Before we will be able to compute the estate tax, it is important that we

determine first the value of the gross estate of the decedent. The gross estate,
which is defined as all property, wherever located , in which the decedent owned
a beneficial interest at the time of death. It also include any right to income that
had accrued, but not yet received as of the decedent’s death. But does not
include expected inheritance.
It also include all taxable transfers, such as revocable transfers and transfers for
insufficient consideration.
Just like in income taxation, in estate tax, we classify the decedent whether,
resident citizen, non-resident citizen and resident alien decedents or non-resident
alien decedents.

The gross estate of the Resident citizen, non-resident citizen and resident alien
decedents shall include all properties and interests wherever situated, meaning
all properties and interest within and outside the Philippines.

For non-resident alien decedent, only properties located in the Philippines shall
form part of his gross estate. The inclusion of intangible personal property of a
non-resident alien decedent is subject to reciprocity rule.
Now, let us focus first on the valuation of the gross estate of the resident citizen,
non resident citizen and resident alien decedent.
1. Real property
2. Tangible personal property and intangible personal property
3. Taxable transfers
1. Transfer in contemplation of death or what we call as donation mortis
causa. It partakes of the nature of a testamentary disposition because
death is the motivating factor for the transfer although death may not
be imminent.
 2. Revocable transfer – a transfer by trust, or otherwise where the
decedent may revoke, alter, amend or terminate the terms of
enjoyment of the property.
3. Transfer under general power of appointment. – it is a power of
appointment which authorizes the donee of the power to appoint any
person to possess or enjoy the property.

Note … in the three transfers that I mentioned, the value to include

shall be in accordance with the following rules
 If the transfer was in the nature of a bona fide sale for an adequate
and full consideration in money or money’s worth, no value shall be
included in the gross estate.
 If the consideration received on the transfer was less than adequate
and full, the value to include in the gross estate shall be the excess
of the fmv of the property at the time of the decedent’s death over
the consideration received.
 If there was no consideration received on the transfer, as in donation
mortis causa, the value to include in the gross estate, shall be the
fmv of the property at the time of the decedent’s death.

Now, let us proceed to valuation of gross estate pertaining to real property.

Remember, without death and property, no estate tax can be imposed. The
values of the gross estate are based on values at the time of the decedent’s
death. And it is always valued at fair market value.
The value of real property in the gross estate is determined by the following
FMV –zonal value as determined by the commissioner or
FMV – as shown in the schedule of values fixed by the provincial and city
assessors, whichever is higher.
If there is no zonal value, the taxable base is the fmv that appears in the
latest tax declaration. If there is an improvement, the value of improvement is
the construction cost per building permit or the fmv per latest tax declaration.
How about the shares of stocks—
We classify them into whether they are unlisted or listed shares- those which
are traded in the stock exchange
For unlisted shares common stocks are computed in their book value, while
preferred shares are at par value
For listed shares – we get the arithmetic mean between the highest and lowest
quotation at a date nearest the death of the decedent. If none is available on the
date of death itself.