B — Estate Tax: one 134 ‘ax: Gross Estate of Married Decedents ER 13-B pst ‘ATE TAX: Gross Estate Of Married Decedents coapter Overview and Objectives this chapter, readers are expected to; id the presentati 4, understan Prese lon of gross estat 2, comprehend the various property regimes e married decedent 3, master the nature of each Property regime le to spouses 4 , beable to compute the separate and exclusi under absolute community of Propety and oetiga yee rship of gains (reper Sree cine GROSS ESTATE OF MARRIED DECEDENTS The gross estate of a married decedent is composed of: 1, The decedent's exclusive properties 2. The common properties of the spouses The gross estate of a decedent is reported as follows in the estate tax return: | GROSS ESTATE { Less: Deductions Note: For single individuals, the “conjugal/communa?” column is left blank. PROPERTY RELATIONS BETWEEN SPOUSES jetween Separate’ properties and for married decedents, the boundary’ b rtant in the determination of the ommon properties of the spouses is impo! SToss estate of the decedent spouse. ymmon property? my ora common property is a question regime of the spouses. just be between the spouses m Under the Family Code, the Proper ee ma riigge and is set in thelr eed upon by the spouses befor "renuptial Agreement.” What is a separate property ora Constitutes a separate property ‘hich will be delineated by the property 501 Scanned with CamScannerSee eee Bpeoey patra oer reas eo HY me agred regime. Telly, al prope 1 aso paren f Pe oe rope Al properties that acne | page pera fe Oral et propo et | Seiaeecreare ; et Ait cml ore fhe mag Sly det ‘of the spouses including future fruit of their Soames Perna ort othe common properties opie propery reine ofan greet repay emetrhen eine are the sat a aed bbe age 2,100 cal be povered oe ce ar ahi Marne tae tng ag, SINE at se cnmeny one Conotrorvenip eats 2 Absoluecommunityof propery Ags, 1968 ‘Basic Rales inthe Determination of Property Interest 1. Common property presumption rele | pein ote reper the et he roe ‘puma peta omen pets en oven | ‘exclusive properties of ether of the spouses. | ‘Tris brezumption doesnot apply under absolute separation of rope. Under ASP. properties are pres separate of ether spouse Proven tobe ln properties ofthe [Properties before te mariage [Properties derived during the marriage — Besar ape + car a 3 Gown of Mrs. Quezon 100,000, 49000 PP carvings and necklace of Urs 2 callphones oe » sao 2 Louls Vatewn bag rs Quezon shone ‘2 Ghthes, shoes, and underwear of Ms. Quezon 1 Ghthes, shoes, and underwear of Mrs Quezon ‘The following are the exclusive and communal properties of th hte rapes _ Ketan Hex Pear ‘Acquired before mariage: Pranic. TuredoofMr.Queon P3000 Ph Wrist watch of Mr. Quezon : es bs : 200,000 (own of Mrs. Quezon 2 ape 2 Earrings and neclace ss Calphones Lous Vatton bg of Mrs. Quezon rom Clothes shoes and underwear 6.000 0000 : a PRATT MATT BUTI nae Eno cat pane tb otter pepe cae pee at 2. Proper or ache pra of ter yas er hn ey parte Fr elon ular ony of er pe cm tot 1 Reyes ogre rer dug Be mara ‘SEPARATE PROPERTIES ACOUIRED DURING MARRIAGE Properties received by way of gratuitous title Soins 0s Sejepa peo ro en ete reed Wom fens ee pte os = * Scanned with CamScannercates ‘Pruits, income oF prs eo ag by BE OOTY Sa Frits arising 0 spouses Posse, oper 3 separate property. flows ther, Bebe reer 8 cTROR POPE. I Shot, rg : Companal —| —Commanal an ‘Exclusive ‘Exclusive “mae fp et poe ‘esraice (Me ta marred decedent under the ACP, received the fellowing properties autoas te eldest ato to “Paongoo, nema Commer = to Mr Ato * P 5900000 Income freien lat 400003 yonreed Income of commer ot * 11490,000 Income from own labor = Mr Ato x 7 Income tromewnlabor-Mru to 590 aa ‘Tee fowig hows nana he propa ofthe p 310 chapter 13-8 Estate Tax: Gross Etat of fitieanmeia once ses Mea ora, vce reel Soongeg * 20080 me comer 1200010 feeome~ own labor (Mr) _'a00 omeownlabor ie) pmo sr Sime te al “a properties me ne mara 1 ee edb warty pean i i i —seeanieiengaaire se 4 Teton tom etabr aad ney cesar se ay fer obo ene cone rp. ‘Mastration 2 Mr, and Mrs. Negros marred on Jamary 10, 1990 witout arcing on 2 property regime. Mr.and Ms Negros brought to her mariage . 1,000,000 car and 2,000,000 residential fot a Daring their mariage, Mr. and Mrs. Nepes sued ropes ‘P500,000 and P800,000, ‘respectively foe thet spurte ab Nes Rept tos her residential let fr P5000 an ede ne pce rod Shown below are the separate and common properties of the spose ‘Separate popes Community MeMegrs Mex Megm Prpetes car PP P1000 000 ‘Stacks (gain and principal) io Fruits of abor (PSO0K*PBDOK) Lannea Total oo em he AC yd nse ey tn se ag 31988 risks a 2 ERS ee rest renee musta tee erecta Sua eens ‘The rule on jewelry commen of eter spouse i general 3 com Jewel for the exe ryt gales 2 ‘under other rules of ACP. su Scanned with CamScannerEstate Tax Gros Estate o statutory provisions ‘The properties shall be ate soy ad hal any cones” Doubts shal be rene et Ieterpeted ml ah a Inter ofthe — breeerty_| wna je aol bracelet worth P400,009 siphons ? Daring he mariage Mrs. Aga ‘ae sare, Mr. Alar bog Fashion| 294 ance rom her BMPS 7200000 dlamond on Gown signature rene ae 100.00 wort of shoes an the A pale of shoes for MEX a 10000) oe einigcash - salary C mercurian este fat hte a eas wh une Mage Ug TTT Itcome rope ought shoes a clothes worth P70.00 ang ‘Additional Mustrations: Absolute esien acme, MFA Oo fortis excusive personal Use Community ot Property planar mace’ Integrated Illustration 1. an anole properties: Spouses Rene and Bebe who as Te towing show c Some en db whe weed chemo pape bute sapetiee Common Medowlac. Mis Aguila: Properties Kee aie ? =P 400000 P 2 ‘aefoe marriage 7 Inher pi act ro0e "100,000 : 1 Donations orinherance reed P100000 150000 250000, Sede ae x : 2 Incomeofpropery froma.” "tooo | 20am0 "nooo Dianood ng a) burtag maria Pao nece —— 3 Properissoqted rom spat Teal iacoog Eso B—ssooon ee ati ont0 sen900 700000 a: Pope ed rig mange al sept proper, even hy 4. Property rectved by donation Poti Fat capes prptan el par operon Henn ere Inheritance 00000 500900 1300000 [ian inteetatrench epee repre 5. Income of properties frm Na and? 15000 25400 4oan0 ‘aception to th Consent Casifcaton Role & IncomectproperyfromNo3 40000 3000 7000 ‘Under ACP properties sored forthe exsive use of ether ofthe spouses 7% Incomeotproperytrom e+ 60an0 50000 130800 daring mange, te than ewer ae exe property. Separate properties of the spouses eatratoe, ‘Scoot seventies ean es Xa ender the bole comamnty of property Mr.X badly i ae res. ites permision, Mex. X went on a shopping spree 24 wig lildaton: 1. Donations or inheritance received r - - Jere P 22000 2 Income of propery from No.1 oe {in000 Pica mai Gown and signature dresses a ‘4. Property received by donation oF wasn "sim Total lorie x pimana inhertance ston saan Apalrofshoes for Mx 262,000 7 Income of property from No.4 Ziman Esso Tal ah spent 2000 Total separate properaes Remating cash Eassong sooo 33 sa i ————_—<—<—<"" Scanned with CamScannerChapter 1-0 este To 08 Commanty properties 8 Ret Ton tee nat AT, bent 000 PIS0200 P2500 7 riegooo | 20000 30000, recived 2, comet property rm Ho +" Receted P1000 000 a inbertance {Used 100.000 bey dressand shoes for his wife Used? 600.000 to bya parking lot Earned 400,000 compensation income The parking loc eared P 120000 rentals ‘Used 720000 of herent income to buy jewelry forthe spouse ‘Used 730000 of the rental income buy gown forthe wife ‘Te folowing depicts the analysis ofthe foregolng transactions: I I a a i bear Pt + Parking = 800K + 600K ed , 00K + 80 = i” 320000 1900 ¢===== «2 foe) 30000 atoan em 34 Chapter 13-8~ Estate Te: ons stat of Marie ecedents ‘Meco Ma cree a eens Srna le” ners lntothemarage ssgatd So 8000 se cee Propertisasfrult of own Sie 250400 150000 400000 Properties acquired forerclusveuse 40400160800 Son.00 Properties rut ofcommon uber ‘moo “49000 “7e00 Frits of 250000 Properties inherited before marge Properties inered 108609 sone spe Froperteescquredrommise” 22808 SlN0onano Properesearedomconmoniier "90? 080 “saoro ACP ation ofthe properties fe spouses under Common rc Meccnet. Mes rc Prperice ‘Properties inherited before marrage , Properties or excusive personal we sapo0 cago” Other properties brought Int the mariage 190200 Properties acrulng during mariage: Properesnherted dung marge 729000 S00 Properties as rutofown tor 300000 Propertes acquired orexcusieuse 3000040000 Properties as fruit f common labor 0000 Prats of . Properties inherited before mariage 000 Properties inherited during marriage 2000000000 Properties acquired from owalabor 3 earned from commontaber | [p]---> * t x estate tax ectotetax eeatetor exterior ete tar >[p]---> Note the series of double transfer tration in both cases Due to this, 3 deduction for property previously taxed is alowed bythe law agalat goss ‘state to mitigate the impart of sucesive transfer tatation Ts deduction | commonly known a “Vanishing Deduction” Requisites of vanishing deduction: 1LThe present decedent must have ded within ve (5) years rom date of, Tervanecmeas oa a Donon ye mabe rect prot omclaimabe ere! 2% The proy respec to which the deduction is claimed mist have ReeProery wets sad et Pps fe ar decedent or taxable pitt the omer mine Inshort th propery must have ben reveus sine an 4s Scanned with CamScannerross Estate chapter 14 Etate Tax Deets fo a peor ak 3 epee me ed ce a rere een be rer aoe Io ay jssion of the prior estate OF the donor, ace erin et apna it he Ip of dg ea oe in een ined the dono aout ee eat Soper tng dtc ont propery the ropery ven in 5 Narinder eate pyr cases eth epi extn Ta ero te second eae cannot dial vanishing deduce, ein an naomi igs ou “The double deduction with vanishing deduction ‘The purpose of vanishing deduction ino other than to minimize the burde, ‘of double ransfer tration that could occur when a decedent dies soon afer ‘ceiving properties that ae previously subjected to transfer tax. ‘This noble gesture from the government should not be construed as perm for taxpayers to abuse dims of deduction. In principle, vanishing deductin ‘can be daimed only theres an incidence of double transfer taxation. Despite the absence of rule prohibiting double deduction using vanisicg ‘ict there no god reson to cam vanishing deduction Ifthe ete ie of the propery is already dalmed under: 2 Gasaiy ones ‘Transfer for publ purpose © Famlyhome 4. The estate ares taxon the must ‘The property is effectively excused from: ita taxation by being deducted under Hence re amas er woul no double tation 0 shouldbe disallowed. Astron 1 HEA od oe 8-3919 ott ewan a ros wat ‘Condo unit = a esis Pa Coomera bald a [commer bag|—~ Pecan CAgicsiralind “[—rene—| [tesa | Sager t-te tn net nae Pag none ner om ater dn Zameen) eee by ayaa co 1 287 oo nl eect yw of at on kee wh fos gece fern a em geen ee Sang at font ma ee ss ht emp gpa et a, et at lg per ed nn Tebalerncrate eae ‘Hence only te car and the residence canbe coined with vnshing dedoctons ‘Mustration 2 ‘Within $ years prior tothe death of Mr Y, she etived a house and lat as Inheritance from her grandparents. The house war uninsured and was totaly destroyed by afr before Mrs. death, Mrs. ¥ also received a vil as inheritance fom her fer whose etate tax remained unpaid atthe date of M.'s death Mrs ¥ also reeved 2 P100200 ‘ash donation from her mother. No donor’ tax was psd on the donation because itis tax exempt The estate of Mr. ¥ can clam vanishing deduction oly forthe lot No vanishing ‘deduction can be claimed with epet tthe house becouse no loge ar of ‘the gros estate having been destroyed before Mrs Yseath [No vanishing deduction i clmebl fo the ve as the eats sx of the prior decedent is stil unpaid. No vahing deduction abo chimable th P100,000 ‘ash asthe same was not previouh taxed. Tere no dove tration he cane. Procedural Computation: Vanishing Deduction 1. Determine the inital ole. nv he a mare vas of propery a he dato Fe ate Near dente ora of ore fale value atthe date of death whichever Is lowe. stration td ate edn ‘Thefeorng eles ta proper tt oan andehaldeetnt oO oa dene 900000 1.000000 Fair value per assessor ‘e000 sar Scanned with CamScannerrom Gross Estate poets habe the gher: Moon dead, 11000,009 ‘Chapter 14 Estat TH ‘The respcine fare 1.200000 snes pe the ower P,000,000 ence, the ni ae sal Determine tential bos 7 ie al ve redoced BY ay INGEBLEGNSS ony Te tal us aly the resent decedent Be orb det. ‘Tus iscompted as : ntl ae ea (ee cetedoess seed and paid before death cox ne Doe 3. Determine he fl bss. ‘The fnl bass isthe inal basis reduced by a proportion of eter ‘ordinary deductions (e, LIT + transfers for public purpose) which the {nial bak bears ovr the gross estate ofthe decedent. Tis computa a P mum = hi bro Ee (ones indeed, "aes an ans ele prose) mim eattese om 4 Deere the vn decom ‘The vanishing deduction isthe final basis sm — lipid by the following Tie dees de wie 1 year rom rep of propery —| aa [ress fom eit oft propery a [Svea tom eet oth opera ae [Szereton eto poger—| a atest ole popery | ——f02 | [erties SPOR} se I Af more than one propery, shale Bowel nda apny ig deduction, the prope se recived asinertance3, ile Sictpropenes eves Ess Fon aoe Eos) Apa etnrydtcons Morgageon hear , Indetedness neces smasor sm Transfer peblewe ‘otal ordinary deductions before vanshing deductions Zaud.nd ‘Te vanishing deduction shall be determined as foo: Initial value (lower of 1.200.000 and P00 000) 200000 ‘Less: Mortgage assumed and pa (50,00 - 202000) 21000 Initial bats 7 000.000 ‘ess Propertional other ordinary deductions nial basls/ Gross estate xother ordinary deductions (?200000/P10,00,000 x P2000.000) —te0000 Pinal basis Pen00 Multiply by: Vanishing percentage (yar) a ‘Vanishing deduction akon ‘Tarreturn presentation ‘These shall be presented inthe estat tx return astllows: Tata aes Gross estate Piopooate PF ~ P10.008000 less: tions Ordinary de 7 = Debts and taxes s.4a.000 2 Maus > Transfer for publeuse ‘300000 a * Vanishing deduction 304000 . ustration 2 - tntegrative application er deat: Mra Z did on july 1.2019 leaving he following PrveT=# Poe we Scanned with CamScanneraden om Gros june30,2017 P 2,000,095 ‘Ranch, received inhertance from wand Mrs.Z fac ced moc 3,000,099 ea Dee 8 6 x ret eed 2S ean os 2018 00089) Fone eames zeae Ser ppertn ton sls “The esate of ie. Zins the folowing deductions: — 400000 ora oseon ies ene 1710000 faneral expense 90009) Aopat mone one ‘ones Additonal formation: the ranch hd afr valu of F2,400,000 Inthe gross estate of he father nde ajc 000,000 mortgage a thattime. ‘Toe orchard hada fr ale of P2500000 on Decernber 18,2017, Mrs Z moraaged the orchard on January 1,2018 for 1,500,000. P5000 ofthe morgage was pal before her death + Mx 7 designated In ber wil to donate the commercial land to + sovernment ageny for pblicuse, equred: Determine the vanishing deduction ‘The rst exate sll be competed ist 2 follows: fics. Communal __Tatal orcad #2000000 Fzamnm cect 2000000 a xaeoane * 29990 nor erp 2000000 2000008 se tee eee, a SSL ate PORE M2 te srg spouse: bec Tere oat ab coed oi cant an atte Upacteremte enn Fn “Trane fr public pu Pay ‘800,000 9000 ‘Total oher ordinary deduction, sana “ oes a au Cos eas Anau Ranch (lower of 2M A248) 2000003 » 200000 Orchard lower of 25M 42m) oa Teal 7 20006 F-2sinow 7 4so0am ese: Debts assumed and pd” “4gnoog InkiaLasis 7 oon 7 zseanen F 4400000 Use Provated deduction Ranch: (PLOM/PISMxPLEM) 170567 170667 Orchard: (P25M/PI5M 12M), <— Manip byiwomes 7 ne ory Donmleee, inarest Piro Femme 7 —% Lit Pramone rissoow pg Famiiyhome deduction Figgaoea pasion po ate: When teat ae ex peer mig pou sn 8 ‘tec ngs Hence ere ad Been tn oar nt Cave matingrle Iustration 2 Mr. dled leaving a famly home consisting oft valued at P4000,00 and a house valued at P11,000,000. ye amount tobe Incied in gross estat andthe deductible fay hhome under each ofthe following ndependent cass: ar waa aaa Tai Satara WT | Coon pepe Cae Touiz ——[ common per Ear 1) Luar oT Saluion 1 caret “gions Sowoe! flame a Poonond Lots? decedent ee ‘Tobe reported in gross estate 215000000 = Denno Prod Deductble amily bone camasee Scanned with CamScannersate cg 14 te vbss F SS 2 cae eons “ie rapt Senco, comma geen pocnitety at annoy 2 cons afm owned Fant hn eS amin atinaed 100% "Loney st eciagresestne AS00000 eae Pesan re Eisai = Ftonaane ete ey hme eanogoon tesa} Yu's family home was pte by fie which resulted in his death, The family ‘ome had valu of F20000,000 thei ofthe fie. Thar sal be ne dado fo fom home 05 the propery was araty ‘ory he poof eth ether hl he Be clted cas a ermant e mrhing rie ‘Stawmanp pepocion ‘ educa he oun of 500,00 sal be allowed a8 an aon lucion without the need of substantiation. The fll amount of PS,000,000 shallbe lowed as deduction forthe benefitaf the decedent. 4s order to simply tx administration of the estate tax, the TRAIN av adjsed the standard deduction of PIM under the NIRC to PSM in leu of ‘imeral epee judicial expense and medical expense which wert Seca ete he own view of th these. expense induce meen owed unde he TRAIN av. Tey ae ome Medel epenses re cured pr aly gare cds eat, pd mel lncreased amount of standart deem Iscadet technical be dedcted nde g2e2"4 deductions, Therefore, Ie canst ‘S54 re Chapt 4 Estate Tax Deco tom Gn tite aoe Ce a = June 17, Cire tno ‘subject to attachment, 17, execution, or any tax whatsoever nema em Fecved yt som dese sa_ 198 ty ant se elas deacon perenne h ‘ours Mela malbegeretente econ bat itustration 1 in 2018, Mr. W resigned from his employment and receved« 72000000 retirement pay from his employer's private bent pla Mes Wri see 71,000,000 in the stock market and used the ether P0200 puree + ‘arn 2019, Mr. W died leaving the car which now has vale of P2000 sod bis investments with valve of P,S00 000, ‘The amount tobe included in goss xa shal be: cor P s00000 Investment in stocks © ysmg000 “Total Inclusion in gross estate aman ‘The deduction for benefits under RA 4917 shall be nll The IRC quali the ‘exemption of benef received as «consequence of deat (Le, death beefs) rather than retirement or termination Beet receled during the fete of he decedent ‘Mustration 2 Mr. Ha bachelor, dled im a car accent. His Bers recived a P.S00000 termination pay from his employer on account Mr. Hs death. ond shall ‘The P1,S00,000 termination pay shall be iced i gros estate likewise be presented as «deduction agats ges eat, SRARE OF Tu SURVIING SOLE Suanmor usm cme emi otc Th ar of te nous ees me) ee ‘decedents have this deduction. Aer deducting the allowable deucos sprera'o tne Aes atc sr he a oe a Serge ea =* Tene Interestin the estat is taxed (RR22003) 555 Scanned with CamScanneracento os er one ce Pa in td van aren cmon seen ‘har othe suring sows Sa oad Pats AE, li, — Bs ao = 400,000 2 Sameagant eat ae oe — Neem aaa satin 7 -Stiame F eseaao0 Fosozen Less: Share of urvring spouse ti 4400000 Pore —— - =. . ‘Statutory deduction vs. Actual share of surviving spouse 1k mat be noted that the deduction for “Share of surviving spouse" is a ‘Statutory deducion ands dierent fom the actual share ofthe surviving spouse In the conjugal property. The statutory deduction is simply computed a hal ofthe net common properties in the estate tax return. lustration ‘A maried cede did soap ih the flowing go and allowable Separate properties Properties he ecdent P 1200000 Gomene -2a0a090 ‘Actual esate expense sn deductions, Funeral expenses Judi or eat admiitratin expenses P song00 {him agant the erate = spar 400,000 (ain agate enate- common ope 400,000 ‘apald mortage on separa pay ete 00,00 Unpaid morgg on common reper 100,000 es of common 400,000 rant for abe 150.000 100,000 pte 14- Estate Ta Deductions tom ou tne ing deduction on common proper Fomly home 220860 Eerd deductions 201000 oot ‘To sautory deduction forthe hare gen, Tring estate tax rules as follows. arid Spouse sal be computed Gross Estate fess: Ordinary deductions ‘Claims against the estate Moresee ‘wane soon “Som ‘Transfer for public use 1 ian Vanishing deduction — se00 Natestate before special deductions 7 Gooama. FLasines Fase Divide: aes ‘Share of surviving spouse Dam owe 1 "Funeral and jd epee re moog en coping be te 4 Ate tae for pthc os pod dees nena eee ppt ‘hci on ari por co in rn Wo Set 1. pont tamer fr btw gd pen men operes the ppb debt enon me op ‘The actual share for surviving spouse ‘The actual share ofthe surviving spouse would be computed from the acl properties that remains ofthe common properties slows. PaaS eam F Stoo Cross nate onary dtucons "Pera epenses satay sma000 Jal pene am iam meagan cog So a0008 ieee 150,000 150,000 : {noe ‘Transfer for public use 100,000 2 2 Newco ene eee ee Divide by: Eom Share fearing spose te octet to 1. The amount of aay dec nie at seveiiename Scanned with CamScannereas trom ren sn x er wg a enact the Ot roper gt hy, common inthe ot esa 28 Se res an re Sedo eee wate cee iy gn neve deduct a ea ran - re inary deterey sted the deductions ys} TT aw ese feos rs an oly inthe vstative gullies of R79 edpecainer sales ora ria Sen perl those chp rene mentee ary erate whl spel deductions pertains yok ser att ae ate dedcons nde ee ntnar 2nd pela Cassfation nthe curent rten of Oren See rdary deduclon pert to dag = ‘izens, residents oF non-resident aliens. 5 cml by ay cee: rt male orp dedions camable only by chizens or raged dno det ales ce vanishing deduction whichis a mere tax incentive is classified 2s = ‘rdnarydeducon evn iit doesnot diminish the hereditary estate beset {ecamable by any decent. The new estate tax form, Form 1801, made ‘dascation cial. ‘Benefit under 14.4917 i commonly treated a a special deduction because te ‘normaly deductible by tins or residents and is least likely tobe aval ‘yynon reside alien, Note onthe classification of benefits under RA 4917 Death benefits under RA4917 may be indicated as an ordinary deduction et ‘special deduction under the category “Other in ether classification. ee ‘Selon tee rt n ia desta = we term ars 7 ded nce ort ore infu under onary ode est rey pte EE TDs fem ne 4 If RA4917 death benef t, he smount ofthe bent mal a el ttn aoa iat Nowe be So commen 490 teal of vtec nt BMS ener deactednough te dedatos arab TM becca eee imasration 114197 debentianimacerac os uaent emer fami ome of F1200300 eter nt 2? Seatac fro» 500,000 exclusive ‘properties Properties of P2800.000\ and ea eles Messen a ae sqaesnaeor oa a — ae te, tet pe evan sears sm ie as ome ae ae rae npamairtt teary ___ 70 ya catteeate ee ae ae ess: Special Deductions Family home (P1,200000 4 sine family homes congo) 600000 Standard deductions 1.000.000 Netestate 72200000 Less: Share of surviving spouse (P3.00000+ 4) sso. NET TAXABLE ESTATE. Essa {ustration 2: RA 4917 death benefit asa spectl deduction ‘The taxable net estate shall be determined as follows: Comba — Tata —_ Family home ? 7 iawn ize Benefits under RA 4917, esneee gee sua a ua Grattan 7 Ste Foun Faseaom ‘Ty et aa cee peas FRG Fue Fees esac om a 7200000508) Patna (2000001 sae omy ome cose F Heoopes Standard deco Necenate noo) ated as follows, Word pet x. Loses indebtedness and taxes ‘Tee Prorat estat will normally resulin tems of losses, indebtedness Taue nonce Meche at an amount diferent om ther actual es ee ‘the legal treatment specified under Section (B)(1) Msraton dna od 2d deacons a" cent ded wth te fein gre Fanty tome Pillboines, —Abroad_ Tal; Ober Canaan on ter reper nae F'rz00000 F 120088 Rao aan ae (hater 14~ Este Ta Decors tom Go xe Philipines. —Abroad? “sone ~ ison ~aideaas ‘00000 ionp00 3onpe0 — ose “Fonooe (laims against the estate esses on properties ‘Transfert publicuse Note: "Peete *P150000 sn, Wie ceasing the matching re with respect, deduces sod he wt Aeduetle aout of LT Rent man Ne Salar residents orcas A Be tote wl vay Clas agaist he exit (72006 5082.1 lasses on properties (400K + eanny 6" ‘tae "oul Word LT oe ‘The Phippine sos eae rat shal bcm aor _Philppne GrssEane ___panognon Word Grows fate Finoone— * 4% ‘The deductible amount of ach LT to be presented nthe estate tax return hall be computed as: hams against the estate (P2250, 00240) P- 900000 Losses on properties (P1200000 40%) ——san000| Total Deductible LIT Esso Property prevonly taxed (VnshingDeucos) The me ranhng en sl ee vind ht te Dropery sujet vahig dtc edo ate other words the property ject Stoo tbe the Philipines athe eo eh wat Als includes a P2M property whlch was lnheced 3 years a0 when valued a P25M. “The vanishing deduction of the no-resdent allen decedent sal be competed P 1000000 Ina value (PIM or 12M whichever slower) ‘as: Indebtedness pald raat Inala = Scanned with CamScannersecant esate Ta"? 1.000.009 ota eu™ ey gut TFPPY ae rea) rie sor upto 2 ye me apy by: vanishing PTH 468009 Vansing detectors gamed wt espe tte POPES lca ig, = eee Fin eerste npc only ifthe properties Pane be situated in the Philippines at the time g ‘rans. Ge coment a et eh a ce sey oe te en Scien eee ‘Share of the surviving spouse ‘The deductible share ofthe surviving spouse of a non-resident alin decedent shall be computed out of Philippine conjugal or communal ‘Properties using the same procedures as previously discussed. ‘Standard Deductions In view ofthe removal ofthe prorated funeral and Judicial expense for no ‘esdent alien decedent, the TRAIN law allows a standard deduction of 500,000 for non-resident alien decedent. lutration ‘Aon resident alien ied eaing the following gross estate: ~y Phllnpines. __Abroad _ —_Toual sey Panos Hosea Fs “otal Goss ste qiimsoaa —inono0n zones Fronted ut = ‘Transfert Phppinepovermene ” 2200000 P 2,800,000 P 4.00000 Invohng nc Veaitingdstecensr 600000 00,000 aa ‘onminal rope 490,000 - 4000 sen chapter 14 Estate Tax: Deductions rom Gros st -the share ofthe surviving spouse and Siem decedent shall be computed ay nt MUAH esate ofthe noe cadent -faclustue_ Communal ae tial ean P 3000000 7.000000 Pi0,000000 ‘er ‘Transfer for public use eoopo 1700800 1.200000 see totee — Fimapm rel aaa esate a eccrine FEO FSA 7 Taboo Seretararteemerrsmumny "Tee re oe THXABLENET ESTATE ” mae ‘Additional Requirements on Deductions of Non-Resident Allens ‘No deduction shall be allowed inthe cate ofa non-resident alien decedent, ‘unless the executor, administrator, or anyone ofthe eis asthe case may be, includes in the return the value atthe time ofthe decedents death that part of is gross estate not situated in the Philippines. SUMMARY OF DEDUCTION RULES Tati | owen Losses Yes. Promated {cats agains the eee 1 Indebtedness ves. Tres es raster forpubicwe YES = ‘Vanishing deductions re. rs [Family ome Sa eiacioas ss ‘Benefits under RA 4917 Ws 4 Shae ofthe surviving spi= Scanned with CamScannerchapter 15 - Estate Tax Payable CHAPTER 15 ESTATE TAX PAYABLE After this chapter, readers are expected wean, aeeene aes 1. The computational procedures of the Det 2. The computational procedures of theestate tax ae tax credit and the computation of 3, The other administrative Tequirements in filing the estate tax return DETERMINATION OF THE NET TAXABLE ESTATE Mlustration 1: Single resident or citizen decedent An unmarried Filipino decedent died leaving the following properties and possible deductions: Philippines Abroad Motorcycle P> 120,000 7 pat 000 Business interests 6,500,000 P 800,000 7,300,000 Family home 10,200,000 - 10,200,000 Other personal properties ——200,000 _ 100,000 ___ 300,000 Gross Estate B1z020.000 Pp 900.000 17,920,000 Funeral expenses P. 180,000 40,000 P 220,000 Judicial expenses 40,000 30,000 70,000 Obligations 300,000 200,000 500,000 Losses 50,000 100,000 Medical expenses 150,000 550,000 ‘Separate Common) Total Gross Estate 17,920,000 P 0. 17,920,000 Less: Prin ee deductions P 500,000 : P 500,000 Ne let: f 00 ae share of 17,320,000 P 0 —-P17,320,08 Less: Share of the surviving spouse 17,320,000 let estate before special deductions $75 Scanned with CamScannerchapter 15~ Estate Tax Payatie sage nx estat sien decedent enraen St dd ering te FONG POPES and pony ustration 3: Married resident o tise decedent ence Me. Rice, a resdent len, ded levng flowing properties and exote ._— fined Tal pecesienn Condominiuan unit ‘2,000,000 - —P2/000,000 Separate nmuperic:__ Conjugal ‘estes iateress Semen Fee jaekaee Lasated ashe Phitoeines: «= “Mie Men Poo sates 1200000 1200,000 Personal properties F eaonnoo F i.o0me 2200000 ‘Other personal properties. «= _390.000 1.150.000 __1.500,000 ‘Family home - 10,800,000 ‘Toot ‘bxasooo piiso.000 =P Z.000,000 Loerp rats 2300000 _1.200000 _ +096,000 : ane Total Philippine properties Fuaooaen Ezsenem) izaonaad Pcsenoes ‘ap00 110000” 15000 acted abroad: bligaions ‘300000 200,000 00000 Personal properties P 2000800 P 1000000 P 4,000,000 lowes ‘000 120000 200000 ea properties “Zogoonn —2sono00 — 4zan000 Tranderirpublepapese $0000 "20000-7000 Toaltoregn properties Anonoa) Hasna Eazonooe Yakhnis ‘wo000 e000 zz0seo Medical expenses 150,000 400,000 550,000 World Properties ‘bag200go0 Pgaoogo pessono0g ‘Teco table eat nda ue shal be computed inthe estate tax rear 35 ‘The executor of Mr. Rice compiled the flowing expenses and deductions which are matched other respecte sources: Seanate ~~ Common ‘Total Conjugal ro sate F2as0000 po 3.850000 = ene oer, ‘ur Sao Fou? en oe ? 275000 P 775900 Judicial expenses xpeoo00 1800000 2000000 poe 110000 Oblgatone feaneoaano00 200.000 we soo lanes eee lt ont enttneetn a Share ofthe surviving pee 27500 Neca besa Scanned with CamScanner[ais Finan Pais ZAM aSon000 wang 1900000 ‘Marration 4: Married noe resident allen decedent ‘rx. Kay Yatoto a noresdet Japanese, ded leaving the following properties, eee Bice "Sa st, ‘Tangle personal properties? 1,400,000 P 1,100,000 P 2,500,000 Reanebl personal properties 300.000 ‘600,000 200,000, Tesi roperies — Fapeo0e9 Fas00.000 PAS0000 Personal properties 2000000 eal propre 1,000,000 2,000,000 Toaltoignpropenies -g-bl0000 _Zs0n000 ~ 2500000 Belinea Pangan Pasonooe #4500000 Feaaaoe e zoon0e0 pxaono.oe ‘tron Ge hes of LT rested flows ‘Scour a ‘aries nd Saag Cone, tas, 200 cok soe oon a a) S78 Chapter 15 ~ Estate TaxPayale ‘Te goss extae shal be comput ag alpine rosette aman ta argon wane Peet 7 Snowe Pizeaass ‘word gross cca Eaaaaet 5 Astnona —stoaacn Palipin ros Esate Rt = P2920 «om wot to readers Imus be noted thatthe NIC required potato dadeion ‘on LIT tems. Due to this there i is Gin become higher tha he ated UT aes Ths peat ‘procedure s mandated by ew became oe forte the more there acepale recon “The total allowable deduction for LIT em shal be competed allows: Alte ___ Global hao Pa Obligations P 5000000 60% 73000006, Losses —inno0 x60% © __ anon Total Pesooom Eien Note: Transer for pul prose separate of econ ‘The deductible amounts of LT between separate and common proper hall ‘be pro-rated based onthe aio of actual LIT amounts flows: ‘Alowable Percentage = otal Actual PlppoeVaoe a : “aolAoed, lia 3 Obligations 3000000 FA OO m : = Separate. Common ‘Obligations: 400.000 P 2,400,000 ‘Actual 000000 P 1 re x Allowable a "3,000,000 a 71750000 F 1750000 F ‘a meget a | Se i ait sm Scanned with CamScannerCommon Tay Piz goo gay “Srerued P 1750000 a, eral 000 1. 000 ens "Miao 320000 ” Aan oe tose ‘ Tem ec pttcen, Meee p y740900 P 6420000 P Br70p09 ane Share of arin sp —? Fitton Neeser before spc deductont F 4995000 ee Spc dts Saad eduction =-sauona ect ee 4455000 Meni by: — i caer Rae ote: Oty properties cated nh Pps canbe cated as transfer for pubic pose Pacing he) [DETERMINATION OF FOREIGN TAX CREDIT ‘The estate tax due of decedents who are taxable on global estate such 3 ‘esdentcizens, resident aliens and non-resident citizens shall be further ‘reduced by foreign tx credit for estate taxes pad in foreign countries. ‘The foreign tax rei stall depend. sth Ineaag cages sal depend on whether the decedent has proper ‘Stagle Foreign Country Te pd cl where isomer af the acta fori Foto net tale sate arable estate World actlaatiecae— * Philppine estat tax due Malte Foretgn Countries The ower of ea determined first. ‘a1 and the foregoing mit for each count) # 580 4 NS (Chapter 15 ~ Estate Tax Papag Te ial fre a ed shal bt oe, steward wre eo “otal foreign net taxable estate cara Worldnettaxable estate“ Tilipine eats de ‘A tesdent decedent aid P1000, breakdown ois net tana esate HP The fatowingsow ‘Net tweable estate inthe Philippines P 1200000 ‘Net taxable estate in japan : World net taxable ate oa ‘The estate tx onthe P3000 world et tae nat P180,00. ‘Tho estate tax credit shal be computa Actual foreign estat ax paid 2 1un009 Limit (P1,800.000/P3,000,00«P160000) P1088 Forelgn tax credit - LOWER, _uanong ‘The estate tax payable shall be computed a Betate tax due P 180000 Less: Foreign tax reat _—ina00 Estate tx still due or payable Ea ‘Mustration 2: Multiple foreign conntres ‘citizen decedent hd the allowing eat: Nettamble Esatetor Esaie— ald F 170000 F 200806 ot ‘poa00 150600 _1soog00 Philippines Total sonoamn axle estate 360200 ‘The estate tax onthe P6,000000 wale Limit: Per country inte pera ‘Actual estate tax paid? 200,000 P — “Thmjeonse30000 120 ayy rwyre P24 5M x P360,000___———- eee ‘owen ia at Scanned with CamScannerP 252,000 meen: Sg dent foreign acre meee ean erg he obevig ot at and dene cree, BESS rie mits ex: Orin deducons 1000 730,000; i 300000 200,000 500,000 Natta re dereot 2 —_sa.a00 __so0.000 are P20ssoo00 la nat tg 1.750000 729,400,000 Neemrbace ——s ° : pc dion las: Specaldedctons "2480000 P 8750,000 ¥29,400,000 cance ee $0000000 000.000 Neteabieenae "9 4600800 —1sa9qnn _"au0008 a Eaiseom Ez2soo09 14400.000 fia aon Th dec EFM 3so0000 japan 32000007 perme —tsna99 Saal state tx credit and tax sl doe ‘The estate tax credit shall be computed a. ‘Actual foreign estate tx pad time (e7180900/P14so000Peszooy = Seah Foreign tax credit - LOWER aa ‘The estate tax stil due or payable shal beeomputed a: sate tax due er ‘Less: Foreign tax credit ° Sone aate tax stl due or payable Esett09 Mlustration 2: Married decedent - foreign tax credit Mr. Nasser a cizen decedent led leaving the following properties and esate educions: McNasse Common — Total — Propertiesinthe Philippines 7277000006 45,000,000 772,000,000 sin "7am soanaed — Agonaod wena Tead anno onan Haoonooe ‘The executor of Mr. Nasser compiled the following deductions, sent — Taal Pains, anon 700008 “aint tae “ronp00 300,000 Family home sso ‘Estate tax paid ree “Aerie eco pop MM “retbreescmman pete 2 Scanned with CamScannerae eesti tt ae oat / Nee so p40 F7L00 P 28900 P4200 P7300 Pray ‘Less Share of SS 42 22400 —__. __+2 _2.00 “| Paani ocean 0700 5,000 P5379 = Font hme 7500 - 330 eauectar(mcowend) FaazDd zn ae me Parte ee 0080x508) 0677500000, E Siena etd on gcc ons apn ntten=72W/POMESM—P4500000 bas FOO Fa nto a “saa Perce ae ‘Sota be computedafalowsP4.200,000x 6% = P2470. ‘The ser sal be computed a: ‘Ac fre eats 2200000 Uns (450/200 72472000 e—g70000 Forsgn tx cet- Lowen ezzn.o0 ‘Thera doo Pails be computed as: Ps a see P 2472000 Stow cmp cca SM mip reign intries conntiora on i ied rpc, Sly the hata. imu Peder and log are apples, su chapter 15~ Estate Tax Payable [ESTATE TAX REQUIREMENTS 4. statetaxreturn 2. Ceriled Public Accountant (CPA) Ceifeaton ‘he eoae tax return and contents ‘The executor, administrator or any ofthe bets sha a state tax return underoath, setingferththe flowing “PRE {1 Value of gross estae a the pont of death or nh cate of non-resident allen that part of his gross estate stated inthe Pippines 2, The deductions allowed from gros esate ‘3. Supplemental data which maybe necessary to establish the coretiax (CPACCertification ‘Where the value ofthe gross estate exceeds PS,000,000, the return shal be accompanied by a statement certified by 2 Certified Publle Accountant. Contents ofthe statement: 1. emized assets of the decedent with thelr corresponding gross value at the time of death or, in the case ofa non-resident decedent that part of his gross estate situated inthe Philppines 2. Itemized deductions from gross estate 3. The amount of tax due whether paid or sil due and oustanding Deadline of ng the ertate tax retar ‘Th estate tax rein sal beled with oe year ser the ate of eth. Extension of fling ‘The Commissioner is authorized to gant i meritorious cases, reasonable extension not exceeding 30 days for fling the eta. Venue of ting 4. Forreldentdecedets were e shall ester the The administrator oF ree he RDO wr eee Momiched ate ae otis eth 2. For non-resident decedents th enseuor or administrator in ‘Whether non-resident cen of ale wt new TIN shall be oe dent ear freedom the ADO ers he ed an ew TH eet Wie mere eee ‘shall be secured form the! 38s Scanned with CamScannerChapter 35st Taxa ele hereto fle thecstate tre? ) 4 ace gent Bak 2. Revenve District Ofice / 5 allecton Age cae Cty oF Municipality In eich 2 SSIS mee or tel decedent o a ite admintatT OF EXECU has ogy 5 Ofiee ofthe Commissioner residence inthe Philippines i Payment of Estate Tax / Pari salle pid atthe de the return sled following the rule, “pay asyoufte” i Insuficlency of cash to pay tax there dificult in pying he tax, the same may be settled by: ‘2 Inszalment payment Paral disposition ofestate Installment payment ‘The estate tax maybe pad in installment within two years without the Imposition of interest or cl penalties. Subject to approval ofthe CR the estate tax may be paid as follows: emo may be paid as fl Square paymens © semi-annual payments 4. Zannual payments 1m cae of ise fo years without payment ofthe entre tx do, Partial spoon a Some of te. properties consideration tobe we ey ee rte rears athe proceeds hereof sb In case of a failure to, “ ‘31d dispostion, he tt ‘2 estate tx due out from the proceeds denandabe subject ote appt? Stall be immediately. due 284 Pl dea gee et ner ecko 586, chapter 15~ Estate Tax Payable pa Pat ny rete Stk ana eat iy {hore executors oF administrators alofthere shall nye payment of salle severally abe forte icin maul deatiyaim ess sa ge er aay pucharge of excito or administrate om perso ity aecetaor oF ainster sa mas ter tpn re Te eiiger of the anc oe eet sn dag fo pen amie executor o admis pn pyme o e ammo f Mat TS soe, shal be cage! om psn ey roy sh the torre fun wb fd hl be eed os seeing sowing sch scr No judge sal athorze the ees orl nist eer aed ohare tay pry meen te ena rian et gtarmnonr ti ee bs be ad BOWE sons ft ede sal et an yet ot ater the payment of the estat at new ofthe proportional partof he appear, and the persons interested sal be ‘court, they shall have aight the restitution taxpaid. 87 Scanned with CamScanner