ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 45  May 2023 CPA Licensure Examination

TAX-101
TAXATION A. TAMAYO  C. LIM  E. BUEN  G. CAIGA  K. MANUEL

ESTATE TAX
A. Estate Tax Return
BIR Form No. Tax Return BIR Form No. 1801

B. Effectivity of Transfer
Effectivity of transfer After death of transferor (Mortis causa)

C. Tax rate
Tax rate 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.”

D. Composition of Gross Estate/Gross Gift

Res/Cit Decedent NRA Decedent
Real properties Wherever situated Situated in the Phils.
Personal properties Wherever situated Situated in the Phils.
Taxable transfers Wherever situated Situated in the Phils.

E. DEDUCTIONS ALLOWED
Estate Tax
Deductions allowed 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. Standard deduction
3. Amount received under RA 4917
Other deduction
1. Share in the conjugal property

Note: When decedent is NRA:

Phil. GE x LITE*
World GE

F. Administrative Provisions
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 1) Executor
returns 2) Administrator or
3) Any of the legal heirs
4. Information shown 1) The value of the gross estate of the decedent at the time of his death, or in case of non-resident
in the returns 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;
5. Time of filing Within one year from decedent’s death
returns
6. Returns to be supported When the estate tax returns show a gross value exceeding P5,000,000
with statements
certified to by a CPA
7. Contents of the 1) Itemized assets of the decedent with their corresponding gross value at the time of his death, or
statements certified to in case of non-resident alien, of that part of his estate situated in the Philippines;
by a CPA 2) Itemized deductions;
3) The amount of tax due whether paid or still due and outstanding
8. Filing of certified copy of Within 30 days after the promulgation of such order
the schedule of partition
and the order of the
court ordering the same
9. Extension for filing the The Commissioner can, in meritorious cases, extend the filing of returns for a period not exceeding
returns 30 days.

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ESTATE TAX TAX-101
10. Place of filing of the 1) In case of resident decedent:
returns 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)
Estate Tax
1. Time of payment At the time the estate tax returns are filed
2. Extension of time of 1) Estate is settled through the courts – not to exceed 5 years
payment 2) Estate is settled extra-judicially – not to exceed 2 years
3. Requirement of bond if If an extension is granted, the Commissioner or his duly authorized representative may require the
extension is granted 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.
4. Extension of payment When there is negligence, intentional disregard of rules and regulations and fraud on the part of
not allowed the taxpayer.
5. Liability for payment 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;
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.
6. Payment in installment 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.
3) 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.
7. Modes of payment 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: (1) Accommodation checks, second endorsed checks, stale checks, postdated
checks, unsigned checks and checks with alterations/erasures are not
acceptable.
(2) 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
G. Accomplishing Tax Returns
Estate Tax
a. BIR Form No. and BIR Form No. 1801 shall be filed in triplicate (per the BIR form.)
number of copies
a. Payment and issuance 1) Upon filing of Estate Tax Return, the estate tax due shall be paid to the Authorized Agent Bank
of Revenue Official (AAB) where the return is filed.
Receipt 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.

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ESTATE TAX TAX-101
5) The AAB shall also issue an official receipt or bank debit advice or credit document, whichever is
applicable, as additional proof of payment.

H. GROSS ESTATE OF MARRIED DECEDENTS

Conjugal partnership of gains Absolute community of properties
(CPOG) (ACOP)
Exclusive properties of the decedent Included Included
Common properties Included Included
Exclusive properties of the surviving spouse Not included Not included

I. 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 a. Properties acquired by onerous title during the marriage at the expense of the
of 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 b. Properties obtained from labor, industry, work or profession of either or both of
lucrative) title during the marriage; the spouses;
c. Properties acquired by right of c. The fruits, natural, industrial or civil, due or received during the marriage from
redemption or by exchange with other the common property, as well as the net fruits from the exclusive property of
property belonging to only one of the spouses; each spouse;
d. Properties acquired with exclusive money of d. The share of either spouse in the hidden treasure which the law awards to the
either spouse. finder 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.

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).
EXCL- CONJ- EXCL- COMM-
FMV 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 2,000,000
property
Property acquired before marriage by the decedent who has legitimate
descendants by a former marriage 3,000,000
Total

J. 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

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ESTATE TAX TAX-101
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)

K. RULE OF RECIPROCITY (NON RESIDENT ALIEN DECEDENT/DONOR)

1. Properties covered by Intangible personal property situated in the Philippines owned by non-resident alien decedent/donor
reciprocity
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 a. Franchise which must be exercised in the Philippines;
b. Shares, obligations or bonds issued by any corporation or sociedad anonima organized and
constituted in the Philippines in accordance with its law;
c. Shares, obligations or bonds issued by any foreign corporation 85% of the business of which is
located in the Philippines;
d. Shares, obligations or bonds issued by any foreign corporation if such shares, obligations or
bonds have acquired a business situs in the Philippines;
e. Shares or rights in any partnership, business or industry established in the Philippines.

4. Exercise: A decedent has 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 Corporation
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

L. TAXABLE TRANSFERS
1. Examples of taxable a. Transfer in contemplation of death – motivated by thought of death although death may not be
transfer 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.
2. Motives that preclude a a. To relieve donor from the burden of management;
transfer from the category b. To save income or property taxes;
of one made in c. To settle family litigated and un-litigated disputes;
contemplation of death 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.

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

M. 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.

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ESTATE TAX TAX-101
Exercise: Determine what value shall be included in the gross estate
FMV, time of Consideration FMV, time of Amount included in the gross
transfer received death/donation estate
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

N. 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 When the designation of the beneficiary is not stated or is not clear, the Insurance Code assumes
designation 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

O. 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 special laws b. Amount received from US Veterans Administration;
c. Benefits from GSIS and SSS.
d. Transfers of shares of stock, common or preferred, owned by a veteran with Philippine Veterans
Bank to his widow, orphan or compulsory heir by way of succession or donation mortis causa
(Sec. 2. RR 5-2022)
P. 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 Purchase price
(recently purchased)
d. Personal property not Pawn value x 3
recently purchased
e. Shares of stock traded Mean between the highest and lowest quotations on valuation date or on a date nearest the
in the local stock valuation date
exchange
f. Common shares of Book value based on the latest available financial statements duly certified by an independent
stock not traded in public accountant prior to the date of sale, but not earlier than the immediately preceding taxable
the local stock year, shall be considered prima facie fair market value. (Sec. 2, RR No. 20-2020)
exchange

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g. Preferred shares of Liquidation value, which is equal to the redemption price of the preferred shares as of balance
stock not traded in sheet date, including any premium and cumulative preferred dividends in arrears, shall be
the local stock considered as fair market value. (Sec. 2, RR No. 20-2020)
exchange
h. Both common shares Book value per common shares is computed by deducting the liquidation value of the preferred
of stock and preferred shares form the total equity of the corporation and dividing the result by the number of outstanding
shares of stock not common shares as of balance sheet date nearest to the transaction date. (Sec. 2, RR No. 20-2020)
traded in the local
stock exchange

3. Exercise: Determine the value to be included in the gross estate

a. Real property, zonal value, time of death/donation, P1,500,000; value per tax declaration, time of death
P1,200,000
b. Real property, zonal value, 6 months before death/donation, P1,500,000; assessed value, time of death
P1,200,000
c. Personal property, recently purchased, FMV, time of death, 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, liquidation value, P10/share; book value,
P15/share
Q. Deductions Amplified (Estate Tax)
ORDINARY DEDUCTIONS
a. Losses
Requisites for a) Incurred during the settlement of the estate; Actual amount of loss
deduction and b) Arising from fires, storms, shipwreck, or other casualties, or
amount deductible from 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 Debts or demands of pecuniary nature
deduction and deceased existing at the time of his death; which could have been enforced against
amount deductible b) The liability was contracted in good faith and for adequate the deceased in his lifetime and could
and full consideration in money or money’s worth; have been reduced to simple money terms
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
c. Unpaid taxes
Requisites for The tax must have accrued before the death of the decedent Unpaid taxes that accrued before the
deduction and decedent’s death but not including:
amount deductible 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; Claims that are not collectible
deduction and b) The incapacity of the debtors to pay their
amount deductible obligation is proven.

e. Unpaid mortgage
Requisites for a) The fair market value of the mortgaged property without Amount of unpaid mortgage
deduction and deducting the mortgage indebtedness has been initially
amount deductible included as part of the gross estate;
b) The mortgage indebtedness was contracted in good faith
and for an adequate and full consideration.

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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 Amount deductible Deducted from
The transfer must be testamentary in character or Amount of all bequest, legacies, devises, Exclusive property
by way of donation mortis causa executed by the or transfers to or for the use of the
decedent before his death Government of the Philippines, or any
political subdivision for exclusively public
purpose

h. Property Previously Taxed (Vanishing Deduction)

Rates (based on time
Requisites for deduction gap) Format of computation
a. The date of death of the present 100% - if not more than 1 Value to take P xxx
decedent must not exceed 5 years from the year Less: Mortgage paid by present
date of death of the prior decedent or date of decedent xxx
donation. 80% - if more than 1 year Initial basis xxx
b. The property can be identified as the one but not more than 2 years Less: Proportional deduction
received from prior decedent, or from the donor, (Initial basis/Gross estate
or the property acquired in exchanged for the 60% - if more than 2 years x Deductions) xxx
original property so received. but not more than 3 years Final basis xxx
c. The property must have formed part of the prior Rate xxx
decedent’s gross estate situated in the 40% -if more than 3 years Vanishing deduction xxx
Philippines or been included in the total amount but not more than 4 years Notes:
of the gifts of the donor made within 5 years 1) Under conjugal partnership of gains
prior to the present decedent’s death. 20% - if more than 4 years vanishing is a deduction from exclusive
d. The estate tax must have been finally but not more than 5 years property.
determined and paid by the prior decedent or 2) Under absolute community of property,
the donor’s tax must have been paid by the vanishing deduction may be deducted from
donor exclusive property or community property.
e. No vanishing deduction was allowed in
determining the value of the net estate of the
prior decedent

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

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)

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ESTATE TAX TAX-101
R. 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 decedent 1) Exclusive property Full value included in the
and his family at the time of his death, as certified by the Barangay gross estate
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
in the gross estate, or to the extent of the decedent’s interest property value)
(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 Non-resident alien decedent
Amount deductible P5,000,000 P500,000

3. Amount Received by Heirs Under R.A. No. 4917

Requisite for deduction Amount deductible
The amount of the separation benefit is included as part of the Any amount received by the heirs from decedent’s employer as a
gross estate of the decedent 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 CONJ/COMM
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 CONJ/COMM
c. Debts and obligations contracted by either spouse without the consent of the other to the extent that the
family may have been benefited CONJ/COMM
d. All taxes, liens, charges and expenses, including major and minor repairs, upon the conjugal/community
property CONJ/COMM
e. All taxes and expenses for mere preservation made during the marriage upon the separate property of either
spouse used by the family CONJ/COMM
f. Expenses to enable either spouse to commence or complete a professional or vocational course, or other
activity for self-improvement CONJ/COMM
g. Ante nuptial debts of either spouse insofar as they have redounded to the benefit of
the family CONJ/COMM
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 self-
improvement CONJ/COMM
i. Expenses of litigation between the spouses unless the suit is found to be groundless CONJ/COMM
j. Ante-nuptial debts of either spouse that did not redound to the benefit of the family EXCLUSIVE
k. Support of illegitimate children of either spouse EXCLUSIVE
l. Liabilities incurred by either spouse by reason of crime or quasi-delict EXCLUSIVE
m. Loss during the marriage in any game of chance, betting, Sweepstakes, or any other kind of gambling whether
permitted or prohibited by law EXCLUSIVE
S. OTHER DEDUCTIONS
1. Share of the Surviving Spouse
Gross conjugal/community properties P xxx
Less: Conjugal/community deductions xxx
Net conjugal/community properties (NCP) P xxx
Share of surviving spouse (1/2 x NCP) P xxx

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 ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
ESTATE TAX TAX-101
T. Tax Credit for Estate Tax Paid to a Foreign Country

1. Entitled to tax credit Resident or citizen decedents

2. Deducted from estate tax due 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.
3. Limitations on credit
a. Only one foreign country Limit: Net estate, foreign/Entire net estate x Philippine estate tax or Actual foreign estate tax,
whichever is lower
b. Two or more foreign Limit (a) – Per foreign country: Net estate, per foreign country/Entire net estate x Philippine
countries are involved estate tax due
Limit (b) – By total: Net estate (all foreign countries)/Entire net estate x Phil. estate tax due

Whichever is lower between limit (a) and limit (b)

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 Estate tax Statement

death return 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)

U. Acts Requiring Certification from the Commissioner that the Estate Tax Has been Paid Under TRAIN (effective January 1. 2018)

Acts requiring certification 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 creditor-decedent;
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)

Additional Cases
i. Estate Tax
i. 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) P 14,000,000
Family home 9,000,000
Ordinary deductions (including P100,000 funeral expenses and P200,000 judicial expenses) 2,000,000
Medical expenses 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)

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
ESTATE TAX TAX-101
3. 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) P1.500,000
Car, USA 2.600,000
Shares of stock, USA 900,000
Shares of stock, Manila 800,000
House and lot, USA 4,800,000
Bank deposit, PNB-Manila 1,000,000
Other tangible personal properties, Manila 500,000
The administrator claimed the following deductions:
Actual funeral expenses P40,000
Judicial expenses 30,000
Loss of certain tangible personal properties 25,000
Claims against the estate 20,000
Unpaid taxes, accrued before death 15,000
Claims against insolvent person 10,000
Transfer for public use 10,000
Medical expenses 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)

Answer:
34 Gross estate 3,810,000
35: Less: Ordinary deductions 626,980
36 Estate after ordinary deductions 3,183,020
37 Less: Special deductions
37A Standard deduction
37D Total special deductions 500,000
38 Net taxable estate 2,683,020
39 Less: Share of surviving spouse -
40 Net taxable estate 2,683,020
17 Applicable tax rate 6%
18 Estate tax due P 160,981

Schedule 2 – Personal Properties (Shares of stock)

Shares of stock, Manila 800,000

Schedule 2A – Other personal properties

Car, Manila P1,500,000
Bank deposit, PNB-Manila 1,000,000
Other tangible personal properties, Manila 500,000
Claims against insolvent person 10,000
Total 3,010,000

Schedule 5 – Ordinary deductions

Claims against the estate P20,000
Claims of the deceased against insolvent person 10,000
Unpaid taxes 15,000
Loss incurred during the settlement of the estate 25,000
Total LITE 70,000
Deductible LITE (3,810,000/12,110,000 x 70,000) P22,023
Transfer for public use 10,000
Property previously taxed (vanishing deduction) 594,957
Total P626,980

Computation of Vanishing Deduction

Value to take P1,500,000
Less: Mortgage paid -
Initial basis 1,500,000
Less: Proportional deduction (1,500,000/3,810,000 x 32,023*) 12,607
Final basis 1,487,393
Rate 40%
Vanishing deduction P594,957

Deductible LITE (3,810,000/12,110,000 x 70,000) P22,023

Transfer for public use 10,000
*Total P32,023

END

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