Tax II 1st Exam TSN Short

TAXATION LAW 2 TRANSCRIPT
From the lectures of Atty. Percy Donalvo, CPA

Ateneo de Davao College of Law | Tres Manresa SY 2015 2016
November 17, 2015 (EAE)
TITLE III
ESTATE AND DONORS TAX
the essence of donation mortis causa. Thats why when you

talk of donation mortis causa, its not about the time of the
execution of the deed, but rather, the tacit donation will arise
only upon the death of the donor.
What is this transfer tax all about? How do we define

transfer tax? What are transfer taxes?
Estate Tax
TRANSFER TAX A tax imposed upon the privilege of

passing ownership of a property without any valuable
consideration.
What is an estate?
So pagsinabi mong transfer tax it would always pertain to a

gratuitous transfer.
obligations which are transferrable obligations which are

not extinguished upon death.
Paano yan pag may valuable consideration? What is the tax
What happens to the estate when the person dies? The

properties that he had will be transferred to the heirs, either
by will or by law. Pag may will, testate siya. Pag walang will,
intestate of course.
consequence for that?
It would entirely depend if the transfer of property

is for business purposes; probably you will be
imposed business taxes.
If the property passed on to another person is not
for business, what do you call that property? What
is that classification of an asset that is not used for
business? Capital asset. So capital asset diba, by
now dapat alam niyo na anong takbo niyan.
But right now we are not concerned about that anymore. We
are concerned about transfer taxes.
What is the nature of a transfer tax? Its pretty much the
same with income tax because it is a privilege tax. It is
not a tax on the property but its a tax on the privilege of
passing the property from one person to another without any
valuable consideration. Because the imposition of transfer
taxes does not rest upon the ownership. Its not about the
ownership but its about the act of passing the thing or the
property from one person to another.
What are the kinds of transfer taxes that we have under our
tax laws? Currently we have two:
1.
Estate tax
2.
Donors tax
So dalawa yan siya. This is actually the coverage of your first

exam.
Lets go to governing laws. With respect to governing laws
you have to remember the basic principle: Transfer taxes are
governed by the law existing at the time when the transfer
took place. Kung kailan siya dinonate, you apply the existing
law during that time. Kung kailan namatay diba. Because
when you talk about succession, the passing of property
happens upon death.
If the property is given gratuitously and is effective during
the lifetime of the giver, we call that donation inter vivos
diba? Or donation lang. Donations inter vivos are governed
by the law at the time of its effectivity. But if its considered
a donation mortis causa, of course, if the transfer will
happen only during that time, the donor will die diba. Thats
Pagsinabi niyo kasing estate guys, its synonymous with

inheritance. Diba, it comprises of all your properties, rights or
It is the act of transferring that is being taxed by our current

estate tax law. What is being taxed by the NIRC is the
privilege of the decedent to control the distribution of his
property even though he is already dead. So that is the
privilege that is being taxed by the government. The nature
of course is it is an excise tax because what is taxed is the
privilege; it is not a tax on the property.
What are the purposes of levying the estate tax?
Most authors would only say two.
Its for more equitable distribution of wealth, lalo na
kung madami masyadong pag-aari yung namatay,

syempre a portion of it must go to the government
to equalize the wealth. Social justice.
It is the most effective and appropriate method for

taxing the privilege which the decedent enjoys of
controlling the disposition upon his death of the
properties he accumulated during the lifetime.
Other purposes are:
To get revenues.
It is also the only method of collecting the share

which is properly due to the state as a partner in
the accumulation of the property on account of the
protection given by the state.
If you go back to our Tax 1 diba, what are the underlying

considerations why the government taxes a particular
transaction or particular person or action? Its because of the
protection that the government affords to that constituent or
property. Diba kung resident ka ditto sa Pilipinas, the
government will protect you. If you are a citizen of course
the government will protect you.
What about inheritance tax? Is this term the same with
estate tax?
Inheritance tax is still a privilege tax. It is a tax on the
right to receive an inheritance. Currently, under Philippine
laws, walatayong inheritance tax dito. Datimerontayo, before
[Page 1 of 29]
First Exam Coverage | To God be the Glory

NIRC meron tayong inheritance tax pero wala na yan siya
ngayon.
What about the term net estate? Compare this to gross

estate.
When you talk about the net estate, this is actually the tax
base of your estate tax. Of course, before you will be able to
get your net estate, you will have your gross estate. So
pretty much the same with your income taxation. Now in
determining your estate tax, you are guided by this basic
formula:
Gross Estate
Net Estate
Its pretty simple. Kumbaga, if you remember your income

taxation, diba almost the same?
Gross Income
(Less) Deductions
=
Of course you will determine those figures. The gross estate,

the deductions, etc., and apply it accordingly, and then when
you reach the net estate, you will have a table, which is your
tax for the estate taxation. Gaya lang sa income tax on
individuals. The concept is the same.
Of course finally, kung late ka nagfile ng ETR mo, or late ka
nagbayad ng estate tax mo, there will be surcharges and
penalties that you will have to take into account later on.
Next question: When will the estate tax accrue? Is it the
same with the time of payment of estate tax?
The estate tax ACCRUES as of the death of the
decedent, and the accrual of the tax is distinct from the
obligation to pay the same. Lets try to understand that.
(Less) Deductions
=
Next, know the location of the property.
Net Taxable Income
If you will spread it out, meron pa yang personal

exemptions, additional personal exemptions, diba. So marami
siya.
Now for our entire discussion here, we will present what is

the composition of gross estate. Yan man ang mahirap. What
composes this? What is the composition of deductions? And
what is the net estate? What are the considerations that you
have to take to account before you reach the net estate,
which would be your tax base for your estate tax.
If you will expand the formula on gross estate further:
Gross Estate
Does that mean if the person dies his estate tax should be
paid immediately? Not really. Because what happens after
the person dies? The first thing that you are going to do is to
collate everything. Ipunin mo lahat ng properties ng
decedent as of the time of his death. Why? Because the
estate tax will accrue on the date of death, you will have to
determine the value of the property at the time of his death,
because that will be the basis of the estate tax later on.
It is different from the OBLIGATION TO PAY the
estate tax.
Why? Because the obligation to pay the estate tax will come
later on. Imposible man yan, mamatay ka tapos bayaran mo
kaagad, hindi man yan, unless kung konte lang estate mo.
This is actually the concept given in the case of Lorenzo vs.
Posadas.
If the estate tax accrues at the time of the decedents death,
when does the obligation to pay the tax arise? Kelan mo siya
bayaran?
This is answered in Section 91 and Section 90 of your NIRC.
(Less) Deductions
SEC. 90. Estate Tax Returns.
Ordinary
xxx
Special
Share of the Surviving Spouse
=
Net Estate
Again, spread out natin yan. What composes the ordinary,

what composes the special, what composes the share of the
surviving spouse. Everything is in the codal.
What are the basic steps for you to determine your estate
tax?
First thing, determine the nationality and the residence
of the decedent. Para lang general principles of income
taxation. You have to know the nationality of the income
earner. You also have to know the residence of the person
who is earning. Pretty much the same with your income
taxation.
(B) Time for Filing. For the purpose of determining the

estate tax provided for in Section 84 of this Code, the estate
tax return required under the preceding Subsection (A) shall
be filed within 6 months from the decedent's death.
A certified copy of the schedule of partition and the order of
the court approving the same shall be furnished the
Commissioner within 30 after the promulgation of such
order.
(C) Extension of Time. The Commissioner shall have
authority to grant, in meritorious cases, a reasonable
extension not exceeding 30 days for filing the return.
xxx
Sec. 91. Payment of Tax.
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(A) Time of Payment. The estate tax imposed by Section

84 shall be paid at the time the return is filed by the
executor, administrator or the heirs.
Next, situs of the properties this is similar to income

taxation.
(B) Extension of Time. When the Commissioner 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 5 years, in case the estate
is settled through the courts, or 2 years in case the estate is
settled extrajudicially.
What about for tangibles? The general rule is movables

follow the owner or the person.
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 in Section 203 of
this Code shall be suspended for the period of any such
extension.
Provided, further, That franchise which must be exercised in
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 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 the tax and with such sureties as the
Commissioner deems necessary, conditioned upon the
payment of the said tax in accordance with the terms of the
extension.
xxx
Real property, the situs is where the property is located.
For intangibles, the NIRC itself has specific rules that must
be followed. You can look at Section 104 of the NIRC.
SEC. 104. Definitions. x x x
the Philippines; shares, obligations or bonds issued by any
corporation or sociedad anonima organized or constituted in
the Philippines in accordance with its laws; shares,
obligations or bonds by any foreign corporation 85% of the
business of which is located in the Philippines; shares,
obligations or bonds issued by any foreign corporation if such
shares, obligations or bonds have acquired a business situs
in the Philippines; shares or rights in any partnership,
business or industry established in the Philippines, shall be
considered as situated in the Philippines x x x
Under this clause in Section 104, these intangibles are
considered as located in the Philippines.
1.
Franchises to be exercised within the Philippines
2.
Shares, obligations or bonds issued by Philippine

corporations
3.
Even if the shares or bonds are from a foreign

corporation, but 85% of its business is situated in
the Philippines
4.
Also pertains to foreign corporations, but the

obligations or the shares or the bonds acquired in
the Philippines
5.
Of course you have any rights in any partnership,

business or industry established in the Philippines
So its pretty much the same thing, pay as you file as a

general rule.
Now, we have said earlier that one of the considerations that
should be taken into account in determining your estate tax
is the nationality and the residence of the decedent.
Lets go back to income taxation. Ano bang rule natin? What
is the simple rule that we have to follow when we talk about
the general principles of income taxation? Only the resident
citizens are taxable on their income within and without the
Philippines. The rest of the individuals are taxable only on
their income earned within the Philippines, right?
What about here in estate taxation? What is the rule that we
have to follow?
Do you notice the difference between taxation of income and
estate? Diba pag income, resident citizen lang. But when you
talk about estate taxation, the rule is:
GR All types of individuals or decedents are taxable
on properties wherever located as part of the gross
estate.
EXC When you are considered as a nonresident
decedent. Because if you are considered a nonresident
decedent, only your properties which are found in the
Philippines are to form part of your gross estate. That
is the importance there.
What about the intangibles which are not listed here in the
NIRC, Section 104? Then you follow the general rule.
Movables follow the person.
If you go back to BPI vs. Posadas, I think this is a different
ruling. The issue here revolves on insurance proceeds. The
decedent here is actually a nonresident alien. Hes a German,
who met a Filipina. Eventually, nonresident siya, but then he
died here in the Philippines. So what happened was that the
insurance proceeds were immediately delivered to BPI.
Ang question dito, WON the insurance policy and its

proceeds were subject to inheritance tax. Inheritance to kasi
at that time meron pa tayong inheritance tax.
The Supreme Court said here that the insurance proceeds
were delivered here in the Philippines sa BPI for purposes of
administration. So since gideliver siya ditto sa Pilipinas, the
movable follows the person, therefore, it is subject to
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inheritance tax. That is one application of that. Intangible

man siya kaya nga insurance proceeds.
November 19, 2015 (AL)

REVIEW:
Last meeting we discussed the general concept of transfer
taxes. As of now we only have two: Estate Tax and Donors
Tax.
We dont have inheritance tax as of the moment. We also
defined what Estate is. And we had a few basic
considerations:
1.
2.
The approval of the Governing law, when does the

estate tax accrue? Of course it is during that time
that the decedent died.
The accrual of the Estate tax is different from the
obligation to pay. Because the obligation to pay the
Estate tax will be provided for by law.
I think I discussed to you Articles 90 and 91, the time of

payment of Estate Tax. And we discussed a little bit about
Lorenzo vs. Posadas. Its a very old case which deals with
inheritance tax.
We also discuss about the importance of nationality and
residence, this has something to do with the composition of
your gross estate later on. We also start discussing about the
situs of the property that can be included in the Gross Estate.
For Real Properties, it is where the property is

located
For Tangible Personal Properties you use the usual

rule, the movables follow the person
For Intangibles, we have discussed Section 104 of

the NIRC which talks about specific intangibles
which has situs here in the PH therefore includable
in the Gross Estate.
Also, what about those intangibles which are not

listed under Section 104, you go back to the general
rule on tangible properties.
DISCUSSION PROPER:
Lets go now to the valuation of properties.
How do you value your properties when you include it in
your Gross Estate? What is the rule that you have to follow?
Read Section 88.
SEC. 88. Determination of the Value of the Estate.
(A) Usufruct. To determine the value of the right of
usufruct, use or habitation, as well as that of annuity, there
shall be taken into account the probable life of the
beneficiary in accordance with the latest Basic Standard
Mortality Table, to be approved by the Secretary of Finance,
upon recommendation of the Insurance Commissioner.
xxx
We have said earlier you also have to include your intangible
properties, also rights as part of your Gross Estate. There are
some rights that you have to include in your gross estate like
Usufruct specifically. But the problem usually with rights
when you include them in your Gross Estate - buti sana kung
intellectual property because there is some certain value that
you can think of. How much cost did you incur for you to
develop that products which are patentable, etc?
But what about rights like Usufruct, how do you value them?
According to the law you have to take into account the
probable life of the beneficiary in accordance with the
[latest] Mortality Table.
In the end it will be the BIR who will determine the value of
that Usufruct.
As to how it is applied in actuality, I do not know. I have no
idea.
xxx
(B) Properties. - The estate shall be appraised at its fair
market value as of the time of death. However, the
appraised value of real property as of the time of death shall
be, whichever is higher of
(1) The fair market
Commissioner, or
value
as
determined
by
the
(2) The fair market value as shown in the schedule of values

fixed by the Provincial and City Assessors.
Section 88 (b) is the more important provision in this section.
It pertains to properties in general.
What is the valuation that you are going to use? You use the
FMV of the Property.
Where do you reckon the value? Is it at the time of the
payment of the Estate Tax?
NO. It should be at the time of death. Basically Section 88
already states the date of [death] valuation rule when it
comes to properties that should be included in the Gross
Estate. The value is the fair market value and then it must be
the value at the time of death of the decedent. Yan ang
sinasabi ng Section 88.
With respect to FMV, how do you determine the FMV of such
property? We will have no problem if its real properties
because you take into account the:
1.
The FMV as per the BIR (zonal value), OR
2.
You take into account the FMV as shown in the

schedule of values fixed by the Provincial and City
Assessors.(Assessed Value)
Are you familiar with those terms?

Its almost similar with the capital gains taxation concept.
When you sell Real properties classified as capital assets.
[Page 4 of 29]

Where do you base your 6% CGT? Selling Price, and these

two values (Zonal value, Assessed Value) whichever is
higher. So its pretty much the same here in Estate Taxation.
ISSUE: Whether or not the CA erred in affirming the CTA in

the latter's determination of the deficiency estate tax
imposed against the Estate.
The problem now is what about the Personal property like

cars, paintings. How do you determine the FMV of that?
RULING: It is admitted that the claims of the Estate's

aforementioned creditors have been condoned. As a mode of
extinguishing an obligation, condonation or remission of
debt is defined as:
Normally, this is from the accountants perspective ha.

According to what my friend said, when it comes to Personal
Properties they would have to get an appraiser. Sometimes
hindi na sila nagakuha ng appraiser, they just put an
amount. For example like cars they would peg it at 20%
depreciation rate per year. So yong car mo 2 years pa lang,
40% less of the cost of that car yun yung value ng Estate.
G.R. No. 140944
April 30, 2008
RAFAEL ARSENIO S. DIZON, in his capacity as the

Judicial Administrator of the Estate of the deceased
JOSE P. FERNANDEZ, petitioner,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF
INTERNAL REVENUE, respondents.
FACTS: On November 7, 1987, Jose P. Fernandez died.
Thereafter, a petition for the probate of his will was
filed. The probate court then appointed retired Supreme
Court Justice Arsenio P. Dizon and petitioner, Atty. Rafael
Arsenio P. Dizon as Special and Assistant Special
Administrator, respectively, of the Estate of Jose.
On November 26, 1991, the Assistant Commissioner for
Collection of the BIR, Themistocles Montalban, issued Estate
Tax
Assessment
Notice
demanding the
payment
of P66,973,985.40 as deficiency estate tax. Petitioner thru
Atty. Gonzales moved for the reconsideration of the said
estate tax assessment. However, the BIR Commissioner
denied the request and reiterated that the estate is liable for
the payment of P66,973,985.40 as deficiency estate tax.
Petitioner filed a petition for review before respondent CTA.
The CTA denied the said petition for review. Nevertheless,
the CTA did not fully adopt the assessment made by the BIR
and it came up with its own computation of the deficiency
estate tax in the amount of P37,419,493.71 plus 20%
interest from the due date of its payment until full payment
thereof. CA affirmed the CTA's ruling.
Hence this petition. The Petitioner claims that:
xxx the BIR failed to consider that although the actual
payments made to the Estate creditors were lower than their
respective claims, such were compromise agreements
reached long after the Estate's liability had been settled by
the filing of its estate tax return and the issuance of BIR
Certification Nos. 2052 and 2053; and that the reckoning
date of the claims against the Estate and the settlement of
the estate tax due should be at the time the estate tax return
was filed by the judicial administrator and the issuance of
said BIR Certifications and not at the time the
aforementioned Compromise Agreements were entered into
with the Estate's creditors. xxx
An act of liberality, by virtue of which, without receiving any

equivalent, the creditor renounces the enforcement of the
obligation, which is extinguished in its entirety or in that part
or aspect of the same to which the remission refers. It is an
essential characteristic of remission that it be gratuitous, that
there is no equivalent received for the benefit given; once
such equivalent exists, the nature of the act changes. It may
become dation in payment when the creditor receives a thing
different from that stipulated; or novation, when the object
or principal conditions of the obligation should be changed;
or compromise, when the matter renounced is in litigation or
dispute and in exchange of some concession which the
creditor receives.
Verily, the second issue in this case involves the construction
of Section 79 of the National Internal Revenue Code (Tax
Code) which provides for the allowable deductions from the
gross estate of the decedent. The specific question is
whether the actual claims of the aforementioned creditors
may be fully allowed as deductions from the gross estate of
Jose despite the fact that the said claims were reduced or
condoned through compromise agreements entered into by
the Estate with its creditors.
"Claims against the estate," as allowable deductions from the
gross estate under Section 79 of the Tax Code, are basically
a reproduction of the deductions allowed under Section 89
(a) (1) (C) and (E) of Commonwealth Act No. 466 (CA 466),
otherwise known as the National Internal Revenue Code of
1939, and which was the first codification of Philippine tax
laws. Philippine tax laws were, in turn, based on the federal
tax laws of the United States. Thus, pursuant to established
rules of statutory construction, the decisions of American
courts construing the federal tax code are entitled to great
weight in the interpretation of our own tax laws.
It is noteworthy that even in the United States, there is some
dispute as to whether the deductible amount for a claim
against the estate is fixed as of the decedent's death which is
the general rule, or the same should be adjusted to reflect
post-death developments, such as where a settlement
between the parties results in the reduction of the amount
actually paid.
On one hand, the U.S. court ruled that the appropriate
deduction is the "value" that the claim had at the date of the
decedent's death. Also, as held in Propstra v. U.S., where a
lien claimed against the estate was certain and enforceable
on the date of the decedent's death, the fact that the
claimant subsequently settled for lesser amount did not
preclude the estate from deducting the entire amount of the
claim for estate tax purposes. These pronouncements
essentially confirm the general principle that post-death
[Page 5 of 29]

developments are not material in determining the amount of

the deduction.
On the other hand, the Internal Revenue Service (Service)
opines that post-death settlement should be taken into
consideration and the claim should be allowed as a deduction
only to the extent of the amount actually paid. Recognizing
the dispute, the Service released Proposed Regulations in
2007 mandating that the deduction would be limited to the
actual amount paid.
In announcing its agreement
5th Circuit Court of Appeals held:
with Propstra, the
U.S.
We
are
persuaded
that
the
Ninth
Circuit's
decision...in Propstra correctly apply the Ithaca Trust dateof-death valuation principle to enforceable claims against the
estate. As we interpret Ithaca Trust, when the Supreme
Court announced the date-of-death valuation principle, it was
making a judgment about the nature of the federal estate
tax specifically, that it is a tax imposed on the act of
transferring property by will or intestacy and, because the
act on which the tax is levied occurs at a discrete time, i.e.,
the instance of death, the net value of the property
transferred should be ascertained, as nearly as possible, as
of that time. This analysis supports broad application of the
date-of-death valuation rule.
We express our agreement with the date-of-death
valuation rule, made pursuant to the ruling of the U.S.
Supreme Court in Ithaca Trust Co. v. United States.
First. There is no law, nor do we discern any legislative intent
in our tax laws, which disregards the date-of-death valuation

principle and particularly provides that post-death
developments must be considered in determining the net
value of the estate. It bears emphasis that tax burdens are
not to be imposed, nor presumed to be imposed, beyond
what the statute expressly and clearly imports, tax statutes
being
construed strictissimi
juris against
the
government. Any doubt on whether a person, article or
activity is taxable is generally resolved against taxation.
Second. Such construction finds relevance and consistency in

our Rules on Special Proceedings wherein the term "claims"
required to be presented against a decedent's estate is
generally construed to mean debts or demands of a
pecuniary nature which could have been enforced against
the deceased in his lifetime, or liability contracted by the
deceased before his death.
What did the BIR say regarding the valuation of that

indebtedness of the estate which has been condone or
compromise? Diba yong namatay meron siyang utang, dapat
bayaran niya ang utang. But what the BIR did is to have the
liabilities of the estate condone, bawasan ang mga utang or
subject to compromise?
From the FT of the case: On the other hand, the Internal
Revenue Service (Service) opines that post-death settlement
should be taken into consideration and the claim should be
allowed as a deduction only to the extent of the amount
actually paid.
Practically what the BIR is trying to say is this; the amount of
the indebtedness of the Estate is deductible from the Gross
estate. Utang yan ng Estate, babayaran niya so deduction
siya sa Gross estate mo. What the BIR is trying to say here is
this; since later on na-condone na pala ang utang ng Estate
then you should either:
1.
Do not (?) claim it as a deduction since wala na

palang utang to deduct to begin with, OR
2.
iI na-compromise mo siya the amount is smaller

you use that compromise amount. So kung maliit
ang deduction niyo, maglaki ang Gross Estate.
Siyempre maglaki ang Net Estate niyo, malaki ang
babayaran na tax. There will be a tax deficiency.
Ano ang sabi ng SC regarding that contention of the BIR?

The post death development is not material in determining
the deductions.
Applying it sa contention ng BIR, bakit mali ang BIR? If it is

reckoned from the date of death of decedent what is the
effect of the remission/condonation of whatever liabilities of
the estate? What is the effect of that? Later on what will
happen if there is condonation of debt after the death of
decedent?
Any post developments already will become immaterial
because what matters is that the value of the Estate at the
time of death, the value of deductions at the time of death,
because sabi ng batas the generating source of the power of
the State to tax the estate of the deceased is the death of
decedent.
G.R. No. L-43082
June 18, 1937
Therefore, the claims existing at the time of death are

significant to, and should be made the basis of, the
determination of allowable deductions.
PABLO LORENZO, as trustee of the estate of Thomas

Hanley, deceased, plaintiff-appellant,
vs.
JUAN POSADAS, JR., Collector of Internal
Revenue, defendant-appellant.
What was the issue regarding the valuation of property? To

be more specific, what about deductions? Ano ang sabi ng
BIR dito specifically with respect to the amount of
indebtedness that were condone? Ang sabi niya dito meron
daw utang ang Estate tapos na-compromise.
FACTS: On May 27, 1922, Thomas Hanley died, leaving a

will and considerable amount of real and personal properties.
The will was admitted to probate. Said will provides, among
other things, as follows:
5. I direct that all real estate owned by me at the time of my
death be not sold or otherwise disposed of for a period of ten
[Page 6 of 29]

(10) years after my death, and that the same be handled

and managed by the executors, and proceeds thereof to be
given to my nephew, Matthew Hanley, at Castlemore,
Ballaghaderine, County of Rosecommon, Ireland, and that he
be directed that the same be used only for the education of
my brother's children and their descendants.
6. I direct that ten (10) years after my death my property be
given to the above mentioned Matthew Hanley to be
disposed of in the way he thinks most advantageous.
The defendant Collector of Internal Revenue, assessed
against the estate an inheritance tax in the total amount of
P2,052.74. The plaintiff paid said amount under protest,
notifying the defendant at the same time that unless the
amount was promptly refunded suit would be brought for its
recovery. The defendant overruled the plaintiff's protest and
refused to refund the said amount, plaintiff went to court.
ISSUES: (b) Should the inheritance tax be computed on the
basis of the value of the estate at the time of the testator's
death, or on its value ten years later?
HELD: (b) The plaintiff contends that the estate of Thomas
Hanley, in so far as the real properties are concerned, did
not and could not legally pass to the instituted heir, Matthew
Hanley, until after the expiration of ten years from the death
of the testator on May 27, 1922 and, that the inheritance tax
should be based on the value of the estate in 1932, or ten
years after the testator's death. The plaintiff introduced
evidence tending to show that in 1932 the real properties in
question had a reasonable value of only P5,787. This amount
added to the value of the personal property left by the
deceased, which the plaintiff admits is P1,465, would
generate an inheritance tax which, excluding deductions,
interest and surcharge, would amount only to about P169.52.
If death is the generating source from which the power of
the estate to impose inheritance taxes takes its being and if,
upon the death of the decedent, succession takes place and
the right of the estate to tax vests instantly, the tax should
be measured by the vlaue of the estate as it stood at the
time of the decedent's death, regardless of any subsequent
contingency value of any subsequent increase or decrease in
value.
"The right of the state to an inheritance tax accrues at the
moment of death, and hence is ordinarily measured as to
any beneficiary by the value at that time of such property as
passes to him. Subsequent appreciation or depriciation is
immaterial."
Our attention is directed to the statement of the rule in
Cyclopedia of Law of and Procedure (vol. 37, pp. 1574,
1575) that, in the case of contingent remainders, taxation is
postponed until the estate vests in possession or the
contingency is settled. This rule was formerly followed in
New York and has been adopted in Illinois, Minnesota,
Massachusetts, Ohio, Pennsylvania and Wisconsin. This rule,
horever, is by no means entirely satisfactory either to the
estate or to those interested in the property. Realizing,
perhaps, the defects of its anterior system, we find upon
examination of cases and authorities that New York has

varied and now requires the immediate appraisal of the
postponed estate at its clear market value and the payment
forthwith of the tax on its out of the corpus of the estate
transferred.
But whatever may be the rule in other jurisdictions, we hold
that a transmission by inheritance is taxable at the time of
the predecessor's death, notwithstanding the postponement
of the actual possession or enjoyment of the estate by the
beneficiary, and the tax measured by the value of the
property transmitted at that time regardless of its
appreciation or depreciation.
Ano sabi ng will regarding sa real properties? Ano sabi ng
BIR? Diba may inheritance tax? Ano sabi ng Government?
The way I understood the case there is an issue here
regarding the value of the property. What is the valuation
that we are going to use? Is it during the time that the
decedent died OR 10 years after during that time that the
heir will receive the money or property? Because ano ang
contention ng gobyerno dito? Medyo mahihirap siya
intindihin pero the way I understood it, when did the transfer
take effect? Sabi ng BIR dapat 10 years after dyan pa
ibibigay ang property eh, because there is a specific
stipulation sa will that it would be *** for 10 years before
you are going to distribute it.
What did the SC say about this matter? Again its date of
[death] valuation rule.
Also take note that the right of the decedent over the
properties are also taken into consideration. Because as we
will find later on when we will discuss about Gross Estate
proper that there will be some properties which seemingly
already transferred to some other person and yet you will
still include them in your Gross Estate.
GROSS ESTATE
Based on Section 85 what are the classifications of
decedents? It is important for you to classify the decedent
because this will have an impact on your Gross Estate.
SEC. 85. Gross Estate. The value of the gross estate of the
decedent shall be determined by including the value at the
time of his death of all property, 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.
xxx
To be more precise you have:
1.
citizens;
2.
residents decedent; and
[Page 7 of 29]

3.
Non-resident alien decedents
Why do you have to classify it that way? Because Under

Section 85 the rule is like this: the estate of residents and
citizens pag residents its either resident citizens or resident
aliens or kung citizens shall comprise all the value of all
your properties (real or personal, tangible or intangible)
wherever situated.
Even if you are an alien and you are residing here in the PH
you have to include the entirety of your property. With
respect to nonresident citizen decedents, you will only
include in the estate those properties which are situated here
in the PH.
What do you understand Residence here in the context of
Estate taxation?
2014 TSN: The term residence is synonymous with
domicile and are used interchangeably without distinction.
It refers to the permanent home, the place to which
whenever absent, for business or pleasure, one intends to
return, and depends on facts and circumstances, in the
sense that disclose intent. It is, therefore, not necessarily the
actual place of residence.
Gross Estate You think of the entirety of the property of
the decedent at the time of his death. Of course you have to
take into consideration his nationality and residence because
that will have an impact on his Gross Estate.
What composes your Gross Estate?
Generally, it is all the properties of the decedent.
(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;
except in case of a bonafide sale for an adequate and full

consideration in money or money's worth.
Lets dissect.
There are 2 types of transfers in contemplation of death:
1.
The decedent has at any time made a

transfer,
by
trust
or
otherwise,
in
contemplation of or intended to take effect in
possession or enjoyment at or after death.
Strictly speaking this is Transfer in contemplation of
death per se. You transfer it now later on pa mag
take effect pag namatay ang tao. I will transfer
four months from now, so I am going to make a will
and of course donate this property sa anak ko. The
transfer will take effect after the death of the
decedent. Dito papasok ang donation mortis causa.
That is why you always have to take note of the
case of Ganuelas vs. Cawed (succession case).
How do you determine whether its a donation intervivos or donation mortis causa aside from the fact
that the formalities will be different. Iba man ang
formalities yan, number one you follow the
formalities donation kung donation intervivos siya.
Once it falls under donation mortis causa then you
have to follow the formalities of will. Take note of
the distinguishing characteristics of a donation
mortis causa.
Specifically you have seven considerations to think of:

Ganuelas vs. Cawed
xxx
(A) Decedent's Interest. - To the extent of the interest
therein of the decedent at the time of his death;
The decedent must have an interest over the property. What
if nabenta niya beforehand? Normally if he has already sold it
prior to his death even if the actual delivery of the property
is already subsequent to his death but there is already a
transfer of ownership even before his death, so Ok lang yan.
Hindi na siya kasali sa Estate. What matters is that the
decedent will have an interest over that property to be
included in the Gross Estate
(B) Transfer in Contemplation of Death. - To the extent
of any interest therein of which the decedent has at any time
made a transfer, by trust or otherwise, in contemplation of or
intended to take effect in possession or enjoyment at or after
death, or of which he has at any time made a transfer, by
trust or otherwise, under which he has retained for his life or
for any period which does not in fact end before his death
(1) the possession or enjoyment of, or the right to the
income from the property, or
The
distinguishing
characteristics
donation mortis causa are the following:
of
1. It conveys no title or ownership to the transferee

before the death of the transferor; or, what
amounts to the same thing, that the transferor
should retain the ownership (full or naked) and
control of the property while alive;
2. That before his death, the transfer should be
revocable by the transferor at will, ad nutum; but
revocability may be provided for indirectly by means
of a reserved power in the donor to dispose of the
properties conveyed;
So it may be possible during the interim period
there is already transfer of ownership but at
anytime before the death the decedent will be able
to revoke it later on if he wants to.
3. That the transfer should be void if the transferor
should survive the transferee.
So think of those characteristics.
[Page 8 of 29]

2.
The decedent has at any time made a

transfer, by trust or otherwise, under which
he has retained for his life or for any period
which does not in fact end before his death;
(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;
It basically means like this:
During his lifetime I will transfer this property to
you but I will remain as the beneficial owner.
Kumbaga legal title ba yan kung transfer lang? Ako
yong beneficial owner although you are already the
title owner as of now. If that is the set-up, it is
considered as transfers in contemplation of death.
Even if the properties are already transferred to
some other person, still you have to include that in
your Gross Estate.
So number one, the possession or enjoyment of, or
the right to the income ang mabilin na lang
beneficial owner[ship]. Or it may be possible the
remaining right is, the decedent either alone or
together with some other person will have right to
choose sino makatanggap ng property or who will
receive the income of this property after I die.
Thats about it. You may simply call this as
Transfers with retention of right.
CAVEAT: But I would suggest pag isulat nyo yan sa
notebook wag niyo sabihin transfers with retention
of right kasi gawa-gawa ko lang nong law student
pa ako. Just to make me remember the things.
What do you mean by contemplation of death?

The thought of death is the impending cause of the transfer.
Mamatay nako ugma ihatag nalang nako sa imoha.

(C) Revocable Transfer. -
(1) To the extent of any interest therein, of which the

decedent has at any time made a transfer (except in case of
a bona fide sale for an adequate and full consideration in
money or money's worth) by trust or otherwise, where the
enjoyment thereof was subject at the date of his death to
any change through the exercise of a power (in whatever
capacity exerciseable) by the decedent alone or by the
decedent in conjunction with any other person (without
regard to when or from what source the decedent acquired
such power), to alter, amend, revoke, or terminate, or where
any such power is relinquished in contemplation of the
decedent's death.
(2) For the purpose of this Subsection, the power to alter,
amend or revoke shall be considered to exist on the date of
the decedent's death even though the exercise of the power
is subject to a precedent giving of notice or even though the

alteration, amendment or revocation takes effect only on the
expiration of a stated period after the exercise of the power,
whether or not on or before the date of the decedent's death
notice has been given or the power has been exercised. In
such cases, proper adjustment shall be made representing
the interests which would have been excluded from the
power if the decedent had lived, and for such purpose if the
notice has not been given or the power has not been
exercised on or before the date of his death, such notice
shall be considered to have been given, or the power
exercised, on the date of his death.
This is just: The transferor reserves the right to alter,
revoke, or amend such transfer before he dies.
Why is it that you will have to include this in your Gross
Estate? Natransfer mo naman siya, it does not *** later on.
It will be subjected to, anong klaseng provision siya hindi
siya suspensive diba, ano siya, resolutory condition??? Hoy
OBLICON!!! (T_T)
You have the right to revoke or change or alter whatever
agreement that you have while you are still alive. You will
have to include that in your Gross Estate because there is no
genuine transfer of ownership. There is still control
remaining on the part of the decedent. That is why you have
to include that as a part of your Gross Estate even if
seemingly before the death you have already transferred its
ownership to some other person. Pretty much like the
situation we discussed earlier in transfer in contemplation of
death. Only that with respect to this revocable transfer you
have the right to revoke or change whatever agreement you
have for the meantime.
Take note also with respect to the Exemption to revocable
transfer, exemption to transfers in contemplation of death:
bona fide sale for an adequate and full consideration
in money or money's worth. If that happens ibaligya jud
nimo siya mudawat ka ug kwarta that will be taken out from
the context of includable properties in your Gross Estate.
(D) Property Passing Under General Power of
Appointment. - To the extent of any property passing
under a general power of appointment exercised by the
decedent:
(1) by will, or
(2) by deed executed in contemplation of, or intended to
take effect in possession or enjoyment at, or after his death,
or
(3) by deed under which he has retained for his life or any
period not ascertainable without reference to his death or for
any period which does not in fact end before his death
(a) the possession or enjoyment of, or the right to the
income from, the property, or
(b) the right, either alone or in conjunction with any person,
to designate the persons who shall possess or enjoy the
[Page 9 of 29]

his death or for any period which does not in fact

end before his death death:
except in case of a bona fide sale for an adequate and full

consideration in money or money's worth.
What do you
Appointment?
understand
by
General
Powers
of
The power of appointment is the power given to that person

to appoint or designate someone who will receive that
property.
How do you distinguish this from Special Power of
Appointment? (From PM Reyes Reviewer)
(a) the possession or enjoyment of, or the right to the

income from, the property, or
(b) the right, either alone or in conjunction with any person,
to designate the persons who shall possess or enjoy the
Diba
sounds familiar.
contemplation of death.
Sounds
like
sa
transfers
in
General Power of
Appointment
Special Power of
Appointment
Take note again of the last clause of the paragraph as

exception, except in case of a bona fide sale for an
adequate and full consideration in money or money's worth.
Donor gives the donee the

power to appoint any
Donor gives the donee the

power to appoint a
Is this power of appointment allowed by law? Its found in

your Civil Code, fidiecommisary substitution. (nadiscuss niyo
ba yan? YESSIR) Check the Civil Code.
person as successor to enjoy

the property.
person within a limited group

to succeed in the
enjoyment of the property
Shall form part of the gross

estate
Shall not form part of the

gross estate
When you talk about the power of appointment it does not

really refer to the property of the decedent. Technically not
the property of the decedent. Ano mga situation dyan?
Sample situation:
Supposing si A died leaving a will in favor of B. He some sort
of designated B. Sabi niya, this property (5 has. land) will be
given to B but after 5 years this property will be given by B
to C.
Of these three, saan nagarefer ang power of appointment?
The power of appointment either by will or by deed, it is A
giving the power of Appointment to B.
Art. 863. A fideicommissary substitution by virtue of which

the fiduciary or first heir instituted is entrusted with the
obligation to preserve and to transmit to a second heir the
whole or part of the inheritance, shall be valid and shall take
effect, provided such substitution does not go beyond one
degree from the heir originally instituted, and provided
further, that the fiduciary or first heir and the second heir are
living at the time of the death of the testator.
(E) Proceeds of Life Insurance. - To the extent of the
amount receivable by the estate of the deceased, his
executor, or administrator, as insurance under policies taken
out by the decedent upon his own life, irrespective of
whether or not the insured retained the power of revocation,
or to the extent of the amount receivable by any beneficiary
designated in the policy of insurance, except when it is
expressly stipulated that the designation of the beneficiary is
irrevocable.
Now, in case B will die, will you include this property to his
Gross Estate? Its not much about A but its about B. Sa
kanya magrefer ang power of appointment. In this scenario
supposing B will die will you include this property in the
estate of B? NO. Because the power of appointment given to
B was specific it is as if the property is not really owned by B
the transfer is from A to C. Intermediary kasi,
What is the rule with respect to the proceeds of life

insurance? Will the proceeds of the life insurance received by
the decedents beneficiary be included in the Gross Estate of
the deceased? If the beneficiary is the Estate, what is the
effect?
What about if sabihin ni A I will give you this 5 has land and
you are free to give it to anyone else, as if owner na si B.
That is why you have to include this, yan yong sinasabi natin
ang general power of appointment.
Who should be the beneficiary of the insurance proceeds?
How should the property pass under this appointment?

1.
Its either by will example natin kanina, last will and

testament;
2.
Any deed executed in contemplation of death;
3.
by deed under which he has retained for his life or

any period not ascertainable without reference to
What are you referring when you talk about revocability? The
designation of the beneficiary.
Take note that the revocability of the insurance proceeds in

Income taxation is immaterial. Maalala niyo yan? Ano nga
ang rule natin with respect to the insurance proceeds?
Excluded from your Gross Income because that is a form of
indemnity. It doesnt really matter if revocable or irrevocable
basta di siya kasali sa Income.
But with respect to Estate Taxation the revocability becomes
material.
So what are the steps that you have to follow here when you
talk about proceeds of life insurance?
[Page 10 of 29]

1.
The first thing that you have to put in mind is that it

should be a Life insurance.
2.
Life Insurance was procured by the decedent upon

his own life.
3.
After determining those two factors the next step is

you determine who receives the life insurance
proceeds.
4.
After determining it whether it is revocable or

irrevocable.
If the transaction is not actually a bona-fide sale, so kulang

ang kwarta. You sell a tract of land worth 5M but you sell it
for only 1m. What will happen? Contemplation of death pa
rin siya. You have to include the difference between the
actual amount and the FMV as part of your Gross
Estate, kasi contemplation of death. More so if the sale is
actually fictitious you have the intention to avoid estate tax
process. Baligya baligaya lang ka as if, no parting of money
whatsoever. This is actually to prevent the Tax evasion
scheme that may be committed by the heirs to *** the tax
liability.
Going to the first point, if the beneficiary is the Estate itself

or the decedent itself you dont think of the revocability
anymore because it will always be included in your Gross
Estate.
(H) Capital of the Surviving Spouse. - The capital of the

surviving spouse of a decedent shall not, for the purpose of
this Chapter, be deemed a part of his or her gross estate.
If it is some other persons or persons other than the

Estate then you include those proceeds to the Gross Estate
if the designation of such beneficiary is revocable.
Beneficiary is the Estate = Always include in the GE.
If beneficiary is not the Estate then:
If revocable = Include in the GE.
If irrevocable = DO NOT include in the GE.
(F) Prior Interests. - Except as otherwise specifically

provided therein, Subsections (B), (C) and (E) of this Section
shall apply to the transfers, trusts, estates, interests, rights,
powers and relinquishment of powers, as severally
enumerated and described therein, whether made, created,
arising, existing, exercised or relinquished before or after the
effectivity of this Code.
Just read this provision, not really that important. One thing
to consider pala itong prior interest provision one of the very
rare occasion Congress will opt to apply the tax measure
retroactively.
(G) Transfers of Insufficient Consideration. - If any one
of the transfers, trusts, interests, rights or powers
enumerated and described in Subsections (B), (C) and (D) of
this Section is made, created, exercised or relinquished for a
consideration in money or money's worth, but is not a bona
fide sale for an adequate and full consideration in money or
money's worth, there shall be included in the gross estate
only the excess of the fair market value, at the time of death,
of the property otherwise to be included on account of such
transaction, over the value of the consideration received
therefor by the decedent.
What does this subsections B, C, D provided for in the codal?
This refers to transfers in contemplation of death, revocable
transfers and property passing under General power of
Appointment. All of which should NOT be bona-fide sale for
good consideration.
If you come to think about it, if you will really apply this
provision regarding this Capital of the Surviving Spouse it is
not actually the property per se. Later on we will try to
compute to determine the Gross Estate. You will realize that
you will have to put the entire property even if it is conjugal
or absolute community property. You have to put it entirely
in your Gross Estate because later on you will realize that
there will be special deduction share of the surviving
spouse. You will also have to take into considerations the
deductions like expenses. Where do you put it? Is it
exclusive? Diba magsharing man ang spouses sa expenses.
Later on I will try to teach you how to compute. For now
wag muna. That is basically our discussion pertaining to
Gross Estate.
Nov. 26, 2015 (ZM)
EXEMPTIONS
Before we begin with deductions lets jump first to section 87.
These are the exemption of certain acquisition and
transmissions.
SEC. 87. Exemption of Certain Acquisitions and
Transmissions. The following shall not be taxed:
xxx
The first question we have to ask here is to what type of
decedents are these exceptions applicable? Basically these
exemptions are applicable to all types of decedents,
residents, citizens or nonresidents. They can have these
types of exceptions.
Under this provision, you can see that there are four
exemptions.
(A) The merger of usufruct in the owner of the naked title;
Number one is self-explanatory. So it is possible that the
property will be transferred to that person but the beneficial
ownership will remain in some other person. If the beneficial
ownership is transferred to the titled owner then there is no
transfer to speak of in the first place.
[Page 11 of 29]

(B) The transmission or delivery of the inheritance or legacy

by the fiduciary heir or legatee to the fideicommissary;
Proceeds of life insurance policy. The beneficiaries

are persons other than the estate if irrevocable.
You have the transmission from the fiduciary to the

fideicomissary. It is under article 863.
Death benefits. (refer to Casasola for the listing)
Basically, the situation here is like this:
DEDUCTIONS
Decedent A executed a will and he transferred a

certain property in favor of B and then the transfer
is with the condition that B should preserve the
property in favor of C. Should B die, C will be the
owner of the property.
So the effects of the transaction are as follows:
For the transfer of A to B, the property will

be included in the gross estate of A.
For the transfer from B to C, the property

will be excluded from Bs gross estate.
Saan to na topic? Diba sa appointments?

(C) The transmission from the first heir, legatee or donee in
favor of another beneficiary, in accordance with the desire of
the predecessor; and
The third one is pretty much like number 2.
excluded from your gross estate.
This will be
In the first acquisition, the law deems it as if there is only

one transfer that is why you exclude this kind of transfer
from the gross estate of the deceased.
(D) All bequests, devises, legacies or transfers to social
welfare, cultural and charitable institutions, no part of the
net income of which insures to the benefit of any individual:
Provided, however, That not more than thirty percent (30%)
of the said bequests, devises, legacies or transfers shall be
used by such institutions for administration purposes.
Deductions here in estate taxation is pretty much easier to

remember because there is some sort of mnemonic.
There are two broad types of deductions from the gross
estate:
1.
Ordinary deductions
2.
Special deductions
Some books say that number 3 is the share of the surviving

spouse but I think this is more of an exclusion rather than a
deduction.
Under ordinary deductions you have (ELIT MTV) Expenses,
Losses, Indebtedness, Taxes, Mortgage unpaid, Transfers for
public use, Vanishing deductions
Special deductions is easier because you have (SMeRF)
Standard, Medical expenses, RA 4917 otherwise known as
the death benefits, Family home and then you have the
share of the surviving spouse.
SEC. 86. Computation of Net Estate. For the purpose of
the tax imposed in this Chapter, the value of the net estate
shall be determined:
(A) Deductions Allowed to the Estate of
Citizen or a Resident.
In the case of a citizen or resident of the
Philippines, by deducting from the value of the
gross estate
xxx
The fourth exclusion is pretty much the same as the

transfers in your income taxation if you remember.
But take note of the conditions or requirements so that these
transfers will be excluded from the gross estate.
Ordinary Deductions
1.
The institutions involved, social welfare, cultural and

charitable institutions
2.
No part of the institutions net income will inure to

the benefit of any individual
(1) Expenses, Losses, Indebtedness, and

taxes. Such amounts:
3.
Not more than 30% of the property transferred will

be part of the administration expenses of that
entity.
(a) For actual funeral expenses or in an amount

equal to 5% of the gross estate, whichever is lower,
but in no case to exceed P200,000;
Q: Is the listing in section 87 exclusive?

A: No because there are a lot of provisions scattered in the
NIRC. Example:
Share of the surviving spouse. It is not actually

deduction but you exclude that amount pertaining
to the spouse.
I. EXPENSES
(b) For judicial expenses of the testamentary or

intestate proceedings;
Regarding the AMOUNT. Sabi ng batas there are three
figures to think of for deduction. But to simplify things its
just:
[Page 12 of 29]

The actual funeral expenses
Or 5% of the gross estate
Or the P200,000 limit whichever is lower.
Regarding SUBSTANTIATION REQUIREMENTS. If you have

substantiation requirements in your income taxation, it is the
same with estate taxation because funeral expenses must
always be supported with documentary requirements,
receipts etc. that would show that these expenses were
actually incurred by the estate.
What do you mean by actual funeral expenses? Because
when you come to think of the strict interpretation of funeral
expenses, katung paglubong lang. mubalit kag lubnganan,
moseleyo, lapida, where you would bury the dead and
probably the coffin.
1.
Mourning apparel of the surviving spouse

and unmarried minor children of the
deceased. Diba usually naka suot tayo ng puti.
Take note that this is for the surviving spouse
and unmarried minor children.
2.
Expenses for the wake of the deceased

including food and drinks. Diba naga siopao,
candy, coffee, Milo.
3.
Publication charges for death notices like

obituary.
6.
Interment
and/or
cremation
fees.
Expenses after interment, so after nalibing you
cannot claim it anymore as part of your funeral
expenses especially tayong mga Pinoy mahilig
tayo mag 9 days, 40 days tapos anniversary. So
All other expenses incurred for the performance
of rites and ceremonies incident to
interment. Example yung honorarium sa pari.
What about crying ladies? (not answered)
Hindi siya deductible because it is not spent by you or

the estate because it is a donation.
Another problem pag may namatay is banks. They will

not allow you to withdraw more than 10,000 so
kailangan ng extrajudicial settlement of estate para
maka withdraw kayo. So ginagawa ng mga lawyers naga
partial distribution of estate with respect to the cash
lang. [talking about corporation law]
Judicial Expenses
When you talk about judicial expenses for purposes of
estate taxation it includes:
1.
Inventory-taking of assets. So kailangan ng

runner na mag collate the mga titulo, mag kuha ng
certified true copy. So you can actually put that in
your judicial expenses because the definition of
judicial expenses here is not strict. Hindi siya limited
to court proceedings. What if naga extrajudicial
settlement ng estate? Ano nalang yung judicial
expense mo, notaryo?
2.
Expenses for the administration of the estate

pending the settlement. Of course you have to
spend something for the preservation of the estate
of the deceased. Yung mga bahay at lupa niya,
businesses niya so you have to spend for the
preservation. Administration man yan siya.
3.
Expenses for the distribution of the estate

among the heirs. Ipadala mo yung sasakyan sa
Manila diba may freight, so you can include that as
a judicial expense. The revenue regulation would
say that these deductible items are expenses
incurred during the settlement of the estate but not
beyond the last day prescribed by law or the
Funeral Expenses
Under the REVENUE REGULATIONS NO. 2-2003, Section
6, we have the expanded meaning of funeral
expenses. Like what?
Cost of the burial plot like mausoleum. But if

there is a family estate only that portion which
pertains to burial lot of the deceased.
What about the food and drinks your relatives would

give you?
There are two types of expenses:
5.
7.
Does this include the medical expenses of the deceased

while he was still alive? Of course no, it is not funeral kasi
hindi pa nga patay and it is considered as a special
deduction. It has a separate treatment as a deduction.
Take note of the P200,000 limit. If it will exceed P200,000

you are not allowed to deduct it anymore simply because the
ceiling is provided by law and this cannot be even adjusted
by the revenue regulation because it is provided by law and
walang nakalagay na as recommended by the secretary of
finance.
Telecommunication expenses in informing

relatives. I think this is already obsolete. Diba
wala ng naga telegram ngayon.
hindi na kasali.
The revenue regulation will say that actual funeral

expenses are the expenses which are actually incurred in
connection with the interment or burial of the deceased. It
includes expenses for the wake.
Is it necessary that the funeral expenses must be actually

paid? Not necessarily as long as it is incurred. Diba usually
pag sudden death hindi prepared so utang utang man yan.
So its okay as long as you are able to substantiate it with
the proper documentation that you have incurred that
expenses during the wake of the deceased.
4.
[Page 13 of 29]

extension thereof so okay lang i-extend as long as

approved by the BIR.
The law says testamentary or intestate proceedings. As
Ive said even the law says it is just testamentary or
intestate proceeding, they are not really strict in the
interpretation of this because the principle is that the
judicial expenses are limited to such administration
expenses as are actually or necessarily incurred:
De Guzman vs. De Guzman-Carillo

GR No. L-29276 May 18 1978
Facts: This is more of an accounting case. Basically
someone died and his will was probated and then he left
behind a residential house. Sa accounting report may
sinabi kasi na expenses like construction of the fence
daw and then the bathroom renovation, the repair of the
terrace and also the interior.
1.
Administration of the assets of the estate
Issue: Are you allowed to deduct these expenses?
2.
Payment of debts
3.
Distribution of the remainder among those

entitled thereto.
Held: SC held yes of course because the administrator

has the duty to preserve the property. Prior to its
distribution to the heirs, the administrator has the duty
to preserve the property and theses expenses for
preservation are allowed as a deduction from the gross
estate.
What about attorneys fees?

CIR vs. CA et al GR No. 123206
March 22, 2000
Facts: This involves WWII veteran and then nabaliw
siya then kailangan niya ng guardianship tapos namatay
siya. Yung PNP nag apply sila accounting while the
decedents brother applied for guardianship pero wala
siyang na file na estate tax return. What the PNP did
was they advised the heirs na mag execute nalang ng
extrajudicial settlement of estate tapos kayo na bahala
magpatakbo ng bayad sa estate tax. Thereafter, sinunod
ng heirs, nag file na sila ng petition for the
administration of estate and then nagpadala na ng
notice si BIR calling for the assessment/ payment. One
of the heirs did not want to pay.
What are the other things allowed under judicial

expenses?
1.
Fees of the executor or administrator
2.
Attorneys fees
3.
Court fees
4.
Accountants fees
5.
Appraisers fees because there are times when

you need an appraiser
6.
Clerk hire
7.
Bookkeeper, probably kailangan mo ito to keep

track of all the businesses
8.
Technical distribution (?)
9.
Cost of storing and maintaining the property of

the estate
Issues:
1. Notarial fee na binayad for the extra judicial
settlement
2. Attorneys fees in the guardianship proceedings.
Held: SC said both expenses are allowed as part of
judicial expenses. With respect to the notarial fees, it is
sufficient that the expense be a necessary contribution
toward the settlement of the case. So even if hindi siya
dumaan sa korte, it falls under the definition of judicial
expenses.
What about brokers fees? Diba sometimes the deceased

has to many assets but hindi liquid meaning marami
siyang assets pero hindi siya cash. So paano mo bayaran
ang estate tax mo so ibenta mo yung ibang properties.
Mag benta ka kailangan mo ng broker bayaran mo yung
broker so that can be claimed as judicial expenses.
With respect to the guardianship proceedings, ito ang

mejo may problema ako sa court kasi the judicial
proceedings was done nung buhay pa siya. It was not
done nung patay na siya kasi bakit ka pa naman mag
ga-guardian. But the Sc said that the guardianship
proceedings was allowed as a judicial expense because
the guardianship proceeding was essential to the
distribution of the property.
What are the documentary requirements needed for the

judicial expenses?
The SC gave a good discussion about judicial expenses

as a deduction. Sabi dito the expenses must be essential
to the proper settlement of the estate, expenditures
incurred for the individual benefit of the heirs, devises
legatees are not deductible.
In general the revenue regulations would just require a

sworn statement of account issued and signed by the
creditor kumbaga. If there is a judicial proceeding you
have the submit the pertinent papers that were filed in
court kung meron ba talagang testate proceedings.
Probably statement of account from the lawyer or
accountant as long as it is a sworn statement. Its more
of a technical matter it is written in your book.
II. LOSSES
I divided the losses in to two:
[Page 14 of 29]

thereof in your gross estate. I-add na nimo sa imong

gross estate isali mo bago niyo i-minus.
Casualty losses
taxes. Such amounts: x x x
(e) x x x
There shall also be deducted losses incurred during
the settlement of the estate arising from fires,
storms, shipwreck, or other casualties, or from
robbery, theft or embezzlement, when such losses
are not compensated for by insurance or otherwise,
and if at the time of the filing of the return such
losses have not been claimed as a deduction for the
income tax purposes in an income tax return, and
provided that such losses were incurred not later
than the last day for the payment of the estate tax
as prescribed in Subsection (A) of Section 91.
What are the requirements of deductibility?

1.
Nasabi na natin kanina na you include is sa gross

estate because it is part of your asset.
2.
It must be shown that the debtors are incapable of

paying their indebtedness. So the principles in
income taxation is likewise applicable here with
respect to uncollectible. Hindi lang siya allowance
for bad debts but you must be able to prove that
indeed the amount is already uncollectible.
III. INDEBTEDNESS
What are the requisites of deductibility?

1.
It must be
settlement;
incurred
during
the
estate
2.
The losses arouse from fire, storm, shipwreck

or other casualties or from robbery, theft or
embezzlement;
3.
The losses are not compensated by insurance

or otherwise;
4.
The losses must not have been claimed as

deduction from income for income tax
purposes;
5.
Such losses were not incurred not later than

the last day for the payment of estate tax (its 6
months from the date of death).
So this is one of the exceptions. Diba sabi natin ang

value at the date of death supposedly but the law
specifically allows you to claim casualty losses. Siyempre
ang value of the property at the time it was lost ang
gamitin natin dito.
Claims against insolvents
Bakit ko sinali ang claims against insolvents? Anong ibig

sabihin ng claims against insolvents? Uncollectible mo
diba? You cannot collect it anymore therefore it is your
loss. Its the loss of the estate.
(c) For claims against the estate: Provided, That at

the time the indebtedness was incurred the debt
instrument was duly notarized and, if the loan was
contracted within three (3) years before the death
of the decedent, the administrator or executor shall
submit a statement showing the disposition of the
proceeds of the loan;
This is different from claims against insolvent kasi dito claims
against the estate, ang utangan kay ang estate.
What are the requirements of deductibility?
1.
It is a personal obligation of the deceased except of

course those which are incident to his death like
funeral expenses, medical expenses or other
expenses which fall under other category
2.
It must be contracted in good faith and for

adequate and full consideration
3.
It must be valid and enforceable
4.
It must not have prescribed
5.
It must not have been condoned by the creditor
Of course you have to look at the SUBSTANTIATION

REQUIREMENTS. It will differ if it is just for a simple loan or
purchases of goods.
1.
Notarized debt instrument;
(1) Expenses, Losses, Indebtedness, and taxes.

Such amounts: x x x
GR: If it is a simple loan it is required that the debt

instrument must have been notarized.
(d) For claims of the deceased against insolvent persons

where the value of decedent's interest therein is
included in the value of the gross estate;
EXC: if these loans were taken from financial

institutions where notarization of document is not
really a practice of that institution
2.
Meaning, you are allowed to deduct your unclaimables

or uncollectibles only if you have included the amount
Notarized certification from the creditor as to the

unpaid balance of the debt including the interest so
para siyang statement of account pero notarized;
[Page 15 of 29]

3.
It must also be shown that the creditor has financial

capacity to have given a loan to the deceased.
V. MORTGAGE UNPAID
Purchase of goods naman are pretty much the same.

1.
Pertinent documents relating to the purchase;
2.
Notarized certification of the creditor as to the

balance of the debt;
3.
The certified true copy of the latest audited balance

sheet of the creditor with a detailed schedule.
If you go back to your case, Dizon versus CTA one of the

issues here is the proper valuation. Sabi dito the condoned
debts can be claimed as deductions. But one of the
requirements of deductibility is that dapat ang debt hindi
daw condoned. What is the difference here? Why is it here in
Dizon hindi na-allow? So post death developments daw.
When you talk about the requirements of deductibility here
that the debt must not be condoned it means that the
condonation must have occurred prior to the death. So there
is no obligation enforceable to speak of dapat kasi na condon
siya bago namatay. Whereas dito sa dizon the condonation
happened after the decedent died. So balik ka sa date of
death rule natin lagi. At the date of death, the debt was still
existing.
IV. TAXES
Taxes is actually part of indebtedness. So meron siyang
unpaid taxes but you have to take note that when you talk
about taxes, this must have been accrued at the time of
death but not yet paid. Meron na siyang na-incur, dumaan
na ang expense pero hindi pa niya nabayaran.
(e) For unpaid mortgages upon, or any

indebtedness in respect to, property where the
value of decedent's interest therein, undiminished
by such mortgage or indebtedness, is included in
the value of the gross estate x x x
Unpaid mortgage is part of your indebtedness. Utang mo yan
pero naka sangla na yung property mo. (Bakit ko siya giseparate? So that we will have a sensible mnemonics. )
Requirements for deductibility of unpaid mortgage is the
same with indebtedness:
1.
Unpaid mortgage should have been included in the

gross estate
2.
Deduction is limited to the extent that they were

contracted bona fide and for an adequate and full
consideration in money or moneys worth
3.
In case of unpaid mortgage payable us being

claimed by the estate verification must be made as
to who was the beneficiary of the loan proceeds
because it has to be the estate or deceased
4.
In all instances the mortgage property to the extent

of the decedents interest should be part of the
gross estate
VI. TRANSFERS FOR PUBLIC USE
So thats why taxes which are not deductible from the gross
estate are the following:
1.
Income tax upon income received after the death of

the decedent, again, we do not have any interest in
post death developments.
2.
Property tax not accrued before his death kasi post

death development.
3.
Estate tax.
What are the requirements for deductibility?

1.
Accrued at the time of death
2.
Unpaid at the time of death and it does NOT

include:
a.
Income tax upon income received after the

death.
b.
Property taxes t accrued after his death.
c.
Estate tax.
(3) Transfers for Public Use. The amount of all

the bequests, legacies, devises or transfers to or for
the use of the Government of the Republic of the
Philippines, or any political subdivision thereof, for
exclusively public purposes.
These are bequests, legacies and devises to the government.
this is different from income taxation because transfers for
public use outright deduction siya so wala siyang limitation
unlike income taxation. Ang requirement lang is these
transfers must be for the government or any political
subdivision.
Requirements for deductibility:
1.
There must be a valid will
2.
The disposition takes effect after the death of the

decedent
3.
It is in favor of the government of the Philippines or

any of its political subdivisions
4.
It must be for public use
[Page 16 of 29]

5.
The value of the property must be included in the

gross estate
deduction but if it is more than one year but not

more than 2 years so it is already 80%, pag more
than 2 but not more than 3, 60% so basically 20%
each year. Pag more than 5 years you are not
anymore allowed to claim further deductions.
VII. VANISHING DEDUCTIONS

Lets go to the nature of vanishing deductions. It is a
diminishing deduction allowed from the gross estate of the
decedent on the property left behind by the decedent which
he had acquired previously by inheritance or donation.
(2) Property Previously Taxed.
An amount equal to the value specified below of
any property forming a part of the gross estate
situated in the Philippines of any person who died
within 5 YEARS prior to the death of the decedent,
or transferred to the decedent by gift within 5
YEARS prior to his death, where such property can
be identified as having been received by the
decedent from the donor by gift, or from such prior
decedent by gift, bequest, devise or inheritance, or
which can be identified as having been acquired in
exchange for property so received: x x x
So there is a property received by the decedent, syempre
kung natanggap niya via succession or via donation it has
already been previously passed. Merong corresponding
transfer tax it is either donors tax or estate tax. Pag tanggap
ko ng property na yun what if namatay ako agad? So here I
received a piece of land and because of happiness I died. So
kanino siya mapunta, sa heirs ko. So it is another set of
transfer tax.
So thats why the law says kailangan na meron tayong
vanishing deductions depending on the holding period of
the property. That is why one of the requirements there is
that the decedent must have died within the 5-year period
from the date it was received by the decedent. So parang
ganyan lang ang concept.
What is the purpose or the reason behind the vanishing
deduction?
The reason is this is in order to mitigate the harshness of
successive taxation of the same property. So meaning bago
ka lang nag bayad sa transfer na iyan and then magbabayad
ka nanaman ulit.
What are the requisites for deductibility?

1.
The property involved must have been transferred

by a prior decedent to the present decedent either
be succession or donation (gratuitous transfer).
2.
The second decedent must have dies within 5 years

from the time he received such property.
3.
The property must have formed part of the gross

estate or gross gift of the prior decedent.
So meaning prior transfer taxes must have been
paid.
4.
The property subject to the vanishing deduction

must be situated in the Philippines.
5.
The vanishing deduction over the property must not

have been claimed by the previous estate involving
the same property.
So basically if this property has been previously
subjected to a vanishing deduction, pag tanggap ng
decedent namatay siya ngayon, he cannot claim
anymore this vanishing deduction.
Lets go now to nonresidents.

shall be determined:
(B) Deductions Allowed to Nonresident
Estates. - In the case of a nonresident not a citizen
of the Philippines, by deducting from the value of
that part of his gross estate which at the time of his
death is situated in the Philippines: x x x
Nonresident alien decedents, they are allowed the same
deductions as resident citizen except they cannot claim
any special deductions. So hanggang ELITMTV lang sila.
The non-resident alien decedents must still declare to the
BIR their gross estate situated outside the Philippines even if
it is already excluded from taxable gross estate.
Special Deductions
I. STANDARD DEDUCTION
Standard deduction automatic 1 Million. Pag namatay ka
automatic na may 1M ka agad that is a standard deduction
so you dont have to prove anything, there is no
substantiation requirement.
What if ang gross estate ko is 900,000 lang? Wala kang
bayaran kasi meron nang standard automatic deduction na 1
Million.
The 5-year period has something to do with the

amount of deduction or vanishing deduction that
can be claimed. Pag namatay siya within 1 year you
are allowed to claim 100% of the vanishing
[Page 17 of 29]

II. MEDICAL EXPENSES

(6) Medical Expenses incurred by the decedent
within 1 year prior to his death which shall be duly
substantiated with receipts: Provided, That in no
case shall the deductible medical expenses exceed
P500,000.
2.
Total value of the family home must be included as

part of the gross estate of the decedent;
3.
The allowable deduction must be an amount

equivalent to the current fair market value of the
family home or to the extent of the decedents
interest whichever is lower but not exceeding 1
Million.
What if conjugal or community property ang family home? Of

course mag divided-by-2 ka pa.
Requisites for deductibility:

1.
The medical expenses must have been incurred 1

year prior to the death of the decedent
2.
the amount must not exceed P500,000
3.
The expenses must be supported by receipts and

other documentary requirements
III. AMOUNTS RECEIVED BY THE HEIRS UNDER RA

4917
(7) Any amount received by the heirs from the
decedent-EE as a consequence of the death of the
decedent-EE in accordance with RA No. 4917:
Provided, That such amount is included in the gross

estate of the decedent.
This is tax exempt retirement or death benefits. Although the

requirement there is pag may natanggap ka na death
benefits si estate usually you include it first in the gross
estate before you may claim this as a deduction.
IV. FAMILY HOME
Share in the Conjugal Partnership

There is nothing much here. All that is being said there is if
the property is conjugal or community in nature, you must
exclude this from your gross estate because this is not a
property of the deceased to begin with. Remember that the
tax base for your estate taxation is the net estate of the
deceased.
shall be determined: x x x
(C) The net share of the surviving spouse in the
conjugal partnership property as diminished by the
obligations properly chargeable to such property
shall, for the purpose of this Section, be deducted
from the net estate of the decedent.
Of course naman when you talk about conjugal or
community property it is not limited only to the properties of
the deceased. What about the obligation of the deceased?
Diba presumed man na conjugal or community ang rights
and obligations? I think that is also the presumption in the
Family Code of the Philippines. It is still also applicable here
in our estate taxation.
December 01, 2015 (KDC)

(4) An amount equivalent to the current fair market
value of the decedent's family home:
Provided, however, That if the said current fair

market value exceeds P1,000,000, the excess shall
be subject to estate tax.
As a sine qua non condition for the exemption or

deduction, said family home must have been the
decedent's family home as certified by the barangay
captain of the locality.
Tonight, lets deal with numbers muna. But as what I have

told you before, its not about the numbers. Its about the
process kung include ba sya sa pagcompute ng gross
estate, deduction ba sya or an exclusion. This exercise will
help you in the identification process. Kung sakaling mabaliw
si Dean and maglagay sya ng napakaraming accounts, you
just have to identify if its part of the gross estate, conjugal
property ba sya or absolute community, or exclusive property
ba sya ng decedent. If it pertains to deductions, then
whether or not it is an ordinary deduction (OD) or special
deduction (SD).
Requirements for deductibility:

1.
Actual residential home as duly certified by the

Barangay Captain;
[Page 18 of 29]

Problem 2
Mr. Antukin, married, Filipino, died in his sleep. He left the
following assets:
a) Commercial building inherited from his
parents during marriage
P 4, 000, 000
b) Accumulated income
commercial building
the
P 3, 000, 000
c) Farm land brought into marriage by

his wife
P 5, 000, 000
d) Personal properties acquired during

marriage
P 5, 000, 000
from
Conjugal Property
P 8, 000, 000
Exclusive Property
decedent)
(of
the
Total Gross Estate
P 4, 000, 000
P 12, 000, 000
How much is the Net Estate? You immediately think of the

deductions.
Basic Formula:
Gross Estate
(Less) Deductions
Ordinary Deductions
Special Deductions
a) Under the conjugal partnership of gains, how

much is the gross estate of Mr. Antukin?
This problem, obviously, would entail your knowledge
of the Family Code and at the same time, apply it with
taxation. Lets review.
Share of the surviving spouse______

NET ESTATE
Sa mga accountants, you might find it weird.
What is CPG? How will you distinguish it with ACP?

I have a trick before (caveat: gawa gawa lang daw ni
Sir. Better check the codal daw), pag sinabi nating
CPG, kaya sya tinatawag na conjugal partnership of
gains dahil most likely ang conjugal property is
comprised of gains lang. Parang the exclusive
property before marriage remains as is pero yung
gains, share na natin yun.
Total
Gross Estate
CPG
P8, 000, 000
Exclusive
P4,000, 000
P12,000,000
Deductions
OD
What about ACP?
SD
General rule, property mo, property ko, property na

nating dalawa (para sweet), save for few exceptions.
Standard
P1,000,000
Share of the
surviving
spouse
P4, 000,000
Now, lets apply that concept here.

Commercial building
inherited from his
parents
during
marriage
Exclusive Property
of Mr. Antukin
Accumulated income
from the commercial
building
Conjugal
Farm land brought

into marriage by his
wife
Exclusive Property
of the wife
excluded from the
gross estate
Personal
acquired
marriage
Conjugal
properties
during
P 4, 000, 000
(8M/2)
NET
ESTATE
P 3, 000, 000
(CPG/2)
P7,000,000
This is a very simple problem, addition, subtraction, division

lang. The problem is paano nyo i-identify kung conjugal ba
sya or exclusive.
Now, how much is the estate tax?
First thing you have to do is you look at the table and
hanapin nyo saang bracket sya na-belong.
P 5, 000, 000
SEC. 84. Rates of Estate Tax. There shall be levied,

assessed, collected and paid upon the transfer of the net
estate as determined in accordance with Sections 85 and 86 of
[Page 19 of 29]

every decedent, whether resident or nonresident of the

Philippines, a tax based on the value of such net estate, as
computed in accordance with the following schedule:
If the net estate is:
Over
Deductions
OD
SD
But Not
Over
The Tax
shall be
Plus
Of Excess
Over
P 200,000
Exempt
P 200,000
550,000
5%
P 200,000
500,000
2,000,000
P 15,000
8%
500,000
2,000,000
5,000,000
135,000
11%
2,000,000
5,000,000
10,000,000
465,000
15%
5,000,000
10,000,000
And Over
1,215,000
20%
10,000,000
Standard
P1,000,000
Share of the
Surviving
Spouse
P5,000,000
NET
ESTATE
P11,000,000
(P10,000,000/2)
Computation:
P 10, 000, 000
P 1, 215, 000
P 200, 000
P 1, 415, 000
(Excess of 10M)
So, it belongs to the over P5M but not over P10M bracket
kasi yung Net Estate is P7M.
Computation:
P5, 000, 000
P465, 000
P300, 000
Estate Tax
P765, 000
Mang Jose is single, but head of the family, Filipino, and a

resident of Davao City. He died intestate on 1 June 2014. He
left the following properties and interests:
Process:
they
1.
Identify the properties whether

conjugal/absolute or exclusive;
2.
Compute for deductions (OD/SD/Share of the

surviving spouse); and
3.
Compute for the estate tax.
are
b) Under the absolute community of property

relation, how much is the gross estate, net
estate, and estate tax?
ACP
Gross
Estate
P10,
000
000,
(Farm land
and
personal
properties)
Exclusive
P7,000,000
(Commerci
al building
and rents)
Estate Tax
Problem 1
(Excess of 5M)
P2,000,000 (15%)
P 1, 000, 000 (20%)
Total
P17,000,000
House and Lot (Family Home)
P800,000
Vacation house in Japan
P1,500,000
Agricultural land in General Santos City

which he inherited from his father
P2,000,000
Car used by his brother
P500,000
Life insurance proceeds with his estate as

the revocable beneficiary
P1,000,000
Household furniture and appliances
P1,000,000
Claim against a cousin who has assets of

P10,000 and liabilities of P100,000
P100, 000
Shares of stocks in ABC, Inc., a domestic

corporation
P100,000
He also listed the following expenses and charges on the

estate:
[Page 20 of 29]

Funeral Expense
P250,000
Taxes
None
Legal fees for estate settlement
P500,000
Unpaid Mortgage
None
Medical expenses for last illness
P60,000
Transfers for Public Use
None
Claims against the estate
P300,000
Vanishing Deductions
None
TOTAL DEDUCTIONS
P 1,000,000
This time, wala tayong problema whether conjugal or

exclusive ang properties kasi single ang decedent.
c)
a) How much is the gross estate?
How much is the total Special Deductions?
P7,000,000 (just add up all the properties and

interests).
Standard Deduction
P1,000,000
As to the insurance, the estate, being the

beneficiary, the proceeds automatically form part of
the GE since the revocability is of no moment if the
beneficiary is the estate.
Medical Expenses
P60,000
RA 4917
None
Family Home
P800,000
TOTAL DEDUCTIONS
P1,860,000
As to the claim against the cousin, it is considered as

a claim against an insolvent but before you can
deduct it, you have to include it in the computation
of the GE first.
b) How much is the total Ordinary Deductions?
Ayaw
gyud ninyo ug kalimti ang Standard

Deduction. This has saved my life.*chika about his
palahubog classmate pero top 4 sa Bar na
nakalimtan ang standard deduction during their
crazy tax exam*
(Hapit nakalimtan ni Sir ang family home if not for
Shelu, the wonder Tax 2 specialist. Abapo 1;
Donalvo 0)
Expenses
Funeral Expenses
P200,000
Judicial Expenses
P500,000
d) How much is the net estate?

Gross Estate
P7,000,000
OD
P1,000,000
SD
P1,860,000
Net Estate
P4, 140, 000
(Less) Deductions
Losses
Casualty Losses
None.
Claims against insolvent
Supposedly,
meron.
Yung kay cousin na
P100,000.
e) How much is the total estate tax due?
But can you claim it as

a deduction?
NO because one of the
requisites
is
not
present
(the
debt
instrument must be
notarized).
In
this
case, it was not
notarized.
Indebtedness
P300,000
P2,000,000
P135,000
(Excess of 2M)
2,140,000 (11%)=
Estate Tax Due
P235, 400
P370,400
Pang accountant ito na problem pero this is also
applicable to you, guys especially when you take up

the requirements. Kung merong requirements for
deductibility, make sure to always think about them
[Page 21 of 29]

para hindi kayo mawala. If the problem is silent,

treat the item as if it was not complied with para
hindi kayo maipit. Total, essay naman to eh, wala
namang numbers. Practice problem niyo ang
Problem 3. Kulitin nyo si Abapo, Azze, Cuabo,
Ceriales at yung iba pang accountants dito.
Additional provisions:
CHAPTER 4
CONJUGAL PARTNERSHIP OF GAINS
SECTION 2. - Exclusive Property of Each Spouse
Art. 148. The following shall be the exclusive property 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
lucrative title;
(3) That which is acquired by right of redemption or by
exchange with other property belonging to only one of the
spouses;
(4) That which is purchased with exclusive money of the wife
or of the husband.
SECTION 3. - Conjugal Partnership Property
Art. 153. The following are conjugal partnership property:
(1) That which is acquired by onerous title during the
marriage at the expense of the common fund, whether the
acquisition be for the partnership, or for only one of the
spouses;
(2) That which is obtained by the industry, or work, or as
salary of the spouses, or of either of them;
(3) The fruits, rents or interests received or due during the
marriage, coming from the common property or from the
exclusive property of each spouse.
Art. 154. That share of the hidden treasure which the law
awards to the finder or the proprietor belongs to the
conjugal partnership. (n)
Art. 155. Things acquired by occupation, such as fishing and
hunting, pertain to the conjugal partnership of gains. (n)
Art. 156. Whenever an amount or credit payable in a certain
number of years belongs to one of the spouses, the sums
which may be collected by installments due during the
marriage shall not pertain to the conjugal partnership, but
shall be considered capital of the husband or of the wife, as
the credit may belong to one or the other spouse.
Art. 157. The right to an annuity, whether perpetual or of
life, and the right of usufruct, belonging to one of the
spouses shall form a part of his or her separate property, but
the fruits, pensions and interests due during the marriage
shall belong to the partnership.
The usufruct which the spouses have over the property of
their children, though of another marriage, shall be included

in this provision.
Art. 158. Improvements, whether for utility or adornment,
made on the separate property of the spouses through
advancements from the partnership or through the industry
of either the husband or the wife, belong to the conjugal
partnership.
Buildings constructed, at the expense of the partnership,
during the marriage on land belonging to one of the spouses,
also pertain to the partnership, but the value of the land shall
be reimbursed to the spouse who owns the same.
Art. 159. Whenever the paraphernal property or the
husband's capital consists, in whole or in part, of livestock
existing upon the dissolution of the partnership, the number
of animals exceeding that brought to the marriage shall be
deemed to be of the conjugal partnership.
CHAPTER 6
SYSTEM OF ABSOLUTE COMMUNITY
Art. 201. The following shall be excluded from the
community:
(1) Property acquired by gratuitous title by either spouse,
when it is provided by the donor or testator that it shall not
become a part of the community;
(2) Property inherited by either husband or wife through the
death of a child by a former marriage, there being brothers
or sisters of the full blood of the deceased child;
(3) A portion of the property of either spouse equivalent to
the presumptive legitime of the children by a former
marriage;
(4) Personal belongings of either spouse.
However, all the fruits and income of the foregoing classes of
property shall be included in the community.
Art. 202. Ante-nuptial debts of either spouse shall not be
paid from the community, unless the same have redounded
to the benefit of the family.
Art. 203. Debts contracted by both spouses or by one of
them with the consent of the other shall be paid from the
community. If the common property is insufficient to cover
common debts, the same may be enforced against the
separate property of the spouses, who shall be equally liable.
Art. 204. Debts contracted by either spouse without the
consent of the other shall be chargeable against the
community to the extent that the family may have been
benefited thereby.
Dec. 5, 2015 (AS)

[Page 22 of 29]

2.
shall be determined: x x x
(E) Tax Credit for Estate Taxes paid to a
Foreign Country.
(1) In General. The tax imposed by this Title shall
be credited with the amounts of any estate tax
imposed by the authority of a foreign country.
(2) Limitations on Credit. The amount of the credit
taken under this Section shall be subject to each of
the following limitations:
(a) The amount of the credit in respect to
the tax paid to any country shall not
exceed the same proportion of the tax
against which such credit is taken, which
the decedent's net estate situated within
such country taxable under this Title bears
to his entire net estate; and
(b) The total amount of the credit shall not
exceed the same proportion of the tax
against which such credit is taken, which
the decedent's net estate situated outside
the Philippines taxable under this Title
bears to his entire net estate.
Section 86 pertains to the tax credit for estate taxes paid to
foreign country. This is quite similar with your Income
Taxation. The rule is estate taxes paid in the Philippines shall
be credited with any amount imposed by authority of a
foreign country. There are two limitations you have to
observe:
1.
Per country basis
2.
Overall basis
WHO files this Notice of Death?

The law provides that its either the:
Heir
Executors/ Administrators
WHERE to do you send the Notice of death?

You give this to the Regional District Office (RDO)
having jurisdiction over the residence of the
deceased.
What if the decedent is engaged in business?
Upon submission of the notice of death, the
administrator or heirs are required to submit a shortterm income tax return of the deceased covering
January 1 until the date of his death.
When do you submit this short-term income tax return?
You submit it within 60 days from the date of
death. But the period to file may be extended within a
period of 6 months but not beyond April 15
following the year of death whichever comes earlier.
After the payment and filing of this short-term income
tax return, the TIN of decedent may now be canceled
but this is still subject to the investigation of BIR later on
for unpaid taxes.
WHEN will you give the notice of death?
There are two periods to consider:
Dont mind the computation.
ADMINISTRATIVE MATTERS
The first thing that you have to do if someone dies is to send
a notice of death.
SEC. 89. Notice of Death to be Filed. In all cases of
transfers subject to tax, or where, though exempt from tax,
the gross value of the estate exceeds P20,000, the executor,
administrator or any of the legal heirs, as the case may be,
within 2 months after the decedent's death, or within a like
period after qualifying as such executor or administrator,
shall give a written notice thereof to the Commissioner.
There is no formal requirement. Just send a letter to the
Commissioner of the BIR informing them that someone has
already died.
Purposes of Notice of Death:
1.
To issue a new TIN for the estate Remember

that in taxation parlance an estate is considered as
a taxable entity.
To inform the BIR of the death so as to cancel

the decedents TIN.
Two months from the DATE OF DEATH or
Two months after you have been OFFICIALLY

DESIGNATED as an executor or administrator.
SEC. 90. Estate Tax Returns.

(A) Requirements. In all cases of transfers subject to the
tax imposed herein, or where, though exempt from tax, the
gross value of the estate exceeds P200,000, or 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 Bureau of Internal Revenue is
required as a condition precedent for the transfer of
ownership thereof in the name of the transferee, the
executor, or the administrator, or any of the legal heirs, as
the case may be, shall file a return under oath in duplicate,
setting forth:
(1) The value of the gross estate of the decedent at the time
of his death, or in case of a nonresident, not a citizen of the
Philippines, of that part of his gross estate situated in the
Philippines;
(2) The deductions allowed from gross estate in determining
[Page 23 of 29]

c)
the estate as defined in Section 86; and

(3) Such part of such information as may at the time be
ascertainable and such supplemental data as may be
necessary to establish the correct taxes.
Provided, however, That estate tax returns showing a gross
value exceeding P2,000,000 shall be supported with a

statement duly certified to by a Certified Public Accountant
containing the following:
(a) Itemized assets of the decedent with their corresponding
gross value at the time of his death, or in the case of a
nonresident, not a citizen of the Philippines, of that part of
his gross estate situated in the Philippines;
(b) Itemized deductions from gross estate allowed in Section
86; and
(c) The amount of tax due whether paid or still due and
outstanding.
(B) Time for filing. For the purpose of determining the
estate tax provided for in Section 84 of this Code, the estate
tax return required under the preceding Subsection (A) shall
be filed within 6 months from the decedent's death.
A certified copy of the schedule of partition and the order of
the court approving the same shall be furnished the
Commissioner within 30 the promulgation of such order.
WHO files the ETR?
Heir
Executors/Administrators
If none of them files, the Commissioner
WHEN is it filed?
Time for filing is within 6 months from the time of
death.
You are given 6 months to collate all the properties of
the deceased and to claim all sorts of exemption allowed
by law.
Extension: Only for 30 days.
You have to file the motion for extension during within
the 6-month period. The ground is for meritorious
cases like magulo ang estate or masyadong madaming
questionable properties.
WHERE do you file your estate tax return?
For citizens and resident aliens:
(C) Extension of Time. The Commissioner shall have

authority to grant, in meritorious cases, a reasonable
extension not exceeding 30 days for filing the return.
(D) Place of Filing. Except in cases where the
Commissioner otherwise permits, the return required under
Subsection (A) shall be filed with an authorized agent bank,
or Revenue District Officer, Collection Officer, or duly
authorized Treasurer of the city or municipality in which the
decedent was domiciled at the time of his death or if there
be no legal residence in the Philippines, with the Office of the
Commissioner.
When is it necessary to file an estate tax return?
Under the NIRC, you are required to file your ETRs:
1.
In all transfers subject to estate tax;
2.
Where even if it is exempt from estate tax, the

gross value of the estate exceeds 2M;
3.
Regardless of its value, if the estate consists of

registered or registrable properties like real
properties or motor vehicles.
If your gross estate exceeds 2M, you are now required

to file with along your ETR a certificate from a CPA
which contains:
Net estate and tax due whether paid or not.
Authorized agent banks
RDO
Collection officers of BIR
Duly authorized treasurer of the city of

municipality where the decedent resided when
he died
In any other place where the CIR permits the

ETR to be filed
For nonresident aliens:
Office of the Commisioner
RDO where the executor or administrator is

residing
WHEN do you PAY your estate tax?

The estate tax imposed by Sec 84 shall be paid at the
time the return is filed by the executor. In other words it
is still PAY-AS-YOU-FILE system. The estate tax shall
be paid within 6 months after the death of the decedent
at the time the ETR is filed.
Can this be extended? YES. The law allows extension as
long as you ask for it within 6 months from the death.
How long can it be extended?
1.
Not exceeding 5 years if the estate is settled

judicially.
Not exceeding 2 years if the estate is settled
extrajudicially.
a)
The itemized value of the properties comprising

the value of the gross estate;
2.
b)
Itemized deductions claimed by estate; and
What are the grounds for extension of PAYMENT?
[Page 24 of 29]

If the payment on due date of the estate tax or any part

thereof will impose undue hardship upon the estate of
the heirs
Undue hardship so mahirapan sila magbayad. When
there is so much property and buildings and the estate
is not liquid so kailangan ibenta muna yun para may
pang-bayad ng tax. That is why extension is allowed.
What are the effects if you are granted an extension?
1.
You have to pay the total estate tax due within

the extended period otherwise the BIR will
impose surcharges of 25% plus interest;
2.
The running of the prescription period to asses

tax deficiencies will be tolled;
3.
The CIR may require the executor, administrator

or heir to furnish a bond to ensure the payment of
taxes; and
4.
Even if you are granted an extension, interest will

still be imposed. Walang surcharge kasi wala pa
namang deficiency.
What are the grounds for the denial of an extension?

1.
If it was filed out of time;
2.
Where taxes assessed are by reason of negligence,

intentional disregard of the rules, or fraud on the
part of the taxpayer.
FERDINAND R. MARCOS II vs. CA, THE

COMMISSIONER OF THE BIR and HERMINIA D. DE
GUZMAN
GR 120880, June 5, 1997
One of the issues discussed in this case is ayaw niya
magbayad ng tax kasi wala pa daw court order approving the
probate and also the settlement of the estate. Sabi ni Marcos
I dont even know the properties yet how can I pay the
estate tax?
Issue: Is the court approval necessary before the taxes may
be collected?
Ruling: No. You have to pay the estate tax even if there is
no court approval. What are the reasons?
1. There is nothing in the Tax Code which provides that there
must be a court approval of the settlement or probate of the
will before estate taxes may be collected;
2. If you look at the NIRC, there is a provision that mandates
the court to forbid the executor or administrator from
distributing the estate prior to the payment of the estate
taxes
Now you might think na tama naman yung point ni Marcos
kasi how will you determine the properties comprising the
estate pending the distribution? Hassle? Yes but there are
remedies like you can file for a refund. So may plausible
remedy pa rin.
From full text: The nature of the process of estate tax

collection has been described as follows:
"Strictly speaking, the assessment of an inheritance
tax does not directly involve the administration of a
decedent's estate, although it may be viewed as an
incident to the complete settlement of an estate,
and, under some statutes, it is made the duty of the
probate court to make the amount of the
inheritance tax a part of the final decree of
distribution of the estate. It is not against the
property of decedent, nor is it a claim against the
estate as such, but it is against the interest or
property right which the heir, legatee, devisee, etc.,
has in the property formerly held by decedent.
Further, under some statutes, it has been held that
it is not a suit or controversy between the parties,
nor is it an adversary proceeding between the state
and the person who owes the tax on the
inheritance. However, under other statutes it has
been held that the hearing and determination of the
cash value of the assets and the determination of
the tax are adversary proceedings. The proceeding
has been held to be necessarily a proceeding in
rem.
In the Philippine experience, the enforcement and
collection of estate tax, is executive in character, as
the legislature has seen it fit to ascribe this task to
the Bureau of Internal Revenue.
"Taxes assessed against the estate of a deceased
person, after administration is opened, need not be
submitted to the committee on claims in the
ordinary course of administration. In the exercise of
its control over the administrator, the court may
direct the payment of such taxes upon motion
showing that the taxes have been assessed against
the estate."
Such liberal treatment of internal revenue taxes in
the probate proceedings extends so far, even to
allowing the enforcement of tax obligations against
the heirs of the decedent, even after distribution of
the estate's properties.
"Claims for taxes, whether assessed before or after
the death of the deceased, can be collected from
the heirs even after the distribution of the
properties of the decedent. They are exempted
from the application of the statute of non-claims.
The heirs shall be liable therefor, in proportion to
their share in the inheritance."
"Thus, the Government has two ways of collecting
the taxes in question. One, by going after all the
heirs and collecting from each one of them the
amount of the tax proportionate to the inheritance
received. Another remedy, pursuant to the lien
created by Section 315 of the Tax Code upon all
property and rights to property belong to the
taxpayer for unpaid income tax, is by subjecting
[Page 25 of 29]

said property of the estate which is in the hands of

an heir or transferee to the payment of the tax due
the estate. (Commissioner of Internal Revenue vs.
Pineda, 21 SCRA 105, September 15, 1967.)
From the foregoing, it is discernible that the approval of the
court, sitting in probate, or as a settlement tribunal over the
deceased is not a mandatory requirement in the collection of
estate taxes. It cannot therefore be argued that the Tax
Bureau erred in proceeding with the levying and sale of the
properties allegedly owned by the late President, on the
ground that it was required to seek first the probate court's
sanction. There is nothing in the Tax Code, and in the
pertinent remedial laws that implies the necessity of the
probate or estate settlement court's approval of the state's
claim for estate taxes, before the same can be enforced and
collected.
On the contrary, under Section 87 of the NIRC, it is the
probate or settlement court which is bidden not to authorize
the executor or judicial administrator of the decedent's estate
to deliver any distributive share to any party interested in the
estate, unless it is shown a Certification by the Commissioner
of Internal Revenue that the estate taxes have been paid.
This provision disproves the petitioner's contention that it is
the probate court which approves the assessment and
collection of the estate tax.
WHO has the primary responsibility of paying the estate tax?
Executor or administrator
If there is more than one, they will be

SEVERALLY liable
What about the heirs? They are SUBSIDIARILY liable but

only to the extent of their share in the inheritance.
Donors Tax
An oral donation requires the simultaneous delivery of the

thing or of the document representing the right donated.
If the value of the personal property donated exceeds five
thousand pesos, the donation and the acceptance shall be
made in writing. Otherwise, the donation shall be void.
Donation of an immovable property:
Article 749. In order that the donation of an immovable
may be valid, it must be made in a public document,
specifying therein the property donated and the value of the
charges which the donee must satisfy.
The acceptance may be made in the same deed of donation
or in a separate public document, but it shall not take effect
unless it is done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the
donor shall be notified thereof in an authentic form, and this
step shall be noted in both instruments.
When is a donation perfected? A donation is perfected
upon knowledge of the donor of the donees acceptance.
When is a donation completed? A donation is completed
upon actual or constructive delivery of the property.
Donors tax will only apply when a donation is COMPLETE
and VALID.
What happens if nag-donate ka ngayon tapos the court will
declare the donation void unya nakabayad na ka ug tax?
You can actually claim a refund from BIR. Because the law
requires that for a donation to be subject to donors tax it
must be both complete and valid.
Elements of a valid donation:
1.
The donor must have capacity to donate;
2.
He must have intent to donate;
Donors Tax An excise tax imposed on the privilege of

transferring property gratuitously. It is an excise tax and not
a tax on property because what is being taxed is the
privilege of transferring property.
3.
The donee must accept the gift;
4.
The donation must be in writing and fully executed;

and
What is the scope of donors taxation?
5.
There must be actual or constructive delivery
What about onerous donations?
Donations inter vivos;
Exchanges or transfers of property for inadequate

consideration.
When do you apply donors tax on a certain gratuitous

transfer during the lifetime of the donor? When there is a
completed gift.
What are the requirements for validity of a donation?
Donation of a movable property (Civil Code):
SEC. 100. Transfer for Less Than Adequate and full

Consideration. Where property, other than real property
referred to in Section 24(D), is transferred for less than an
adequate and full consideration in money or money's worth,
then the amount by which the fair market value of the
property exceeded the value of the consideration shall, for
the purpose of the tax imposed by this Chapter, be deemed
a gift, and shall be included in computing the amount of
gifts made during the calendar year.
Article 748. The donation of a movable may be made

orally or in writing.
[Page 26 of 29]

Problem: Suppose I have a residential house and lot and its

FMV is 10 million but I sold it to my friend for 2 million. Is
there a taxable gift?
There is no taxable gift. The sale of the residential
house is subject to capital gains tax since it is a
capital asset.
What if the property is a warehouse?
The excess of FMV from the selling price which is 8
million is now subject to donors tax.
What about condonation? Kunwari may utang ka sa akin
tapos sabihin ko na wag mo nalang bayaran. Will that be
subject to donors tax?
If services have been rendered as consideration for
the condonation, the condoned debt is taxable
income subject to income tax on the part of the
debtor
If there are no services rendered, it can be subject
to donors tax.
What if magkapatid tayo and our parents died tapos binigay
ko sayo ang share ko sa property?
If you specifically renounce the inheritance, it is
now subject to donors tax. But if the renunciation is
general, there will be no donors tax due on the
transfer.
What about donations propter nuptias? Are they taxable?
They are not taxable if they comply with the
following requirements: (from Casasola p. 738)
1.
The gifts must be made on account of marriage

before the celebration or within 1 year
thereafter;
2.
The donor/s must be the parent/s of the done

who is/are residents of the Philippines;
3.
The donee must be a legitimate, recognized

natural or legally adopted child;
4.
The amount of the donation exempted is to

the extent of the first 10,000. In case of real
property since the real property is either
conjugal or absolute community property, each
spouse is deemed to have made separate
donation of of the value of the property.
Suppose she called me and said that she accepted the

donation. Is there a taxable donation?
No because the acceptance must also be in a public
instrument.
Supposing she is smart so she had the acceptance notarized
and she mailed it back to me but I died while it is in transit?
There is still no taxable donation because the donor
had no knowledge of the donees acceptance.
How do you define gross gift?
Gross Gift It is all property, real or personal, tangible or
intangible, that was given to the donee by way of gift
without the benefit of any deduction.
Fomula:
Gross Gift
xx
(Less) Deduction
xx
= Net Gift
The net gift is the tax base.

Factors to consider in computing the gross gift:
Nationality and residence of donor. The rule is the same
as estate taxation. The gross gift includes real and personal
properties whether tangible or intangible wherever situated,
If the donor is a NRA at the time of donation, only the
properties in the Philippines shall form part of the gross gift.
Location of the property.
Then, the valuation of the gross gift.
Cash gift
Other than cash
SEC. 102. Valuation of Gifts Made in Property. If the

gift is made in property, the fair market value thereof at the
time of the gift shall be considered the amount of the gift.
In case of real property, the provisions of Section 88(B)
shall apply to the valuation thereof.
Then you have deductions, mnemonics is DEDNO.
What if Im going to give my child a house and lot in

consideration?
10,000 from the value of the house will be exempt
from donors tax
Suppose I have a crush in Manila and I decided to give her a
house and lot. I send the deed of donation. Is there a
taxable donation?
No because it should have been in a public
document.
xx
DEDUCTIONS
I. DOWRIES
These are donations propter nuptias.
SEC. 101. Exemption of Certain Gifts. The following gifts
or donations shall be exempt from the tax provided for in this
Chapter: x x x
(1) Dowries or gifts made on account of marriage
[Page 27 of 29]

and before its celebration or within one year

thereafter by parents to each of their legitimate,
recognized natural, or adopted children to the
extent of the first P10,000.
For nonresident aliens, the deductions are the same

EXCEPT dowries.
RATES
The rate of donors tax will depend if the donee is a stranger
of relative.
II. ENCUMBRANCES ASSUMED

For example: I give you a house and lot pero may utang pa
na 100,000 na ikaw na magbabayad. Ang value ng house
and lot is 1 Million. So P900,000 lang ang irecognize mo as
part of your gross gift.
III. DIMINUTION OF GIFTS

For example: I will give you cash of 100, 000 but I want you
to give 10, 000 to Mr. Abapo. So there is now dimunition of
the gift.
IV. DONATIONS TO THE NATIONAL GOVERNMENT

(2) Gifts made to or for the use of the National
Government or any entity created by any of its
agencies which is not conducted for profit, or to any
political subdivision of the said Government; and
Under the tax code, who is a stranger?

SEC. 99. Rates of Tax Payable by Donor.
xxx
(B) Tax Payable by Donor if Donee is a Stranger.
When the donee or beneficiary is stranger, the tax payable
by the donor shall be 30% of the net gifts.
For the purpose of this tax, a 'stranger' is a person who is
not a:
(1) Brother, sister (whether by whole or half-blood), spouse,
ancestor and lineal descendant; or
(2) Relative by consanguinity in the collateral line within the
fourth degree of relationship
So if you are a stranger, flat rate na 30% ang donors tax.
If you are a relative, you use the tax table:
SEC. 99. Rates of Tax Payable by Donor.
V. ORGANIZATIONS NOT FOR PROFIT

(3) Gifts in favor of an educational and/or
charitable, religious, cultural or social welfare
corporation, institution, accredited nongovernment
organization, trust or philanthrophic organization or
research institution or organization:
(A) In General. The tax for each calendar year shall be

computed on the basis of the total net gifts made during the
calendar year in accordance with the following schedule:
If the net gift is:
Over
Provided, however, That not more than 30% of said
But Not
Over
The Tax
Shall be
Plus
gifts shall be used by such donee for administration

purposes.
P 100,000
Exempt
P 100,000
200,000
2%
P100,000
200,000
500,000
2,000
4%
200,000
500,000
1,000,000
14,000
6%
500,000
1,000,000
3,000,000
44,000
8%
1,000,000
3,000,000
5,000,000
204,000
10%
3,000,000
5,000,000
10,000,000
404,000
12%
5,000,000
1,004,000
15%
10,000,000
For the purpose of the exemption, a 'non-profit
educational
and/or
charitable
corporation,
institution, accredited nongovernment organization,
trust or philanthrophic organization and/or research
institution or organization' is a school, college or
university and/or charitable corporation, accredited

nongovernment organization, trust or philanthrophic
organization and/or research institution or
organization, incorporated as a nonstock entity,
paying no dividends, governed by trustees who
receive no compensation, and devoting all its
income, whether students' fees or gifts, donation,
subsidies or other forms of philanthrophy, to the
accomplishment and promotion of the purposes
enumerated in its Articles of Incorporation.
Of the
Excess
Over
10,000,000
[Page 28 of 29]

ADMINISTRATIVE MATTERS
WHEN do you file your DTR?
You file it within 30 days after the gift is made.
WHEN do you PAY the donors tax?
Pay as you file system pa rin.
What if you donate several gifts during the year?
For each gift you have to file a separate DTR.
The DTR is cumulative. By the end of the year
you can determine you total tax due.
SEC. 103. Filing of Return and Payment of Tax.
(B) Time and Place of Filing and Payment. The return of
the donor required in this Section shall be filed within 30
days after the date the gift is made and the tax due thereon
shall be paid at the time of filing.
Except in cases where the Commissioner otherwise permits,
the return shall be filed and the tax paid to an authorized
agent bank, the Revenue District Officer, Revenue Collection
Officer or duly authorized Treasurer of the city or
municipality where the donor was domiciled at the time of
the transfer, or if there be no legal residence in the
Philippines, with the Office of the Commissioner.
In the case of gifts made by a nonresident, the return may
be filed with the Philippine Embassy or Consulate in the
country where he is domiciled at the time of the transfer, or
directly with the Office of the Commissioner.
WHERE do you file your DTR?
For citizens and resident aliens:
Authorized agent banks
RDO
Collection officers of BIR
Duly authorized treasurer of the city of municipality

where the donor resides.
For nonresident aliens:
Office of the Commisioner
Philippine Embassy or Consulate where he is

residing at the time of donation.
END OF FIRST EXAM COVERAGE.

God bless us. KJ
[Page 29 of 29]

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TAXATION LAW 2 TRANSCRIPT

From the lectures of Atty. Percy Donalvo, CPA

November 17, 2015 (EAE)

the essence of donation mortis causa. Thats why when you

What is this transfer tax all about? How do we define

TRANSFER TAX A tax imposed upon the privilege of

So pagsinabi mong transfer tax it would always pertain to a

obligations which are transferrable obligations which are

Paano yan pag may valuable consideration? What is the tax

What happens to the estate when the person dies? The

consequence for that?

It would entirely depend if the transfer of property

So dalawa yan siya. This is actually the coverage of your first

Pagsinabi niyo kasing estate guys, its synonymous with

It is the act of transferring that is being taxed by our current

Its for more equitable distribution of wealth, lalo na

kung madami masyadong pag-aari yung namatay,

It is the most effective and appropriate method for

Other purposes are:

It is also the only method of collecting the share

If you go back to our Tax 1 diba, what are the underlying

TAXATION LAW 2 TRANSCRIPT

NIRC meron tayong inheritance tax pero wala na yan siya

What about the term net estate? Compare this to gross

Its pretty simple. Kumbaga, if you remember your income

Of course you will determine those figures. The gross estate,

Next, know the location of the property.

Net Taxable Income

If you will spread it out, meron pa yang personal

Now for our entire discussion here, we will present what is

This is answered in Section 91 and Section 90 of your NIRC.

SEC. 90. Estate Tax Returns.

Again, spread out natin yan. What composes the ordinary,

(B) Time for Filing. For the purpose of determining the

TAXATION LAW 2 TRANSCRIPT

(A) Time of Payment. The estate tax imposed by Section

Next, situs of the properties this is similar to income

(B) Extension of Time. When the Commissioner finds that

What about for tangibles? The general rule is movables

In such case, the amount in respect of which the extension is

Provided, further, That franchise which must be exercised in

Where the taxes are assessed by reason of negligence,

Real property, the situs is where the property is located.

Franchises to be exercised within the Philippines

Shares, obligations or bonds issued by Philippine

Even if the shares or bonds are from a foreign

Also pertains to foreign corporations, but the

Of course you have any rights in any partnership,

So its pretty much the same thing, pay as you file as a

Ang question dito, WON the insurance policy and its

TAXATION LAW 2 TRANSCRIPT

inheritance tax. That is one application of that. Intangible

November 19, 2015 (AL)

The approval of the Governing law, when does the

I think I discussed to you Articles 90 and 91, the time of

For Real Properties, it is where the property is

For Tangible Personal Properties you use the usual

For Intangibles, we have discussed Section 104 of

Also, what about those intangibles which are not

(2) The fair market value as shown in the schedule of values

The FMV as per the BIR (zonal value), OR

You take into account the FMV as shown in the

Are you familiar with those terms?