Chapter 9

Net Taxable Estate

 Rates of Estate Tax

There shall be an imposed rate of six percent (6%) based on the value of such
NET ESTATE determined as of the time of death of decedent composed of all
properties, real or personal, tangible or intangible less allowable deductions. (RA
10963 TRAIN LAW)

 Resident decedent was single at the time of his death

Illustration 1
Mr. Ilagan died a head of family, a citizen of the Philippines and a resident of
Marikina City. He left the following properties, with their respective fair market values
and charges thereon:

Piece of land and house thereon (family home) in the

Philippines………………………………………………………… ₱ 6,125,000
Car in the Philippines……………………………………………. 375,000
Personal properties in the house in Marikina City…………….. 500,000
Bank deposit in the Philippines…………………………………. 10,375,000
Bank deposit in the United States………………………………. 312,500
Claim against an insolvent person…………………………….. 62,500

Funeral expenses………………………………………………… 225,000

Judicial expenses………………………………………………… 125,000
Claims against the estate………………………………………… 375,000

The net taxable estate and the estate tax are computed as follows:
Modifi ed Reyes

Answer:
Gross estate:
Family home in the Philippines…………………………………… 6,125,000
Car in the Philippines……………………………………………… 375,000
Personal properties in Marikina City……………………………… 500,000
Bank deposit in the Philippines…………………………………… 10,375,000
Bank deposit in the United States………………………………… 312,500
Claim against an insolvent person………………………………. 62,500
Total……………………………………………………………... 17,750,000
Deductions:
Ordinary deductions -
Claims against the estate……………………….. 375,000
Claim against an insolvent person…………….. 62,500
Special deductions -
Family home (6,125,000 < 10M)………………. 6,125,000
Standard deduction……………………………… 5,000,000
Total deductions…………………………………………… (11,562,500)
Net taxable estate…………………………………………………. 6,187,500
Estate tax rate 6%
Estate tax…………………………………………………………… 371,250

 Non-resident alien decedent was single at the time of his death

Illustration 2
Mr. Kimmel a citizen and resident of Sydney Australia died leaving properties
and obligations in Australia and in the Philippines. Data on his properties and
obligations follows:

Properties in the Philippines…………………………………….. ₱ 1,500,000

Properties in Australia……………………………………………. 4,500,000
Funeral expenses in Australia………………………………….. 375,000
Unpaid obligations in Australia…………………………………. 1,050,000
Medical expenses in the Philippines…………………………… 300,000

The net taxable estate and the estate tax are computed as follows:
Modifi ed quizz er R eyes

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Net Taxable Estate

Answer:
Gross estate…………………………………………………….. 1,500,000
Deductions:
Ordinary deductions -
Unpaid obligations in Australia…………………
Allowable deductions (1.5/6) x ₱1,050,000 = …………… (262,500)
Special deductions -
Standard deduction……………………………………………. (500,000)
Net taxable estate…………………………………………………. 737,500
Estate tax rate 6%
Estate tax…………………………………………………………… 44,250

 Property Relations between Spouses

The property relationship between husband and wife shall be governed in the
following order: (Sec 74 & 75 Family Code of the Philippines)
http://www.weddings atwor k.c om/c ulture_laws _famil yc ode04.shtml

1. By marriage settlements executed before the marriage;

2. By the provisions of the Family Code; and
3. By the local custom.

The future spouses may, in the marriage settlements, agree upon the regimes:
1. Absolute community
2. Conjugal partnership of gains
3. Complete separation of property
4. Any other regime.

In the absence of a marriage settlement, or when the regime agreed upon is void,
1. The system of absolute community of property shall govern marriages
contracted on or after August 3, 1988, the effectivity of the Family Code of
the Philippines (EO No. 209); or
2. The system of conjugal partnership of gains shall govern marriages
contracted before August 3, 1988.

 Absolute Community of Property

The gross estate of a decedent who was married and under the system of absolute
community of property shall consist of:
1. The exclusive properties of the decedent; and
2. The community properties.

Table 4-1 Classification of properties under absolute community of property

a) Property acquired before the marriage, in general Community
b) Property acquired during the marriage, in general Community
c) Property acquired by inheritance or gift before the
marriage (because of letter a) Community
d) Property acquired by inheritance or gift during marriage
(Unless letter e) Exclusive
e) Property acquired by inheritance or gift during the
marriage and the giver stated that the property should be Community
community
f) The income from property in (letter d) Exclusive
g) The income from property in (letter e) Community
h) Jewelry, by whom, how, and when acquired does not Community
matter
i) Clothes of the decedent (exclusive and personal use) Exclusive
except jewelry-if inherited during marriage exclusive if not community.
j) Property owned before marriage #2 when there is
legitimate descendant of marriage #1 Exclusive
k) Property owned before marriage #2 when there is no
legitimate descendant of marriage #1 (because of letter Community
a)
Textbook Reyes

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Net Taxable Estate

The following shall be excluded from the community property:

1. Property acquired during the marriage by gratuitous title by either spouse,
and the fruits as well as the income thereof, if any, unless it is expressly
provided by the donor, testator or grantor that they shall form part of the
community property;
2. Property for personal and exclusive use of either spouse, however jewelry
shall form part of the community property;
3. 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.

Property acquired during the marriage is presumed to belong to the community;

unless it is proved that it is one of those excluded therefrom.

Illustration 3
Mr. Trinidad died married, leaving the following properties:
Land inherited before the marriage………………………………. ₱ 1,900,000
Cash income from the land inherited ……………………………. 38,000
Cash received as gift during the marriage……………………….. 380,000
Interest income on the cash received as gift……………………. 14,250
Property unidentified as to when any by whom acquired………. 475,000
Clothes of the decedent purchased with spouse’s income……. 95,000

How much is the gross estate under the system of absolute community of
property?
Moditi ed T extbook R eyes

Answer:
Gross estate Exclusive Community Total GE
Land……………………………………… 1,900,000
Cash income from the land……………. 38,000
Cash received as gift…………………… 380,000
Income from the cash received as gift… 14,250
Unidentified property…………………… 475,000
Clothes…………………………………… 95,000
Totals………………………………. 489,250 2,413,000 2,902,250

Charges and Obligations of the Absolute Community

 Debts and obligations which cannot be identified as those of exclusive
properties shall be presumed to be community debts and obligations.
 Debts and obligations on exclusive properties, which were already
charges on the properties at the time they were acquired (e.g., by
inheritance or gift), shall continue to be debts and obligations of exclusive
properties.
 The special deductions of family home, standard deduction, and amount
receivable under RA 4917 are deductions from the total of the gross
estate consisting of exclusive and communal properties.
 All other deductions have to be classified into community or exclusive. As
a general rule, the classification of a deduction will follow the classification
in the gross estate of the property to which the deduction is related. Modified Textbook R eyes

Illustration 4
Mr. Giron, a citizen and resident of the Philippines, under the system of
absolute community of property during the marriage, died on September
2011, leaving properties and obligations that follow:

Property owned by Mr. Giron before the marriage…………. ₱ 3,750,000 C

Property owned by Mrs. Giron before the marriage………… 2,500,000 C
Property received by Mr. Giron as inheritance on March 2011
(during the marriage)……………………………………. 4,000,000 E

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Net Taxable Estate

Real property acquired thru the labor of Mr. and Mrs. Giron
during the marriage (family home)…………………………… 2,625,000 C

Medical expenses……………………………………………… 43,750

Funeral expenses……………………………………………… 375,000
Judicial expenses for the settlement of the estate………… 100,000
Unpaid obligations (not including unpaid mortgage)……… 43,750
Unpaid mortgage on property inherited…………………….. 250,000

The property received as inheritance was part of the gross estate of the prior
decedent at a fair market value of ₱1,375,000 with a mortgage on it at that
time of ₱375,000, during his lifetime, he paid ₱125,000. Compute the net
taxable estate and the estate tax. Modified Textbook Reyes

Answer:
Gross estate Exclusive Community Total
Property owned by Mr. Giron before
marriage……………………………… 3,750,000
Property owned by Mrs. Giron before
the marriage…………………………. 2,500,000
Property received as inheritance…. 4,000,000
Family home………………………… 2,625,000
Totals…………………………….. 4,000,000 8,875,000 12,875,000
Less: Ordinary deductions
Unpaid obligations (43,750)
Unpaid mortgage (250,000)
Vanishing deduction (schedule 1) (1,221,481)
Estate after ordinary deductions… 2,528,519 8,831,250 11,359,769
Less: Special deductions
Family home (½ of 2,625,000 = 1,312,500 < 10M)………….... (1,312,500)
Standard deduction………………………………………………… (5,000,000)
Net estate………………………………………………………………. 5,047,269
Less: Share of surviving spouse (½ of 8,831,250)………………… (4,415,625)
Net taxable estate……………………………………………………… 631,644
Estate tax rate 6%
Estate tax………………………………………………………………. 37,899

Schedule 1:
Step 1 Value taken (value of property at the time of the P 1,375,000
first transfer or at the time of the present
decedent’s death, whichever is lower)
Step 2 Less: Mortgage debt paid, if any (125,000)
Initial Basis 1,250,000
Step 3 Less: IB 1,250,000
X 293,750 = (28,519)
GE 12,875,000
Final Basis 1,221,481
Step 4 Percentage of vanishing deduction 100%
Vanishing deduction 1,221,481

 Conjugal Partnership of Gains

The gross estate of a decedent who was married and under the conjugal partnership of
gains shall consist of:
Textbook R ey es

1. The exclusive properties of the decedent; and

2. The conjugal properties.

The deductions from the gross estate of a decedent who was married and under the
property relationship of conjugal partnership of gains with the spouse shall consist of:
1. Deductions from exclusive properties; and
2. Deductions from conjugal properties.

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Net Taxable Estate

The following are exclusive properties of each spouse:

1. That which is brought to the marriage as his or her own;
2. That which each acquires during the marriage by gratuitous title;
3. That which is acquired by right of redemption, by barter, or by exchange with
property belonging to only one of the spouses; and
4. That which is purchased with exclusive money of the wife or of the husband. All
the rest are considered conjugal properties.

Table 4-2 Summary of classification of properties

Property Absolute Conjugal
Community Partnership
1. Property acquired before the
marriage or brought to the Community Exclusive
marriage
2. Fruits or income in (No.1) Community Conjugal
3. Property acquired during the Community Conjugal
marriage
4. Fruits or income in (No.3) Community Conjugal
5. Property acquired by
inheritance or gift before the Community Exclusive
marriage (gratuitous title)
6. Fruits or income in (No.5) Community Conjugal
7. Property acquired by
inheritance or gift during Exclusive Exclusive
marriage (gratuitous title)
8. Fruits or income in (No.7) Exclusive Conjugal
Modified Textbook Ampongan

Illustration 5
Mr. Tecson died married, leaving the following properties:

Land inherited before the marriage………………………………. ₱ 2,500,000 E

Cash income from the property inherited……………………….. 50,000 C
Cash received as gift during the marriage……………………….. 500,000 E
Interest income on the cash received as gift…………………….. 18,750 C
Property unidentified as to when and by whom acquired……… 625,000 C
Clothes of the decedent purchased with spouse’s income……. 125,000 C

How much is the gross estate under the system of conjugal partnership of
gains?
Modifi ed T extbook R ey es

Answer:
Gross estate Exclusive Conjugal Total GE
Land…………………………………… 2,500,000
Cash income…………………………. 50,000
Cash received as gift………………… 500,000
Interest income………………………. 18,750
Property unidentified………………… 625,000
Clothes of the decedent…………….. *125,000
Totals……………………………… 3,000,000 818,750 3,818,750
Note: Rule #4
Charges against conjugal properties:
1. Debts and obligations contracted during the marriage;
2. Debts before the marriage of either spouse insofar as they have
redounded to the benefit of the family.
Debts and obligations which cannot be identified as those of exclusive
properties shall be presumed to be conjugal debts and obligations.
Debts and obligations on exclusive properties, which were already charges on
the properties at the time they were acquired (e.g. by inheritance or gift) shall
continue to be debts and obligations of exclusive properties.
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Net Taxable Estate

Vanishing deductions is always a deduction from exclusive property.

The special deductions of family home, standard deduction, and amounts
under RA 4917 are deductions from the total gross estate, consisting of
exclusive and conjugal properties.
Note: In absolute community it depends on the inheritance if exclusive or community

All other deductions have to be classified into conjugal or exclusive. As a

general rule, the classification of a deduction will follow the classification in
the gross estate of the property to which the deduction is related.
A deduction from the gross estate of the married person under the property
relationship of conjugal partnership of gains with his spouse is the share of
the surviving spouse in the net conjugal estate.

Illustration 6
Mr. Isaac, married, a citizen and resident of the Philippines died on October 1, 2014,
leaving properties and obligations with their fair market values as follows:
Properties:
Car inherited from the father who died in 2004…………………… ₱ 375,000 E
Real property (family home) acquired during the marriage and thru his
own efforts…………………………………………………… 437,500 C
Cash received as gift from his father in 2001……………………… 11,300,000 E
Real property (land) purchased out of cash inherited from his mother in
2001………………………………………………………… 250,000 E
Other real property acquired during the marriage (unidentified as to
whose effort resulted in the acquisition)………………………… 750,000 C

Obligations and charges:

Medical expenses in 2014…………………………………………… 125,000 SD
Funeral expenses……………………………………………………. 150,000 C
Judicial expenses……………………………………………………. 250,000 C
Claims against conjugal properties………………………………… 131,250 C
Claim against an insolvent…………………………………………. 12,500 C
Unpaid mortgage on car (constituted by the father on a loan for father’s
pleasure trip)…………………………………………………. 12,500 E

How much is the net taxable estate and the estate tax?
Modifi ed T extbook R ey es
Modifi ed T extbook R eyes

Note: Claim against an insolvent should be included in the gross estate.

Answer:
Gross estate Exclusive Conjugal Total
Car inherited from the father 375,000
Family home 437,500
Cash received as gift from his father 11,300,000
Real property (land) 250,000
Other real property 750,000
Claim against an insolvent 12,500
Totals…………………………….. 11,925,000 1,200,000 13,125,000
Less: Ordinary deductions
Claims against conjugal properties (131,250)
Claim against an insolvent (12,500)
Unpaid mortgage (12,500)
Estate after ordinary deductions… 11,912,500 1,056,250 12,968,750
Less: Special deductions
Family home (½ of 437,500 = 218,750 < 10M)………………… (218,750)
Standard deduction………………………………………………… (5,000,000)
Net estate………………………………………………………………. 7,750,000
Less: Share of surviving spouse (½ of 1,056,250)………………… (528,125)
Net taxable estate……………………………………………………… 7,221,875
Estate tax rate 6%
Estate tax………………………………………………………………. 433,313

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Net Taxable Estate

 Estate Tax Credit

Estate tax credit is a remedy against international double taxation. To minimize the
onerous effect of taxing the same property twice, tax credit against Philippine
estate tax is allowed for estate taxes paid to foreign countries.

Only the estate of a decedent who was a citizen or resident of the Philippines at
the time of his death can claim tax credit for any estate tax paid to a foreign
country. http://www .scribd.c om/doc/33337629/UP08-T ax-01-amp-02

Table 4-3 Formulas for estate tax credit (Sec. 86 E, NIRC)

One foreign country only

Tax Credit = Net estate, foreign country X Philippine

Net estate, world estate tax
Or
Actual estate tax paid to the foreign country, whichever is lower

Two or more foreign countries

Limitation A (per country): See above formula

Limitation B (by total):

Tax Credit = Net estate, all foreign country X Philippine
Net estate, world estate tax
Or
Actual estate tax paid to all foreign country, whichever is lower
http://www.s cribd.c om/doc /16884100/T axation-Revi ewer

Illustration 7
Mr. Ultado was a citizen and resident of the Philippines. He died leaving a net
estate in Austria of ₱360,000 and the Philippines of ₱1,440,000 (after
deducting standard deduction), and an estate tax paid to Austria of ₱24,000.
How much is the estate tax due after tax credit? Modified T extbook Reyes

Answer:
Net estate, Austria…………………………………… 360,000
Net estate, Philippines……………………………… 1,440,000
Net estate, world…………………………………….. 1,800,000

Estate tax (1,800,000 x 6%)…………………………….. 108,000

Less: Estate tax credit (schedule 1)………………. (21,600)
Estate tax due……………………………………… 86,400

Schedule 1 – Estate tax credit

Austria, estate tax paid…………………………….. 24,000
Formula: (360,000/1,800,000 x ₱108,000)………. 21,600
Allowed……………………………………………… 21,600

Illustration 8
Mr. Quidlat, a citizen of the Philippines, died with the following data on net
estate (net estate after deducting standard deduction) and estate taxes paid
to foreign countries:
Net estate Tax paid
Singapore……………. ₱ 240,000 ₱ 21,600
Hong Kong…………... 120,000 7,100
Philippines………….. 2,040,000

How much is the estate tax due after tax credit?

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Chapter 9
Net Taxable Estate

Answer:
Net estate, Singapore ……………………………… 240,000
Net estate, Hong Kong..…………………………… 120,000
Net estate, Philippines…………………………….. 2,040,000
Net estate, world……………………………………. 2,400,000

Estate tax (2,400,000x6%)……………………………. 144,000

Less: Estate tax credit (schedule 1)……………… (21,500)
Estate tax due……………………………………... 122,500

Schedule 1 – Estate tax credit

Limitation A: Lower
Singapore, estate tax paid…………………….. 21,600
Formula: (240,000/2,400,000 x ₱144,000)….. 14,400 14,400

Hong Kong, estate tax paid…………………… 7,100

Formula: (120,000/2,400,000 x ₱144,000)…. 7,200 7,100
Total……………………………………………………………….. 21,500

Limitation B:
All foreign estate tax paid………………………….. 28,700
Formula: (360,000/2,400,000 x ₱144,000)……….. 21,600 21,600

Allowed…………………………………………………………………..
Modified Textbook Reyes
21,500
Note: Deduct the net share of surviving spouse in the conjugal estate if any, to get
the estate tax and tax credit

 Estate Tax Return

Who Shall File – The Estate Tax Return (BIR Form 1801) shall be filed in triplicate
by:
1. The executor, or administrator, or any of the legal heir/s of the decedent,
whether resident or non-resident of the Philippines, under any of the following
situations:
a. In all cases of transfers subject to estate tax;
b. Regardless of the gross value of the estate, where the said estate consists
of registered or registrable property such as real property, motor vehicle,
shares of stock or other similar property for which a clearance from the
BIR (Certificate Authorizing Registration) is required as a condition
precedent for the transfer of ownership thereof in the name of the
transferee; or
2. If there is no executor or administrator appointed, qualified, and acting within
the Philippines, then any person in actual or constructive possession of any
property of the decedent.
Taxpayers who are filing BIR Form 1801 are excluded in the mandatory coverage
from using the eBlRForms (Section 2 of RR No. 9-2016)

When and Where to File and Pay – The Estate Tax Return shall be filed within
one (1) year from the decedent's death. In meritorious cases, the Commissioner
shall have the authority to grant a reasonable extension not exceeding thirty (30)
days for filing the return.

The return shall be filed with any Authorized Agent Bank (AAB) of the Revenue
District Office (RDO) having jurisdiction over the place of domicile of the decedent
at the time of his death. If the decedent has no legal residence in the Philippines,
the return shall be filed with the Office of the Commissioner (RDO No. 39, South
Quezon City).

In case of a non-resident decedent with executor or administrator in the

Philippines, the return shall be filed with the AAB of the RDO where such

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Net Taxable Estate

executor/administrator is registered or is domiciled, if not yet registered with the

BIR.

When the return is filed with an AAB, taxpayer must accomplish and submit BIR-
prescribed deposit slip, which the bank teller shall machine validate as evidence
that payment was received by the AAB. The AAB receiving the tax return shall
stamp mark the word “Received’’ on the return and also machine validate the
return as proof of filing the return and payment of the tax by the taxpayer,
respectively. The machine validation shall reflect the date of payment, amount paid
and transaction code, the name of the bank, branch code, teller’s code and teller’s
initial. Bank debit memo number and date should be indicated in the return for
taxpayers paying under the bank debit system.

Payments may also be made thru the e-payment channels of AABs thru either their
online facility, credit/debit/prepaid cards, and mobile payments.

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 the
statutory date for its payment without civil penalty and interest upon approved by
the concerned BIR Official.

The due date on filing and payment of the return/tax shall depend on the applicable
law at the time of the decedent’s death.

Mandatory Requirements – [additional two (2) photocopies of each document]:

1. Certified true copy of the Death Certificate;
2. Taxpayer Identification Number (TIN) of decedent and heir/s;
3. Notice of Death (only for death prior to January 1, 2018) duly received by the
BIR, if gross taxable estate exceeds ₱20,000 for deaths occurring on January
1, 1998 up to December 31, 2017; or if the gross taxable estate exceeds
₱3,000 for deaths occurring prior to January 1, 1998;
4. Any of the following: a) Affidavit of Self Adjudication; b) Deed of Extra-Judicial
Settlement of the Estate, if the estate has been settled extra-judicially; c) Court
order if settled judicially; d) Sworn Declaration of all properties of the Estate;
5. A certified copy of the schedule of partition and the order of the court approving
the same within thirty (30) days after the promulgation of such order, in case of
judicial settlement;
6. Proof of Claimed Tax Credit, if applicable;
7. Certified Public Accountant (CPA) Statement on the itemized assets of the
decedent, itemized deductions from gross estate and the amount due if the
gross value of the estate exceeds five million pesos (₱5,000,000) for
decedent’s death on or after January 1, 2018 or two million pesos (₱2,000,000)
for decedent’s death from January 1, 1998 to December 31, 2017;
8. Certification of the Barangay Captain for the claimed Family Home (If the family
home is conjugal property and does not exceed ₱10 Million, the allowable
deduction is one-half (1/2) of the amount only);
9. Duly Notarized Promissory Note for "Claims Against the Estate" arising from
Contract of Loan;
10. Accounting of the proceeds of loan contracted within three (3) years prior to
death of the decedent;
11. Proof of the claimed "Property Previously Taxed";
12. Proof of the claimed "Transfer for Public Use";
13. Copy of Tax Debit Memo used as payment, if applicable;

Extension to File and Pay – When the Commissioner of Internal Revenue finds
that the payment on the due date of the estate tax or of any part thereof would
impose undue hardship upon the estate or any of the heirs, he may extend the
time for payment of such tax or any part thereof not to exceed five (5) years, in
case the estate is settled through the courts, or two (2) years in case the estate is
settled extra-judicially. In such case, the amount in respect of which the extension
is granted shall be paid on or before the date of the expiration of the period of the
extension, and the running of the Statute of Limitations for assessment as provided

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in Section 203 of the National Internal Revenue Code shall be suspended for the
period of any such extension.

Where the taxes are assessed by reason of negligence, intentional disregard of

rules and regulations, or fraud on the part of the taxpayer, no extension will be
granted by the Commissioner.

If an extension is granted, the Commissioner of Internal Revenue or his duly

authorized representative may require the executor, or administrator, or
beneficiary, as the case may be, to furnish a bond in such amount, not exceeding
double the amount of tax and with such sureties as the Commissioner deems
necessary, conditioned upon the payment of the said tax in accordance in the
terms of extension.

The application for extension of time to file the estate tax return must be filed with
the Revenue District Officer (RDO) where the estate is required to secure its
Taxpayer Identification Number (TIN) and file the tax returns of the estate. The
application shall be approved by the Commissioner or his duly authorized
representative.

 Payment of Estate Tax as Prerequisite to Transfer Shares, Bonds or Rights

There shall not be transferred to any new owner in the books of any corporation,
sociedad anonima, partnership, business, or industry organized or established in
the Philippines any share, obligation, bond or right by way of gift inter vivos or
mortis causa, legacy or inheritance, unless a eCAR is issued by the Commissioner
or his duly authorized representative.

 Withdrawal from the bank deposit account/s of a deceased depositor

The executor, administrator, or any of the legal heir/s may withdraw from the said
deposit account within one (1) year from the date of the decedent’s death provided
that prior to withdrawal, the tax identification number of the estate of the decedent
and BIR Form No. 1904 duly stamped received by the concerned Revenue District
Office shall be presented to the bank.
It is further clarified that for joint accounts, the FWT shall be based on the share of
the decedent in the joint bank deposit/s.
To certify the withholding of the 6% FWT, the bank shall issue BIR Form No. 2306
(Certificate of Final Tax Withheld at Source). Thereafter, the bank shall file the
quarterly return on the final tax withheld and remit the same on or before the last
day of the month following the close of the quarter when the tax was withheld.
All withdrawal slips shall contain a (1) sworn statement by any one of the surviving
joint depositor/s to the effect that all of the other joint depositors are still living at
the time of withdrawal, and (2) a statement that the withdrawal is subject to 6%
FWT.
In case the bank deposit is already declared for estate tax purposes and indicated
in the eCAR issued by the concerned RDO, it shall no longer be subject to the 6%
FWT. (RMC No. 62 – 2018)

 Net Distributable Estate

The net taxable estate on which the estate tax rates are applied is not the same as
the net distributable estate. The net taxable estate is the result of the formula
under the NIRC: Gross estate less deductions equals net taxable estate. The net
distributable estate refers to the gross estate reduced by the actual diminution from
the estate.

Net taxable estate and net distributable estate may be at different amounts
because of deductions to arrive at net taxable estate which are paper deductions
but do not physically diminish the gross estate.
Note: Net taxable estate and net distributable estate may be at different amounts because there are deductions from the gross estate to arrive
at net taxable estate which are only at maximum amounts provided by law, and are not the actual diminution of the estate.
Quizz er T ax ation R ey es

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Illustration 9
The taxpayer was married and under the system of absolute community of
property. He died on February 02. He left the following properties and
charges thereon:
Personal properties owned for ten years and before
marriage……………………………………………………….... ₱ 1,100,000
Real property received as gift six years ago and during
marriage………………………………………………………… 5,500,000
Personal and real properties acquired during marriage…… 4,400,000
Actual funeral expenses……………………………………… 550,000
Judicial expenses on April 01………………………………… 220,000
Judicial expenses on October 06……………………………. 132,000
Loss of property on March 06………………………………... 110,000
Loss of property on November 16 following year………….. 220,000
How much is the estate tax and net distributable estate? Modified T extbook Rey es

Answer:
(1)
Gross estate Exclusive Community Total
Personal properties owned before
marriage………………………….. 1,100,000
Real property received as gift during
marriage………………………….. 5,500,000
Personal and real properties
acquired during marriage…………. 4,400,000
Totals………………………….. 5,500,000 5,500,000 11,000,000
Less: Ordinary deductions
Losses…………………………. (110,000)
Estate after ordinary deductions 5,500,000 5,390,000 10,890,000
Less: Special deductions
Standard deduction……………………………………………………… (5,000,000)
Net estate…………………………………………………………………… 5,890,000
Less: Share of surviving spouse (5,390,000 / 2)…………………………. (2,695,000)
Net taxable estate…………………………………………………………. 3,195,000
Estate tax rate 6%
Estate tax…………………………………………………………………… 191,700

(2)
Gross estate Exclusive Community Total
Personal properties owned before
marriage………………………….. 1,100,000
Real property received as gift during
marriage………………………….. 5,500,000
Personal and real properties
acquired during marriage…………. 4,400,000
Totals………………………….. 5,500,000 5,500,000
Less: deductions
Funeral expense……………… (550,000)
Judicial expense……………… (352,000)
Losses…………………………. (330,000)
Estate after deductions 5,500,000 4,268,000 9,768,000
Less: Share of surviving spouse (4,268,000/ 2)…………………………. (2,134,000)
Estate tax…………………………………………………………….. (191,700)
Net distributable estate………………………………………………….. 7,442,300
Modified Quizzer Taxation Reyes

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