E, EEE :?E, EEE +EE, EEE )EE, EEE IEE, EEE )?E, EEE

+E. Ban. deposited in J"rich, S!it4er and ++. Fo"se G ot in the Phi ippines +). Interest in an ind"str$ esta# ished in Bris#ane, A"stra ia
13. Notes recei%a# e, de#tor residing in

OUT 1?EE, EEE IN +)?E, EEE

OUT +EEE, EEE IN OUT IN IN OUT 1?,EEE '1,?EE +EE, EEE +?E, EEE (EE, EEE

Phi ippines +(. Acco"nts recei%a# e, de#tor residing in S!it4er and +?. Fish Pond in 0ag"na +I. 9op$right exercised in the Phi ippines +1. Can in Da a$sia

+'. Trademar. "sed in Da a$sia

19. O# igations iss"ed #$ foreign corporation !ith

OUT OUT IN IN IN IN OUT OUT IN OUT

)EE, EEE :1?, EEE :?E, EEE ))?, EEE )1?, EEE ()?, EEE :EE, EEE (?E, EEE :)?, EEE 1?E, EEE ++)?, EEE '1?, EEE

no #"siness sit"s in the Phi ippines )E. Franchise "sed in the Phi ippines )+. She 9orporation certificate of stoc.s .ept in safe in Thai and )). 7 o#e Te ecom certificates of stoc.s .ept in the Phi ippines
23. Treas"r$ #onds iss"ed #$ Bang.o Sentra ng

Pi ipinas )(. Patent exercised in 9hina )?. Foreign shares, 'E@ of the #"siness is in the Phi ippines
26. Foreign #onds !ith #"siness sit"s in the

Phi ippines )1. B"siness right in corporation esta# ished in Daca", 9hina

)'. In%estment in a partnership esta# ished in the IN Phi ippines )-. Foreign shares, -E@ of the #"siness is in the Phi ippines IN

a. resident citi4en Ca "e +. Ban. deposit at 9hina Ban., A$a a A%e., Da.ati 9it$ ). Fo"se G ot in Thai and :. B"i ding G and on !hich it stands in Pasa$ 9it$ (. Trees, p ants, gro!ing fr"its G and on !Hh the$ are p anted in Bag"io 9it$ ?. 9ar in the Phi ippines I. App iances in ho"se G ot in the Phi ippines )?EE, EEE +?EE, EEE ?EEE, EEE )?E, EEE :?E, EEE +EE, EEE

1. App iances in ho"se G ot in Thai and

8. *e!e r$ in the Phi ippines 9. *e!e r$ in Thai and

)EE, EEE IEE, EEE )?E, EEE 1?EE, EEE +)?E, EEE +EEE, EEE 1?,EEE '1,?EE +EE, EEE +?E, EEE (EE, EEE )EE, EEE :1?, EEE :?E, EEE ))?, EEE )1?, EEE ()?, EEE :EE, EEE (?E, EEE :)?, EEE 1?E, EEE ++)?, EEE '1?, EEE

+E. Ban. deposited in J"rich, S!it4er and ++. Fo"se G ot in the Phi ippines +). Interest in an ind"str$ esta# ished in Bris#ane, A"stra ia
13. Notes recei%a# e, de#tor residing in Phi ippines

+(. Acco"nts recei%a# e, de#tor residing in S!it4er and +?. Fish Pond in 0ag"na +I. 9op$right exercised in the Phi ippines +1. Can in Da a$sia +'. Trademar. "sed in Da a$sia
19. O# igations iss"ed #$ foreign corporation !ith no

#"siness sit"s in the Phi ippines )E. Franchise "sed in the Phi ippines )+. She 9orporation certificate of stoc.s .ept in safe in Thai and )). 7 o#e Te ecom certificates of stoc.s .ept in the Phi ippines
23. Treas"r$ #onds iss"ed #$ Bang.o Sentra ng Pi ipinas

)(. Patent exercised in 9hina )?. Foreign shares, 'E@ of the #"siness is in the Phi ippines
26. Foreign #onds !ith #"siness sit"s in the Phi ippines

)1. B"siness right in corporation esta# ished in Daca", 9hina )'. In%estment in a partnership esta# ished in the Phi ippines )-. Foreign shares, -E@ of the #"siness is in the

Phi ippines TOTA0 )I--1?EE

a. non 3 resident citi4en Ca "e +. Ban. deposit at 9hina Ban., A$a a A%e., Da.ati 9it$ ). Fo"se G ot in Thai and :. B"i ding G and on !hich it stands in Pasa$ 9it$ (. Trees, p ants, gro!ing fr"its G and on !Hh the$ are p anted in Bag"io 9it$ ?. 9ar in the Phi ippines I. App iances in ho"se G ot in the Phi ippines 1. App iances in ho"se G ot in Thai and
8. *e!e r$ in the Phi ippines 9. *e!e r$ in Thai and

)?EE, EEE +?EE, EEE ?EEE, EEE )?E, EEE :?E, EEE +EE, EEE )EE, EEE IEE, EEE )?E, EEE 1?EE, EEE +)?E, EEE +EEE, EEE 1?,EEE '1,?EE +EE, EEE +?E, EEE (EE, EEE )EE, EEE :1?, EEE :?E, EEE

+E. Ban. deposited in J"rich, S!it4er and ++. Fo"se G ot in the Phi ippines +). Interest in an ind"str$ esta# ished in Bris#ane, A"stra ia
13. Notes recei%a# e, de#tor residing in Phi ippines

+(. Acco"nts recei%a# e, de#tor residing in S!it4er and +?. Fish Pond in 0ag"na +I. 9op$right exercised in the Phi ippines +1. Can in Da a$sia +'. Trademar. "sed in Da a$sia
19. O# igations iss"ed #$ foreign corporation !ith no

#"siness sit"s in the Phi ippines )E. Franchise "sed in the Phi ippines

)+. She 9orporation certificate of stoc.s .ept in safe in Thai and )). 7 o#e Te ecom certificates of stoc.s .ept in the Phi ippines
23. Treas"r$ #onds iss"ed #$ Bang.o Sentra ng Pi ipinas

))?, EEE )1?, EEE ()?, EEE :EE, EEE (?E, EEE :)?, EEE 1?E, EEE ++)?, EEE '1?, EEE )I--1?EE

)(. Patent exercised in 9hina )?. Foreign shares, 'E@ of the #"siness is in the Phi ippines
26. Foreign #onds !ith #"siness sit"s in the Phi ippines

)1. B"siness right in corporation esta# ished in Daca", 9hina )'. In%estment in a partnership esta# ished in the Phi ippines )-. Foreign shares, -E@ of the #"siness is in the Phi ippines TOTA0

a. resident a ien Ca "e +. Ban. deposit at 9hina Ban., A$a a A%e., Da.ati 9it$ ). Fo"se G ot in Thai and :. B"i ding G and on !hich it stands in Pasa$ 9it$ (. Trees, p ants, gro!ing fr"its G and on !Hh the$ are p anted in Bag"io 9it$ ?. 9ar in the Phi ippines I. App iances in ho"se G ot in the Phi ippines 1. App iances in ho"se G ot in Thai and
8. *e!e r$ in the Phi ippines

)?EE, EEE +?EE, EEE ?EEE, EEE )?E, EEE :?E, EEE +EE, EEE )EE, EEE IEE, EEE

9. *e!e r$ in Thai and

)?E, EEE 1?EE, EEE +)?E, EEE +EEE, EEE 1?,EEE '1,?EE +EE, EEE +?E, EEE (EE, EEE )EE, EEE :1?, EEE :?E, EEE ))?, EEE )1?, EEE ()?, EEE :EE, EEE (?E, EEE :)?, EEE 1?E, EEE ++)?, EEE '1?, EEE )I--1?EE

+E. Ban. deposited in J"rich, S!it4er and ++. Fo"se G ot in the Phi ippines +). Interest in an ind"str$ esta# ished in Bris#ane, A"stra ia
13. Notes recei%a# e, de#tor residing in Phi ippines

+(. Acco"nts recei%a# e, de#tor residing in S!it4er and +?. Fish Pond in 0ag"na +I. 9op$right exercised in the Phi ippines +1. Can in Da a$sia +'. Trademar. "sed in Da a$sia
19. O# igations iss"ed #$ foreign corporation !ith no

#"siness sit"s in the Phi ippines )E. Franchise "sed in the Phi ippines )+. She 9orporation certificate of stoc.s .ept in safe in Thai and )). 7 o#e Te ecom certificates of stoc.s .ept in the Phi ippines
23. Treas"r$ #onds iss"ed #$ Bang.o Sentra ng Pi ipinas

)(. Patent exercised in 9hina )?. Foreign shares, 'E@ of the #"siness is in the Phi ippines
26. Foreign #onds !ith #"siness sit"s in the Phi ippines

)1. B"siness right in corporation esta# ished in Daca", 9hina )'. In%estment in a partnership esta# ished in the Phi ippines )-. Foreign shares, -E@ of the #"siness is in the Phi ippines TOTA0

a. non 3 resident a ien, !ith reciprocit$ Ca "e +. B"i ding G and on !hich it stands in Pasa$ 9it$ ). Trees, p ants, gro!ing fr"its G and on !Hh the$ are p anted in Bag"io 9it$ :. 9ar in the Phi ippines (. App iances in ho"se G ot in the Phi ippines
5. *e!e r$ in the Phi ippines

?EEE, EEE )?E, EEE :?E, EEE +EE, EEE IEE, EEE +)?E, EEE 1?,EEE +EE, EEE 1I?EEEE

I. Fo"se G ot in the Phi ippines

7. Notes recei%a# e, de#tor residing in Phi ippines

'. Fish Pond in 0ag"na TOTA0

a. non 3 resident a ien, !itho"t reciprocit$ Ca "e +. Ban. deposit at 9hina Ban., A$a a A%e., Da.ati 9it$ ). B"i ding G and on !hich it stands in Pasa$ 9it$ :. Trees, p ants, gro!ing fr"its G and on !Hh the$ are p anted in Bag"io 9it$ (. 9ar in the Phi ippines ?. App iances in ho"se G ot in the Phi ippines
6. *e!e r$ in the Phi ippines

)?EE, EEE ?EEE, EEE )?E, EEE :?E, EEE +EE, EEE IEE, EEE +)?E, EEE 1?,EEE

1. Fo"se G ot in the Phi ippines

8. Notes recei%a# e, de#tor residing in Phi ippines

-. Fish Pond in 0ag"na +E. 9op$right exercised in the Phi ippines ++. Franchise "sed in the Phi ippines +). She 9orporation certificate of stoc.s .ept in safe in Thai and +:. 7 o#e Te ecom certificates of stoc.s .ept in the Phi ippines
14. Treas"r$ #onds iss"ed #$ Bang.o Sentra ng Pi ipinas 15. Foreign #onds !ith #"siness sit"s in the Phi ippines

+EE, EEE +?E, EEE :?E, EEE ))?, EEE )1?, EEE ()?, EEE :)?, EEE ++)?, EEE '1?, EEE +:-'?EEE

+I. In%estment in a partnership esta# ished in the Phi ippines +1. Foreign shares, -E@ of the #"siness is in the Phi ippines TOTA0

References<
1. A#e a, Att$. Ed!in R. =n.d.>. Ne!s and Cie!s< 7"ide ines in Estate

and Donor5s Tax. Retrie%ed Decem#er I, )EE-, from http<HH!!!.thetr"stg"r".comHne!spg(.htm

2. Scri#d. =)EE'>. Tax)89h +8? Estate Taxes Re%ie!er. Retrie%ed

Decem#er I, )EE-, from http<HH!!!.scri#d.comHdocH:-+(E+EHTax)89h+?8Estate8Taxes8 Re%ie!er :. BIR. Estate Tax Ret"rn ftp<HHftp.#ir.go%.phH!e#admin+HpdfH+I)I+'E+@)E=fina >.pdf
4. Ba ada, S"san. Ba ada, Ain. =)EE->. Transfer and B"siness Taxation.

+E Ed. Phi ippines.

TRANSFER AND BUSINESS TAXATION 7ROSS ESTATE

Daria Princess 7. Bac"ngan Decem#er 1, )EE-