Exclusions & Inclusions; Assets; Resident Alien (2005)

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 a

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) a

resthouse in Orlando, Florida; (c) a condominium unit in Makati; (d) shares of stock in the Philippine
subsidiary of

the U.S. Company where he worked; (e) shares of stock in

San Miguel Corp. and PLOT; (f) shares of stock in Disney

World in Florida; (g) U.S. treasury bonds; and (g) proceeds

from a life insurance policy issued by a U.S. corporation.

Which of the foregoing assets shall be included in the

taxable gross estate in the Philippines? Explain. (5%)

SUGGESTED ANSWER:

All of the properties enumerated except (g), 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 American 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, (g) 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)