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, whenever situated. Provided, than in case of a nonresident decedent who at the time of his death was not a citizen of the Philippines, only that part of his entire gross estate which is situated in the Philippines shall be included in his taxable estate. (sec 85) The Gross Estate of the Decedent Includes a. Property owned by the decedent at the time of his death b. Property formerly owned by the decedent but which were no longer owned by him at the time of his death; c. Property transferred during his lifetime upon which the donors tax would have applied; and d. Property which he never owned during his lifetime.
of his gross estate. There are three persons involved
here. The transferor, the first transferee, and the second transferee. The first transferee is the decedent. If authority is granted by the transferor to the first transferee to determine the person, who, upon the latters death, would next possess or enjoy the property transferred, his authority emanates from a general power of appointment. But if the transferor himself had determined beforehand who upon the death of the first transferee, would next possess or enjoy the property, then the authority of the first transferee emanated from a special power of appointment. Although the decedent never formally owned it, property passing under a general power of appointment forms part of his gross estate because his absolute authority to choose the next transferee, upon his death, is a badge of ownership. If the transferor died, the same property would form part of his (transferor) gross estate under sec. 85 (a) of the tax code.
A. Decedents Interest- this refers to all property
owned by the decedent- real or personal, tangible or intangible- including shares of stock in corporationsat the time of his death.
E. Proceeds of Life Insurance- this contemplates
a situation where a person insures his own life If the beneficiary is his estate, represented by his administrator, executor or heir- irrespective of whether the designation of said beneficiary is revocable or irrevocable- proceeds therefrom form part of his gross estate.
B. Transfer in Contemplation of Death- this
refers to property formerly owned by the decedent but were no longer owned by him at the time of his death.
But if the beneficiary is a third person, proceeds of
life insurance form part of the gross estate of the decedent only if the designation of said beneficiary is revocable.
It contemplates a situation where the transferor
during his lifetime, transfers property in contemplation of or intended to take effect in possession or enjoyment at or after his death. Or where the transferor retains for life the possession or enjoyment, or the right to the income from the property, or the right to designate the person who shall possess or enjoy the property or the income therefrom. At the time of his death, therefore, the decedent no longer owned the property, but still applying sec. 85(b) of the tax code, such property forms part of his gross estate.
F. Transfer for Insufficient Consideration- where
the transfers in contemplation of death, revocable transfers, and general power of appointment are made, created, exercised or relinquished for less than the adequate or full consideration, the difference between the FMV of the subject property at the time of death and the value of the consideration received therefore forms part of the decedents gross estate subject to estate tax.
Under section 85, the following items
comprise the decedents gross estate:
C. Revocable Transfer- this refers to property that
had been transferred but the transferor, personally or through another person, retained for life the right to alter, amend, revoke, or terminate the enjoyment by the transferee of the property transferred. Here, a property no longer owned by the decedent still forms part of his gross estate. This is another situation where estate tax applies to transfer of property made during the lifetime of the transferor. If the donors tax had been paid, it is simply credited to the amount of estate tax due. D. Property Passing Under General Power of Appointment Under this paragraph, a property which the decedent never owned in his lifetime now forms part
Exemptions/ Exclusions from Gross Estate:
1. The merger of usufruct in the naked title 2. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicommissary; 3. The transmission from the first heir, legatee or done in favor of another beneficiary, in accordance with the desire of the predecessor 4. All bequests, devises, legacies or transfer to social welfare, cultural and charitable institution, no part of the net income of which inures to the benefit of any individual, provided that not more than 30% of said bequest, devises or legacies or transfers shall be used by such institution for administrative purposes.
Exemptions from Estate Tax Under Special
Laws.
4. Amounts received from the Philippines and the US
Governments for damages suffered during WWII.
1. Benefits received by members from GSIS, SS by
reason of death;
5. Retirement benefits of officials and employees of
private firms if included in gross estate.
2. Proceeds of GSIS life insurance
6. Proceeds of group insurance.
3. Benefits received by beneficiaries residing in the
Philippines under laws administered by the US Veterans Administration.