BAM 208 | Business Taxation

Student Activity Sheet Module #4

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

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Lesson Title: Transfer Taxes: Gross Estate – Part 2 Materials:

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Calculator, reviewer notebook,
Lesson Objectives: textbook

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At the end of this module, I should be able to:
1. Explain the valuation of gross estate References:
2. expound exemptions/exclusions from the gross estate Business and Transfer Taxes by

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3. Expound inclusions in gross estate Enrico Tabag (latest edition)

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4. Illustrate estate tax rates

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5. Show the law governing imposition of estate tax and accrual
of estate tax
6. Demonstrate filing and payment of estate tax
7.
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Productivity Tip:
Avoid Your Bed at All Costs
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Most students have fallen prey to this sneaky trap. Try to study in a chair or at a desk, where you must sit up
and pay attention. If you let yourself lie down or try to study in bed, you are guaranteed to feel sleepier and
not be as productive.
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A. LESSON PREVIEW/REVIEW
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1) Introduction (2 mins)
Welcome back to the class. Let us be acquainted with your learning.
Enumeration:
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1. 1 – 3: Classification of taxpayers for estate tax

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2. 4 – 5: Generally, what is the composition of gross estate

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Essay: Explain why estate tax is being imposed in the Philippines

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2) Activity 1: What I Know Chart, part 1 (3 mins)
What I Know Questions: What I Learned (Activity 4)
1. What is the tax rate on 6%
estate's net proceeds?

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 BAM 208 | Business Taxation
Student Activity Sheet Module #4

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

2. When should the estate When you file, you pay. The Estate Tax

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tax be paid? Return (BIR Form 1801) shall be filed within
one (1) year from the decedent's death. In

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meritorious cases, the Commissioner shall
have the authority to grant a reasonable

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extension not exceeding thirty (30) days for
filing the return.

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B. MAIN LESSON

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1) Activity 2: Content Notes (13 mins)
LO 1: Explain the valuation of gross estate
The term "gross estate" refers to the total dollar value of an individual’s property and assets at the time of his or

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her death. This figure does not factor in any liabilities, such as debts owed and taxable events triggered by one's
death. When those charges are deducted, the sum figure represents the net value of an individual’s estate.
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Real and personal Whichever is higher between, FMV, BIR value or assessed
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value
Stock, bonds & other - if listed in PSE, average of the Highest and lowest stock
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securities price multiplied by number of shares.

- If not listed, common shares will be book value and
preferred shares will be par value.
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LO 2: Exemptions/exclusions from the gross estate

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1. Merger of usufruct and owner of naked title

2. Transmission of the fiduciary heir to the fideicommissary
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3. Second transfer as desired by the predecessor

4. Transfer for charitable contributions and donations
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5. Reciprocity clause
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6. Share/capital of the surviving spouse

LO 3: Expound inclusions in gross estate

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Aside from real and personal properties and securities these are other inclusions in the gross estate.
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1. Revocable transfers
2. Transfers in contemplation of death
3. Property passing under general power of appointment
4. Decedent’s interest in profits, insurance, right of usufruct
5. Proceeds of life insurance
6. Transfer for insufficient consideration
7. Claims against insolvent person
8. Amount received by heirs under RA 4917

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 BAM 208 | Business Taxation
Student Activity Sheet Module #4

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

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LO 4: Illustrate estate tax rates
Imposed on the right of the deceased to transmit properties to legal heirs upon death. Under the 2018

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TRAIN law, taxes are now 6% on an estate's net proceeds. Seems simple, but the confusion lies in what
makes up the gross estate and the allowable deductions

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LO 5: Show the law governing imposition of estate tax and accrual of estate tax

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According to Revenue Regulations No. 12-2018: Consolidated Revenue Regulations on Estate Tax and

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Donor’s Tax Incorporating the Amendments Introduced by Republic Act No. 10963 Otherwise Known as

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the “Tax Reform for Acceleration and Inclusion (TRAIN) Law”.

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LO 6: Demonstrate filing and payment of estate tax

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WHO SHALL FILE

The Estate Tax Return (BIR Form 1801) shall be filed in triplicate by:
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1. The executor, or administrator, or any of the legal heir/s of the decedent, whether resident or non-resident
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of the Philippines, under any of the following situations:

a) In all cases of transfers subject to estate tax;

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b) Regardless of the gross value of the estate, where the said estate consists of registered or
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registrable property such as real property, motor vehicle, shares of stock or other similar property
for which a clearance from the BIR 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.

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 BAM 208 | Business Taxation
Student Activity Sheet Module #4

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Taxpayers who are filing BIR Form 1801 are excluded in the mandatory coverage from using the

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eBlRForms (Section 2 of RR No. 9-2016)

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WHEN AND WHERE TO FILE AND PAY
The Estate Tax Return (BIR Form 1801) shall be filed within one (1) year from the decedent's death. In meritorious

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cases, the Commissioner shall have the authority to grant a reasonable extension not exceeding thirty (30) days
for filing the return.

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The return shall be filed with any Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having

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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).

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In case of a non-resident decedent with executor or administrator in the Philippines, the return shall be filed with
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the AAB of the RDO where such executor/administrator is registered or is domiciled, if not yet registered with
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the BIR.
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2) Activity 3: Skill-building Activities (with answer key) (18 mins + 2 mins checking)
A. Pedro, March 1, 2018. The following data were available in connection with the property.
Assessed value, six months before death P2,500,000
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Fair market value in time of filing estate tax return on February 28, 2019 3,000,000
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Zonal value, March 1, 2018 2,000,000

What should be the value of the piece of land in the gross estate?
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Answer: ____________________
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B. A decedent left 10,000 PLDT shares. The shares were traded in the local stock exchange. At the time of death,
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the following were available:

Fair market value P400 per share
Highest quotation 700 per share
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Lowest quotation 300 per share

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Book value 350 per share

What was the value included in the decedent’s gross estate?
Answer: _____________________

3) Activity 4: What I Know Chart, part 2 (2 mins)

4) Activity 5: Check for Understanding (5 mins)

Encircle the letter of your answer.

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 BAM 208 | Business Taxation
Student Activity Sheet Module #4

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

1. Which of the following is not a characteristic of donation mortis causa?

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a. The transfer to the donee is irrevocable while donor is alive.
b. There is no conveyance of title or ownership to the donee before the death of the donor.

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c. The transferor retains the full or naked ownership and control of the property while alive.
d. The transfer should be void if the donor should survive the donee.

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2. Statement 1: A special power of appointment authorizes the donee of the power to appoint only from among
a designated class or group of persons other than himself.

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Statement 2: The donee-decedent of a special power of appointment only holds the property in trust, hence, the

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property shall form part of the donee-decedent’s gross estate.

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a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
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3. Pedro, decedent, owns ap property valued at P1,500,000 at the time of his death. The said property was sold
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by Pedro during his lifetime to Juan for P700,000 when its value was P1,200,000. It was agreed by Pedro and Juan
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that the former will enjoy the income of the property as long as he lives. For Philippine estate tax purposes, how
much will be included in determining gross estate?
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Answer: ___________________________
4. Based on the preceding number, if the fair market value of the property at the time of death is only P600,000,
how much will form part of the gross estate?
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Answer: ___________________________
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5. Proceeds of life insurance where the beneficiary of the decedent is not his estate, executor or administrator is:
a. Part of gross income if the beneficiary is revocable
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b. Part of gross income regardless whether the beneficiary is revocable or irrevocable

c. Not part of gross estate if the beneficiary is irrevocable
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d. Part of gross estate regardless whether the beneficiary is revocable or irrevocable

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C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning (5 mins)
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Work tracker. Congratulations! You have finished the module for today! Shade the number of the module that
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you finished.

Period 1 Period 2 Period 3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

How do you feel today?

I feel (unsatisfactory/satisfactory/excellent) because _______________________________________________________________.

This document is the property of PHINMA EDUCATION

 BAM 208 | Business Taxation
Student Activity Sheet Module #4

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

What are your challenges in learning the concepts in this module? If you do not have challenges, what is your

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best learning for today?
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______________________________________________________________________________________________________________________

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What are the questions/thoughts you want to share to your teacher today?
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______________________________________________________________________________________________________________________

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FAQs
1. What will be used as basis in the valuation of property?
The properties comprising the gross estate shall be valued based on their fair market value as of the time of
decedent’s death.
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If the property is a real property, the appraised value thereof as of the time of death shall be, whichever is the
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higher of –
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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.
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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
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considered as well as the value assigned to preferred shares, if there are any. On this note, the valuation of
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unlisted shares shall be exempt from the provisions of RR No. 6-2013, as amended.
For shares which are listed in the stock exchanges, the fair market value shall be the arithmetic mean between
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the highest and lowest quotation at a date nearest the date of death, if none is available on the date of death
itself.
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The fair market value of units of participation in any association, recreation or amusement club (such as golf,
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polo, or similar clubs), shall be the bid price nearest the date of death published in any newspaper or publication
of general circulation.
To determine the value of the right to usufruct, use or habitation, as well as that of annuity, there shall be taken
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into account the probable life of the beneficiary in accordance with the latest basic standard mortality table, to
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be approved by the Secretary of Finance, upon recommendation of the Insurance Commissioner.(Sec. 5, RR No.
12-2018)

KEY TO CORRECTIONS
Review
Enumeration:
1. 1 – 3: Classification of taxpayers for estate tax
Resident Citizen

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 BAM 208 | Business Taxation
Student Activity Sheet Module #4

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Non-resident citizen with no reciprocity

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Non-resident citizen with reciprocity

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2. 4 – 5: Generally, what is the composition of gross estate
Real properties

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Personal properties

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Activity 1 and 4.

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Questions: What I Learned (Activity 4)

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1. What is the tax rate on estate's net 6% on an estate's net proceeds
proceeds?
2. When should the estate tax be paid? When you file, you pay. The Estate Tax Return (BIR Form 1801)

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shall be filed within one (1) year from the decedent's death. In
meritorious cases, the Commissioner shall have the authority to
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grant a reasonable extension not exceeding thirty (30) days for
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filing the return.

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Activity 3.
A. P2,000,000 – The higher between the FMV provided by the City or Provincial assessors (assessed value) or
zonal value provided by the BIR, at the time of death.
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B. P4,000,000
Valuation of shares of stock:
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- In general, FMV at the time of death

- Traded – FMV (closing rate) at the date of death
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- Traded, FMV at the time of death is not available – the average between the highest and lowest quotation
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nearest the date of death

- Common or ordinary shares, not traded – book value at the time of death
- Preferred or preference shares, not traded – par value
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Activity 5.
1. A
2. A
3. P800,000 (P1,500,000 – P700,000)
4. None
5. C

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