BUSINESS AND TRANSFER TAXATION

Gross Estate (Students’ Handouts)

GROSS ESTATE
-consists of all tangible or intangible, real or personal properties, of the decedent wherever situated at
the point of death

Illustration
A decedent died leaving the following property:
Location
Philippines Abroad Total
Real property P2,000,000 P3,000,000 P5,000,000
Tangible personal property 1,000,000 500,000 1,500,000
Intangible personal property 800,000 1,200,000 2,000,000
Total P3,800,000 P4,700,000 P8,500,000

The Gross Estate Formula

Inventory of properties at the point of death P xxx
Less: Exempt transfers
Properties not owned P xxx
Properties owned but excluded by law xxx xxx
Inventory of taxable present properties xxx
Add: Taxable transfers xxx
Gross Estate P xxx

Transfer of Properties Not Owned by the Decedent

1. Merger of the usufruct in the owner of the naked title
2. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
fideicommissary
3. The transmission from the first heir, legatee, or done in favor of another beneficiary, in
accordance with the desire of the predecessor
4. Proceeds of irrevocable life insurance policy payable to beneficiary other than the estate,
administrator or executor
5. Properties held in trust by the decedent
6. Separate properties of the surviving spouse of the decedent
7. Transfer by way of bona fide sales

Legal Exclusions
1. Proceeds of group insurance taken out by a company for its employees
2. Proceeds of GSIS policy or benefits from GSIS
3. Accruals from SSS
4. United States Veterans Administration (USVA) benefits – RA136
5. War damage payments
6. All bequests, devises, legacies or transfers to social welfare, cultural and charitable institution,
no part of net income of which inures to the benefit of any individual; provided, however, that
not more than 30% of the said bequests, devises, legacies or transfers shall be used by such
institutions for administration purposes
7. Acquisitions and or transfers expressly declared as non-taxable by law

Taxable Transfers
1. Transfer in contemplation of death
2. Revocable transfers, including conditional transfers
3. Property passing under general power of appointment

Composition of Gross Estate

1. Properties, movable or immovable, tangible or intangible
2. Decedent’s interest on properties
3. Proceeds of life insurance
a. Designated as revocable to any heir
b. Regardless of designation, if the beneficiary is the estate, administrator or executor
4. Taxable transfers

Valuation of the Gross Estate

Properties subject to estate tax shall be appraised at their fair value at the point of death.

Based on R.B.Banggawan’s Business and Transfer Taxation (2019) Page 1 of 2

BUSINESS AND TRANSFER TAXATION
Gross Estate (Students’ Handouts)

Gross Estate of Married Decedents

1. Decedent’s exclusive properties
2. Common properties of the spouses

PROPERTY RELATIONS BETWEEN SPOUSES

Common Types of Property Regimes
1. Absolute Separation of Property
2. Conjugal Partnership of Gains
Properties of spouse including fruits before marriage are their exclusive properties.
Exception to prospectivity: gratuitous acquisition during marriage
3. Absolute Community of Property
All properties will be common except:
a. Properties received by way of gratuitous title during marriage
b. Fruits of separate properties of the spouses
c. Properties for exclusive personal use of either spouses, except jewelry
d. Properties brought into the marriage by either spouse with a descendant by a prior
marriage

Illustration 1
Mr. A, a citizen resident, died leaving the following properties:
Cash proceeds of life insurance designated to
A brother as revocable beneficiary P 1,000,000
Building, properties held as usufructuary 4,000,000
Cash and cars, earned from building 2,400,000
Agricultural land 3,000,000
House and lot, from Mr. A’s industry 7,000,000
Benefits from GSIS 500,000
Total properties P17,900,000

Additional information:
1. The agricultural land was designated by Mr. A’s father in his will to be transferred to D, Mr. A’s
son, upon Mr. A’s death.
2. Mr. A made a revocable donation involving a residential lot to his brother, E. Mr. E paid P400,000
when the lot was worth P1,000,000. The lot was currently valued at P2,000,000 zonal value
upon Mr. A’s death.

Illustration 2
Mr. Crocs died. An inventory of the properties of Mr. and Mrs. Crocs were as follows:
Mr. Crocs Mrs. Crocs Total
Properties accruing before marriage:
Properties inherited before marriage P 200,000 P 100,000 P 300,000
Properties for exclusive personal use 50,000 60,000 110,000
Other properties brought into marriage 350,000 440,000 790,000

Properties accruing during marriage:

Properties inherited during marriage P 250,000 P 150,000 P 400,000
Properties as fruit of own labor 140,000 160,000 300,000
Properties accrued for exclusive use 30,000 40,000 70,000
Properties as fruit of common labor 250,000
Fruits of:
Properties inherited before marriage 100,000 50,000 150,000
Properties inherited during marriage 20,000 80,000 100,000
Properties acquired from own labor 20,000 40,000 60,000
Properties earned from common labor 50,000

Based on R.B.Banggawan’s Business and Transfer Taxation (2019) Page 2 of 2