Tax II Reviewer (Midterms)

TAXATION II REVIEWER
ATTY. LIGON
I.
ESTATE TAXES
A. BASIC CONCEPTS
1.
2.
3.
4.
SUCCESSION - A mode of acquisition by virtue of which

the property, rights and obligations to the extent of the
values of the inheritance, of a person are transmitted
through his death to another or others either by his will or
by operation of law (Art 774).
a. Testamentary - is that which results from the
designation of an heir, made in a will executed in
the form prescribed by law. (Art 779)
b. Intestate - by operation of law based on the
decedents presumed will
Legal or intestate succession is that mode of
transmission of inheritance which takes place
upon the death of the decedent who died without
a valid will or with an ineffective will. (Art 960)
DECEDENT - Person whose property is transmitted
through succession, whether or not he left a will. If he left
a will, he is also called the testator. (Art 775)
ESTATE - All properties at the time of the decedents
death (Art 776)
HEIR - those who are called to the whole or to an aliquot
portion of the inheritance either by will of by operation of
law
a. Legatee - persons to whom gifts of PERSONAL
property are given by virtue of a will
b. Devisee - persons to whom gifts of REAL property
are given by virtue of a will.
ESTATE TAX It is an excise tax imposed upon the privilege of

transmitting property at the time of death and on the privilege
that a person is given in controlling to a certain extent the
disposition of his property to take effect upon death
NOTE: The tax should not be construed as a direct tax on the
property of the decedent although the tax is based thereon.
INHERITANCE TAX It is the tax on the privilege to receive

property from a deceased person. This has been abolished by
PD69 on November 24, 1972 effective January 1, 1973 due to
administrative difficulty in its collection
NOTE: Presently, there is no inheritance tax imposed by law.
Only estate taxes are imposed
ESTATE AND INHERITANCE TAX DISTINGUISHED
ESTATE TAX
INHERITANCE TAX
BASIS
Tax on the privilege
Tax on the privilege
to transfer property
to receive property
upon ones death
from the deceased
WHO PAYS THE TAX
Paid by the estate
Paid by the
represented by the
recipients of the
administrator or
properties of the
executor
estate
ESTATE PLANNING The manner by which a person takes
step to conserve the property to be transmitted to his heirs by
decreasing the amount of the estate to be paid upon demand
o It is considered lawful because the legal right of the
taxpayer to decrease the amount of what otherwise
would be his taxes altogether and avoid them by means
which the law permits, cannot be doubted (Delpher
Trades Corp v. IAC, G.R. no 73584, January 28, 1988)
Q: A law was passed by Congress abolishing estate tax?
Is the law valid?
A: Yes, it is in the nature of a tax exemption. Settled is the rule
that the power to tax includes the power to grant an exemption.
NATURE OF ESTATE TAX
They are excise taxes, not property taxes. They are not
property taxes because their imposition does not rest upon the
general ownership but rather they are privilege taxes since they
are imposed on the act of passing of ownership of property.
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BY: J. Lumbres, C. Mejia and M. Mejia
CHARACTERISTICS OF ESTATE TAX

1. EXCISE TAX It is a tax imposed upon the privilege of
transferring property or shifting of economic benefits and
enjoyment of the property of the dead to the living
2. AD VALOREM TAX It is based on FMV 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 the FMV
a. As determined by the Commissioner (zonal value); or
b. As shown in the schedule of values fixed by the
Provincial and City Assessors (Sec 88)
3. INDIRECT TAX Amount may be shifted or passed to the
transferee
4. NATIONAL imposed by the National government. It
cannot be imposed by LGUs pursuant to Sec 133 LGC
5. GENERAL To raise revenue for the government to be
used for general purposes
6. PROGRESSIVE The rate increases as the tax base
increases (Sec 84)
BASIS FOR THE IMPOSITION OF ESTATE TAX
1. BENEFITS PROTECTION THEORY Based on the power of
the State to demand and receive taxes on the reciprocal
duties of support and protection, i.e. distribution of the
estate of the decedent
2. PRIVILEGE THEORY/STATE-PARTNERSHIP THEORY The
State, as a passive and silent partner in the privilege of
accumulating property has the right to collect the share
which is properly due it
3. ABILITY TO PAY The receipt of inheritance is in the
nature of unearned wealth which creates the ability to pay
the tax
4. REDISTRIBUTION OF WEALTH Receipt of inheritance
contributes to the widening inequalities in wealth. By
imposing estate tax, the value received by the successor
is thereby reduced and brings said value into the coffers
of the government
REQUISITES FOR THE IMPOSITION OF ESTATE TAX (DSD)
1. DEATH of decedent
2. SUCCESSOR is alive at the time of decedents death; and
3. Successor is not DISQUALIFIED to inherit
PURPOSE OF ESTATE TAX

1. GENERATE additional revenue for the government
2. REDUCE the concentration of wealth
3. Provide for EQUAL distribution of wealth
4. COMPENSATE the government for the protection given to
the decedent that enabled him to prosper and accumulate
wealth
NOTE: Generally, the purpose of the estate tax is to tax the
shifting economic benefits and enjoyment of property from the
dead to the living.
Q: When are the properties and rights transferred to
successors?
A: The properties and rights are transferred to the successors
at the time of death (Art 777 NCC)
Q: What law governs the imposition of estate tax?
A: The statute in force at the time of death of the decedent.
Q: When does estate tax accrue?
A: The estate tax accrues as of the death of the decedent. The
accrual of the tax is distinct from the obligation to pay the same
which is 6 months after the death of the decedent.
B. ESTATE TAXES
1. HISTORICAL BACKGROUND
The estate tax is a tax on property (cash, real estate, stock, or
other assets) transferred from deceased persons to their
heirs. Only the wealthiest estates in the country pay the
tax because it is levied only on the portion of an estates
value that exceeds a specified exemption level, currently
$5.12 million per person.
THE ESTATE TAX: MYTHS AND REALITIES
Myth 1: The estate tax is best characterized as the death tax.
Reality: Everybody dies, but only the richest 2 in 1,000 estates pay
any estate tax.
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ATTY. LIGON
The estate tax is best characterized as a tax
inheritances by a small group of wealthy heirs.
fewer than 2 out of every 1,000 people who die
tax whatsoever because the first $5.12 million
any estate
on very large Myth 6: The estate tax constitutes double taxation because it
The estates of
applies to assets that already have been taxed once as income
owe any estate Reality: Large estates consist to a large degree of unrealized capital
of the value of
gains that have never been taxed; the estate tax is the only
means of taxing this income.
Much of the money that wealthy heirs inherit has never been taxed.
Myth 2: The estate tax forces estates to turn over half of their assets
In fact, thats one reason why policymakers created the estate
to the government.
tax in 1916: to serve as a backstop to the income tax. Capital
Reality: The few estates that pay any estate tax generally pay less
gains tax, a type of income tax, is due on the appreciation of
than one-sixth of the value of the estate in tax.
assets, such as real estate or an art collection, only when the
There are several reasons why the effective rate is so much lower
owner sells the asset. Therefore, the increase in the value of an
than the top rate. First, as noted, estate taxes are due only on
asset is never subject to income tax if the owner holds on to
the portion of an estates value that exceeds the exemption
the asset until death. These unrealized capital gains account for
level; at the current exemption level of $5.12 million, a $6
a significant proportion of the assets held by taxable estate
million estate would owe estate taxes on $880,000 at most.
Second, heirs can often shield a large portion of an estates Myth 7: If policymakers decide to retain the estate tax, the logical top
remaining value from taxation through various deductions.
rate would be 15
percent, the same as the capital gains rate.
Myth 3: Weakening the estate tax wouldnt significantly worsen the Reality: To match the effective tax rate on capital gains, the top
deficit because the tax doesnt raise much revenue.
estate tax rate would need to be about 45 percent.
Reality: Extending the temporary estate tax cut enacted in 2010 Since the estate tax serves, in part, to tax capital gains that have not
rather than restoring the 2009 rules would add billions of
otherwise been taxed, some people have proposed taxing
dollars to deficits.
estates at the current capital gains rate of 15 percent. There
are two problems with this argument. First, the capital gains
Myth 4: The cost of complying with the estate tax nearly equals the
rate is typically applied to all capital gains income, whereas the
amount of revenue the tax raises.
estate tax is applied only to part of an estate. Second, the top
Reality: The costs of estate tax compliance are relatively modest and
capital gains rate is scheduled to revert to 20 percent at the
are consistent with the costs of complying with other taxes
end of 2012.
Myth 5: Many small, family-owned farms and businesses must be
liquidated to pay estate taxes.
Reality: Only a handful of small, family-owned farms and businesses
owe any estate tax at all, and virtually none would have to be
liquidated to pay the tax.
Few taxable estates that would face any liquidity constraints, there
are special provisions written into the law for them such as
the option to spread estate tax payments over a 15-year period
and at low interest rates that would allow them to pay the
tax without having to sell off any of the farm assets.
Myth 8: Eliminating the estate tax would encourage people to save

and thereby make
more capital available for investment.
Reality: Eliminating the estate tax would not substantially affect
private saving, and it would greatly increase government
dissaving (i.e., deficits); as a result, it would more likely reduce
the capital available for investment than increase it.
While repealing the estate tax might lead some people to save more,
it also would lead the government to borrow more to offset the
lost revenue. Government borrowing soaks up capital that
would otherwise be available for investment in the economy. In
the case of estate-tax repeal, the added government borrowing
Page | 3
would more than outweigh any added private saving, leaving

the economy no better off and quite possibly worse off.
base than others (that is, they allow fewer exemptions and
other special preferences).
Myth 9: The estate tax unfairly punishes success.

Not all wealthy people are against estate taxes: Warren Buffett:
Reality: The estate tax affects only those most able to pay, and the Tax law changes have benefited this group, including me, in a huge
funds it raises help support a range of programs that benefit
way. During that time the average American went exactly
the nation.
nowhere on the economic scale: hes been on a treadmill while
The estate tax is the most progressive component of a tax code that
the superrich have been on a spaceship.
overall is only modestly progressive, particularly when
regressive state and local taxes are taken into account. The
2. SS 84-97, NIRC
money it raises helps to fund essential programs, from health
care to education to national defense. If the estate tax were
3. RR 2-2003: - Consolidated Revenue Regulations on
repealed, other taxpayers would have to foot the bill for these
Estate Tax and Donors Tax amending Revenue
programs, face cuts in the benefits and services provided, or
Regulations No. 17-93.
bear the burden of a higher national debt. Bill Gates, Senior, a
RATES OF ESTATE TAX:
prominent advocate of retaining a strong estate tax, has
If the Net Estate is:
explained, The reason the estate tax makes so much sense isOver
But not OverThe tax shall Plus
be
Of the excess
that there is a direct relationship between the net worth people
over
have when they pass on and where they live. The government
P 200,000
Exempt
that protects their business activities, the traditions that enableP 200,000
500,000
P 200,000
them to rely on certain things happening, thats what creates 500,000
2,000,000
P 15,000
500,000
capital and enables net worth to increase. It is appropriate that
2,000,000
5,000,000
135,000
11%
2,000,000
people who have prospered the most in this society help to
5,000,000
10,000,000
465,000
15%
5,000,000
preserve it for future generations through tax revenues that
10,000,000 10,000,000 1,215,000
20%
10,000,000
derive from their estates. President Theodore Roosevelt stated
in 1906 that the man of great wealth owes a particular
The application of the rates in determining the estate

obligation to the State because he derives special advantages
taxes falling due or have accrues beginning January
from the mere existence of government.
1,1998, the effectivity date of RA 8424 (The Tax Reform
Act of 1997)
Myth 10: The United States taxes estates more heavily than do other
countries
Reality: Measured as a share of the economy, U.S. estate tax
revenues are below the international average for taxes on
wealth.
The claim that the United States taxes estates more highly than other
countries is based on a misleading comparison of the top
statutory estate tax rates across countries. Many countries tax
accumulated wealth by means of wealth or wealth transfer
taxes (such as inheritance taxes) rather than through an estate
tax, so international comparisons must take these other taxes
into account. And some countries levy taxes on a broader tax
4.
RR 17-93: Estate and Donor's Taxes as Restructured by

Republic Act No. 7499.
o It govern the taxation of the transmission of the
decedent's estate and donations made by
persons, natural or juridical, whether citizens or
aliens, residents or non-residents.
o Pursuant to Section 245 in relation to Section
4(h)
of the National Internal Revenue Code
(NIRC), as amended, these regulations are hereby
promulgated to implement the provisions of RA
No. 7499 which restructured Estate and Donor's
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ATTY. LIGON
Taxes amending for the purpose Sections 77,

79(a), 83(b), Chapter I and 92(a) and (b),
Chapter II, Title III of the NIRC
It is a well settled rule that estate taxation is
governed by the statute in force at the time of
death of the decedent. (26 R.C.L., p. 206, 4
Cooley on Taxation) Accrual of the estate tax as of
the date of death of the decedent is distinct from
the obligation to pay the same. (Lorenzo vs.
Posadas, 64 Phil. 353) Upon the death of the
decedent, succession takes place and the right of
the state to tax vests instantly
C. COMPOSITION OF GROSS ESTATE

SEC 104. DEFINITIONS. - For purposes of this Title, the
terms "gross estate" and "gifts" include real and personal
property, whether tangible or intangible, or mixed, wherever
situated: Provided, however, That where the decedent or donor
was a nonresident alien at the time of his death or donation, as
the case may be, his real and personal property so transferred
but which are situated outside the Philippines shall not be
included as part of his "gross estate" or "gross gift": Provided,
further, That franchise which must be exercised in 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 eighty-five percent (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: Provided, still further, that no tax
shall be collected under this Title in respect of intangible
personal property: (a) if the decedent at the time of his death
or the donor at the time of the donation was a citizen and
resident of a foreign country which at the time of his death or
donation did not impose a transfer tax of any character, in
respect of intangible personal property of citizens of the
Philippines not residing in that foreign country, or (b) if the laws
of the foreign country of which the decedent or donor was a

citizen and resident at the time of his death or donation allows
a similar exemption from transfer or death taxes of every
character or description in respect of intangible personal
property owned by citizens of the Philippines not residing in that
foreign country.
The term "deficiency" means: (a) the amount by which tax
imposed by this Chapter exceeds the amount shown as the tax
by the donor upon his return; but the amount so shown on the
return shall first be increased by the amount previously
assessed (or collected without assessment) as a deficiency, and
decreased by the amounts previously abated, refunded or
otherwise repaid in respect of such tax, or (b) if no amount is
shown as the tax by the donor, then the amount by which the
tax exceeds the amounts previously assessed, (or collected
without assessment) as a deficiency, but such amounts
previously assessed, or collected without assessment, shall first
be decreased by the amount previously abated, refunded or
otherwise repaid in respect of such tax.
If the decedent is a resident
citizen, non-resident
citizen, or resident alien
1.
2.
3.
The gross estate of a

decedent shall be
comprised of all:
Real property
wherever situated
Personal property,
tangible or intangible,
wherever situated
To the extent of the
interest therein of the
decedent at the time
of his death.
If the decedent is a
non-resident alien
1.
2.
The gross estate of a

decedent shall be
comprised only of:
Tangible personal property
situated in the Philippines
Intangible personal
property with situs in the
Philippines unless
exempted on the basis of
reciprocity
GROSS ESTATE OF THE DECEDENT (SEC. 85)
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Includes the value at the time of his death of all

property, real or personal, tangible or intangible,
wherever situated.
In the case of nonresident citizen, only that part of the
gross estate which is situated in the Philippines shall be
included in his taxable estate.
the Philippines, but does not from part of the gross

estate:
1.
TOTAL EXEMPTION - If the decedent at the time of his

death or the donor at the time of the donation was a
citizen and resident of a foreign country which at the time
of his death or donation did not impose a transfer tax of
any character, in respect of intangible personal property
of citizens of the Philippines not residing in that foreign
country, or
2.
PARTIAL EXEMPTION - If the laws of the foreign country

of which the decedent or donor was a citizen and resident
at the time of his death or donation allows a similar
exemption from transfer or death taxes of every character
or description in respect of intangible personal property
owned by citizens of the Philippines not residing in that
foreign country.
SPECIAL RULES ON INTANGIBLE PROPERTIES (Sec 104,

NIRC)
Intangible properties of a non-resident alien decedent
which are considered as situated in the Philippines,
hence treated as part of the gross estate.
FranSha4- (Organized-Established-85- Foreign situs)
1. Franchise which must be exercised in the Philippines;
2. Shares, obligations or bonds issued by any corporation or
sociedad anonima organized or constituted in the
Philippines in accordance with its laws; (domestic
corporation)
3. Shares, obligations or bonds by any foreign corporation
85% of its business is located in the Philippines;
4. Shares, obligations or bonds issued by any Foreign
corporation if such shares, obligations or bonds have
acquired a business situs in the Philippines;
5. Shares or rights in any partnership, business or industry
Established in the Philippines
NOTE: This enumeration of intangible properties are significant
only for non-resident alien and for foreign corporation because
they are the only set of taxpayers where the situs of the
property is considered in determining whether their property
shall form part of the gross estate or not. Remember that in
case of Filipino citizens (whether resident or non-resident) and
resident aliens all of their properties whether real or personal
wherever situated shall form part of the gross estate.
RECIPROCITY CLAUSE (Sec. 104, NIRC)
Intangible personal property of a decedent who is
nonresident alien, which are considered as situated in
COLLECTOR VS. CAMPOS RUEDA, 42 SCRA 23 (1971)

FACTS: Petitioner Campos Rueda (Rueda) was the
administrator of the estate of the deceased Dona Maria de la
Estrella Soriano vda. De Cerdeira (Cerdiera). Rueda interposed
an appeal from the decision of the CIR assessing and
demanding from the estate the payment of deficiency estate
and inheritance taxes, including interests and penalties on the
transfer of intangible personal properties situated in the
Philippines and belonging to Cerdiera.
2. Cerdeira was a Spanish national, by reason of her
marriage to a Spanish citizen and was a resident of
Tangier, Morocco from 1931 up to her death on Jan. 2,
1955. At the time of her death, she left intangible
personal properties in the Philippines.
3. In an amended tax return, Rueda claimed that the
intangible personal properties of Cerdiera valued at
P396,308.90 were exempted from taxes. This was denied
by the CIR on the ground that the law of Tangier is not
reciprocal to Sec. 122 of the NIRC. The denial was
premised on the ground that there was no reciprocity with
Tangier, which was a mere principality and not a foreign
country. Thus, the CIR demanded the payment of the
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ATTY. LIGON
deficiency estate and inheritance taxes, including
surcharges, interest and compromise penalties.
4. Section 122 of the National Internal Revenue Code (1939)
reads insofar as relevant: "For the purposes of this Title
the terms 'gross estate' and 'gift' include real estate and
tangible personal property, or mixed, physically located in
the Philippines; franchise which must be exercised in 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 issued by any foreign corporation
eighty-five per centum 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; or any personal property,
whether tangible or intangible, located in the
Philippines; Provided, however, That in the case of a
resident, the transmission or transfer of any intangible
personal property, regardless of its location, subject to
the taxes prescribed in this Title; And provided,
further, that no tax shall be collected under this
Title in respect of intangible personal property (a) if
the decedent at the time of his death was a resident
of a foreign country which at the time of his death
did not impose a transfer tax or death tax of any
character in respect of intangible personal property
of citizens of the Philippines not residing in that
foreign country, or (b) if the laws of the foreign
country of which the decedent was a resident at the
time of his death allow a similar exemption from
transfer taxes or death taxes of every character in
respect of intangible personal property owned by
citizens of the Philippines not residing in that
foreign country." (controlling provision)
5. The case was elevated to the CTA. The main
contention of Rueda was that the transfers by
reason of death of movable properties, corporeal or
incorporeal, including furniture and personal
effects, as well as of securities, bonds, shares, were
not subject to the payment of the death tax in

Tangier, whatever might have been the nationality
of the deceased or his heirs and legatees. The
controlling provision of Sec. 122 of the NIRC will therefore
apply to this case (see above), based on the theory of
reciprocity.
6. The CIR claims that Tangier is bereft of international
personality. To be a nation, its people should occupy a
definite territory, be politically organized, exercise by
means of its government its sovereign will over the
individuals within it and maintaining its separate
international personality. The Philippines has no
reciprocity with Tangier, which was a mere principality and
not a foreign country.
ISSUE: WON it was proper for the CIR to assess the taxes on
the estate of Cerdiera, who had intangible properties in the
Philippines but was a Spanish citizen, and at the time of her
death, was living in Morocco
HELD: No, it was not proper for the CIR to do so. The Court
based its decision on the following
A. The decision in the case of CIR vs. de Lara, which was
decided four days after the filing of this petition stating
that : The State of California was held as a foreign
country in relation to Sec. 122 of the NIRC, and thus the
Ancillary Administrator is entitled to exemption from the
inheritance tax on the intangible property found in the
Philippines. Although California is a state in the American
Union and thus lacked the requisite of international
personality, it was held to be a foreign country within the
meaning of Sec. 122 of the NIRC.
B. The Court also held in a previous decision that the tiny
principality of Liechtenstein, hardly an international
personality, also fell under the exemption category.
In the case of Kiene vs. CIR, based on documents submitted by
the Board, as proof of the laws of Liechtenstein, the said
country does not impose estate, inheritance and gift taxes on
intangible personal property of Filipino citizens not residing in
Page | 7
that country. Thus, in the name of reciprocity, such exemption

must be honoured also in the Philippines
Q: Will shares of stock issued by a foreign corporation in favor
of a non-resident form part of the gross estate?
A: Yes, if 85% of the business of the foreign corporation who
issued the stocks is located in the Philippines. It is considered to
have obtained business situs in the Philippines, thus the issued
shares of stock shall form part of the gross estate of the
nonresident. (Section 104, NIRC)
Q:
Is there a need to disclose properties outside the

Philippines?
A: Yes, whether resident or non-resident. A resident decedent is
taxed on properties within or without. A non-resident is
required to disclose properties outside the Philippines under
Sec. 86 (D), NIRC.
Q: Discuss the rule on situs of taxation with respect to
the imposition of the estate tax on property left behind
by a non-resident decedent.
A: The value of the gross estate of a non-resident decedent who is a
Filipino citizen at the time of his death shall be determined by
including the value at the time of his death of all property, real
or personal, tangible or intangible, wherever situated to the
extent of the interest therein of the decedent at the time of his
death (Sec. 85 [A], NIRC). These properties shall have a situs
of taxation in the Philippines hence subject to Philippines estate
taxes.
On the other hand, in the case of a non-resident 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 to the extent of the interest therein of the decedent
at the time of his death shall be included in his taxable estate.
Provided, that, with respect to intangible personal property, we
apply the rule of reciprocity.
Q: Ralph Donald, an American citizen, was a top executive of a
U.S company in the Philippines until he retired in 1999.
He came to like the Philippines so much that following
his retirement, he decided to spend the rest of his life in
the country. He applied for and was granted permanent
resident status the following year. In the spring of 2004,

while vacationing in Orlando Florida USA, he suffered a
heart attack and died. At the time of his death he left the
following properties:
a. Bank deposits with Citibank Makati and
Citibank Orlando Florida;
b. Rest house in Orlando, Florida;
c. A condominium unit in Makati;
d. Shares of stock in the Phil subsidiary of the
U.S company where he worked;
e. Shares of stock in San Miguel Corporation
and PLDT
f. Shares of stock in Disney World in Florida
g. U.S treasury bonds
h. Proceeds from a life insurance policy
issued by a US corporation.
Which of the foregoing assets shall be included in the taxable
gross estate in the Philippines? Explain.
A: All of the properties enumerated except (h), the proceeds from life
insurance, are included in the taxable gross estate in the
Philippines. Ralph Donald is considered a resident alien for tax
purposes since he is an Aerican citizen and was a permanent
resident of the Philippines at the time of his death. The value of
the gross estate of a resident alien 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. (Sec. 85, NIRC) The other item, (h) proceeds from a
life insurance policy, may also be included on the assumption
that it was Ralph Donald who took out the insurance upon his
own life, payable upon his death to his estate. (Sec. 85[E],
NIRC).
Q: What is the meaning of fair market value?
A: The price at which any seller will sell and any buyer will buy
both willingly without any force or intimidation.
D. GROSS ESTATE SUBJECT TO TAX

ESTATE TAX FORMULA:
Gross estate (Sec 85)
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ATTY. LIGON
Less:
2.
(1) Deductions (Sec 86 NIRC)

(2) Net share of the surviving spouse
Net Estate
Tax Rate (Sec 84)
Estate Tax Due

Less: Tax Credit, if any (Sec 86.E or 110.B)
Estate Tax Due, if any
DETERMINATION OF GROSS AND NET ESTATE (Sec 85)
1. If the decedent is a resident (RC) or non-resident citizen
(NRC), or a resident alien (RA) all properties, real or
personal, tangible or intangible, wherever situated
2. If the decedent is a non-resident alien (NRA) Only
properties situated in the Philippines provided that,
intangible personal property is subject to the rule of
reciprocity provided for under Sec 104 NIRC
BASIS OF VALUATION OF GROSS ESTATE
PROPERTY VALUATION
AS TO REAL PROPERTY
Whichever is higher between the
FMV:
1. As determined by CIR (zonal
value); or
2. As shown in the schedule of
values fixed by the provincial
and city assessors
If there is no zonal value, use the
FMV in the latest tax declaration
AS TO PERSONAL PROPERTY
Whether tangible or intangible,
appraised as FMV. Sentimental
value is practically disregarded
1. UNLISTED
AS TO SHARES OF STOCK
a. Unlisted common book
value
b. Unlisted preferred par
value
AS TO RIGHT OF USUFRUCT,
USEOR HABITATION, AND
ANNUITY
LISTED Arithmetic mean

between
the
highest
and
lowest quotation at a date
nearest the date of death, if
none is available on the date of
death itself
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
NOTES:
In determining the book value of common shares, the

following shall not be considered:
1. Appraisal surplus
2. The value assigned to preferred shares, if there are
any
If there is an improvement, the value of improvement is

the construction cost per building permit or the FMV per
latest tax declaration
ITEMS TO BE INCLUDED IN GROSS ESTATE
1. Decedents interest
2. Transfer in contemplation of death
3. Revocable transfer
4. Property passing under general power of appointment
5. Proceeds of life insurance
6. Prior interests
7. Transfers of insufficient consideration
NOTE: Nos. 2, 3, 4 and 7 properties not physically in the
estate (these have already been transferred during the lifetime
of the decedent but are still subject to payment of estate tax)
are transfers inter vivos which are considered part of gross
estate
Page | 9
1.
DECEDENTS INTEREST (Sec 85.A)
It includes any interest having value or capable of being valued,
transferred by the decedent at his death.
TRANSFERS IN CONTEMPLATION OF DEATH (Sec 85.B)
This is a transfer motivated by the thought of impeding death
although death may not be imminent:
1. When the decedent, has at any time, made a transfer in
contemplation of or intended to take effect in possession
or enjoyment at or after death; or
2. When the decedent has, at any time, made a transfer
under which he has retained for his life or for a period not
ascertainable without reference to his death or any period
which does not in fact end before his death:
a. Possession, enjoyment, or right to income from the
property; or
b. The right alone or in conjunction with any other
person to designate the person who will possess or
enjoy the property or income there from.
EXCEPTIONS:
Transfers which are not considered in contemplation of death
and as such, are not part of the gross estate:
(a) Bona fide sale
(b) Sale for adequate and full consideration in money or in
moneys worth (Sec 85.B).
NOTE: The concept of transfer in contemplation of death has a
technical meaning. This does not constitute any transfers made
by a dying person. It is not the mere transfer that constitutes a
transfer in contemplation of death but the retention of some
type of control over the property transferred. In effect, there is
no full transfer of all interests in the property inter vivos.
VIDAL DE ROCES V. POSADAS, 58 PHIL 108 (1933)
FACTS: Esperanza Tuazon donated several parcels of land to
plaintiffs. By virtue of said donations, plaintiffs took possession
of said lands, received the fruits thereof and obtained the
corresponding TCTs
2.
3.
The donor died, without leaving any forced heir. In her

will, Esperanza bequeathed to each of the donees
(plaintiffs) the sum of P5,000.
Collector(respondent) assessed plaintiffs as donees and
legatees inheritance tax. Collector assessed P15,191 as
tax donation to Concepcion Vidal de Roces and
P1,481.52 on her legacy, and likewise, P12,388.95 was
imposed upon the donation to Elvira Vidal de Richards
and P1,462.50 on her legacy. The plaintiffs paid the tax
under protest.
Plaintiffs contend that Sec 1540 does not include
donations inter vivos and assuming arguendo, it is
unconstitutional because:
a. It violates Sec 3 of Jones law (should only cover
one subject)
b. The Legislature has no authority to impose
inheritance tax on donations inter vivos; and
c. It contravenes the fundamental rule of uniformity in
taxation
ISSUE: WON the word gifts in Sec 1540 Admin Code involve
donation inter vivos
Sec 1540. Additions of gifts and advances. After the
aforementioned deductions have been made, there shall be
added to the resulting amount the value of all gifts or advances
made by the predecessor to any those who, after his death,
shall prove to be his heirs, devisees, legatees, or donees mortis
causa.
HELD: Yes. The gifts under Sec 1540 refer to donations inter
vivos that take effect immediately or during the lifetime of the
donor but are made in consideration or in contemplation of
death. Gifts inter vivos, the transmission of which is not
made in contemplation of the donors death should not
be understood as included within Sec 1540 since it would
amount to imposing a direct tax on property and not on
the transmission thereof, which does not come within the
provisions contained in Art XI Admin Code which deals
Page | 10
ATTY. LIGON
with tax on inheritance, legacies and other acquisitions
mortis causa.
CAB: The tax collected by CIR on the properties donated to
plaintiffs constitutes an inheritance tax imposed on the
transmission of said properties in contemplation or in
consideration of the donors death and under the circumstance
that the donees were later instituted as the decedents
legatees. As such, the law considers such transmissions in the
form of gifts inter vivos, as advances on inheritance and such
legislation is therefore within power of the Congress.
DIZON V. POSADAS, 57 PHIL 465 (1932)
FACTS: Plaintiff Dizon was assessed by Collector (respondent)
P2,808.73 as inheritance tax. Plaintiff alleged that the tax is
illegal because he received the property, which is the basis of
the tax, from his father before his death by a deed of gift inter
vivos which was duly accepted and registered before the death
of his father.
ISSUE: Does Sec 1540 Admin Code subject the plaintiff to the
payment of an inheritance tax
HELD: Yes. When the law says all gifts, it doubtless refers to
gifts inter vivos and not mortis causa. Such is the tenor of the
language which refers to donations that took effect before the
donors death and not mortis causa donations, which can only
be made with the formalities of a will, and can only take effect
after the donors death.
The law presumes that such gifts have been made in
anticipation of inheritance, devise, bequest, or gift mortis
causa, when the donee, after the death of the donor proves to
be his heir, devisee or donee mortis causa, for the purpose of
evading tax.
The phrase in Sec 1540 that any of those who, after his death,
shall prove to be his heirs include those who, by our law, are
given the status and rights of heirs, regardless of the quantity

of property they receive as such heirs. CAB: Dizon is an heir to
his deceased father.
3-YEAR PRESUMPTION RULE
The 3-year presumption rule states that any transfer made
within 3 years before ones death is considered one in
contemplation of death. This has been deleted by PD 1705.
FACTORS IN DETERMINING WHETHER TRANSFER IS ONE IN
CONTEMPLATION OF DEATH
1. AGE of decedent at the time the transfers were made
2. Decedents HEALTH, as he knew it at or before the time of
the transfers
3. The INTERVAL between the transfers and the decedents
death
4. The AMOUNT of property transferred in proportion to the
amount retained
5. The NATURE and disposition of the decedent
6. The existence of a general TESTAMENTARY SCHEME of
which the transfers were a part
7. The RELATIONSHIP of the done/s to the decedent
8. The existence of a desire on the part of the decedent to
ESCAPE the burden of managing property by transferring
the property to others
9. The existence of a long established GIFT-MAKING policy
on the part of the decedent
10. The existence on the part of the decedent to
VICARIOUSLY enjoy the enjoyment of the donees for the
property transferred
11. The existence of the desire by the decedent of AVOIDING
the estate taxes by means of making inter vivos transfers
of property (Estate of Oliver Johnson v. Commissioner, 10
CT 860)
REVOCABLE TRANSFERS (Sec 85.C)
A revocable transfer is a transfer 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 to alter or amend
or revoke or terminate such transfer by:
1. Decedent alone
Page | 11
2.
3.
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 decedents death other than a bona fide sale for an
adequate and full consideration in money or moneys
worth (Sec 85.C.1)
The power to alter, amend or revoke shall be considered to exist

on the date of decedents death even though:
1. The exercise of the power is subject to a precedent of
giving of NOTICE; or
2. The alteration, amendment or revocation takes effect only
on the expiration of a stated period for the exercise of the
power, whether or not on or before the date of the
decedents death
a. Notice has been given
b. The power has been exercised
In such cases, proper adjustment shall be made representing
the interest which would have been excluded from the power if
the decedent had lived, and for such purpose if 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
(Sec 85.C.2).
NOTE: Revocable transfer is part of the gross estate of the
decedent because the transferor can revoke the transfer any
time, such person wields tremendous amount of power such
that he can revoke the transfer as if none was actually made.
GENERAL RULE: It Is sufficient that the decedent has the power
to revoke, though he did not exercise such power.
EXCEPTION: In case of bona fide sale for an adequate and full
consideration in money or moneys worth.
TRANSFER IS NOT REVOCABLE AND NOT SUBJECT TO ESTATE

TAX WHEN
1. If the decedents power could only be exercised with the
consent of all parties having an interest in the transferred
property and if the power adds nothing to the rights the
parties possess under local law (Lober v. United States,
346 US 335)
2. When the decedent has been completely divested of the
power at the time of his death
3. Where the exercise of the power by the decedent was
subject to a contingency beyond the decedents control
which did not occur before his death (Hurd v.
Commissioner, 160 F(2) 610)
4. The mere right to name trustees. Neither is the grantors
limited power to appoint himself as trustee under
conditions which did not exist at his death (23 AM JUR
2D, 790)
PROPERTY PASSING UNDER GENERAL POWER OF
APPOINTMENT (Sec 85.D)
GENERAL POWER OF APPOINTMENT (GPA) It is the right to
designate the person who will succeed to the property of the
prior decedent, in favor of anybody, including himself, his
estate, his creditors, or the creditors of his estate. If the
donation contains a provision of reversion to the donor, this is
similar to a revocable transfer.
NOTE: A power is not general (specific) if it can be exercised
only in favor of one or more designated person or classes of
persons exclusive of the decedent, his estate, his creditors and
the creditors of his estate, or if it expressly not exercisable in
favor of the decedent, his estate, his creditors or creditors of his
estate.
PROPERTIES UNDER GPA INCLUDED IN DECEDENTS ESTATE
(Sec 85.D)
Those properties passed by the decedent under a GPA by:
1. Will
Page | 12
ATTY. LIGON
2.
3.
Deed executed in contemplation of death, or intended to

take effect in possession or enjoyment at, or after his
death
Deed under which he has retained for his life or for 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, enjoyment or right to income from
the property; or
b. The right to designate the person who will possess or
enjoy the property or income therefrom
PROPERTIES UNDER GPA BUT ARE NOT PART OF DECEDENTS

GROSS ESTATE
Those properties transferred:
1. Under a bona fide sale
2. For an adequate and full consideration in money or
moneys worth
TRANSFER IN CONTEMPLATION OF DEATH AND GENERAL
POWER OF APPOINTMENT DISTINGUISHED
TRANSFER IN
GENERAL POWER OF
CONTEMPLATION
APPOINTMENT (GPA)
OF DEATH
EFFECTIVITY
At or after death
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
MEANS
By trust or
Property passed under GPA
otherwise
and by will or by deed
PROCEEDS OF LIFE INSURANCE (Sec 85.E)
1. Part of the gross estate when the beneficiary is:
a. The ESTATE of the decedent, his executor or
administrator regardless of whether the designation is
revocable or irrevocable; and
b.
2.
A THIRD PERSON, other than the decedents estate,

executor or administrator provided that the
designation is revocable
Not part of the gross estate when:

a. Proceeds received by a beneficiary designated as
irrevocable provided that the beneficiary is not the
decedents estate, executor or administrator; and
b. Where the insurance was not taken by the decedent
upon his own life and the beneficiary is not the
decedents estate, executor or administrator
NOTE: If the beneficiary who was irrevocably designated caused

the death of the insured, the designation is considered
revocable unless he acted in self defense.
BPI V. POSADAS, 56 PHIL 215 (1932)
FACTS: Adolpe Oscar Scheutze, a non-resident alien, died and
left a will, naming his widow Rosario Gelano as his universal
heir. Among the personal property left by the deceased was a
life insurance policy issued in Manila for the sum of $10,000 by
Sun Life (Canada).
1. BPI, the administrator of Scheutzes, received the sum of
P20, 150 from Sun Life, representing the proceeds of the
insurance policy. The amount the was then delivered to
Schuetzes widow
2. In 1929, Collector (respondent) imposed an inheritance
tax upon the transmission of the proceeds of the
insurance policy amounting to P1,209
ISSUE: WON Collector has the authority to collect inheritance
tax upon of the insurance policy
HELD: Yes. The taxable situs of tangible property is where it is
more or less permanently located, regardless of the domicile of
the owner. It is well-settled that the state where it is more or
less permanently located has the power to tax it although the
owner resides out of the state, regardless of whether it has
been taxed for the same period at the domicile of the owner,
Page | 13
provided there is statutory authority for taxing such property

(Cooley).
If the proceeds of the life-insurance policy taken out by the
decedent and made payable to his estate, were delivered to BPI
for administration and distribution, they were not in transit but
were more or less permanently located in the Philippines. If this
is so, half the proceeds which is community property, belongs to
the estate of the deceased and is subject to the inheritance tax,
in accordance with the legal provision, irrespective whether or
nor the decedent was domiciled in the Philippines.
WHEN APPLICABLE
1. Transfers in contemplation of death
2. Revocable transfers
3. Transfers under general power of appointment (GPA)
which are NOT bona fide sale for an adequate and full
consideration in money or moneys worth
SUBJECT TO DONORS TAX IF
It is subject to donors tax if there is no reference to :
1. Revocable transfer
2. Contemplation of death
3. General power of appointment
The SC held that: (1) The proceeds of a life-insurance policy

payable to the insureds estate on which the premiums were
paid by the conjugal partnership constitute community
property, and belong to to the husband and the other half to
the wife, exclusively; (2) If the premiums were paid partially
with paraphernal property and partly conjugal funds, the
proceeds are likewise in like proportion paraphernal in part and
conjugal in part; and (3) The proceeds of a life-insurance policy
payable to the insureds estate as the beneficiary, if delivered to
the testamentary administrator of the former as part of the
assets of the said estate under probate administration, are
subject to inheritance tax if they belong to the assured
exclusively and it is immaterial that the insured was domiciled
in the Philippines or not.
NOTE: It is subject to estate tax if the 3 instances mentioned

are present (Sec 100 in relation to Sec 85.B).
PRIOR INTEREST (Sec 85.F)

All transfers, trusts, estates, interests, rights powers and
relinquishment of powers made, created, arising, existing,
exercised or relinquished before or after the effectivity of the
Tax Code.
E. DEDUCTIONS
TRANSFERS FOR INSUFFICIENT CONSIDERATIONS (Sec

85.G)
Only the excess of the FMV of the property at the time of the
decedents death over the consideration shall be included in the
gross estate.
CLAIMS AGAINST INSOLVENT PERSONS (Sec 86)

REQUISITES FOR DEDUCTIBILITY
1. The full amount of the receivables be included first in the
gross estate; and
2. The incapacity of the debtors to pay their obligation is
proven not merely alleged
NOTE: Judicial declaration of insolvency is not necessary. It is
enough that the debtors liabilities exceeded his assets.
1. CITIZEN OR RESIDENT S86(A)

a. EXPENSES, LOSSES, INDEBTEDNESS AND TAXES
(ELIT)
1) Funeral Expenses S86(A)(1)(a)
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.
Procedure: Compute for the 5% of the gross

estate and compare the result to the actual
funeral expense.
Page | 14
ATTY. LIGON
Section 6(A)(1) of RR 2-2003: Any amount of

funeral
expenses
in
excess
of
the
P200,000.00 threshold, whether the same
had actually been paid or still payable, shall
not be allowed as a deduction under this
Subsection. Neither shall the unpaid portion of
the funeral expenses incurred which is in
excess of the P200,000.00 threshold be
allowed to be claimed as a deduction under
claims against the estate provided under
Subsection (C).
The term FUNERAL EXPENSES is not
confined to its ordinary or usual meaning.
They include:
a) The mourning apparel of the surviving
spouse and unmarried minor children
of the deceased;
b) Expenses for the deceaseds wake,
including food and drinks;
c) Publication charges for death notices;
d) Telecommunication expenses incurred
in informing relatives of the deceased;
e) Cost of burial lot, tombstones,
monument or mausoleum but not
their upkeep. In case the deceased
owns a family estate or several burial
lots, only the value corresponding to
the plot where he is buried is
deductible;
f) Interment and/or cremation fees and
charges; and
g) All other expenses incurred for the
performance
of
the
rites
and
ceremonies incident to interment.
Expenses NOT deductible as funeral expenses
(RR 2-2003):
1. Expenses
incurred
AFTER
THE
INTERMENT, such as for prayers, masses,
entertainment, or the like;
2.
Any portion of the funeral and burial

expenses borne or defrayed by relatives
and friends of the deceased
3. Medical expenses as of the last illness will
not form part of the funeral expense but
should be claimed as medical expenses.
Actual funeral expenses shall mean those
which are actually incurred in connection with
the interment or burial of deceased. The
expenses must be duly supported by receipts
or invoices or other evidence to show that
they were actually incurred. (Sec. 6[A][1] RR
2-2003)
2) JUDICIAL EXPENSES S86(A)(1)(B) for

judicial expenses of the testamentary or intestate
proceedings.
Expenses allowed as deduction under this

category are those incurred in the:
1. inventory-taking of assets comprising
the gross estate,
2. administration
3. the payment of debts of the estate
4. distribution of the estate among the
heirs (Sec. 6[A][2], RR 2-2003)
Judicial Expenses may include:

a) Fees of executor or administrator
b) Attorneys fees
c) Court fees
d) Accountants fees
e) Appraisers fees
f) Clerk hire
g) Cost of preserving and distributing the
estate
h) Cost of storing or maintaining property of
the estate
i) Brokerage fees for selling property of the
estate (Sec. 6[A][2], RR 2-2003)
Any unpaid amount for the cost and expenses

claimed under judicial Expenses should be
supported by a sworn statement of account
Page | 15
issued and signed by the creditor. (Sec. 6[A]

[2], RR 2-2003)
These deductible items are expenses incurred
during the settlement of the estate but not
beyond the last day prescribed by law, or the
extension thereof, for the filing of the estate
tax return.
Items NOT included as Judicial Expenses of
the testamentary and judicial proceedings:
1. Expenditures
incurred
for
the
individual benefit of the heirs,
devisees, legatees
2. Compensation paid to a trustee of the
decedents estate when it appeared
that such trustee was appointed for
the
purpose
of
managing
the
decedents real property for the
benefit of the testamentary heir
3. Premiums paid on the bond filed by
the administrator as an expense of
administration since the giving of a
bond is in the nature of a qualification
for the office and not necessary for
the settlement of the estate.
4. Attorneys fees incidental to litigation
incurred by the heirs in asserting their
respective rights.
CIR VS. CA, CTA AND PAJONAR, G.R. NO. 123206, MARCH
22, 2009
FACTS: Pedro Pajonar was part of the death march by reason of
which he suffered shock and become insane. Sister Josefina
Pajonarbecame guardian over his person, while his property
was placed under the guardianship of the PNB. Pursuant to the
assessment by the BIR, the estate of Pedro Pajonar paid taxes.
Josefina, as administratrix and heir of Pedro Pajonars estate,
filed a protest with the BIR praying that a portion of the estate
tax payment be refunded. The CTA ordered the CIR to refund
Josefina the amount representing erroneously paid estate tax.
Among the deductions from the gross estate allowed by the CTA
were the amounts of the notarial fee for the Extrajudicial
Settlement and the attorneys fees in Special Proceedings for
guardianship. The CIR filed a MR asserting, that the notarial fee

for the Extrajudicial Settlement and the attorneys fees in the
guardianship proceedings are not deductible expenses.
ISSUE: Whether the notarial fee and the attorneys fees may be
allowed as deductions from the gross estate of the decedent?
HELD: Yes, Judicial expenses are expenses of administration.
Administration expenses, as an allowable deduction from the
gross estate of the decedent for purposes of arriving at the
value of the net estate, have been construed to include all
expenses must be essential to the proper settlement of the
estate.
The notarial fee paid for the extrajudicial settlement is clearly a
deductible expense since such settlement effected a distribution
of Pedro Pajonarsestate to his lawful heirs. Similarly, the
attorneys fees paid to PNB for acting as the guardian of Pedro
Pajonars property during his lifetime should also be considered
as a deductible administration expense. PNB provided a detailed
accounting of decedents property and gave advise as to the
proper settlement of the latters estate, which contributed
towards the collection of decedents assets and the subsequent
settlement of the estate.
COLLECTOR V. FISHER, 1 SCRA 93
FACTS: Walter G. Stevenson was born in the Philippines of
British parents, married in Manila to another British subject,
Beatrice. He died in 1951 in California where he and his wife
moved to.
1.
In his will, he instituted Beatrice as his sole heiress to

certain real and personal properties, among which are
210,000 shares of stocks in Mindanao Mother Lode
Mines (Mines).
2.
Ian Murray Statt (Statt), the appointed ancillary

administrator of his estate filed an estate and
inheritance tax return. He made a preliminary return to
secure the waiver of the CIR on the inheritance of the
Mines shares of stock.
Page | 16
ATTY. LIGON
3.
In 1952, Beatrice assigned all her rights and interests in

the estate to the spouses Fisher.
4.
On September 7, 1953, the ancillary administrator filed

an amendment of the estate and inheritance tax return.
This return declared the same assets of the estate
stated in the amended return of September 22, 1952,
except that it contained new claims for additional
exemption and deduction to wit: (1) deduction in the
amount of P4,000.00 from the gross estate of the
decedent as provided for in Section 861 (4) of the U.S.
Federal Internal Revenue Code which the ancillary
administrator averred was allowable by way of the
reciprocity granted by Section 122 of the National
Internal Revenue Code, hence, warranting a refund
from what he initially paid. The collector denied the
claim. He then filed in the CFI of Manila for the said
amount. Pursuant to Republic Act No. 1125, the case
was forwarded to the Court of Tax Appeals.
5.
CTA ruled that (a) the share of Beatrice should be

deducted from the net estate of Walter, (b) the
intangible personal property belonging to the estate of
Walter is exempt from inheritance tax pursuant to the
reciprocity proviso in NIRC, (c) the estate shall be
entitled to a deduction of P2,000.00 for funeral
expenses and judicial expenses of P8,604.39.
ISSUE: Whether or not the estate is entitled to the following

deductions: P8,604.39 for judicial and administration expenses;
P2,086.52 for funeral expenses; P652.50 for real estate taxes;
and P10,0,22.47 representing the amount of indebtedness
allegedly incurred by the decedent during his lifetime.
HELD: The court uphold the action of the lower court in
disallowing the deduction. The approval of the Philippine
probate court of this particular indebtedness of the decedent is
necessary. This is so although the same, it is averred has been
already admitted and approved by the corresponding probate
court in California, situs of the principal or domiciliary

administration. It is true that we have here in the Philippines
only an ancillary administration in this case, but, it has been
held, the distinction between domiciliary or principal
administration and ancillary administration serves only to
distinguish one administration from the other, for the two
proceedings are separate and independent. The reason for the
ancillary administration is that, a grant of administration does
not ex propriovigore, have any effect beyond the limits of the
country in which it was granted. Hence, we have the
requirement that before a will duly probated outside of the
Philippines can have effect here, it must first be proved and
allowed before our courts, in much the same manner as wills
originally presented for allowance therein. And the estate shall
be administered under letters testamentary, or letters of
administration granted by the court, and disposed of according
to the will as probated, after payment of just debts and
expenses of administration. In other words, there is a regular
administration under the control of the court, where claims
must be presented and approved, and expenses of
administration allowed before deductions from the estate can
be authorized. Otherwise, we would have the actuations of our
own probate court, in the settlement and distribution of the
estate situated here, subject to the proceedings before the
foreign court over which our courts have no control. We do not
believe such a procedure is countenanced or contemplated in
the Rules of Court.
Another reason for the disallowance of this indebtedness
as a deduction, springs from the provisions of Section 89,
letter (d), number (1), of the National Internal Revenue
Code which reads:
(d) Miscellaneous provisions (1) No deductions shall be
allowed in the case of a non-resident not a citizen of the
Philippines unless the executor, administrator or anyone
of the heirs, as the case may be, includes in the return
required to be filed under section ninety-three the value
at the time of his death of that part of the gross estate
of the non-resident not situated in the Philippines."
Page | 17
In the case at bar, no such statement of the gross estate

of the non-resident Stevenson not situated in the
Philippines appears in the three returns submitted to the
court or to the office of the petitioner Collector of Internal
Revenue. The purpose of this requirement is to enable the
revenue officer to determine how much of the
indebtedness may be allowed to be deducted, pursuant to
(b), number (1) of the same section 89 of the Internal
Revenue Code which provides:
(b) Deductions allowed to non-resident estates. In the case
of a non-resident 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
(1) Expenses, losses, indebtedness, and taxes. That
proportion of the deductions specified in paragraph (1)
of subjection (a) of this section which the value of such
part bears the value of his entire gross estate wherever
situated;"
The allowable deduction is only to the extent of the
portion of the indebtedness which is equivalent to the
proportion that the estate in the Philippines bears to the
total estate wherever situated. Stated differently, if the
properties in the Philippines constitute but 1/5 of the
entire assets wherever situated, then only 1/5 of the
indebtedness may be deducted. But since, as heretofore
adverted to, there is no statement of the value of the
estate situated outside the Philippines, no part of the
indebtedness can be allowed to be deducted, pursuant to
Section 89, letter (d), number (1) of the Internal Revenue
Code.
For the reasons thus stated, we affirm the ruling of the
lower court disallowing the deduction of the alleged
indebtedness in the sum of P10,022.47.
LACSON VS. REYES, 182 SCRA 729

FACTS:The private respondent, Ephraim Serquina, petitioned
the respondent court for the probate of the last will and
testament of Carmelita Farlin. He also petitioned the court in his
capacity as counsel for the heirs, the herein petitioners, and as
executor under the will. The petition was not opposed and
hence, on November 17, 1987, the respondent court issued a
"certificate of allowance."
1.
Atty. Ephraim Serquina filed a "motion for attorney's

fees" 3 against the petitioners, alleging that the heirs
had agreed to pay, as and for his legal services
rendered, the sum of P68,000.00.
2.
The heirs denied the claim for P68,000.00 alleging that

the sum agreed upon was only P7,000.00, a sum they
had allegedly already paid.
The respondent court rendered its judgement directing
the respondent heirs to pay their lawyer the sum of
P65,000.00 as true and reasonable attorney's fees
which shall be a lien on the subject properties.
On review the petitioners submit that the decision is
null and void because the respondent court gravely
abused its discretion in awarding attorney's fees
contrary to the provisions of Section 7, of Rule 85, of
the Rules of Court.
Atty. Serquina now defends the challenged acts of the
respondent court in collecting attorney's fees, he was
not acting as executor of Carmelita Farlin's last will and
testament because no letters testamentary had in fact
been issued.
3.
4.
5.
ISSUE: Whether the respondent court erred in directing the

heirs to pay their lawyer the sum of P65, 000 as attorneys fees
which shall be a lien on the subject properties.
HELD: Yes
It is pointed out that an attorney who is concurrently an
executor of a will is barred from recovering attorney's fees from
the estate. The Rule is specifically as follows:
Page | 18
ATTY. LIGON
SEC.
7.What expenses and fees allowed executor or

administrator. Not to charge for services as attorney.
Compensation provided by will controls unless
renounced. An executor or administrator shall be
allowed the necessary expenses in the care,
management and settlement of the estate, and for his
services, four pesos per day for the time actually and
necessarily employed, or a commission upon the value
of so much of the estate as comes into his possession
and is finally disposed of by him in the payment of
debts, expenses, legacies, or distributive shares, or by
delivery to heirs or devisees, of two per centum of the
first five thousand pesos of such value, one per centum
of so much of such value as exceeds five thousand
pesos and does not exceed thirty thousand pesos, onehalf per centum of so much of such value as exceeds
thirty thousand pesos and does not exceed one hundred
thousand pesos, and one-quarter per centum of so
much of such value as exceeds one hundred thousand
pesos. But in any special case, where the estate is
large, and the settlement has been attended with great
difficulty, and has required a high degree of capacity on
the part of the executor or administrator, a greater sum
may be allowed. If objection to the fees allowed be
taken, the allowance may be reexamined on appeal.
If there are two or more executors or administrators, the

compensation shall be apportioned among them by the
court according to the services actually rendered by
them respectively.
When the executor or administrator is an attorney, he shall
not charge against the estate any professional fees for
legal services rendered by him.
When the deceased by will makes some other provision for
the compensation of his executor, that provision shall be
a full satisfaction for his services unless by a written

instrument filed in the court he renounces all claim to
the compensation provided by the will. 17
The rule is therefore clear that an administrator or executor
may be allowed fees for the necessary expenses he has
incurred as such, but he may not recover attorney's fees from
the estate. His compensation is fixed by the rule but such
compensation is in the nature of executor's or administrator's
commissions, and never as attorney's fees.
A lawyer of an administrator or executor may not charge

the estate for his fees, but rather, his client. Mutatis
mutandis, where the administrator is himself the counsel
for the heirs, it is the latter who must pay therefor.
SISON VS. TEODORO, 100 PHIL 1055

FACTS: Carlos MoranSison was appointed, without
compensation, as judicial administrator of the estate of
Margarita David. He files a bond of P5,000. Sison included in his
accounting his administration as disbursement items the
premium of the bond as well as the renewal fee thereof.
Teodoro, one of the heirs, objected on the grounds that they
are not necessary expenses of administration and should not be
charged against the estate.
ISSUE: Whether a judicial administrator, serving without
compensation, is entitled to charge as an expense of
administration the premiums paid on his bond?
HELD: No, an expense incurred by an executor or administrator
to produce a bond is not a proper charge against the estate.
The ability to give bond is in the nature of a qualification for
office. The execution and the approval of the bond constitute a
condition precedent to acceptance of the responsibilities of the
trust. It is far-fetched to conclude that the giving of a bond by
an administrator is a necessary expense in the care,
management and settlement of the estate within the meaning
Page | 19
of the law, because these expenses are incurred after the

executor or administrator has met the requirement of the law
and has entered upon the performance of his duties. Moreover,
Sison waived compensation, he cannot now be heard to
complain of the expenses incident to his qualifications.
3) Claims against the Estate for claims against the
estate to
be deductible the following must
concur:
a) At the time of the indebtedness was
incurred the debt instrument was duly
notarized; and
b) If the loan was contracted within 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.
The word claims is generally construed to

mean debts or demands of a pecuniary
nature which could have been enforced
against the deceased in his lifetime and
could have been reduced to simple money
judgments.
Claims against the estate or indebtedness in

respect of property may arise out of:
1. Contract
2. Tort
3. Operation of law
Requisites for deductibility of claims against

the Estate
1. The liability represents a personal
obligation of the deceased existing
at the time of the deceased existing
at the time of his death except:
a. Unpaid obligations incurred
incident to his death such as
unpaid funeral expenses
(i.e. Expenses incurred up
to
the
time
of
the
interment); and
b. Unpaid medical expenses
which are classified under a
different
category
of
deductions
pursuant
to
these Regulations;
2. The liability was contracted in good
faith and for adequate and full
consideration in money or moneys
worth;
3. The claim must be a debt or claim
which is valid in law and enforceable
in court; and
4. The indebtedness must not have
been condoned by the creditor or
the action to collect from the
decedent must not have prescribed.
Substantiation Requirement
All unpaid obligations and liabilities of the
decedent at the time of his death (except
unpaid funeral or medical expenses which
are deductible under a different category)
are allowed as deductions from gross
estate.
Provided,
the
following
requirements/documents are complied with
or submitted:
1. In case of Simple Loan (including
advances):
1. Debt Instrument it must be
duly NOTARIZED at the time the
indebtedness was incurred, such
as promissory note or contract
of loan, except for loans granted
by financial institutions where
notarization is not part of the
business practice/policy of the
financial institution-lender;
2. Notarized Certification duly
notarized
CREDITORS
CERTIFICATION as to the unpaid
balance of the debt, including
interest as of the time of death.
a. Creditor is a corporation,
the
sworn
certification
should be signed by the
Page | 20
ATTY. LIGON
b.
c.
d.
e.
President, or Vice-President,
or other principal officer of
the corporation.
Creditor is partnership, the
sworn certification should be
signed by any of the general
partners.
Creditor is a bank or other
financial institutions, the
Certification
shall
be
executed by the branch
manager
of
the
bank/financial
institution
which
monitors
and
manages the loan of the
decedent-debtor.
Creditor is an individual, the
sworn certification should be
signed by him. In any of
these case, the one who
should certify must not be a
relative of the borrower
within
the
fourth
civil
degree,
either
by
consanguinity or affinity,
except
when
the
requirement
below
is
complied with.
When the lender, or the
President/Vicepresident/principal officer of
the creditor-corporation, or
the general partner of the
creditor-partnership
is
a
relative of the debtor in the
degree mentioned above, a
copy of the promissory note
or other evidence of the
indebtedness must be filed
with
the
RDO
having
jurisdiction
over
the
3.
4.
borrower within fifteen days

from the execution thereof.
Proof of Financial Capacity
proof of CAPACITY of lender or
creditor to lend
Latest audited balance sheet

with a detailed schedule of
its receivable showing the
unpaid
balance
of
the
decedent-debtor.
In case the creditor is an

individual who is no longer
required to file income tax
returns with the Bureau, a
duly notarized Declaration
by creditor of his capacity to
lend at the time when the
loan was granted without
prejudice to verification that
may be made by the BIR to
substantiate
such
declaration of the creditor.
If the creditor is a nonresident,

the
executor/administrator
or
any of the legal heirs must
submit a duly notarized
declaration by the creditor
of his capacity to lend at the
time when the loan is
granted, authentication or
certified to as such by the
tax authority of the country
where
the
non-resident
creditor is resident.
Proof
of
DISPOSITION
of
proceeds of loan from the
executor or administrator if loan
was contracted 3 years before
the death.
Page | 21
2.
3.
If the unpaid obligation arose from

purchase of goods or services:
1. Pertinent
documents
or
contracts
evidencing
the
PURCHASE of goods or services
2. Notarized Certification Duly
notarized Certification from the
creditor as to the unpaid
balance of the debt, including
interest as of the time of death.
3. CERTIFIED TRUE COPY of the
latest audited balance sheet of
the creditor
Where the settlement is made through
the Court in a testate or intestate
proceeding, pertinent documents filed
with the Court evidencing the claims
against the estate, and the Court Order
approving the said claims, if already
issued, in addition to the documents
mentioned in the preceding paragraph
(Sec.6 [A][3], RR 2-2003)
GUITERREZ VS. BARETTO-DATU, 5 SCRA 757

FACTS: Maria Gerardo Vda. deBarretto, owner of hectares
of fishpond lands in Pampanga, leased the same to
appellant Gutierrez for a term to expire on May 1, 1947.
Pursuant to a decision of Department of Public Works
rendered after due investigation the dikes of the
fishponds were opened at several points, resulting in their
destruction and in the loss great quantities of fish inside,
to the damage and prejudice of the lessee.
1.
The lessor having died in 1948 and the corresponding

testate proceeding to settle her estate having been
opened.
2.
Gutierrez filed a claim therein for two items: first, for the
sum of P32,000.00 representing advance rentals he had
to the decedent (the possession of the leased property is

alleged, having been returned to her after the open of the
dikes ordered by the government); and second, the sum
of P60,000.00 as damages in the concept of earned
profits, that is, profits which the claimant failed to realize
because of the breach of the lease contract allegedly
committed by the lessor.
3.
Appellant commenced the instant ordinary civil action in

the CFI of Rizal. The complaint specifically charges
decedent Manila Gerardo Vda. de Barretto, is lessor, was
having violated a warranty in the lease contract again any
damages the lessee might suffer by reason of the claim of
the government that several rivers and creeks of the
public domain were included in the fishponds
4.
Appellant contends that this action is proper against the

executrix. The citation is not in point. The claim therein,
which was filed in the testate proceeding, was based upon
a breach of contract committed by the executrix herself,
in dismissing the claimant as administrator of the
hacienda of the deceased. While the contract was with the
decedent, its violation was by the executrix and hence
personal to her
ISSUE: Whether or not his claim for damages based on

unrealized profits is a money claim against the estate of the
deceased Maria Gerardo Vda. deBarretto within the purview of
Rule 87, Section 5.
HELD: The word "claims" as used in statutes requiring the
presentation of claims 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 and could have been reduced to simple money
judgments; and among these are those founded upon contract.
The claim in this case is based on contract specifically, on a
breach thereof. It falls squarely under section 5 of Rule 87
Page | 22
ATTY. LIGON
"Upon all contracts by the decedent broken during his lifetime,
even though they were personal to the decedent in liability, the
personal representative is answerable for the breach out of the
assets." A claim for breach of a covenant in a deed of the
decedent must be presented under a statute requiring such
presentment of all claims grounded on contract.
The only actions that may be instituted against the

executor or administrator are those to recover real or
personal property from the estate, or to enforce a lien
thereon, and actions to recover damages for an injury to
person or property, real or personal. Rule 88, section 1.
The instant suit is not one of them.
The claim was for indemnity in the form of a certain

quantity ofpalay every year for the unexpired portion of
the term of the
4) Claims against insolvent persons Claims of the

deceased against insolvent persons where the
value of decedents interest therein is included in
the value of the gross estate. Since a claims
against insolvent persons is deductible item, the
insolvency of the debtor or his inability to pay his
debt to the estate of the decedent must be
proven not merely alleged.
Requisites for Deductibility:

a. The full amount of the receivables
be included first in the gross
estate; and
b.
The incapacity of the debtors to

pay their obligation is proven not
merely alleged.
Judicial declaration of insolvency is not

necessary. It is enough that the debtors
liabilities exceeded his assets.
5) Unpaid mortgages, taxes, casualty losses
unpaid mortgages upon, or any indebtedness in
respect to, property where the value of decedents
interest therein, undiminished by such mortgage
or indebtedness, is included in the value of the
gross estate, but not including any income tax
upon income received after the death of the
decedent, or property taxes not accrued before
his death, or any estate tax.
Unpaid Mortgages
1. In all instances:
a. The value of the property
undiminished
by
such
mortgage or indebtedness is
included in the gross estate;
and
b. The mortgage indebtedness
was contracted in good faith
and for an adequate and full
consideration in money or
moneys worth
2. In case unpaid mortgage payable is
being claimed by the estate,
verification must be made as to who
was the beneficiary of the loan
proceeds;
3. If the loan is found to be merely an
accommodation loan where the loan
proceeds went to another person,
the value of the unpaid loan must
be included as receivable of the
estate; and
4. If there is a legal impediment to
recognize the same as receivable of
Page | 23
the
estate,
said
unpaid
obligation/mortgage payable shall
not be allowed as a deduction from
the gross estate. (Section 86(A)(1)
(e), NIRC)
Taxes
Deductible Taxes:
1. Income taxes upon income received
before the decedents death
2. Property taxes which accrue before
the decedents death
Taxes NOT deductible:

1. Income tax on income received
after death
2. Property tax not accrued before
death
3. Estate
tax
due
from
the
transmission of his estate.
Losses
Losses are allowed as deductions from the gross
estate of a Filipino citizen whether resident
or non-resident and resident alien allowed
provided that they:
1. Were incurred during the settlement
of the estate
2. Arise from fire storm, shipwreck, or
other casualties, or robbery theft or
embezzlement;
3. Are not compensated by insurance
or otherwise;
4. Are not claimed as deduction in the
ITR of the estate at the time of the
filing of the return; and
5. Occur not later than the last day for
payment of the estate tax (last day
to pay: six months after the
decedents death)
b) Property Previously Taxed it is the deduction
allowed from the gross estate of citizens, resident
aliens and non-resident estates for properties which

were previously subject to donors or estate taxes.
Concept/Purpose: To minimize the effect of

taxing twice the same property within a
period of 5years. Thus, minimizing or avoiding
double taxation.
It is called vanishing deduction because the

amount allowed as deduction in the long run
is decreasing. The longer the period of
interval, the lower the rate or percentage
allowed.
Rate of deduction the rate is dependent

upon the period of interval between 2
incidents, namely:
1. The date of death of present decedent
and the date of death of prior decedent if
the property previously taxed was
acquired or received by inheritance; or
2. The date of death of present decedent
and the date of gift, if the property
previously taxed was acquired or received
by donation.
If the period of interval is
More than
But not more than
0
1 year
1 year
2 years
2 years
3 years
3 years
4 years
4 years
5 years
5 years
REQUISITES:
1.
2.
The present decedent died within 5

years from the receipt of the property
from the prior decedent or donor;
The property on which vanishing
deduction is being claimed is located
within the Philippines
Page | 24
Percenta
ATTY. LIGON
3.
4.
5.
6.
The property formed part of the taxable

estate of the prior decedent or of the
taxable gift of the donor;
The estate tax in the prior succession or
donors tax on the gift must have been
finally determined and paid
The property on which the vanishing
deduction is taken must be identified as
the one received or acquired; and
No vanishing deduction was allowed on
the same property on the prior
decedents estate.
3.
4.
5.
Formula for Computing vanishing deduction

Value of property previously taxed
Less: Mortgage debt paid, if any (first
deductions)
_____________________________________
First basis
6.
Value of gross estate of the present decedent

Less: Expenses
_____________________________________
Second deduction
First basis
Less: Second deduction
_____________________________________
Second basis
Multiplied by 100%, 80%, etc. (as the case maybe)
_____________________________________
Vanishing deduction
Conditions for deductibility:

1. The gift or estate tax imposed were
finally determined and paid by or in
behalf of such donor or estate of such
prior decedent;
2. The deduction allowed is only in the
amount finally determined as the value
of such property in determining the
7.
c)
value of the gift, or the gross estate of

such prior decedent;
Only to the extent that the value of
such property is included in the
decedents gross estate;
Only if in determining the value of the
estate of the prior decedent, no
deduction was allowed for property
previously taxed in respect of the
property of properties given in exchange
therefore;
Where a deduction was allowed of any
mortgage or lien in determining the gift
tax, or the estate tax of the prior
decedent, which were paid in whole or
in part prior to the decedents death,
then the deduction allowable for
property previously taxed shall be
reduced by the amount so paid;
Such deduction allowable shall be
reduced by an amount which bears the
same ratio to the amounts allowable as
deductions
for
expenses,
losses,
indebtedness, taxes, and transfers for
public use as the amount otherwise
deductible for property previously taxed
bears to the value of the decedents
estate; and
Where the property referred to consists
of two or more items, the aggregate
value of such items shall be used for the
purpose of computing the deduction.
Transfers for Public Use

1. The disposition is in a last will and testament
2. To take effect after death
3. In favor of the Government of the Philippines
or any political subdivision thereof;
4. For exclusive Public purposes; and
Page | 25
5.
The value of the property given is included in

the gross estate.
The transfer also contemplates bequest, devices
or transfer to social welfare, cultural and
charitable institutions.
d) Family Home The dwelling house, including the

land where it is situated where the married person
or an unmarried head of the family and his family
resides.
Family home is deemed constituted on the

house and lot from the time it is constituted
as a family residence and is considered as
such as long as any of the beneficiaries
actually resides therein.
Requisites:
1. The family home must be the actual
residential home of the decedent
and his family at the time of his
death, as certified by the Barangay
Captain of the locality where the
family home is situated;
2. The total value of the family home
must be included as part of the
gross estate of the decedent; and
3. Allowable deduction must be in the
amount equivalent to:
a. the current FMV of the family
home as declared or included in
the gross estate, or
b. the extent of the decedents
interest
(whether
conjugal/community
or
exclusive property), whichever
is lower, but not exceeding
P1,000,000.
NOTE: The estates of non-resident decedents are not
allowed to avail the family home deduction because
they do not have a family home in the Philippines
since they are non-residents. For purposes of availing
the family home deduction to the extent allowable a
person may constitute only one family home.
NOTE: Actual occupancy of the house or house and lot

as the family residence shall not be considered
interrupted or abandoned in such cases as the
temporary absences from the constituted family home
due to travel or studies or work abroad, etc. The
family home is generally characterized by permanency
e) Standard Deduction
Amount of the standard deduction P1 million,
without need of any substantiation (Sec. 86(A)(5))
Note: Nonresident estates are not entitled to standard
deduction because it is not among those
enumerated under Sec. 86(b) of the NIRC.
f)
Medical Expenses
Requisite for Deductibility:
1. Medical expenses incurred by the decedent
2. Incurred within 1 year prior to the decedents
death
3. Must be substantiated with receipts; and
4. Shall not exceed 500,000 whether paid or
unpaid.
NOTE: Any amount of medical expenses incurred within

1 year from the decedents death in excess of P500, 000
shall no longer be allowed as deduction. Neither can any
unpaid amount thereof in excess of the P500,000
threshold nor any unpaid amount for medical expenses
incurred prior to the 1 year period from date of death
shall be allowed to deducted from the gross estate as
claim against the estate. (Sec. 86 (A)(6))
g) Amount Received by Heirs under RA 4917 any
amount received by the heirs from the decedent
employee as a consequence of the death of the
decedent-employee as a consequence of the death
of the decedent-employee in accordance with RA
4917: Provided, that such amount is included in the
gross estate of the decedent
Requisites:
Page | 26
ATTY. LIGON
1.
2.
3.
4.
The decedent-employee has been employed

for at least 10 years
Not less than 50 years old at the time of his
retirement
Must have availed of this benefit only once
The benefits granted must be in accordance
with a reasonable private benefit plan
maintained by the employer duly approved by
the BIR
2. NON-RESIDENT S86(B) & (D)

a) Expenses, Losses, Indebtedness and Taxes
1. Funeral expenses
2. Judicial Expenses for testamentary or
intestate proceeding
3. Claims against the estate
4. Claims against insolvent persons included
in the gross estate
5. Unpaid mortgages or indebtedness upon
the property
6. Unpaid taxes
7. Losses incurred during the settlement of
the estate
b) Property Previously Taxed (Vanishing deduction) In case of a non-resident alien decedent, the
property involved must be located within the
Philippines and is included in the gross estate.
c)
Transfers for Public Use the property transferred

must be located within the Philippines and
included in the gross estate.
F. VALUATION
DETERMINATION OF THE VALUE OF THE ESTATE (Sec 88)
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.
b. Properties. - The estate shall be appraised at its fair
market value (FMV) 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:
i. The FMV as determined by the
Commissioner, or
ii. The FMV as shown in the schedule of
values fixed by the Provincial and City
Assessors.
PERSONAL PROPERTY FMV at the time of death.
In the case of SHARES OF STOCKS, the FMV shall depend on
whether the shares are LISTED or UNLISTED in the STOCK
EXCHANGE.
1.
UNLISTED SHARES
Unlisted common shares are valued based on their
book value.
b. Unlisted preferred shared are valued at par value.
In determining the book value of common shares,
appraisal surplus shall not be considered and the value
assigned to preferred shares, if there are any.
2. LISTED SHARES FMV shall be the arithmetic mean
between the highest and lowest quotation at a date
nearest the date of death, if none is available on the date
of death itself.
a.
KINDS OF PROPERTY:
1) By Nature:
a. Real or immovable property.
b. Personal property, tangible or intangible.
2) By Ownership:
a. Exclusive capital or paraphernal property.
b. Conjugal or community property.
PERSONAL PROPERTIES:
1) Shares of stocks, bonds and securities.
Page | 27
2) Interest in partnerships, business or industry.

3) Cash on hand and in banks.
4) Machineries, transportation equipments, farm
implements, tools, farm animals, etc.
5) Antiques, jewelry, silverware, paintings, etchings,
engravings,
3) books, statues, vases, oriental rugs, collection of stamps
and coins.
6) Household furnitures, fixtures, appliances and other
personal effects.
7) Usufruct, annuities, use or habitation.
8) Mortgage notes, participation certificates, judgements,
obligations and action which have for their object
movables or demandable sums.
9) Goodwill, patents, and trademarks.
The following shall not be taxed:
1.
The merger of usufruct in the owner of the naked title;
2.
The transmission or delivery of the inheritance or legacy
by the fiduciary heir or legatee to the fideicommisary;
3.
The transmission from the first heir, legatee or donee in
favor of another beneficiary, in accordance with the desire
of the predecessor; and
4.
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 no more than 30% of
the said bequests, devises, legacies or transfers shall be
used by such institutions for administration purposes
5.
Bequests to be used actually, directly, and exclusively for
educational purposes under Art. XIV , Sec 4 (4) of the
Constitution.
6.
Exemptions under reciprocity clause.
7.
Exemptions under special laws such as:
a
Capital of the surviving spouse under sec. 85 (H)
of the NIRC.
b
If the net estate if P200,000 or below under sec.
84 of the NIRC
c
Benefits received from SSS under PD 1161 as
amended, or GSIS under PD 1146, as amended.
d
Benefits received from the US Veterans
Administration under RA 360 or war benefits
under RA 227
LORENZO VS. POSADAS, 64 PHIL 353

FACTS: Thomas Hanley died, leaving a will and considerable
amount of real and personal properties.
His will provided that 10 years after his death, his

nephew would become owner of his properties.
Plaintiff Lorenzo was appointed as trustee.
During plaintiffs incumbency as trustee, CIR, alleging

that the estate left by the deceased at the time of his
death consisted of realty and personalty, assessed
against the estate an inheritance tax.
The defendant prayed that the trustee be ordered to

pay the Government the inheritance tax together with
the penalties for delinquency in paying such tax.
The trustee, plaintiff Lorenzo, paid under protest and

however, he demanded that he be refunded for the
amount paid. The defendant overruled plaintiffs protest
and refused to refund the amount.
ISSUE: Should the inheritance be computed on the basis of the
value of the estate at the time of the testators death or on its
value 10 years later?
HELD: BASED OF THE VALUE OF THE ESTATE AT THE TIME OF
THE TESTATORS DEATH
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 value 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.
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.
COLLECTOR VS. FISHER, 1 SCRA 93
Page | 28
ATTY. LIGON
FACTS: This case relates to the determination and settlement of
PARCELS OF LAND IN BAGUIO YES.
the hereditary estate left by the deceased Walter Stevenson
The properties are required to be appraised at their fair
who was born in the Philippines of British parents and
market value and the assessed value thereof shall be
married in Manila to another British. Walter died in 1951
considered as the fair market value only when evidence
in the U.S. where he established permanent residence.
to the contrary has not been shown.
In his will executed in San Francisco, Stevenson

It must be noted that 1 year after decedent's death the said
instituted his wife as his sole heiress to the following
properties were sold for a price of P72,000.00. Even more, the
real and personal properties acquired by the spouses
counsel for plaintiffs admitted that he was willing to purchase
while residing in the Philippines:
the said properties at P2.00 per square meter. In the light of
Real Property 2 parcels of land
P43,500.00
these facts we believe and therefore hold that the valuation of
in Baguio
P52,200.00 of the real estate in Baguio made by defendant is
Personal Property
fair, reasonable and justified in the premises." It is of common
(2) 210 shares of stock in
P79,800.00
knowledge, and this Court can take judicial notice of it, that
Mindanao Lode Mines
assessments for real estate taxation purposes are very
Inc at P0.38 per share
much lower than the true and fair market value of the
properties at a given time and place.
The administrator filed a preliminary estate and
inheritance tax return with the reservation of having the

properties appraised at their values six months after the
death of Stevenson.
Acting upon said return, the CIR increased the
appraisal of the two parcels of land located in
Baguio City by fixing their fair market value in the
amount of P52.200.00, instead of P43,500.00.
The ancillary administrator filed in amended estate and
inheritance tax return
In this amended return the valuation of the 210,000
shares of stock in the Mindanao Mother Lode Mines, Inc.
was reduced from 0.38 per share to P0.20 per share.
This change in price per share of stock was based
by the ancillary administrator on the market
notation of the stock obtaining at the San
Francisco California Stock Exchange six months
from the death of Stevenson.
ISSUE: WON the real estate properties of the decedent located

in Baguio City and the 210,000 shares of stock in the Mindanao
Mother Lode Mines, Inc., were correctly appraised?
HELD:
SHARES OF STOCK IN MINDANAO MOTHER LODE NO

Respondents contend that their value should be fixed on the
basis of the market quotation obtaining at the San Francisco
(California) Stock Exchange, on the theory that the certificates
of stocks were then held in that place and registered with the
said stock exchange. We cannot agree with respondents'
argument.
The situs of the shares of stock, for purposes of taxation,
being located here in the Philippines, their fair market
value should be taxed on the basis of the price prevailing
in our country.
Upon the other hand, we find merit in respondents' other
contention that the said shares of stock commanded a
lesser value at the Manila Stock Exchange six months
after the death of Stevenson. Through Atty. Allison Gibbs,
respondents have shown that at that time a share of said stock
was bid for at only P.325. In the absence of evidence to the
contrary, we are, therefore, constrained to reverse the Tax
Court on this point and to hold that the value of a share in
the said mining company on August 22, 1951 in the
Philippine market was P.325 as claimed by respondents.
Page | 29
DIZON VS. CTA and CIR, G.R. NO 140944 (2008)

FACTS: In 1987, Jose died. Dizon was appointed as
Administrator. Dizon filed the required estate tax return
showing therein ZERO estate tax liability.
Petitioner requested the probate court's authority

to sell several properties forming part of the
Estate, for the purpose of paying its creditors.
HOWEVER, BIR issued a deficiency estate tax

assessment.
The petitioner claims that in as much as the valid claims

of creditors against the Estate are in excess of the gross
estate, no estate tax was due. On the other hand,
respondents argue that since the claims of the Estates
creditors have been condoned, such claims may no
longer be deducted from the gross estate of the
decedent.
ISSUE: WON the actual claims of 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
HELD: Yes.
Following the US Supreme Courts ruling in Ithaca Trust Co. v.
United States, the Court held that post-death developments
are not material in determining the amount of
deduction. This is because estate tax 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 the that time. This is the date-of-death
valuation rule.
The Court, in adopting the date-of-death valuation principle,
explained that: First. There is no law, nor do we discern any
legislative intent in our tax laws which disregards the date-ofdeath valuation principle and particularly provides that postdeath 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. 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. Therefore, the claims existing at the time of
death are significant to, and should be made the basis of, the
determination of allowable deductions.
G. COMPUTATION OF ESTATE TAX (Sec 84)

RATES OF ESTATE TAX (Sec 84)
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 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
BUT NOT
OVER
P200,000
P 500,000
2,000,000
5,000,000
10,000,000
P 200,000
P 500,000
2,000,000
5,000,000
10,000,000
AND OVER
TAX SHALL
BE
PLUS
EXEMPT
P0
15,000
135,000
465,000
1,215,000
-5%
8%
11%
15%
20%
OF THE
EXCESS
OVER
P200,000
500,000
2,000,000
5,000,000
10,000,000
10,000,000
H. PROPERTY RELATIONSHIP BETWEEN SPOUSES

1.
2.
3.
Conjugal partnership of gains married before August 3,

1988
Absolute community
Complete separation of property
Page | 30
ATTY. LIGON
4.
Marriage settlement (Art. 65, CC)
Art. 75. The future spouses may, in the marriage settlements,

agree upon the regime of absolute community, conjugal
partnership of gains, complete separation of property, or any
other regime. In the absence of a marriage settlement, or when
the regime agreed upon is void, the system of absolute
community of property as established in this Code shall govern.
CONJUGAL
PARTNERSHIP
OF GAINS (CPG)
1.
2.
3.
4.
5.
6.
Property acquired
during marriage by
onerous title trough
common fund
Property obtained from
labor, industry, work or
profession of either of
both spouses
Fruits, natural,
industrial or civil
received during the
marriage from the
common property
Property acquired
during the marriage by
gratuitous title
(inheritance or
donation)
Property bought to the
marriage as his or her
own
Fruits from the
exclusive property
Conjugal
ABSOLUTE
COMMUNITY OF
PROPERTY
(ACP)
Communal
Conjugal
Communal
Conjugal
Exclusive
(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.
The capital of the surviving spouse of a decedent

shall not be deemed part of his or her gross estate
SIMPLIFIED
CONJUGAL/COMMUNAL
PROPERTIES
xx
ADD: EXCLUSIVE properties of the

decedent
xx
Gross estate
xx
Exclusive
Exclusive
Communal
Conjugal
Eclusive
I. PROPERTY OF SURVIVING SPOUSE

EXCLUSION (Sec 85.H)
Communal
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
DEDUCTION (Sec 86.C)

Computation of Net Estate. - For the purpose of the tax
imposed in this Chapter, the value of the net estate shall be
determined:
(C) Share in the Conjugal Property. - 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.
COLLECTOR VS. FISHER, 1 SCRA 93
Page | 31
FACTS: This case relates to the determination and settlement of

the hereditary estate left by the deceased Walter Stevenson
who was born in the Philippines of British parents and
married in Manila to another British. Walter died in 1951
in the U.S. where he established permanent residence.
In his will executed in San Francisco, Stevenson

instituted his wife as his sole heiress to the real and
personal properties acquired by the spouses while
residing in the Philippines.
The court held that share of the surviving spouse in

the conjugal partnership property should be deducted
from the net estate of the deceased Walter pursuant to
Section 89-C of the National Internal Revenue Code
ISSUE: WON in determining the taxable net estate of the
decedent, of the net estate should be deducted therefrom as
the share of tile surviving spouse in accordance with our law on
conjugal partnership
HELD: Yes.
The law determinative of the property relation of the
Stevensons, married in 1909, would be the English law
even if the marriage was celebrated in the Philippines,
both of them being foreigners.
But, as correctly observed by the Tax Court, the pertinent
English law that allegedly vests in the decedent husband
full ownership of the properties acquired during the
marriage has not been proven by petitioner. Except for a
mere allegation in his answer, which is not sufficient, the record
is bereft of any evidence as to what English law says on the
matter. In the absence of proof, the Court is justified,
therefore, in indulging in what Wharton calls "processual
presumption," in presuming that the law of England on this
matter is the same as our law.
A reading of Article 10 of the old Civil Code, which incidentally
is the one applicable, shows that it does not encompass or
contemplate to govern the question of property relation
between spouses. Said article distinctly speaks of amount of
successional rights and this term, properly refers to the extent
or amount of property that each heir is legally entitled to inherit

from the estate available for distribution. It needs to be pointed
out that the property relation of spouses, as distinguished from
their successional rights, is governed differently by the specific
and express provisions of Title VI, Chapter I of our new Civil
Code (Title III, Chapter I of the old Civil Code.)
We, therefore, find that the lower court correctly deducted the
half of the conjugal property in determining the hereditary
estate left by the deceased Stevenson.
J. TAX CREDIT FOR ESTATE TAX (Sec 86.E)

TAX CREDIT FOR ESTATE TAXES PAID TO A FOREIGN
COUNTRY (Sec 86.E)
(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.
ESTATE TAX CREDIT It is a remedy against international
double taxation to minimize the onerous effect of taxing the
same property twice.
WHO MAY AVAIL TAX CREDITS?
Only the estate of a citizen or a resident alien at the time of
death can claim tax credit for any estate taxes paid in a foreign
country.
Page | 32
ATTY. LIGON
WHAT AMOUNT OF TAX CREDIT MAY BE CLAIMED
(LIMITATION ON TAX CREDIT)
1. 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 decedents
net estate situated within such country taxable under the
NIRC bears to his entire net estate (per country
limitation/basis); and
2. The total amount of the credit shall not exceed the same
proportion of the tax against which such credit is taken,
which the decedents net estate situated outside the
Philippines taxable under the NIRC bears to his entire net
estate (global limitation/overall basis)
PER COUNTRY LIMITATION
NET ESTATE (per foreign country)
ENTIRE GROSS ESTATE
a.
The substitution must not go beyond one

degree from the heir originally instituted
b. The fiduciary or the first heir and the
fideicommissary must be both living at the time
of death of the testator
EXAMPLE: X dies and leaves in his will a lot to his brother
Y, who is entrusted with the obligation to transfer the lot
to Z, a son of X, when Z reaches legal age. Y is the
fiduciary heir and Z is the fideicommissary. The transfer
from X to Y is subject to estate tax. But the transmission
or delivery to Z upon reaching legal age shall be exempt
from estate tax.
3.
The transmission from the first heir, legatee or donee in

favor of another beneficiary, in accordance with the desire
of the predecessor
4.
All bequests, devises, legacies, or transfers to social

welfare, cultural and charitable institutions. Provided:
a. No part of the net income of which inures to the
benefit of any individual; and
b. Not more than 30% of the said bequests,
devises, legacies or transfers shall be used by
such institutions for administration purposes
x PHIL. MAX. AMOUNT OF CREDIT
GLOBAL LIMITATION
NET ESTATE (from all foreign countries) x PHIL. MAX. AMOUNT OF CREDIT
ENTIRE GROSS ESTATE
L. ADMINISTRATIVE REQUIREMENTS
K. EXEMPTION OF CERTAIN ACQUISITIONS (Sec 87)
EXEMPTIONS FOR ESTATE TAX (Sec 87)
1. The MERGER of usufruct in the owner of the naked title
EXAMPLE: Y died leaving a condominium unit, the naked title
belongs to W and usufruct to F, then F died after 2 years.
Upon the death of F, the usufruct shall merge into the
owner of the naked title W who shall become the absolute
owner of the said condominium unit. The transfer from F
to W is exempt from estate tax
2.
The transmission or DELIVERY of the inheritance or legacy

by the fiduciary heir or legatee to the fideicommissary,
provided that:
NOTICE OF DEATH (Sec 89)

1. Transfers subject to death
2. Even if exempt from tax, if gross value of estate exceeds
P20,000
Q: When must notice of death be filed?
A: Within 2 months (60 days) after the decedents death or
within the same period after qualifying as executor or
administrator.
A certified copy of the schedule of partition and the order of the
court approving the same shall be furnished the CIR within 30
days after promulgation of such order.
Page | 33
Q: Who must file the notice of death?

A: The executor, administrator, or any legal heir
Q: To whom must notice of death be filed?
A: To the CIR
ESTATE OF THE LATE JULIANA DIEZ VDA DE GABRIEL V.
CIR, G.R. NO 155541 (2004)
FACTS: During the lifetime of decedent Juliana Diez, her
business affairs were managed by Philtrust. The decedent died
on April 3, 1979. Two days after her death, Philtrust filed her
income tax return for 1978. The return did not indicate that the
decedent had died.
1. Philtrust filed a petition before the probate court to be
appointed as special administrator however the probate
court denied the petition.
2. Subsequently, BIR
conducted
an
administrative
investigation on the decedents tax liability and found a
deficiency income tax for the year 1977. As such, BIR
sent a demand letter and assessment notice addressed
to the decedent c/o Philtrust.
3. No response was made by Philtrust. BIR was not
informed that the decedent had actually passed away
4. Thereafter, CIR issued warrants of distraint and levy to
enforce collection of the decedents deficiency income
tax liability. Respondent filed a Motion for Allowance of
Claim and for an Order of Payment of Taxes.
5. The estate of the decedent filed a formal opposition to
BIRs motion based on the ground that there was no
proper service of the assessment and that the filing of
the claim had already prescribed.
6. BIR contended that service to Philtrust was sufficient
service and that the filing of the claim against the
estate on November 22, 1984 was within the 5-year
prescriptive period for assessment and collection of
taxes. CIR argued that Philtrust had been remiss in not
notifying respondent of the decedent.
7. CA held in favor of respondent, citing that the
administrator of the Estate had failed in its legal duty to
inform respondent CIR of the decedents death pursuant
8.
to Sec 104. Consequently, BIRs service to Philtrust of

the demand letter was binding upon the Estate, and
upon the lapse of the 30-day period to question its
claim, the assessment had become final and executory.
Petitioner Estate argues that Philtrust does not have
any legal personality to represent the decedent after
her death. As such, there was no proper notice of the
assessment which, therefore never became final and
executory.
ISSUE:WON service on Philtrust of the demand letter and

assessment notice was valid service on petitioner and WON
Philtrusts inaction could bind petitioner
HELD: No. It must be emphasized that the relationship between
the decedent and Philtrust was one of agency, which is a
personal relationship between agent and principal. Under Art
1919(3) NCC, death of the agent or principal automatically
terminates the agency. In this case, the death of the decedent
on April 3, 1979 automatically severed the legal relationship
between her and Philtrust and could not be revived by the mere
fact that Philtrust continued to act as her agent when it filed her
ITR for the year 1978. Since the relationship between
Philtrust and decedent was automatically terminated
upon the latters death, none of Philtrusts acts or
omission could bind the Estate of the taxpayer. Service
on Philtrust was improperly done. Moreover, Philtrust
was never appointed as administrator of the estate.
Although the administrator of the Estate may have been remiss
in his legal obligation to inform CIR of the decedents death, the
consequences of such failure as provided in Sec 119 NIRC
merely refer to the imposition of penal sanctions on the
administrator. These do not include the tolling of the
prescriptive period for making deficiency tax assessments or
the waiver of notice requirement for such assessments.
Since there was never any valid notice of assessment, it
could not have become final, executory and
Page | 34
ATTY. LIGON
incontestable, and failure to make th assessment within
the 5-year period as provided, CIRs claim against the
petitioner Estate is barred as provided in Sec 18 NIRC.
CIR argues that an assessment is deemed made for the
purpose of giving effect to such assessment when notice is
released, mailed or sent to the taxpayer to effectuate the
assessment, and there is no legal requirement that the
taxpayer actually receive said notice within the 5-year period. It
must be noted, however, that the rules require that the
notice be sent to the taxpayer. Although there is no
specific requirement that the taxpayer should receive the
notice within the said period, due process requires that
at the very least such notice be actually be received.
ESTATE TAX RETURNS
WHO SHALL FILE
1. Executor
2. Administrator
3. Any legal heir
WHEN TO FILE
1. In cases of:
a. Transfers subject to tax
b. Where the gross value of estate exceeds P200,000
c. Where estate consists of registered or registrable
property, regardless of amount (Sec 90.A)
2. Within the period of 6 months from the decedents death
(Sec 90.B)
3. Extension to file an estate tax return is allowed in
meritorious cases but not to exceed 30 days (Sec 90.C)
WHERE TO FILE
1. IF IT IS A RESIDENT DECEDENT To an authorized agent
bank, RDO, Collection Officer, or duly authorized
Treasurer in the city or municipality where the decedent
was domiciled at the time of his death, or to the Office of
CIR (if decedent has no legal residence in the Philippines)
2.
IF IT IS A NON-RESIDENT DECEDENT To the RDO, or to

the Office of CIR (Sec 90.D)
CONTENTS OF ESTATE TAX RETURN

Must be under OATH and shall contain the following:
1. The VALUE of the gross estate of the decedent at the time
of his death or in case a non-resident, not a citizen of the
Philippines (NRA), the part of his gross estate situated in
the Philippines
2. The DEDUCTIONS allowed from the gross estate in
determining the estate
3. Such part of the information as may at the time be
ascertainable and such supplemental data as may be
necessary to ESTABLISH correct taxes (Sec 90.A)
REQUIREMENTS IN CASE GROSS ESTATE EXCEEDS P2 MILLION
The estate tax return shall be accompanied by a statement
which is certified by an independent CPA which shall contain the
following:
1. Itemized assets of the decedent with its corresponding
gross value at the time of his death, or in case of a nonresident, not a citizen of the Philippines (NRA), the part of
his gross estate situated in the Philippines
2. Itemized deduction from the gross estate; and
3. The amount of the tax whether paid or still due and
outstanding (Sec 90.A)
NOTICE OF DEATH AND ESTATE TAX RETURN (ETR)

DISTINGUISHED
NOTICE OF DEATH
ESTATE TAX RETURNS (ETR)
CONDITIONS REQUIRED FOR ITS APPLICATION
1. In all cases of transfers 1. Transfers subject to tax
subject to tax
where gross value of estate
2. Where though exempt from
EXCEEDS P200,000
tax, the gross estate value 2. Where estate consists of
of the estate EXCEEDS
registered
or
registrable
P20,000
property,
regardless
of
amount
WHO FILES
Page | 35
1.
2.
3.
CIR
Executor
Administrator
Any of the legal heirs
WHERE TO FILE
1. RESIDENT DECEDENT
a. Authorized bank agent
b. Revenue District Officer
c. Duly
authorized
City
or
Municipal Treasurer of the
place
of
the
decedents
residence at the time of his
death or any other place where
CIR permits the estate tax
return to be filed (Sec 90.D)
2.
NON-RESIDENT DECEDENT With

the CIR
a. In case of non-resident citizen
(NRC) or non-resident alien
(NRA)
with
executor
or
administrator
in
the
Philippines, the ETR together
with TIN is filed with the RDO
b. In case the executor or
administrator is not registered
the ETR together with the TIN
filed with the RDO having
jurisdiction over the executor
or
administrators
legal
residence
c. In the absence of an executor
or
administrator
in
the
Philippines the ETR together
with the TIN shall be filed
before RDO 39-South Quezon
City
d. Any other place where the CIR
permits the ETR to be filed
(Sec 90.D)
PERIOD OF FILING
Within 2 months (60 days)
Within 6 months from the
after the decedents death or
decedents death, except in
within the same period after

qualifying as executor or
administrator
meritorious cases where the

CIR may grant a reasonable
extension not exceeding 30
days
PAYMENT OF ESTATE TAX (Sec 91)

Q: When must the taxpayer pay the estate tax?
A: Upon filing, under the Pay as you file system
Q: May an extension to pay estate tax be granted?
A: Yes, if the CIR finds that such payment would impose undue
hardships upon the estate or any heir and shall:
(1) Not exceed 5 years in case of judicial settlement
(2) Not exceed 2 years in case of extrajudicial settlement
REQUISITES FOR GRANTING EXTENSION TO PAY ESTATE TAX
1. The request for extension must be filed before the
expiration of the original period to pay which is within 6
months from death
2. There must be a finding that the payment on the due date
of the estate tax would impose undue hardship upon the
estate or any of the heirs
3. The extension must be for a period not exceeding 5 years
if the estate is settled judicially, or 2 years if settled
extrajudicially; and
4. The Commissioner may require the posting of a bond in
an amount not exceeding the amount of tax to secure the
payment thereof
Q: Remedios, a resident citizen, died on November 10,
2006. She died leaving 3 condominium units in Quezon
City valued at 5 million each. Rodolfo was her only heir.
He reported her death on December 6, 2006 and filed the
estate tax return on March 30, 2007. Because he needed
to sell unit of the condominium to pay for the estate tax,
he asked the CIR to give him one year to pay the estate
tax due. The CIR approved the request of extension of
time provided that the estate tax be computed on the
basis of the value of property at the time of payment of
tax.
Page | 36
ATTY. LIGON
(1) Does CIR have the power to extend the payment
of estate tax?
(2) Does the condition that the basis of the estate tax
will be the value at the time of the payment have
legal basis?
A:
(1) Yes, the CIR may allow an extension of time to pay the
estate tax if the payment on the due date would impose
undue hardship upon the estate or any of the heirs. The
extension in any case, will not exceed 2 years if the
estate is under extrajudicial settlement, or 5 years if
the it is under judicial settlement. The CIR may require
the posting of a bond to secure the payment of tax.
(Sec 91.B)
(2) No. The valuation of properties comprising the estate of
a decedent is the FMV at the time of death. No other
valuation date is allowed by law (2007 Bar Question).
EFFECTS OF GRANTING EXTENSION TO PAY ESTATE TAX
1. The amount shall be paid on or before expiration of the
extension and running of the statute of limitations for
assessment shall be suspended for the period of any such
extension
2. The CIR may require a bond not exceeding double the
amount of the tax and with such sureties as the CIR
deems necessary when the extension of payment is
granted
3. Any amount paid after the statutory due date of the tax,
but within the extension period, shall be subject to
interest but not to surcharge (Sec 91.B)
Q: What are the instances where the request for
extension of time to pay estate tax should be denied?
A: No extension IF there is:
(a) Negligence
(b) Intentional disregard of rules and regulations
(c) Fraud
WHO SHALL PAY ESTATE TAX

1. The executor or administrator, before delivery to any
beneficiary of his distributive share
2. The beneficiary, to the extent of his distributive share in
the estate, shall be subsidiarily liable for the payment of
such portion of the estate tax as his distributive share
bears to the value of the total net estate
CIR V. GONZALES, 18 SCRA 757
FACTS: Matias Yusay, died intestate on May 13, 1948, leaving 2
heirs: Jose Yusay Gonzales, a legitimate child and Lilia Yusay,
an acknowledged natural child. Jose was subsequently
appointed as administrator
1. Jose Yusay filed with BIR an estate and inheritance return
declaring the properties of the decedent, however the
return mentioned no heir
2. Upon investigation, BIR discovered that the Estate Tax
Return did not indicate all the properties owned by the
decedent. Based on its findings, BIR assessed estate and
inheritance taxes in the amount of P6,849.78 and
P16,970.63 respectively.
3. Jose Yusay requested an extension of time within which to
pay the tax. He posted a surety bond to guarantee
payment of the taxes in question within 1 year. CIR,
however, denied the request.
4. No payment having been made despite repeated
demands, CIR filed proof of claim for the estate and
inheritance due and a motion of allowance with the
settlement court.
5. Petitioner Gonzales disputed the legality of the
assessment, claiming that the right to make the same
had prescribed inasmuch as more than 5 years had
elapsed since the filing of the estate and inheritance tax
on May 11, 1949.
ISSUE: Has the right of CIR to assessment the estate and
inheritance taxes in question prescribed?
Page | 37
HELD: No. The return filed in this case was so deficient

that it prevented CIR from computing the taxes due on
the estate because: (1) It was incomplete as it did not
declare all the properties owned by the decedent; and
(2) the return mentioned no heir. It was as though no
return was made. The CIR had to determine and assess the
taxes on data obtained, not from the return, but from other
sources. As such, the return in question was no return at all as
required in Sec 93 Tax Code.
The law imposes upon the taxpayer the burden of supplying by
the return the information upon which an assessment would be
based. His duty complied with, the taxpayer is not bound to do
anything more than to wait for the CIR to assess the tax.
However, he is not required to wait forever. Sec 331 Tax Code
gives the Commissioner 5 years within which to make his
assessment. Except if the taxpayer failed to observe the
law, in which case Sec 332 grants the CIR a longer
period. Non-observance consists in filing a false or
fraudulent return with intent to evade the tax or in filing
no return at all.
VERA V. NAVARRO, 79 SCRA 408
FACTS: Elsie Gaches died on March 9, 1966 without a child. The
deceased however left a will disposing her properties.
Respondent Tan was appointed as executor of the estate the
testator.
1. Tan informed the CIR that the testate estate was worth
about P10 million and the estate and inheritance taxes
due thereon were about P9.5 million
2. Respondent Medina, representing herself as attorneyin-fact of voluntary heirs Eribal and Abanto filed with
the probate court a motion to allow the executor to give
a monthly allowance to the voluntary heirs until final
distribution has been made
3. CIR advised the executor to pay P1,398,436.30 as
estate tax and P7,140,060.69 as inheritance tax based
on the findings that the net value of the estate was
P10,212,899.20.
4.
5.
6.
With the probate courts approval, the executor paid the

amount of P185,286.93 as estate tax and P1,055.776
as inheritance tax. These were based on a tax return
filed by Medina with BIR
Thereafter the executor submitted a final accounting
and project of partition of the estate. The probate judge
ordered the partial distribution of the estate and
discharged the executor from all responsibilities
pertaining to the estate. Moreover, the probate judge
held that voluntary heirs Abanto and Eribal shall be
responsible for all taxes of any nature that may be due
the government arising out of the transaction of the
properties
CIR opposed the order and argued that the executor
cannot be discharged without the payment of estate
and inheritance taxes
ISSUE: WON the respondent judge Navarro committed grave

abuse of discretion when he ordered a partial distribution of the
estate without payment of estate taxes
HELD: Yes.
On the matter of authority of a probate court to allow
distribution of an estate prior to the complete liquidation of the
inheritance tax, the Tax Code apparently lacks any provision
substantially identical. There are similar provisions of the Tax
Code but such provisions by themselves do not clearly establish
that the purchase and the object of the statute is to make the
payment of the inheritance tax a pre-condition to an order for
the distribution and delivery of the decedents estate to the
lawful heirs.
However, under Sec 1 of Rule 90 ROC, the distribution of a
decedents assets may only be ordered under any of the
following circumstances:
(1) When the inheritance tax, among others, is paid
(2) When a bond is given to meet the payment of the
tax and all the other options of the nature
enumerated in Sec 1, Rule 90; or
Page | 38
ATTY. LIGON
(3) When the payment of the said tax and other
obligations mentioned in the said Rule has been
provided for
Although the respondent judge did not make a condition
it is order that the distribution of estate of Elsie Gaches
shall be entrusted to Medina for the payment of whatever
taxes may be due to the government from the estate and
the heirs, the Court cannot subscribe to the proposition
that the payment of the tax due was adequately provided
for. In the first place, the order was a complete distribution of
the estate to the heirs for, the executor who is supposed to take
care of the estate was absolutely discharged, the attorneys
fees for the lawyer who presumably acted as legal counsel for
the estate were ordered paid, as well as the fees for the
executors cash funds of the estate. In short, the probate court
virtually withdrew its custodial jurisdiction over the estate which
is the subject of settlement before it. In the second place, the
respondent judge, in the distribution of the properties of the
estate, relied solely upon the mere manifestation of the counsel
for the heirs Eribal and Abanto that they will be liable for the
payment of estate taxes due to the government. There is no
evidence that would show that the probate court ever made a
serious attempt to determine what the values of the different
assets and that such properties shall be preserved for the
satisfaction of the taxes. What the probate court should
have done is to require the heirs to deposit the amount
of inheritance tax being claimed in a suitable institution
or to authorize the sale of non-cash assets under the
courts control and supervision.
Moreover, there is no evidence to show that sufficient bond has
been filed to meet this particular outstanding obligation.
COMMISSIONER V. PINEDA, 21 SCRA 105
FACTS: : Estate proceedings were instituted to settle the estate
of Anatasio Pineda.
1.
2.
3.
4.
After the estate proceedings were closed, BIR found out

that the income tax liability of the estate during the
pendency of the estate proceedings were not paid
CTA rendered judgment holding Manuel Pineda, the
eldest son of the deceased, liable for the payment
corresponding to his share of the estate
CIR appealed to SC and proposed to hold Manuel Pineda
liable for the payment of all the taxes found by the Tax
Court to be due from the estate instead of only for the
amount of taxes corresponding to his share in the
estate
Pineda opposed the proposition on the ground that as
an heir he is liable for unpaid income tax due the estate
only up the extent of and in proportion to any share he
received.
ISSUE: Can the Government require Pineda to pay the full

amount of the taxes assessed?
HELD: Yes. Pineda is liable for the assessment as an heir
and as a holder-transferee of property belonging to the
estate-taxpayer. As a holder of the property belonging to
the estate, Pineda is liable for the tax up to the amount
of the property in his possession. The reason is that the
Government has a lien on what he received from the
estate as his share in the inheritance for unpaid income
taxes for which said estate is liable.
By virtue of such lien, the Government has the right to subject
the property in Pinedas possession, i.e. P2,500, to satisfy the
income tax assessment in the sum of P760.28. After such
payment, Pineda will have the right of contribution from his coheirs, to achieve an adjustment of the proper share of each heir
in the distributable estate.
The Government has two ways of collecting the tax 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. The reason why
Page | 39
a case suit is filed against all the heirs for the tax due from the
estate is to achieve thereby two results: (1) payment of th tax;
and (2) adjustment of the shares of each heir in the distributed
estate as lessened by the tax.
Another remedy is by subjecting said property of the
estate which is in the hands of an heir or transferee to
the payment of the tax due. This second remedy is the very
avenue the Government took in this case to collect the tax. BIR
should be given the necessary discretion to avail itself of the
most and expeditious way to collect the tax because taxes are
the lifeblood of the government and their prompt and certain
availability is an imperious need. The adjustment of the
respective shares due to the heirs from the inheritance (as
lessened by the tax), is left to await the suit for contribution by
the heir from whom the Government recovered said tax.
M. INHIBITIONS,
OBLIGATIONS
ESTATE TAX
IN
RESPONSIBILITIES
THE ENFORCEMENT
&
OF
DISCHARGE OF EXECUTOR OR ADMINISTRATOR FROM

PERSONAL LIABILITY (Sec 92)
In case the+ executor or administrator wishes to be discharged
from liability as such, he should make a WRITTEN APPLICATION
to the CIR for determination of the amount of the estate tax
and discharge from personal liability therefor. The CIR, as soon
as possible or within 1 year after making of such application, or
if the application is made before the return is filed, then within
1 year after the return is filed but not after the expiration of the
period prescribed in Sec 203, shall notify the executor or
administrator of the amount of tax.
The executor or administrator, upon payment of the said
amount of tax, shall be discharged for any deficiency in the tax
thereafter found to be due and shall be entitled to receipt or
writing showing such discharge.
INSTANCES WHEN CERTIFICATE OF PAYMENT OF TAX

FROM CIR IS REQUIRED
1. Before a JUDGE who shall authorize the executor or
judicial administrator to deliver a distributive share to any
party interested in the estate (Sec 94)
2. Before the REGISTER OF DEEDS shall registered in the
Registry of Property any document transferring real
property or real rights therein or any chattel mortgage, by
way of gifts inter vivos or mortis causa, legacy or
inheritance
3. When a LAWYER, by reason of his official duties,
intervenes in the preparation or acknowledgment of
documents regarding partition of disposal of donation
inter vivos or mortis causa, legacy or inheritance
4. When a PUBLIC NOTARY, by reason of his official duties,
intervenes in the preparation or acknowledgment of
documents regarding partition of disposal of donation
5. When a GOVERNMENT OFFICER, by reason of his official
duties, intervenes in the preparation or acknowledgment
of documents regarding partition of disposal of donation
6. Before a DEBTOR of the deceased pays his debts to the
heirs, legatee or executor or administrator of his creditor
7. Before a TRANSFER of any new owner in the books of any
corporation, sociedad anonima, partnership, business or
industry organized or established in the Philippines any
share, obligation, bond or right by way of gift inter vivos
or mortis causa, legacy or inheritance
8. Before a BANK which has knowledge of the death of a
person who maintained a bank deposit account alone, or
jointly with another, shall allow any withdrawal from the
said deposit account. (Sec 95)
Q: When is said
A: In cases when
(4)
(5)
certification not required?

withdrawal of bank deposit:
Has been authorized by the Commissioner
The amount does not exceed P20,000
DEFICIENCY (Sec 93)
Page | 40
ATTY. LIGON
1.
2.
The AMOUNT by which the estate tax exceeds the amount

shown in the estate tax return; or
If no amount is shown upon return or if there is no
return, the amount by which the tax exceeds the amounts
previously assessed
RESTITUTION OF TAX UPON SATISFACTION OF

OUTSTANDING OBLIGATIONS (Sec 96)
If, after the payment of the estate tax, new obligations of the
decedent shall appear, and the persons interested shall have
satisfied them by order of the court, they shall have a right to
the restitution of the proportional part of the tax paid. Even if
the estate tax has been paid but new obligations of the
decedent has appeared and has been settled by the estate, the
tax corresponding that amount of the new debt shall be
restituted to the estate.
PAYMENT OF TAX ANTECEDENT TO THE TRANSFER OF
SHARES, BONDS OR RIGHTS (Sec 97)
For the transfer to the new owner be effected, there must be a
showing of the certification from the CIR that the estate tax has
been paid.
Further, if a bank has knowledge of the death of a person, who
maintained a bank deposit account ALONE or JOINTLY with
another, it shall NOT allow any withdrawal from the said deposit
account unless the CIR has certified that the estate tax has
been paid. However, the administrator or any one of the heirs of
the decedent may, upon authorization of the CIR, withdraw an
amount NOT EXCEEDING P20,000 without the said certification.
For this purpose, all withdrawal slips shall contain a statement
to the effect that:
1. All of the joint depositors are still living at the time of
withdrawal by any one of the joint depositors
2. Such statement shall be under oath by the said
depositors.
Q: Is there any prohibition from withdrawing funds in the

bank account of a deceased depositor?
A:
GENERAL RULE: If the bank has knowledge of the death of the
person who maintains a bank deposit alone or jointly with
another, it shall not allow any withdrawal from said deposit
account unless the CIR has certified that estate taxes have
been paid (Sec 97)
EXCEPTION: The CIR may allow the administrator or any one of
the heirs to withdraw an amount NOT EXCEEDING P20,000
without the certification that estate taxes have been paid.
JOSON V. JOSON ET AL., 2 SCRA 82
FACTS: Tomas Joson died in July 5, 1945 leaving behind heirs
and properties. Upon his death, his will was presented to CFI
Nueva Ecija by his son Felicisimo Joson for probate. Felicisimo
was then appointed administrator of the estate.
1. Felicisimo Joson filed with the court the accounting of
the decedents estate for the years, 1945-1946, 19461947 and 1947-1948
2. Eduardo Joson, one of the heirs, filed an opposition to
all the accounts filed by the administrator and alleged
that the administrator diminished the shares of the
heirs in the yearly produce of the properties and had
padded his expenses of administration. In particular,
there was a big difference of P132,600 in the income of
the estate from 1947-1952
3. In the meantime, the heirs were able to compromise
their differences and entered into an extrajudicial
settlement and partition of the estate
4. Without the said accounts having been heard or
approved, the administrator filed a motion to declare
the proceedings closed and terminated and to relieve
him of his duties as such.
5. The trial court issued an order declaring the
proceedings terminated and reliving the administrator
not only of his duties but also of his accounts despite
the heirs opposition to said accounts. The court opined
Page | 41
that when the heirs entered into an extrajudicial

settlement, they were presumed to have approved the
administrators accounts. There is no reason, then, to
suspend the proceedings and make the same depend
upon the approval of the old accounts.
ISSUE: Is the administrator ipso facto relieved of his duty of
proving his account from the moment said partition has been
executed
HELD: No. The duty of an administrator to render an account is
not a mere incident of an administration proceeding which can
be waived or disregarded when the same is terminated, but
that it is a duty that has to be performed and duly acted upon
by the court before the administration is finally ordered closed
and terminated. Here the administrator has submitted his
accounts for several years not only motu proprio but upon
requirement of the court, to which accounts the heirs have
seasonably filed their opposition. And when the administrator
moved the court to close the proceedings and relieve him of his
administration and of his accounts, the heirs who objected
thereto objected likewise to the closing of the proceeding
invoking their right to be heard but the court ignored their
opposition and granted the motion.
The fact that the heirs of the estate have entered into an
extrajudicial settlement and partition in order to put an end to
their differences cannot in any way be interpreted as a waiver
of the objection of the heirs to the accounts submitted by the
administrator not only because to so hold would be a
derogation of the pertinent provisions of our rules but also
because there is nothing provided in said partitions that the
aforesaid accounts shall be deemed waived or condoned.
PASTOR V. CTA, G.R. NO L-56340 (1983)
FACTS: Alvaro Pastor Sr., died on June 1966 survived by his
wife Sofia, their two legitimate children (Pastor Jr. and Sofia),
and an illegitimate child, Quemada. Quemada filed a petition
filed a petition for the probate of the alleged will of Pastor Sr..
the will contained only one testamentary disposition: a legacy

in favor Quemada consisting of 30% of Pastor Sr.s 42% share
in the operation of Atlas of some mining claims. Quemada was
appointed special administrator. As the special administrator,
Quemada filed an action for reconveyance against Pastor Jr. and
his wife regarding some properties allegedly forming part of
Pastor Sr.s estate, including the property subject of legacy.
Spouses Pastor Jr. filed their opposition to the petition for
probate and the order appointing Quemada as special
administrator. However, the probate court admitted the will to
probate in 1972.
In 1980, the probate court set a hearing on the intrinsic validity
of the will and required the parties to submit their position
papers as to how the inheritance could divided. On August 20,
1980, while the action for reconveyance was still pending, the
probate court issued an order of execution and garnishment,
resolving the issue of ownership of the royalties payable by
Atlas and granting the legacy to Quemada.
On November 11, 1980, the probate court issued an order
declaring that the probate order of 1972 indeed resolved the
issue of ownership and the intrinsic validity of the will
reiterating its previous orders
ISSUE: WON the probate order resolved with finality the
questions of ownership and intrinsic validity as stated in the
November 11, 1980 order
HELD: No. In a special proceeding for the probate of a
will, the issue is restricted to the extrinsic validity of the
will, i.e. whether the testator, being of sound mind,
freely executed the will in accordance with the
formalities prescribed by law. As a rule, the question of
ownership is an extraneous matter which the probate
court cannot resolve with finality. Thus, for the purpose of
determining whether a certain property should or should not be
included in the inventory of estate properties, the probate court
Page | 42
ATTY. LIGON
may pass upon the title thereto, but such determination is
provisional, not conclusive, and is subject to the final decision in
a separate action to resolve title. It was therefore erroneous
for the assailed orders to conclude that the probate order
adjudged with finality the question of ownership of the mining
properties and royalties, and that, premised on this conclusion,
the dispositive portion of the said probate order directed the
special administrator to pay the legacy in dispute.
Pastor Sr., was survived by his wife and their two children as
well as by an illegitimate child. There is therefore a need to
liquidate the conjugal property and set apart the share of Pastor
Sr.s wife in the conjugal partnership preparatory to the
administration and liquidation of the estate of Pastor Sr. when
the disputed probate order of 1972 was issued, there was no
liquidation of the conjugal properties of the spouses. So as of
that date, there was no prior definitive determination of the
assets of the decedents estate. There was no determination,
much less payment of the debts of the decedent.
Furthermore, there was neither assessment nor payment

of the estate tax to the government. The net estate not
having been determined, the legitime of the forced heirs
in concrete figures could not be determined. Thus, it was
not possible to determine whether the legacy to
Quemada would produce an impairment of the legitime
of the compulsory heirs. Without a final, authoritative
adjudication of the issue as to what properties compose the
estate of Pastor Sr. in the face of conflicting claims involving
properties not in the name of the testator, and in the absence of
a resolution on the intrinsic validity of the will, there was no
basis for the probate court to hold that the 1972 probate order
that Quemada is entitled to payment of the questioned legacy.
Therefore, the execution and the subsequent order for the
payment of Quemadas legacy, in the alleged implementation of
the probate order of 1972 must fall for lack of basis.
Page | 43

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TAXATION II REVIEWER

SUCCESSION - A mode of acquisition by virtue of which

ESTATE TAX It is an excise tax imposed upon the privilege of

INHERITANCE TAX It is the tax on the privilege to receive

BY: J. Lumbres, C. Mejia and M. Mejia

CHARACTERISTICS OF ESTATE TAX

PURPOSE OF ESTATE TAX

Myth 8: Eliminating the estate tax would encourage people to save

BY: J. Lumbres, C. Mejia and M. Mejia

would more than outweigh any added private saving, leaving

Myth 9: The estate tax unfairly punishes success.

The application of the rates in determining the estate

RR 17-93: Estate and Donor's Taxes as Restructured by

Taxes amending for the purpose Sections 77,

C. COMPOSITION OF GROSS ESTATE

of the foreign country of which the decedent or donor was a

The gross estate of a

The gross estate of a

GROSS ESTATE OF THE DECEDENT (SEC. 85)

BY: J. Lumbres, C. Mejia and M. Mejia

Includes the value at the time of his death of all

the Philippines, but does not from part of the gross

TOTAL EXEMPTION - If the decedent at the time of his

PARTIAL EXEMPTION - If the laws of the foreign country

SPECIAL RULES ON INTANGIBLE PROPERTIES (Sec 104,

COLLECTOR VS. CAMPOS RUEDA, 42 SCRA 23 (1971)

not subject to the payment of the death tax in

BY: J. Lumbres, C. Mejia and M. Mejia

that country. Thus, in the name of reciprocity, such exemption

Is there a need to disclose properties outside the

resident status the following year. In the spring of 2004,

D. GROSS ESTATE SUBJECT TO TAX

(1) Deductions (Sec 86 NIRC)

Estate Tax Due

LISTED Arithmetic mean

Shall be taken into account the

In determining the book value of common shares, the

If there is an improvement, the value of improvement is

BY: J. Lumbres, C. Mejia and M. Mejia

The donor died, without leaving any forced heir. In her

given the status and rights of heirs, regardless of the quantity

BY: J. Lumbres, C. Mejia and M. Mejia

By the decedent in conjunction with any other person

The power to alter, amend or revoke shall be considered to exist

TRANSFER IS NOT REVOCABLE AND NOT SUBJECT TO ESTATE

Deed executed in contemplation of death, or intended to

PROPERTIES UNDER GPA BUT ARE NOT PART OF DECEDENTS

A THIRD PERSON, other than the decedents estate,

Not part of the gross estate when:

NOTE: If the beneficiary who was irrevocably designated caused

BY: J. Lumbres, C. Mejia and M. Mejia

provided there is statutory authority for taxing such property

The SC held that: (1) The proceeds of a life-insurance policy

NOTE: It is subject to estate tax if the 3 instances mentioned

PRIOR INTEREST (Sec 85.F)

TRANSFERS FOR INSUFFICIENT CONSIDERATIONS (Sec

CLAIMS AGAINST INSOLVENT PERSONS (Sec 86)

1. CITIZEN OR RESIDENT S86(A)

Actual funeral expenses or in an amount equal

Procedure: Compute for the 5% of the gross

Section 6(A)(1) of RR 2-2003: Any amount of

Any portion of the funeral and burial

2) JUDICIAL EXPENSES S86(A)(1)(B) for

Expenses allowed as deduction under this