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Gross Estate: Chapter 13-A: Gross Esate - Common Rules

The document defines the gross estate for estate tax purposes as the total value of all properties owned by the decedent at the time of death, wherever located. It discusses what is included in the gross estate for different categories of taxpayers based on residency and citizenship status. The composition of the gross estate, exempt transfers such as certain insurance proceeds and government benefits, and taxable transfers such as those made in contemplation of death are described. Valuation methods for different asset types at date of death are also provided.

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Titania Erza
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185 views3 pages

Gross Estate: Chapter 13-A: Gross Esate - Common Rules

The document defines the gross estate for estate tax purposes as the total value of all properties owned by the decedent at the time of death, wherever located. It discusses what is included in the gross estate for different categories of taxpayers based on residency and citizenship status. The composition of the gross estate, exempt transfers such as certain insurance proceeds and government benefits, and taxable transfers such as those made in contemplation of death are described. Valuation methods for different asset types at date of death are also provided.

Uploaded by

Titania Erza
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CHAPTER 13-A: GROSS ESATE - COMMON RULES

Gross Estate
- Consists of the totality of the value of all properties of the decedents at the time of death.
- The value of the gross estate of the decedent shall be determined by including the value of all the
property at the time of his death, real or personal, tangible or intangible, wherever situated: Provided,
however, that in the case of a nonresident decedent who at the time of his death was not a citizen of the
Philippines, only that part of the entire gross estate which is situated in the Philippines shall be included in
his taxable estate.
Section 85, NIRC

Taxpayer Within Without


RC / /
NRC / /
RA / /
NRA / X

Composition of Gross Estate:


1. Properties, movable, immovable, tangible/intangible.
2. Decedent’s interest on properties
3. Proceed of life insurance
- if beneficiary is others (revocable designated)
-regardless of designation, beneficiary = estate/executor/admin
4. Taxable transfers

Resident or citizen NRA w/o reciprocity NRA w/ reciprocity


Property Location w/in w/out w/in w/out w/in w/out
Real Property / / / X / X
Personal Properties:
Tangible / / / X / X
Intangible / / / X X X

GROSS ESTATE
Inventory of property at point of death Pxx
Less: Exempt transfers
Properties NOT owned xx
Properties OWNED but are exc. By law xx xx
Invent of taxable present property xx
Taxable transfers xx
GROSS ESTATE xx

EXEMPT TRANSFERS

A. PROPERTIES NOT OWNED


i. Merger of the usufruct In the owner of naked title.
ii. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee
iii. to the fideicommisary
iv. The transmission from the first heir, legatee, or donee in favor of another beneficiary, in
v. accordance with the desire of the predecessor
vi. Proceeds of irrevocable life insurance payable to persons “ other than the estate, admin,
vii. and executor”
viii. v. Properties held in trust.
ix. Separate properties of the ss.
x. Transfer by way of bona fide sales
PROCEEDS OF IRREVOCABLE LIFE INSURANCE

Beneficiary
Designation Estate, Admin, Executor Other
Revocable Included Included
Irrevocable Included Excluded

B. LEGAL EXCLUSIONS ( PROPERTIES OWNED BUT ARE EXCLUDED BY LAW)


i. Proceeds of group insurance taken out by company for its employee.
ii. Proceeds of GSIS policy or benefits from GSIS.
iii. Accruals from SSS
iv. United States Veterans Admin benefit.
v. v. War damage payments.
vi. All transfers to social welfare, cultural and charitable institution, no part of net income which ? to the
benefit of any individual, provided, however that not more than 30% of such bequest, devises,
legacies or transfer shall be used for admin purposes

EXEMPT TRANSFERS – LEGAL EXCLUSIONS


vii. Acquisition and or transfers expressly declared by law as non-taxable.

NOTE: Physical transformation does not change its classification.

TAXABLE TRANSFERS
1. Transfer in contemplation of death.
- donations made by the decedent during his lifetime which are motivated by the thought of his
death
- it is a donation mortis causa in guise of donation inter vivos
- eg. Transfers of property to take effect in possession or enjoyment or after date of death
- if there is retention of right

2. Revocable transfers including conditional transfers.


- involves transfer of possession during the lifetime, but not transfer of ownership
- eg. A transfers a house to her son B, but the ownership will transfer upon B’s passing the
October 2017 CPA board exam. Before that happened A died.

3. Properties passing under general power of appointment.


- special/limited power of appointment is excluded (not with the present decedent)
- the presence of the GPA enables the holder of such power to do with the property anything
which he could do as if the property were his own
- eg. A died, in his will he gave B a property with the right to designate the property to whomever B likes.
Because of so much happiness, B died and appointed C as the heir of the Property.

COMPOSITION OF GROSS ESTATE


1. Properties, movable or immovable, tangible/intangible.
2. Decedent’s interest on properties.
3. Proceeds of life insurance
a. revocable to any heir
b. whether revocable or irrevocable = estate, admin, executor
4. Taxable transfers

VALUATION OF GROSS ESTATE


- FMV at date of death

Fair Market Value


1. Real Property
- ZONAL VALUE or ASSESSED VALUE whichever is HIGHER
- if no Zonal Value, FMV is the FMV at the latest tax declaration.

2. Shares of Stocks
a. Preference Share = PAR Value
b. Unlisted Common Shares = Book Value using the adj net asset method
- for purposes of getting the FMV of unlisted stocks, get the highest of ZV, AV or land app (used only in this
instance)
c. Listed = arithmetic mean of highest and lowest quotation at a date nearest the date of death

3. Usufruct and annuities


- FV of annuity

4. Other Properties
a. newly purchased = purchase price
b. not new = secondhand value
c. pawned property = grossed up pawned value
d. foreign currency = peso value translated at prevailing exchange rate at date of death

5. Taxable Transfers
- FMV at date of death less consideration received at the date of transfer

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