Module 3- EXEMPTIONS AND EXCLUSIONS ● Proceeds of life insurance under a group

BRYAN C. BARLIS, CPA, MBA insurance taken by employer (not taken out
Professor, AE 25 upon his life)
● War damage payments
EXEMPTION AND EXCLUSIONS FROM GROSS ● Transfer by way of bona fide sales
ESTATE ● Transfer of property to the National
UNDER SECTION 85 AND 104 of the Tax Code, Government or to any of its political
as amended subdivisions
● Capital or exclusive property of the surviving ● Separate property of the surviving spouse
spouse ● Merger of usufruct in the owner of the naked
● Properties outside the Philippines of a non- title
resident alien decedent ● Properties held in trust by the decedent
● Intangible personal property in the ● Acquisition and/or transfer expressly
Philippines of a non-resident alien when the declared as not taxable
rule of Reciprocity applies
A. Under Section 87 of the Tax Code, as DEDUCTIONS FROM GROSS ESTATE
amended For dates of deaths occurring January 1, 2018 to
● The merger of the usufruct (right to use) in present (RA No. 10963/TRAIN Law)
the owner of the naked title
● The transmission from first heir, legatee or A. For a citizen or resident alien:
donee in favor of another beneficiary in
accordance with the will of the predecessor. Standard Deduction — An amount equivalent to
This type of transfer is most commonly as Five million pesos (₱5,000,000.00)
transfer under Special Power of
Appointment (SPA) Claims against the estate -
Requisites for Deductibility of Claims against the
EXEMPTION AND EXCLUSIONS FROM GROSS Estate –
ESTATE The liability represents a personal obligation of the
GPA = Inclusion to the Gross Estate deceased existing at the time of death;
SPA = Exclusion from the Gross Estate The liability was contracted in good faith and for
adequate and full consideration in money’s worth;
EXEMPTION AND EXCLUSIONS FROM GROSS The claim must be a debt or claim which is valid in
ESTATE law and enforceable in court; and
3. The transmission or delivery of the inheritance or The indebtedness must not have been condoned by
legacy of the fiduciary heir or legatee to the the creditor or the action to collect from the
fideicommissary. decedent must not have been prescribed.
● This is the same with SPA above. The only
difference is, in fideicommissary transfer, the 3. Claims of the deceased against insolvent
relationship of the donor and donee is only persons where the value of the decedent’s
one degree apart. interest therein is included in the value of the
4. All bequests, devices, legacies or transfers to gross estate
social welfare, cultural and charitable institutions,
provided: 4. Unpaid mortgages, taxes and casualty losses
No part of the net income of said institutions inure to
the benefit of any individual; 5. Property previously taxed - An amount
Not more than 30% of such transfers shall be used equal to the value specified below of any property
for administration purposes. forming part of the gross estate situated in the
Philippines of any person who died within five (5)
EXEMPTION AND EXCLUSIONS FROM GROSS years prior to the death of the decedent, or
ESTATE transferred to the decedent by gift within five (5)
● GSIS proceeds/ benefits years prior to his death, where such property can be
● Accruals from SSS identified as having been received by the decedent
● Proceeds of life insurance where the from the donor by gift, or from such prior decedent
beneficiary is irrevocably appointed by gift, bequest, devise or inheritance, or which can
be identified as having been acquired in exchange death of the decedent-employee in accordance with
for property so received: Republic Act No. 4917: Provided, that such amount
is included in the gross estate of the decedent.
DEDUCTIONS FROM GROSS ESTATE
● “One hundred percent (100%) of the value, if 9. Net share of the surviving spouse in the conjugal
the prior decedent died within one (1) year partnership or community property
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 than five (5) 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.

DEDUCTIONS FROM GROSS ESTATE

6. Transfers for Public Use

7. The Family Home - An amount equivalent to the

If the family home is conjugal property and does not

8. Amount Received by Heirs Under Republic

Any amount received by the heirs from the