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Gross Estate

The value of the gross estate of the decedent shall

be determined by including the value at the time of
his death of all property, real or personal, tangible
or intangible, whenever situated. Provided, than in
case of a nonresident decedent who at the time of
his death was not a citizen of the Philippines, only
that part of his entire gross estate which is situated
in the Philippines shall be included in his taxable
estate. (sec 85)
The Gross Estate of the Decedent Includes
a. Property owned by the decedent at the time of his
b. Property formerly owned by the decedent but
which were no longer owned by him at the time of
his death;
c. Property transferred during his lifetime upon
which the donors tax would have applied; and
d. Property which he never owned during his

of his gross estate. There are three persons involved

here. The transferor, the first transferee, and the
second transferee. The first transferee is the
If authority is granted by the transferor to the first
transferee to determine the person, who, upon the
latters death, would next possess or enjoy the
property transferred, his authority emanates from a
general power of appointment. But if the transferor
himself had determined beforehand who upon the
death of the first transferee, would next possess or
enjoy the property, then the authority of the first
transferee emanated from a special power of
Although the decedent never formally owned it,
property passing under a general power of
appointment forms part of his gross estate because
his absolute authority to choose the next transferee,
upon his death, is a badge of ownership.
If the transferor died, the same property would form
part of his (transferor) gross estate under sec. 85 (a)
of the tax code.

A. Decedents Interest- this refers to all property

owned by the decedent- real or personal, tangible or
intangible- including shares of stock in corporationsat the time of his death.

E. Proceeds of Life Insurance- this contemplates

a situation where a person insures his own life If the
beneficiary is his estate, represented by his
administrator, executor or heir- irrespective of
whether the designation of said beneficiary is
revocable or irrevocable- proceeds therefrom form
part of his gross estate.

B. Transfer in Contemplation of Death- this

refers to property formerly owned by the decedent
but were no longer owned by him at the time of his

But if the beneficiary is a third person, proceeds of

life insurance form part of the gross estate of the
decedent only if the designation of said beneficiary
is revocable.

It contemplates a situation where the transferor

during his lifetime, transfers property in
contemplation of or intended to take effect in
possession or enjoyment at or after his death. Or
where the transferor retains for life the possession
or enjoyment, or the right to the income from the
property, or the right to designate the person who
shall possess or enjoy the property or the income
therefrom. At the time of his death, therefore, the
decedent no longer owned the property, but still
applying sec. 85(b) of the tax code, such property
forms part of his gross estate.

F. Transfer for Insufficient Consideration- where

the transfers in contemplation of death, revocable
transfers, and general power of appointment are
made, created, exercised or relinquished for less
than the adequate or full consideration, the
difference between the FMV of the subject property
at the time of death and the value of the
consideration received therefore forms part of the
decedents gross estate subject to estate tax.

Under section 85, the following items

comprise the decedents gross estate:

C. Revocable Transfer- this refers to property that

had been transferred but the transferor, personally
or through another person, retained for life the right
to alter, amend, revoke, or terminate the enjoyment
by the transferee of the property transferred.
Here, a property no longer owned by the decedent
still forms part of his gross estate. This is another
situation where estate tax applies to transfer of
property made during the lifetime of the transferor.
If the donors tax had been paid, it is simply credited
to the amount of estate tax due.
D. Property Passing Under General Power of
Under this paragraph, a property which the
decedent never owned in his lifetime now forms part

Exemptions/ Exclusions from Gross Estate:

1. The merger of usufruct in the naked title
2. The transmission or delivery of the inheritance or
legacy by the fiduciary heir or legatee to the
3. The transmission from the first heir, legatee or
done in favor of another beneficiary, in accordance
with the desire of the predecessor
4. All bequests, devises, legacies or transfer to
social welfare, cultural and charitable institution, no
part of the net income of which inures to the benefit
of any individual, provided that not more than 30%
of said bequest, devises or legacies or transfers
shall be used by such institution for administrative

Exemptions from Estate Tax Under Special


4. Amounts received from the Philippines and the US

Governments for damages suffered during WWII.

1. Benefits received by members from GSIS, SS by

reason of death;

5. Retirement benefits of officials and employees of

private firms if included in gross estate.

2. Proceeds of GSIS life insurance

6. Proceeds of group insurance.

3. Benefits received by beneficiaries residing in the

Philippines under laws administered by the US
Veterans Administration.