Article 38p. 38

NATIONAL INTERNAL REVENUE CODE TAXATION, TARIFF and CUSTOMS LAWS

through

the

exercise

of

a

power

(in

whatever

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 power if

the decedent had lived, and 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.

(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.

(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.

(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.

(G) Transfers for 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.

(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.

SEC. 86. Computation of Net Estate. - For the purpose of

the tax imposed in this Chapter, the value of the net

estate shall be determined:

(A) Deductions Allowed to the Estate of a Citizen or a

Resident. — In the case of a citizen or resident of the

Philippines, by deducting from the value of the gross

estate —

(1) Standard Deduction. — An amount equivalent to

Five million pesos (P5,000,000).

(2) 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.

(3) 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.

(4)

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.

(5) Property Previously Taxed. — An amount equal

to the value specified below of any property forming

part of the gross estate situated in the Philippines of

any person who died within five (5) years prior to the

death

of

the

decedent,

or

transferred

to

the

decedent by gift within five (5) years prior to his

death, where such property can be identified as

having been received by the decedent from the

donor by gift, or from such prior decedent by gift,

bequest, devise or inheritance, or which can be

identified as having been acquired in exchange for

property so received:

One hundred percent (100%) of the value, if the prior

decedent died within one (1) year prior to the death

of the decedent, or if the property was transferred to

him by gift, within the same period prior to his

death;

Eighty

percent

(80%)

of the value, if the prior

decedent died more than one (1) year but not more

than two (2) years prior to the death of the decedent,

or if the property was transferred to him by gift

within the same period prior to his death;

Sixty percent (60%) of the value, if the prior decedent

died more than two (2) years but not more than

three (3) years prior to the death of the decedent, or

if the property was transferred to him by gift within

the same period prior to his death;

Forty

percent

(40%)

of

the

value,

if

the

prior

decedent died more than three (3) years but not

more than four (4) years prior to the death of the

decedent, or if the property was transferred to him

by gift within the same period prior to his death; and

Twenty percent (20%) of the value, if the prior

decedent died more than four (4) years but not more

© Compiled by RGL

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