1.

Gross estate The extent of property that will form part of the gross estate of the decedent is
determined by the classification of decedent and location of property: Classification of decedent
Location of property Resident or citizen All properties wherever situated Nonresident alien Only
properties situated in the Philippines

2. Situs of intangible personal property Philippine situs of the following intangible personal property a.
The franchise which must be exercised in the Philippines (FRANCHISE); b. Shares, obligations or bonds
issued by any corporation or sociedad anonima organized or constituted in the Philippines in accordance
with its laws (DOMESTIC CORPORATION); c. Shares, obligations or bonds by any foreign corporation
eighty-five percent (85%) of the business of which is located in the Philippines (FOREIGN CORPORATION
– 85%); d. Shares, obligations or bonds issued by any foreign corporation if such shares, obligations or
bonds have acquired a business situs in the Philippines (FOREIGN CORPORATION – BUSINESS SITUS); e.
Shares or rights in any partnership, business or industry established in the Philippines, shall be
considered as situated in the Philippines. (PARTNERSHIP) Reciprocity clause (For nonresident alien and
intangible personal property). No transfer tax is imposed in respect of intangible personal property: a.
The foreign country has no estate tax law. b. The foreign country has an estate tax law but provides for
exemption to NRA

3. Composition of gross estate All properties registered under the name of the decedent at the time of
his death shall be considered in determining the gross estate depending upon the classification of the
decedent. The gross estate is not only limited to properties registered under the name of the decedent,
it also includes the following according to the Tax Code: a. Decedent's Interest To the extent of the
interest of the decedent at the time of his death; b. Transfer in Contemplation of Death (A) Transfers
made in contemplation of death. (B) Transfers intended to take effect in possession or enjoyment at or
after death (Ex. Donation Mortis Causa). (C) Transfers made by the decedent during his lifetime under
which he has retained for his life (1) the possession or enjoyment of, or the right to the income from the
property, or (2) the right, either alone or in conjunction with any person, to designate the person who
shall possess or enjoy the property or the income therefrom. c. Revocable Transfer Transfers made by
the decedent during his lifetime, which the decedent has reserved the right to alter, amend, revoke, or
terminate the transfer. d. Property Passing Under General Power of Appointment Transfer of property
by the decedent upon death, of property which the decedent acquired by will wherein the testator
allows the present decedent to transfer the property to any person. e. Proceeds of Life Insurance. If the
beneficiary designated is the executor, administrator or the estate, the proceeds of life insurance taken
by the decedent during his lifetime will form part of his gross estate. If the beneficiary designated is
other beneficiary (other than executor, administrator, or estate), the proceeds of life insurance taken by
the decedent during his lifetime will form
part of his gross estate if the beneficiary is revocably designated. g. Transfers for Insufficient
Consideration If the decedent transfers his property during his lifetime for insufficient consideration, the
excess of fair market value at the time of death over the consideration received will form part of the
gross estate. h. Capital of the Surviving Spouse The capital of the surviving spouse of a decedent shall
not form part of his or her gross estate. (EXCLUSIVE PROPERTY OF THE SURVIVING SPOUSE) SEC. 4.
COMPOSITION OF THE GROSS ESTATE. – The gross estate of a decedent shall be comprised of the
following properties and interest therein at the time of his/her death, including revocable transfers and
transfers for insufficient consideration, etc.: 1. Residents and citizens – all properties, real or personal,
tangible or intangible, wherever situated. 2. Non-resident aliens – only properties situated in the
Philippines provided, that, with respect to intangible personal property, its inclusion in the gross estate
is subject to the rule of reciprocity provided for under Section 104 of the NIRC. Provided, that amounts
withdrawn from the deposit accounts of a decedent subjected to the 6% final withholding tax imposed
under Section 97 of the NIRC, shall be excluded from the gross estate for purposes of computing the
estate tax. SEC. 5. VALUATION OF THE GROSS ESTATE. – The properties comprising the gross estate shall
be valued according to their fair market value as of the time of decedent’s death. If the property is a real
property, the appraised value thereof as of the time of death shall be, whichever is the higher of – (1)
The fair market value as determined by the Commissioner, or (2) The fair market value as shown in the
schedule of values fixed by the provincial and city assessors, whichever is higher. For purposes of
prescribing real property values, the Commissioner is authorized to divide the Philippines into different
zones or areas and shall, upon consultation with competent appraisers, both from the private and public
sectors, determine the fair market value of real properties located in each zone or area. In the case of
shares of stocks, the fair market value shall depend on whether the shares are listed or unlisted in the
stock exchanges. Unlisted common shares are valued based on their book value while unlisted preferred
shares are valued at par value. In determining the book value of common shares, appraisal surplus shall
not be considered as well as the value assigned to preferred shares