CHAPTER 3: GROSS ESTATE
DETERMINATION & EVALUATION OF GROSS ESTATE
-starting point in computing Philippine estate tax liability GROSS ESTATE
-consists of all property owned by a decedent at the time of his death, including stocks, bonds, real estate, mortgages & any other property that technically belonged to him -it shall not include the exclusive properties of the surviving spouse -property is called gross estate because it is to be reduced by decedent’s debts (including taxes), funeral expenses, share of the surviving spouse & other permissible deductions to arrive at a net taxable estate. DECEDENT CITIZENS & RESIDENT ALIENS
-real & personal properties, wherever located, shall be included as part of the gross estate. NONRESIDENT ALIENS
-only properties located in the Philippines that are to be transferred upon death are subject to estate tax. -share of stocks acquired from a domestic corporation are taxable in the Philippines. REAL PROPERTY
-land, building or any structure or even equipment permanently attached to the land. TANGIBLE PERSONAL PROPERTY
-property with physical form that could be seen or touched, such as car, jewelry and clothing. INTANGIBLE PERSONAL PROPERTY
-property that has no physical form, such as receivables, bonds and other securities. -located within the Philippines of a non-resident alien is subject to the rule of reciprocity. If there is reciprocity, it is not subject to estate tax in the Philippines. SITUS OF A PROPERTY
-is the domicile or residence of the owner.
DATE OF VALUATION
-is the time of death because the transfer of properties from the dead to the living takes effect at the moment of death. RULES IN VALUING THE GROSS ESTATE
1. In general, the GROSS ESTATE shall be valued at its FAIR MARKET VALUE at the time of the decedent’s death. 2. REAL PROPERTIES should be valued at the CURRENT FAIR MARKET VALUE as shown in the schedule of values fixed by the Provincial/City Assessors, or the fair market value as determined by the BIR Commissioner, whichever is higher. 3. PERSONAL PROPERTIES should be reported at the ACQUISITION COST for the RECENTLY acquired properties, or the CURRENT MARKET PRICE for the previously acquired properties. 4. Stocks, bonds and other securities
a. If listed in the local stock exchange – the value is the mean between the highest and lowest quoted selling price at the date nearest the date of death, if none is available on the date of death. b. If not listed in the local stock exchange
1. UNLISTED COMMON SHARES should be valued at BOOK VALUE at the date of death. 2. UNLISTED PREFERRED SHARES are valued at PAR VALUE.
APPRAISAL SURPLUS & VALUE ASSIGNED TO PREFERRED SHARES
-shall not be considered in determining the book value of the unlisted common shares.
UNIDENTIFIABLE RIGHTS OR PROPERTIES TO BE ADDED IN THE GROSS ESTATE 1. Taxable transfers (transfers during the lifetime of the decedent) a. Revocable transfers
b. Transfers in contemplation of death
c. Property passing under general power of appointment
d. Transfers for insufficient consideration
a. Decedent’s interest accrued at the date of death
b. Proceeds of life insurance with revocable beneficiary
c. Claims against insolvent person
d. Amount received by heirs under RA 4917
-a transfer of property with retention or reservation of rights over the property by the donor (decedent) while he still lives. TRANSFER IN CONTEMPLATION OF DEATH
-properties are not physically available in the estate at the time of death because the decedent transferred them during his lifetime in anticipation of his death. -the purpose of including this as part of the gross taxable estate is to prevent evasion from estate tax liability by the use of other forms of conveyances rather than by succession or transfer mortis causa.
TRANSFERS ARE HELD TO BE IN CONTEMPLATION OF DEATH
1. Where a donation was made concurrently...
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