Classification of decedents valuation of properties left behind by the

decedent (unlike in the old revenue

1.Residents
regulation).

2.Citizens

3.Non-resident aliens.
Valuation of properties:

• Determine the classification of Shares of Stocks- determine if listed and

decedent at the time of death to traded, or unlisted

ascertain what are included in his

gross estate.
a.Listed or traded - The value thereof
is the arithmetic mean or average of
• For resident citizen, resident alien the highest and lowest quotation on
and non resident citizen –Within and the date of date.

Without
If none, nearest date of death refer
to the PSE website

• Non resident alien - Within

When it is NRA the general rule is a.If unlisted - check if common share
only the properties within will be or preferred share

subject to estate tax except for

intangible personal properties in Preferred share- have some rights
cases where reciprocity rule can preferential rights as compared to
be applied. In such case, you common shareholder.

need not include these as part of In case of dividend distribution –

the gross estate.
preferred are given priority.

Asset or Property distribution in times of

liquidation, preferred SH will be
• Properties included
preferred.

1. real properties

2. tangible personal properties

The price thereof, the preferred shares
3. intangible personal properties.
are usually sold at higher par value than
common shares

During valuation:

Rules on Valuation of Gross i.Preferred- par value/ face value as

Estate indicated in the certificate of
stock. (Does not necessarily
fluctuate as a result of operation)

GR: Fair Value at the time of death

If there is no other reasonable means,

i.Common- book value per share
then - Follow GAAP (Generally Accepted
(result of dividing net assets of the
Accounting Principles) in ascertaining the
FMV
company by the total outstanding
shares)

Real property- appraised value

whichever is higher between zonal or If book value is given, then multiple it
FMV
with the shares to get the value

- as determined by the Commissioner or

Example: 1000 shares multiplied by the
- assessed value based on a fix schedule computed BV is P50/share = total value
of shares left by the decedent

as determined by the provincial or city

assessor

Book value (could either go up or down)

– fluctuates depending on the income of
There is no need for an independent
appraiser's certificate when it comes to

Taxation II (August 26, 2019) Page 1 of 9

the company, if retains income, BV will 2.properties owned but excluded by
increase, if losing, then BV will decrease
law.

On valuation of shares under RR 12-2018 3.Bank deposit which has been

We do not look at the adjusted book subjected to 6% FWT pursuant to
value but merely on the BV.
amendment under the train law.

Adjusted book value is Used in sale of Result is inventory of taxable present

shares of stocks inter vivos.
property in the possession of the
decedent.

To compute the adjusted value - take into Add back taxable transfers- those inter
consideration, appraised value of assets vivos but are deemed mortis causa-
which appreciates.
those which are no longer in the
possession.

• Do we apply that adjusted for

appraisal in value for estate taxation Ex:

purposes? NO, under RR 12-2018 we 1.transfer in contemplation of death

don’t care about it anymore

2.revocable transfer

3. transfer passing under the general

• Units of participation, recreation, power of appointment

amusement - valued based on FMV Result is gross estate

on its bid price nearest date of death

Gross estate composition

• Usufruct/ habitation- probable life of
beneficiary taken into consideration in
Section 85. Gross Estate

computing for the value

xxx

Other guidelines in determining FV

(A)  Decedent's Interest.  - To the extent of
1.N e w l y p u r c h a s e d p r o p e r t y - the interest therein of the decedent at the
acquisition/purchase price OW time of his death;

second-hand value

2.Pawned items- (gross it up) Loan to 1. Decedent interest- extent of his

value ratio- refers to net amount equity or ownership participation over
received by pawnee when it was a property existing at the time of
pawned.
death. Property may or may not be
present/ interest must be present.

Example value is P1M, then the

pawnshop does not give you more than Ex.: Share in dividend declared
the value. If P600,000 is received from before death but not yet received-
pawnshop then that amount shall be property. Share in GPP which
divided by 60% .
accrued prior to death but no
For gross estate tax formula:
actual receipt-equity.

Start with the inventory of properties (B) Transfer in Contemplation of Death.  -

after death
To the extent of any interest therein of which
the decedent has at any time made a
Then add anything and everything in
t r a n s f e r, b y t r u s t o r o t h e r w i s e , i n
possession of decedent

contemplation of or intended to take effect

Then deduct the exempt transfer
in possession or enjoyment at or after death,
or of which he has at any time made a
Exempt transfers cover:
transfer, by trust or otherwise, under which
1.properties not owned by decedent
he has retained for his life or for any period
which does not in fact end before his death
Taxation II (August 26, 2019) Page 2 of 9
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
2. Transfer in contemplation of death-
motivation of transfer should be the
thought of death, does not have to be
imminent danger—intent is displayed
in several manifestations
(gravity of illness of transferor,
age, length of time of transfer and
death, length of time between
transfer and crafting of will of
decedent)- not absolute reasons;
power if the decedent had lived, and
In the exam, add other
manifestations, because one does
not really absolutely qualify the
transfer as in contemplation of
death. 2 possible scenarios, can
be applied to intervivos sale with
insufficient consideration.- estate
tax applies instead of donor’s tax.
If sold higher than FMV- that is
bona fide sale, not considered.
possession at time of death, but
In the exam: If you are the BIR
Commissioner- go to the GR. If
you are the taxpayer, rely on the
provision.
he can revoke the transfer anytime he
C) Revocable Transfer. -
(1)   To the extent of any interest
therein, of which the decedent has at
any time made a transfer (except in
case of a bona fide sale for an
adequate and full consideration in


money or money's worth) 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
Taxation II (August 26, 2019)
capacity exercisable) 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.


(2)   For the purpose of this
Subsection, the power to alter, amend
or revoke shall be considered to exist
on the date of the decedent's death
even though the exercise of the power
is subject to a precedent giving of
notice or even though the alteration,
amendment or revocation takes effect
only on the expiration of a stated
period after the exercise of the power,
whether or not on or before the date
of the decedent's death notice has
been given or the power has been
exercised. In such cases, proper
adjustment shall be made
representing the interests which
would have been excluded from the
for such purpose if the 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
death.
3. Revocable transfers - not in
considered mortis causa. Cases
where the owner transfers inter vivos
but retains economic benefit during
his life or he specifically provides that
wants or on a specific date.
Donation: If there’s condition or
date and did not happen, then
there is no transfer. If right to
revoke was waived by transferor-
transfer is absolute and no need
to add back.
If with unsound mind, it’s just
suspended. It does not destroy
the right to revocation.
Page 3 of 9
 Appointment of conservator- a 5. Proceeds of Life Insurance- this
revocable transfer.
must be a life insurance not property
not non-life. Must be taken by the
Sale: deed of conditional sale can decedent on his own life, the policy
be deemed revocable if not bona holder and insured is one and the
fide which can be considered as same.

transfer for insufficient 

consideration. The difference will a) Determine the designation of the
be subject to estate tax.
beneficiary, if designation is revocable
or irrevocable;



(D) Property Passing Under General
b) Determine who is the beneficiary

Power of Appointment.  - To the extent of

any property passing under a general power
(E) Proceeds of Life Insurance.  - To
of appointment exercised by the decedent:
the extent of the amount receivable by
(1) by will, or (2) by deed executed in
the estate of the deceased, his
contemplation of, or intended to take effect
executor, or administrator, as insurance
in possession or enjoyment at, or after his
under policies taken out by the
death, or (3) by deed under which he has
decedent upon his own life,
retained for his life or any period not
irrespective of whether or not the
ascertainable without reference to his death
insured retained the power of
or for any period which does not in fact end
revocation, or to the extent of the
before his death (a) the possession or
amount receivable by any beneficiary
enjoyment of, or the right to the income
designated in the policy of insurance,
from, the property, or (b) the right, either
except when it is expressly stipulated
alone or in conjunction with any person, to
that the designation of the beneficiary
designate the persons who shall possess or
is irrevocable.
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. 6. Proceeds of Life Insurance- this
must be a life insurance not property
not non-life. Must be taken by the
4.Property passing under the general decedent on his own life, the policy
power of appointment- - applies in a holder and insured is one and the
situation where the donor donates his same.

property, with a condition that the

donee has the right to pass it to other
people as specified by donor. If
donee dies the property will not form
part of the estate of donee. If no
restriction and the donee dies, it will
I f t h e b e n e fi c i a r y i s t h e e s t a t e ,
administrator or executor.
Whether revocable or irrevocable, the
proceeds in the life insurance policy shall
be included in the gross estate

form part of his estate.

Tr a n s f e r s f o r i n s u ffi c i e n t If the beneficiary is a third party other

consideration- difference of FMV than estate, administrator or executor
and consideration is subject to
donor’s tax.
Revocable: Proceeds included in the
gross estate

If death happens before 2018,

apply previous rate if doesn’t avail Irrevocable: Proceeds excluded from
of the amnesty. If no date, then gross estate.

qualify.

Taxation II (August 26, 2019) Page 4 of 9



(F) Prior Interests.  - Except as otherwise
specifically provided therein, Subsections
(B), (C) and (E) of this Section shall 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.
7. Prior Interest
There was no concept of transfer in
contemplation of death, revocable
transfer, proceeds of life insurance prior
to 1997 NIRC. Hence, the provision
allows taxing authorities to apply the
concepts retroactively under the prior
interest rule .
(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.
involve the owner-predecessor.
8. Capital of Surviving Spouse
estate tax.
Provision pertains to the exclusive
property of the surviving spouse as it is
not included in the gross estate. 
 (heirs of C). The usufructuary in favor of


The provision of serves as reminder that
for community or conjugal properties, it
shall first form part of the gross estate.
Only after computing the gross estate
and making deduction will the surviving
spouse’s share and spouse’s exclusive
property is deducted.
(predecessor).
9. Amounts received under RA 4917 or
the Retirement Benefits Act
Amount received is deductible but it has
to be included in the gross estate of the
decedent.
Taxation II (August 26, 2019)
For disclosure purposes.
All properties purchased using the
retirement benefit is equally exempted
under the law.
10. Claims Against Insolvent Persons
Allowable deduction but the entire
amount must be included as the
component of the gross estate.
The decedent is the creditor and that the
debtor became insolvent.
Tr a n s f e r o f P ro p e r t i e s n o t
subject to Estate Tax
I. (Merger of Usufruct)
A. - B. - C
(predecessor). (usufructuary) (naked owner)


Upon the death of B and prior to that of
C, there is a merger of the naked owner
and the usufructuary as the latter passes
in favor of C. The transfer is not subject
to estate tax as the transfer did not
Only transfer from A to C is subject to
If naked owner dies prior to the
usufructuary, the right goes to the heirs
B subsist. However the transmission of
the right from the the naked owner to his
heir (transfer of right from C to his heirs)
is subject to estate tax.
II. (Transmission from Fiduciary to Fideicommissary)
A. - B. - C
(Fiduciary Heir) (Fideicommissary)
* Ta k e n o t e o f t h e r e l a t i o n s h i p
requirement for fiduciary heir.
Page 5 of 9
If B dies ahead of C, the property goes to
C. The transmission between B and C is Claims against the estate(indebtedness)-
not subject to estate tax as B is not the estate is the debtor

owner. As B merely held the property in

trust.
Claims of the deceased against insolvent

persons-estate is the creditor.

III. (Transmission from 1st to 2nd)

A. - B. - C

(predecessor). (1st Heir) (2nd Heir)

The transmission from first heir to

second heir is not subject to tax as the
property is merely held in trust.

IV. Proceeds of Life Insurance

If beneficiary is other than the estate,

executor and administrator and
designated as irrevocable.

V. Properties held in Trust by the

Decedent

VI. Exclusive Property of Surviving

Spouse

VII. Transfer by Way of Bona Fide Sale

RATE

Prior to the train law, the rate ranges

from 5%-20%

After TRAIN law, the rate now is only 6%

on the value of the net estate

DEDUCTIONS

You can only deduct provided you have

added it first as part of the the gross
estate:

Amounts received by heirs under

R.A.4917

Claims of the deceased against

insolvent persons

Family home -Residential house as

w e l l a s t h e re s i d e n t i a l l o t
(classification matters whether
common or exclusive)

Standard deductions: No need of

support with any receipts; automatic
deduction

Taxation II (August 26, 2019) Page 6 of 9

LEGEND
RED COLOR- CHANGES IN THE LAW

STRIKETHROUGH - DELETED UNDER TRAIN

CITIZEN AND RESIDENT ALIEN

BEFORE TRAIN AFTER TRAIN

Funeral expenses Claims against the estate(indebtedness)
Judicial expenses Claims of the deceased against insolvent persons
Claims against the estate(indebtedness) Unpaid mortgages
Claims of the deceased against insolvent persons Properties previously taxed (VANISHING DEDUCTIONS)
Unpaid mortgages Transfers for public use
P r o p e r t i e s p r e v i o u s l y t a x e d ( VA N I S H I N G Family home of P10,000,000
DEDUCTIONS) Standard deduction of 5,000,000
Transfers for public use Amounts received by heirs under R.A.4917
Family home of P1,000,000
Standard deduction of P1,000,000
Medical expenses
Amounts received by heirs under R.A.4917

NON-RESIDENT ALIEN

BEFORE TRAIN AFTER TRAIN

Expenses, losses and indebtedness Properties previously taxed
Properties previously taxed Transfers for public use
Transfers for public use Standard deduction of 500,000
Miscellaneous provisions

FILING OF RETURNS
BEFORE TRAIN TRAIN
NOTICE OF DEATH Transfers subject to tax REPEALED
Gross estate exceeds P20K
Within 2 months from decedent’s
death

WHEN ESTATE TAX RETURN IS Transfers subject to tax Transfers subject to tax
REQUIRED Gross estate exceeds P200K Estate tax includes registered
Estate includes registered/ or registrable properties
registrable properties

THRESHOLD FOR RETURNS P2,000,000 P 5,000,000

REQUIRING CERTIFICATION FROM (estate gross value) (estate gross value)
A CPA

DEADLINE FOR FILING 6 months after the decedent’s death 1 year after the decedent’s
death
PAYMENT BY INSTALLEMENT NO PROVISION Up to 2 years from the
statutory date for its payment
without civil penalty and
interest

Taxation II (August 26, 2019) Page 7 of 9

 HOW TO COMPUTE THE TOTAL NET
Filing of Estate Tax Return ESTATE:
Valuation rule at the time of death

You still need to file estate tax even if the Allowable deduction at the time of death.

estate value does not exceed P5M

because unless and until you file COVERAGE
estate tax return, even if you have
zero tax payable, BIR will not issue shall cover the estate of decedents who
Certificate Authorizing Registration died on or before December 31,
(CAR), hence you cannot transfer the 2017, with or without assessments
title of the property
duly issued therefor, whose estate
taxes have remained unpaid or have
FINAL WITHHOLDING TAX PROVISION accrued as of December 31, 2017

BEFORE TRAIN LAW- NO Time and Place of Filing and Payment

P R O V I S I O N ; i t ’s r e a l l y a RDO having jurisdiction over the last
requirement for the taxpayer to residence of the decedent

get a CAR in order to witthdraw within two (2) years from the effectivity of
the bank deposits of the the Implementing Rules and
decedent;you can only withdraw Regulations of this Act(IRR effective
up to P20K for the basic needs of JULY 2, 2019)

the estate

Procedures in the Availment of Estate

AFTER TRAIN LAW-
Tax Amnesty
OPTION 1: You can withdraw the bank
Step 1: Accomplish the Estate Tax
deposits but subject to 6% final
Amnesty Return (ETAR) and submit with
withholding tax

the complete documentary requirements

OPTION 2 :Apply for a CAR but you have
to the concerened RDO for computation
to declare the bank deposits as part
o f E s t a t e Ta x A m n e s t y d u e a n d
of the gross estate and withdraw

endorsement of Acceptance Payment

Form (APF)

Under the TRAIN LAW, you can also

process estate tax for specific
Step 2: Present the RDO- endorsed APF
properties only.

to Authorized Agent Banks (AABs) or

RDOs, whichever is applicable, and pay
Estate Tax Amnesty the amnesty amount

Signed on Feb. 14, 2019 Step 3: Submit the validated APF and
R.A.11213 proof of payment to the concerned RDO,
Purpose: which shall not be beyond the two(2)
Primary to level since 6% fixed rate and year availment period.

revised allowable deductions applies

only to deaths 2018 onwards
Step 4: Receive Certificate of Availment
RATE: 6% and Electronic Certificate Authorizing
TAX BASE: Registration (eCAR)

Total Net Estate at the time of death; or

Total Net undeclared Estate- properties The Certificate of Availment of the Estate
which are not included in the estate Tax Amnesty shall be issued by the
tax return when you process the concerned RDO within (15) calendar
payment of the estate tax before days from the receipt of the following:

2018

MINIMUM AMOUNT: 1. Application for Estate Tax Amnesty

P5K even if the net estate is zero or Return (ETAR);

negative

Taxation II (August 26, 2019) Page 8 of 9

2. Duly Validated Acceptance Payment
Form (APF); and

3. Complete Documentary Requirements

ONE ESTATE TAX RETURN FOR

EACH TRANSMISSION (ONE
G E N E R AT I O N T O A N O T H E R
GENERATION

Taxation II (August 26, 2019) Page 9 of 9