Estate Tax (January 24, 2019) Exclusions from Gross Estate under Special

Laws:
Exclusions from the Gross Estate
1. Proceeds from life insurance where the
Acquisitions and transfers expressly declared
beneficiary is other than the estate,
as exempt under the Tax Code:
administrator or executor and the
1. Merger of Usufruct in the Naked Title designation is irrevocable.
a. Example: Mr. DD died leaving a piece 2. SSS and GSIS benefits
of land to Mr. EE in usufruct (right to 3. Retirement benefits received from private
enjoy the fruits), and to Mr. FF in firms (RA 4917)
naked ownership (without rights to 4. Properties held in trust by the decedent
the fruits). The land was subject to 5. Benefits received by beneficiaries
estate tax in the estate of Mr. DD.
residing in the Philippines under laws
Upon death of Mr. EE, the usufruct
administered by the US Veterans
will be merged into the naked
ownership of Mr. FF and Mr. FF will Administration
become the absolute owner of the 6. Separate or exclusive properties of
property. Surviving Spouse
2. Fideicomisarry Substitution
a. Example: Mr. GG died leaving a Property Valuation (RA 10963)
piece of agricultural land to Mr. HH, a Zonal Value or
grandson, to be owned by him for four Real Property Assessed Value
years, with the obligation to preserve (whichever is higher)
it, after which time, one-half (1/2) will
Shares of Stocks:
be given to Mr. II, a great grandson,
under the other one-half to be
Unlisted:
retained by him. The transfer from Mr.
Preferred PAR Value
HH to Mr. II is not taxable.
Fiduciary Heir – Mr. HH
Common Book Value
Fideicomisarry Heir – Mr. II
Listed: FMV based on
3. Transmission from 1st heir to another
arithmetic mean
beneficiary
between the highest
a. Example: Mr. GG died leaving a
and lowest quotation at
piece of land to Mr. HH, a friend, but
date nearest date of
with a condition that if another friend,
death, if DOD not
Mr. II, gets married, Mr. HH will give
available.
the property to Mr. II. Mr. II got
married. The transmission from Mr. Probable life of the
GG to Mr. HH paid the estate tax. The beneficiary in
transmission from Mr. HH to Mr. II will accordance with the
not be subject to the estate tax. latest Basic Standard
4. All bequests, devises, legacies or Right of Usufruct, Mortality Table
transfers to social welfare, cultural and use or habitation (BSMT), approved by
charitable institutions no part of the net and Annuities the Secretary of
income of which inures to the benefit of Finance upon
any individual: Provided, that not more recommendation of the
that thirty percent (30%) of said Insurance
bequests, legacies or transfers will be Commissioner
used by such institutions for
administrative purposes.
 Special Deductions:
Units of
participation in any Bid price nearest the Items of RC/NRC/RA Nonresident
association, date of death published Deduction Decedent Alien Decedent
recreation or in any newspaper or 1. Family Home Deductible Not Deductible
amusement club publication of general 2. Standard Deductible Deductible
(e.g. golf, polo, or circulation. Deduction (P5,000,000) (P500,000)
similar clubs) 3. Amount
received by
Personal Property: heirs under RA
Deductible Not Deductible
Used Property FV is second-hand 4917
value; or pawn value x3
Newly Purchased FV is purchase price
Pawned Property Grossed up pawn value Other Deductions:
by loan-to-appraisal
Items of RC/NRC/RA Nonresident
value ratio of pawnshop Deduction Decedent Alien Decedent
Share of
e.g. Pawn value = 50,000 surviving Deductible Deductible
L-V ratio = 50% spouse
FMV = 50,000/0.5 = 100,000

FOREX currencies
Prevailing Exchange
rate at date of death

Gross Estate Allowable Deductions

RA 10963:
1. No deductions allowed for expenses
related to funeral expenses and judicial
expenses.
2. Claims applies to:
a. Claims against estate
b. Claims against insolvent persons