ESTATE TAX

||| sipag notes ni Joyette haha

Theories on imposition
1 Prevention of under accumulation theory
2 Benefits received theory 3 Privilege or state partnership theory succession to the property of a
deceased person is not a fundamental right and consequently, the legislature
can constitutionally burden such succession with a tax
4 Ability to pay theory those who have more properties to transfer to their
heirs upon death shall pay more estate taxes; redistribution of wealth theory
Section 84 rates estate tax
Section 84. Rates of Estate Tax. There shall be levied, assessed, collected and paid upon the
transfer of the net estate as determined in accordance with Sections 85 and 86 of 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 The Tax shall be Plus

Of the Excess Over

P 200,000

Exempt

P 200,000

550,000

5%

P 200,000

500,000

2,000,000

P 15,000

8%

500,000

2,000,000

5,000,000

135,000

11% 2,000,000

5,000,000

10,000,000

465,000

15% 5,000,000

1,215,000

20% 10,000,000

10,000,000 And Over

GROSS ESTATE
Section 85. Gross Estate. - the value of the gross estate of the decedent shall be
determined by including the value at the time of his death of all property, real or
personal, tangible or intangible, wherever situated: Provided, however, that in the
case of a nonresident decedent who at the time of his death was not a citizen of the
Philippines, only that part of the entire gross estate which is situated in the
Philippines shall be included in his taxable estate.
ALL PROPERTY
1. Real or personal
2. Tangible or intangible
Take note whether the decedent is a citizen, resident alien, or non-resident alien:
1. Citizen and Resident Alien decedent:
a. Following properties WHEREVER SITUATED:
i. Real property
ii. Tangible personal property
iii. Intangible personal property
2. Non-Resident Alien decedent:

a. Real Property situated in the Phils

b. Tangible personal property situated in the Phils
c. Intangible personal property with a situs in the Phils
UNLESS, exempted on the basis of reciprocity exempted from
tax
MEMORIZE SEC. 104
Section 104. Definitions xxx 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.
CASE: Collector v Campos Rueda "It does not admit of doubt that if a foreign
country is to be identified with a state, it is required in line with Pound's formulation
that it be a politically organized sovereign community independent of outside
control bound by penalties of nationhood, legally supreme within its territory, acting
through a government functioning under a regime of law. A foreign country is thus
a sovereign person with the people composing it viewed as an organized corporate
society under a government with the legal competence to exact obedience to its
commands.
Even on the assumption then that Tangier is bereft of international personality, the
CIR has not successfully made out a case. The Court did commit itself to the
doctrine that even a tiny principality, like Liechtenstein, hardly an international
personality in the sense, did fall under this exempt category."
COMPOSITION OF DECEDENTS GROSS ESTATE (Sec. 85)
1. Decedents Interest covers all the properties owned by the decedent at the
time of his death
2. Transfer in contemplation of death
3. Revocable transfers
4. Property passing under General Power of Appointment
5. Proceeds of life insurance
6. Prior interests
7. Transfers for insufficient consideration
8. Capital of the surviving spouse
(A) Decedents Interest covers all the properties owned by the decedent at the
time of his death
- to the extent of the interest therein of the decedent at the time of his death;
-

(B) Transfer in Contemplation of Death. To the extent of any interest therein of

which the decedent has at any time made a transfer, by trust or otherwise, in
contemplation of or intended to take effect in possession or enjoyment at or after
death, or of which he has at any time made a transfer, by trust or otherwise, under
which he has retained for his life or for any period which does not in fact end
before his death :
(1) the possession or enjoyment of, or the right to the income from the property, or
(2) the right, either alone or in conjunction with any person, to designate the person
who shall possess or enjoy the property or the income therefrom;
EXCEPT in case of a bona fide sale for an adequate and full consideration in money
or money's worth.
CASE: Dizon v Posadas it was the proximity or length of time between the donation
(gift) and the date of death to bring the transfer in contemplation of death
The facts warrant the inference that the transfer was an advancement upon the
inheritance which the donee, as the sole and forced heir of the donor, would be
entitled to receive upon the death of the donor. The argument that plaintiff is not an
heir because there was no longer any property is fallacious.
Section 1540 Administrative Code. 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 of those
who, after his death, shall prove to be his heirs, devises, legatees, or donees mortis
causa.
The phrase any of those who, after his death, shall prove to be his heirs include
those who are given the status and rights of heirs, regardless of the quantity of
property they may receive. Thus, construing the conveyance in question, which is
the girft inter vivos, the SC held that Sec, 1540 is thus applicable and the tax was
properly assessed by the CIR.
(C) Revocable Transfer. To the extent of any interest therein, of which the
decedent has at any time made 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 (in whatever capacity exerciseable) by the decedent alone or by
the decedent in conjunction with any other person (without regard to when or from
what source the decedent acquired such power), to alter, amend, revoke, or
terminate, or where any such power is relinquished in contemplation of the
decedent's death
EXCEPT in case of a bona fide sale for an adequate and full consideration in money
or money's worth
(D) Property Passing Under General Power of Appointment. - To the extent of any
property passing under a general power of appointment exercised by the decedent:
(1) by will, or
(2) by deed executed in contemplation of, or intended to take effect in possession or
enjoyment at, or after his death, or

(3) by deed under which he has retained for his life or any period not ascertainable
without reference to his death or for any period which does not in fact end before
his death
(a) the possession or enjoyment of, or the right to the income from, the property, or
(b) the right, either alone or in conjunction with any person, to designate the
persons who shall possess or enjoy the property or the income therefrom;
EXCEPT in case of a bona fide sale for an adequate and full consideration in money
or money's worth

If the transfer s by virtue of a SPECIAL Power of Appointment, then the

property is EXCLUDED from Gross Estate
Q: When is it a GPA?
A:
REQUISITES FOR TRANSFER TO BE INCLUDED IN GROSS ESTATE
1. Existence of GPA
2. Such GPA exercised by the decedent: (1) by will, or (2) by deed
3. Passing of the property by virtue of such GPA
(E) Proceeds of Life Insurance. To the extent of the amount receivable by the
estate of the deceased, his executor, or administrator, as insurance under policies
taken out by the decedent upon his own life, irrespective of whether or not the
insured retained the power of revocation, or to the extent of the amount receivable
by any beneficiary designated in the policy of insurance, except when it is expressly
stipulated that the designation of the beneficiary is irrevocable.
1. The proceeds of life insurance are INCLUDED in the gross estates of decedent
in the following cases:
a. Beneficiary is the estate of the deceased, his executor or administrator,
irrespective of WON the insured retained the power of revocation
b. Beneficiary is other than those mentioned in letter (a), when designation is
NOT EXPRESSLY made irrevocable or the designation of the beneficiary is
revocable.
- Under the Insurance Code, when designation, WON the designation is
revocable, it is PRESUMED REVOCABLE, hence, includible in the
decedents gross estate.
2. The proceeds are EXCLUDED if the ff:
a. Accident insurance proceeds
XPN: CASE: Gallardo v Morales - exemption there established applies to
ordinary life insurance contracts, as well as to those which, although intended
primarily to indemnify for risks arising from accident, likewise, insure against
loss of life due, either to accidental causes, or to the willful and criminal act
of another, which, as such, is not strictly accidental in nature. Indeed, it has
been held that statutes of this nature seek to enable the head of the family to
secure his widow and children from becoming a burden upon the community
and, accordingly, should merit a liberal interpretation.
b. Proceeds of a group insurance policy taken out by a company for its
employees.

- The law speaks of polices taken out of his own life

c. Amount receivable by any beneficiary irrevocably designated in the policy of
insurance by the insured. The transfer is absolute and insured and did not
retain any legal interest in the insurance.
d. Proceeds of insurance policies issued by GSIS to government officials and
employees
- Exempt from ALL taxes
e. Benefits accruing under SSS law

Proceeds of Life insurance taken out by decedent for his OWN life shall be
included in his Gross Estate shall be considered his exclusive property only if
paid out of his exclusive funds. But if paid out of the conjugal funds, it shall
to the conjugal properties.

(F) Prior Interests. apply to the transfers, trusts, estates, interests, rights, powers
and relinquishment of powers, as severally enumerated and described therein,
whether made, created, arising, existing, exercised or relinquished before or after
the effectivity of this Code.
Except as otherwise specifically provided under Transfer in Contemplation of Death,
Revocable Transfers, Proceeds of life Insurance, shall
(G) Transfers of Insufficient Consideration. - If any one of the transfers, trusts,
interests, rights or powers enumerated and described in Subsections (B), (C) and
(D) of this Section is made, created, exercised or relinquished for a consideration in
money or money's worth, but is not a bona fide sale for an adequate and full
consideration in money or money's worth, there shall be included in the gross
estate only the excess of the fair market value, at the time of death, of the property
otherwise to be included on account of such transaction, over the value of the
consideration received therefor by the decedent.
If no consideration was not paid, like donation mortis causa, the fair market value of
the property at the time of death of decedent.
(H) Capital of the Surviving Spouse. pertains to his exclusive property of the
decedent.
- if conjugal property, after the deducting the necessary deductions, the share of the
decedent on conjugal property shall be included to the gross estate of the decedent
- The capital of the surviving spouse of a decedent shall not be deemed a part of
his or her gross estate.
CASE: Social Security System vs. Davac - The benefit receivable under the Social
Security Act is in the nature of a special privilege or an arrangement secured by the
law pursuant to the policy of the State to provide social security to workingThe
benefit receivable under the Social Security Act is in the nature of a special privilege
or an arrangement secured by the law pursuant to the policy of the State to provide
social security to workingmen. The amount received by the members cannot be
considered property earned by him. It is not his conjugal property.

DEDUCTIONS ALLOWED TO THE ESTATE OF CITIZEN OR A RESIDENT ALIEN

SITUS OF TAXATION
- determining factor:
a. citizenship
b. residence
c. location of property
Art. 781 Inheritance
Revocable transfer includes
Donation mortis causa
CASE: Puig v Penaflorida - In dispositions mortis causa, conveyance or alienation is
revocable ad nutum, i.e., at the discretion of the grantor or so-called "donor" simply
because the latter has changed his mind.

EXEMPTIONS UNDER RECIPROCITY RULE OF ESTATE TAX

1. Special law (SSS, GSIS, US Veteran Admin)
2. Capital of surviving spouse
3. Net value of less than 200k
DEDUCTIONS FROM GROSS ESTATE (per Sec. 86)
FOR CITIZENS AND RESIDENT ALIENS
(1) Expenses, Losses, Indebtedness, and taxes. - Such amounts:
(a) FUNERAL EXPENSES
- The actual funeral expenses or in an amount equal to 5% of the gross
estate, whichever is lower, but in no case to exceed 200K, shall be
deducted from gross estate
- The excess from the 200k cannot be allowed as an exemption
- Expenses after the burial are not deductible
(b) For JUDICIAL EXPENSES of the testamentary or intestate proceedings
ADMINISTRATION EXPENSES
CASE: Lorenzo v Posadas - ADMINISTRATION EXPENSES Judicial expenses
are expenses of administration but, in State vs. Hennepin County Probate

Court, it was said: "* * * the compensation of a trustee, earned, not in the
administration of the estate, but in the management thereof for the benefit of
the legatees or devisees, does not come properly within the class or reason
for exempting administration expenses. * * * Services rendered in that behalf
have no reference to closing the estate for the purpose of a distribution
thereof to those entitled to it, and are not required or essential to the
perfection of the rights of the heirs or legatees. * * * Trusts * * * of the
character of that here before the court, are created for the benefit of those to
whom the property ultimately passes, are of voluntary creation, and intended
for the preservation of the estate. No sound reason is given to support the
contention that such expenses should be taken into consideration in fixing
the value of the estate for the purposes of this tax.
(c) For CLAIMS AGAINST THE ESTATE: Provided, That at the time the indebtedness
was incurred the debt instrument was duly notarized and, if the loan was contracted
within three (3) years before the death of the decedent, the administrator or
executor shall submit a statement showing the disposition of the proceeds of the
loan
REQUISITES for the deductibility of the claims against estate:
1. Xx
2. They were contracted in good faith and for an adequate and full consideration
in money or for moneys worth
3. Xxx
4. Xxx

The following are NOT deductible:

o An indebtedness that has been condoned or has prescribed
o Unpaid taxes such as income or real estate taxes that accrued AFTER
the DEATH of the decedent

(d) For CLAIMS of the deceased against INSOLVENT PERSONS where the value of
decedent's interest therein is included in the value of the gross estate
REQUISITES (mamalateo)
1. The amount of said claims has been initially included as part of his gross
estate; and
2. The incapacity of the debtors to pay their obligations is proven, not merely
alleged.
(e) For UNPAID MORTGAGES upon, or any INDEBTEDNESS in respect to, property
where the value of decedent's INTEREST therein, undiminished by such mortgage or
indebtedness, is included in the value of the gross estate, 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. The deduction herein allowed in the
case of claims against the estate, unpaid mortgages or any indebtedness shall,
when founded upon a promise or agreement, be limited to the extent that they were
contracted bona fide and for an adequate and full consideration in money or
money's worth. There shall also be deducted losses incurred during the settlement

of the estate arising from fires, storms, shipwreck, or other casualties, or from
robbery, theft or embezzlement, when such losses are not compensated for by
insurance or otherwise, and if at the time of the filing of the return such losses have
not been claimed as a deduction for the income tax purposes in an income tax
return, and provided that such losses were incurred not later than the last day for
the payment of the estate tax as prescribed in Subsection (A) of Section 91.

Where the decedent paid only half of the property mortgaged (so that only
half of its value was included in his estate), only half of the mortgage debt
was deductible, even though the executor paid the entire debt, the liability of
the decedent being solidary, inasmuch as the executor would be subrogated
to the rights of the mortgagee as against the co-mortgagor.

Xxxxxxx

DEDUCTIBLE LOSSES are those incurred during the settlement of the estate
arising from fires, storms, shipwreck, or other casualties, or from robbery,
theft or embezzlement, when such losses are not compensated for by
insurance or otherwise, and if at the time of the filing of the return such
losses have not been claimed as a deduction for the income tax purposes in
an income tax return, and provided that such losses were incurred not later
than the last day for the payment of the estate tax (i.e. 6 months from the
date of death)

(2) PROPERTY PREVIOUSLY TAXED (Vanishing Deduction)

REQUISITES:
1. XXX
2. Present decedent died within 5 yrs from death of prior decedent
3. Xxx
4. Same property
5. Deductible amount subject to Sec. 86:
DEDUCTI
ON
100%

DEATH OF PRIOR
DECEDENT prior to
the death of the
present decedent
within 1 year

80%

MORE than 1 year

but LESS than 2
years

60%

MORE
than
2
years but LESS
than 3 years

40%

MORE
than
3
years but LESS
than 4 years

20%

MORE
than
4
years but LESS
than 5 years

NO MORE
deductio
n

5 years or more

(3) TRANSFERS FOR PUBLIC USE.

1. The amount of all the bequests, legacies, devises or transfers to or for the
use of the Government of the Republic of the Philippines, or any political
subdivision thereof, AND
2. exclusively for public purposes.
(4) THE FAMILY HOME
- An amount equivalent to the current FMV of the decedent's family home which
does not exceed P1,000,000 is deductible
- the excess of 1M shall be subject to estate tax
- As a sine qua non condition for the exemption or deduction, said family home must
have been the decedent's family home as certified by the barangay captain of the
locality
(5) STANDARD DEDUCTION. - An amount equivalent to One million pesos
(P1,000,000).
(6) MEDICAL EXPENSES.
- incurred by the decedent within one (1) year prior to his death
- substantiated with receipts
- shall not exceed P500,000
(7) AMOUNT RECEIVED BY HEIRS UNDER REPUBLIC ACT NO. 4917. - Any
amount received by the heirs from the decedent - employee as a consequence of
the death of the decedent-employee in accordance with Republic Act No. 4917:
Provided, that such amount is included in the gross estate of the decedent.
Republic Act No. 4917
AN ACT PROVIDING THAT RETIREMENT BENEFITS OF EMPLOYEES OF PRIVATE
FIRMS SHALL NOT BE SUBJECT TO ATTACHMENT, LEVY, EXECUTION, OR ANY TAX
WHATSOEVER.
Section 1.
xxx The retirement benefits received by officials and employees of private
firms, whether individual or corporate, in accordance with a reasonable private
benefit plan maintained by the employer, shall be exempt from all taxes xxx:
Provided, That the retiring official or employee has been in the service of the
same employer for at least ten (10) years and is not less than fifty years of age
at the time of his retirement: Provided, further, That the benefits granted under
this Act shall be availed of by an official or employee only once:

xxx any amount received by him or by his heirs from the employer as a
consequence of such separation shall likewise be exempt as hereinabove
provided.
"reasonable private benefit plan" means a pension, gratuity, stock bonus or
profit sharing plan maintained by an employer for the benefit of some or all of
his officials and employees, wherein contributions are made by such employer or
officials and employees, or both, for the purpose of distributing to such officials
and employees the earnings and principal of the fund thus accumulated, and
wherein it is provided in said plan that at no time shall any part of the corpus or
income of the fund be used for, or be diverted to, any purpose other than for the
exclusive benefit of the said officials and employees.
DEDUCTIONS ALLOWED TO NONRESIDENT ALIENS.
In the case of a nonresident not a citizen of the Philippines, by deducting from
the value of that part of his gross estate which at the time of his death is situated
in the Philippines:
(1) Expenses, Losses, Indebtedness and Taxes. - That proportion of the
deductions specified in paragraph (1) of Subsection (A) of this Section which the
value of such part bears to the value of his entire gross estate wherever situated;
(2) Property Previously Taxed. ( SAME AS ABOVE)
These deductions shall be allowed only where a donor's tax, or estate tax imposed
under this Title is finally determined and paid by or on behalf of such donor, or the
estate of such prior decedent, as the case may be, and only in the amount finally
determined as the value of such property in determining the value of the gift, or the
gross estate of such prior decedent, and only to the extent that the value of such
property is included in that part of the decedent's gross estate which at the time of
his death is situated in the Philippines; and only if, in determining the value of the
net estate of the prior decedent, no deduction is allowable under paragraph (2) of
Subsection (B) of this Section, in respect of the property or properties given in
exchange therefore. Where a deduction was allowed of any mortgage or other lien
in determining the donor's tax, or the estate tax of the prior decedent, which was
paid in whole or in part prior to the decedent's death, then the deduction allowable
under said paragraph 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 allowed as deductions under paragraphs (1) and (3) of this Subsection as
the amount otherwise deductible under paragraph (2) bears to the value of that
part of the decedent's gross estate which at the time of his death is situated in the
Philippines. Where the property referred to consists of two (2) or more items, the
aggregate value of such items shall be used for the purpose of computing the
deduction.
(3) Transfers for Public Use. SAME AS ABOVE

(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.
(D) Miscellaneous Provisions. - No deduction shall be allowed in the case of a
nonresident 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 90 the value at the time of his death of that part of the gross estate
of the nonresident not situated in the Philippines.

EXEMPTION OF CERTAIN ACQUISITIONS AND TRANSMISSIONS (Sec. 87)

The following shall NOT be taxed:
(A) The merger of usufruct in the owner of the naked title;
-

When the transfer of usufructuary rights was made by the usufructuary to

a third person other than the naked owner, said transfer is taxable
But when the transfer was made by the usufructuary to the naked owner
of the property, it is not taxable because the effect is just giving absolute
dominion of ownership to the owner of the property

(B) The transmission or delivery of the inheritance or legacy by the fiduciary heir or
legatee to the fideicommissary;
-

Fideicommissary - also known as indirect substitution; it is a substitution

by virtue of which the fiduciary or first heir instituted is entrusted with the
obligation to preserve and transmit to a second heir the whole or part of
the inheritance.
Illustration: X, the decedent, appointed Y, the first heir to preserve and
transmit his property to Z, his grandson.
o The transfer of X to Y is exempted
o While the transfer of X to Z is taxable.

(C) The transmission from the first heir, legatee or donee in favor of another
beneficiary, in accordance with the desire of the predecessor; and
(D) All bequests, devises, legacies or transfers to social welfare, cultural and
charitable institutions, no part of the net income of which insures to the benefit of
any individual: Provided, however, That not more than thirty percent (30%) of the
said bequests, devises, legacies or transfers shall be used by such institutions for
administration purposes.

DETERMINATION OF THE VALUE OF THE ESTATE (Section 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 as of the time
of death.
CASE: Lorenzo v Posadas - 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 affecting value or any subsequent increase or
decrease in value.
However, the appraised value of real property as of the time of death shall be,
whichever is higher of (1) The fair market value as determined by the Commissioner, or
(2) The fair market value as shown in the schedule of values fixed by the
Provincial and City Assessors.
Re: FMV of SHARES OF STOCKS
DEPENDS on whether it LISTED or UNLISTED
LISTED shares
UNLISTED shares
FMV on the date of death or, if none,
ULISTED COMMON shares based on
The arithmetic mean between the their book value
highest and lowest quotation at the UNLISTED PREFERRED shares par
closest date to the death of the value
decedent

Section 89. Notice of Death to be Filed to CIR

by the executor, administrator or any of the legal heirs
a. within 2 months after the decedent's death, or
b. within 2 months after qualifying as such executor or administrator
EXCEPTION: gross value of the estate is only 20k or less
Section 90. Estate Tax Returns.
- a clearance from BIR is required as a condition precedent for the transfer
of ownership thereof in the name of the transferee, the executor, or the
administrator, or any of the legal heirs, as the case may be, shall file a
return under oath in duplicate, setting forth:
(1) The value of the gross estate of the decedent at the time of his death, or in case
of a nonresident, not a citizen of the Philippines, of that part of his gross estate
situated in the Philippines;
(2) The deductions allowed from gross estate in determining the estate as defined in
Section 86; and

(3) Such part of such information as may at the time be ascertainable and such
supplemental data as may be necessary to establish the correct taxes.
If the gross value exceeds P2,000,000, it shall be supported with a statement duly
certified to by a Certified Public Accountant containing the following:
(a) Itemized assets of the decedent with their corresponding gross value at the time
of his death, or in the case of a nonresident, not a citizen of the Philippines, of that
part of his gross estate situated in the Philippines;
(b) Itemized deductions from gross estate allowed in Section 86; and
(c) The amount of tax due whether paid or still due and outstanding.
(B) Time for filing. - within six (6) months from the decedent's death.
A certified copy of the schedule of partition and the order of the court approving the
same shall be furnished the Commissioner within thirty (30) after the promulgation
of such order.
(C) Extension of Time. - The Commissioner shall have authority to grant, in
meritorious cases, a reasonable extension not exceeding thirty (30) days for filing
the return.
(D) Place of Filing
a. where the decedent was domiciled at the time of his death or
b. with the Office of the Commissioner, if there be no legal residence in
the Philippines
SUBSTANTIAL COMPLIANCE
CIR v Gonzales When tax return is considered sufficient.A return need not
be complete in all particulars. It is sufficient if it complies substantially with the law.
There is substantial compliance
(1) when the return is made in good faith and is not false or fraudulent;
(2) when it covers the entire period involved; and
(3) when it contains information as to the various items of income, deductions and
credits with such definiteness as to permit the computation and assessment of the
tax.
Section 91. Payment of Tax. (A) Time of Payment. - paid at the time the return is filed
(B) Extension of Time. - Commissioner xxx may extend the time for payment xxx
a. not to exceed five (5) years, in case the estate is settled through the courts,
or
b. not to exceed two (2) years in case the estate is settled extrajudicially.

Where the taxes are assessed by reason of negligence, intentional disregard of rules
and regulations, or fraud on the part of the taxpayer, no extension will be granted
by the Commissioner.
If an extension is granted, the Commissioner may require the executor, or
administrator, or beneficiary, as the case may be, to furnish a bond xxx.
(C) Liability for Payment
Q: Who are liable for the payment of estate tax
A: the executor or administrator
- BEFORE delivery to any beneficiary of his distributive share of the estate
CASE: The estate tax is one of those obligations that must be paid before
distribution of the estate, and if not paid, the rule requires that the
distributees post a bond or make such provisions as to meet the said tax
obligation in proportion to their respective shares in the inheritance.In the
case at bar, the probate court ordered the release of the titles to the Valle
Verde property and the Blue Ridge apartments to the private respondents
after the lapse of six months from the date of first publication of the notice to
creditors. The questioned order speaks of notice to creditors, not payment
of debts and obligations. Hilario Ruiz allegedly left no debts when he died but
the taxes on his estate had not hitherto been paid, much less ascertained.
The estate tax is one of those obligations that must be paid before
distribution of the estate. If not yet paid, the rule requires that the
distributees post a bond or make such provisions as to meet the said tax
obligation in proportion to their respective shares in the inheritance. Notably,
at the time the order was issued the properties of the estate had not yet been
inventoried and appraised. (Estate of Hilario M. Ruiz vs. Court of Appeals, 252
SCRA 541, G.R. No. 118671 January 29, 1996)
Q: What is the liability of the beneficiary?
A: Such beneficiary shall to the extent of his distributive share of the estate, 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.
CASE: An heir is not solidarily liable for the payment of the inheritance due
from a co-heir.The liability of the herein respondents Eribal and Abanto to
pay the inheritance tax corresponding to the share of Bess Lauer in the
inheritance must be negated. The inheritance tax is an imposition created by
law on the privilege to receive property. Consequently, the scope and
subjects of this tax and other related matters in which it is involved must be
traced and sought in the law itself. An analysis of our tax statutes supplies no
sufficient indication that the inheritance tax, as a rule, was meant to be the
joint and solidary liability of the heirs of a decedent. (Vera vs. Navarro, 79
SCRA 408, No. L-27745 October 18, 1977)
'executor' or 'administrator' means the executor or administrator of the decedent,
or if there is no executor or administrator appointed, qualified, and acting within the
Philippines, then any person in actual or constructive possession of any property of
the decedent.

CASE: Lat vs. Court of Appeals - Executor and Administrator; Administrator, an

officer of the probate court; Heirs not allowed to interfere in administration
before complete liquidation of estate.The administrator of an estate is not a
mere alter ego of the heirs, but is an officer of the probate court entrusted with
the management and settlement of the estate until, with the court's approval, he
has distributed and delivered to the heirs their respective shares of the
inheritance. Before the completion of the liquidation of the estate, the heirs have
no right to interfere in its administration.
CASE: Joson vs. Joson - Executor and Administrator; Extent and scope of
responsibilities enumerated.Section 1 of Rule 86 categorically charges an
administrator with the whole of the estate of the deceased which has come into
his possession at the value of appraise-ment contained in the inventory; with all
the proceeds of so much of the estate as is sold by him, at the price at which
sold. Section 8 of the same rule imposes upon him the duty to render an
account of his administration within one year from his appointment, unless the
court otherwise directs, as well as to render such further accounts as the court
may require until the estate is fully settled. Section 10 likewise provides that
before an account of the administrator is allowed, notice shall be given to all
persons interested of the time and place of examining and allowing the same.
And finally section 9 expressly directs that the court shall examine the
administrator upon oath with respect to every matter relating to his account
except when no objection is made to the allowance of the account and its
correctness is satisfactorily established by competent testimony.
CASE: Republic vs. De la Rama - Assessment should be sent to administrator of
estate.An assessment is deemed made when the notice to that effect is
released, mailed or sent to the taxpayer for the purpose of giving effect to the
assessment (Bautista and Corrales Tan vs. Collector of Internal Revenue, L12259, May 27, 1959). Where an estate is under administration, the notice of
assessment must be sent to the administrator. In the case at bar, notices were
sent to persons other than the administrator; hence, they could not produce any
legal effect.
CASE: Due Process; The rule that an assessment is deemed made for the
purpose of giving effect to such assessment when the notice is released, mailed
or sent to the taxpayer to effectuate the assessment requires that the notice be
sent to the taxpayer, and not merely to a disinterested party. - Although there is
no specific requirement that the taxpayer should receive the notice within the
said period, due process requires at the very least that such notice actually be
received. In Commissioner of Internal Revenue v. Pascor Realty and Development
Corporation, we had occasion to say: An assessment contains not only a
computation of tax liabilities, but also a demand for payment within a prescribed
period. It also signals the time when penalties and interests begin to accrue
against the taxpayer. To enable the taxpayer to determine his remedies thereon,
due process requires that it must be served on and received by the taxpayer.
(Estate of the Late Juliana Diez Vda. de Gabriel vs. Commissioner of Internal
Revenue, 421 SCRA 266, G.R. No. 155541 January 27, 2004)

Effect of FAILURE to pay estate tax before distribution:

executor or administrator shall be subjected to criminal liability under the
Tax Code
CASE: Claims for income tax need not be filed with the committee on claims and
appraisals appointed in the course of testate proceedings, and the amount thereof
may be collected after the distribution of the decedent's estate among his heirs,
who shall be liable therefor in proportion to their share in the inheritance.
(Government vs. Pamintuan, 55 Phil. 13, No. 33139 October 11, 1930)
2 Ways available to government to collect the tax.
1. by going after all the heirs and collecting from each one of them the amount
of the tax proportionate to the inheritance received
2. pursuant to the lien created by Tax Code upon all property and rights to
property belong to the taxpayer for unpaid income tax, 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 the estate. (CIR vs. Pineda, 21 SCRA 105, No. L-22734
September 15, 1967)
Section 92. Discharge of Executor or Administrator from Personal Liability. - If the
executor or administrator makes a written application to the Commissioner for
determination of the amount of the estate tax and discharge from personal liability
therefore, the Commissioner (as soon as possible, and in any event within one (1)
year after the making of such application, or if the application is made before the
return is filed, then within one (1) year after the return is filed, but not after the
expiration of the period prescribed for the assessment of the tax in Section 203
shall not notify the executor or administrator of the amount of the tax. The executor
or administrator, upon payment of the amount of which he is notified, shall be
discharged from personal liability for any deficiency in the tax thereafter found to be
due and shall be entitled to a receipt or writing showing such discharge.
Section 93. Definition of Deficiency. - As used in this Chapter, the term 'deficiency'
means:
(a) The amount by which the tax imposed by this Chapter exceeds the amount
shown as the tax by the executor, administrator or any of the heirs upon his return;
but the amounts so shown on the return shall first be increased by the amounts
previously assessed (or collected without assessment) as a deficiency and
decreased by the amount previously abated, refunded or otherwise repaid in
respect of such tax; or
(b) If no amount is shown as the tax by the executor, administrator or any of the
heirs upon his return, or if no return is made by the executor, administrator, or any
heir, 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 amounts
previously abated, refunded or otherwise repaid in respect of such tax.

Section 94. Payment before Delivery by Executor or Administrator. - No judge shall

authorize the executor or judicial administrator to deliver a distributive share to any
party interested in the estate unless a certification from the Commissioner that the
estate tax has been paid is shown.
Section 95. Duties of Certain Officers and Debtors. - Registers of Deeds shall not
register 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, unless a certification from the Commissioner that the tax
fixed in this Title and actually due thereon had been paid is show, and they shall
immediately notify the Commissioner, Regional Director, Revenue District Officer, or
Revenue Collection Officer or Treasurer of the city or municipality where their offices
are located, of the non payment of the tax discovered by them. Any lawyer, notary
public, or any government officer who, by reason of his official duties, intervenes in
the preparation or acknowledgment of documents regarding partition or disposal of
donation intervivos or mortis causa, legacy or inheritance, shall have the duty of
furnishing the Commissioner, Regional Director, Revenue District Officer or Revenue
Collection Officer of the place where he may have his principal office, with copies of
such documents and any information whatsoever which may facilitate the collection
of the aforementioned tax. Neither shall a debtor of the deceased pay his debts to
the heirs, legatee, executor or administrator of his creditor, unless the certification
of the Commissioner that the tax fixed in this Chapter had been paid is shown; but
he may pay the executor or judicial administrator without said certification if the
credit is included in the inventory of the estate of the deceased.
Section 96. Restitution of Tax Upon Satisfaction of Outstanding Obligations. - 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.
Section 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights. There shall not be transferred to 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, unless a certification from the Commissioner that the
taxes fixed in this Title and due thereon have been paid is shown.
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 Commissioner has certified that the taxes imposed
thereon by this Title have been paid: Provided, however, That the administrator of
the estate or any one (1) of the heirs of the decedent may, upon authorization by
the Commissioner, withdraw an amount not exceeding Twenty thousand pesos
(P20,000) without the said certification. For this purpose, all withdrawal slips shall
contain a statement to the effect that all of the joint depositors are still living at the
time of withdrawal by any one of the joint depositors and such statement shall be
under oath by the said depositors.