Gross Estate Composition and Exempt Transfers
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Questions and Answers

Which of the following properties will be included in the gross estate of the decedent under a general power of appointment?

  • Only properties owned directly by the decedent
  • Properties subject to general power of appointment (correct)
  • Properties that have no beneficiaries
  • Only real properties

    • What should be reported as part of the gross estate on BIR Form 1801?

  • Only real properties
  • Only personal properties and business interests
  • Family interests
  • Real properties, family home, personal properties, and business interest (correct)

    • How should unlisted common shares be valued for the gross estate?

  • At the price set by the stock exchange
  • At historical acquisition cost
  • At fair market price
  • At their book value (correct)

    • What is the valuation method for the value of usufruct or annuity?

    <p>Probable life of the beneficiary with a mortality table</p> Signup and view all the answers

    What value should newly purchased property be recorded at when reporting gross estate?

    <p>The purchase price</p> Signup and view all the answers

    For properties that have no fixed valuation rules under the law, what is the primary consideration in determining their value?

    <p>Fair value rules under generally accepted accounting principles</p> Signup and view all the answers

    What is the preferred method for valuing listed shares in the stock exchange for the gross estate?

    <p>The average of the highest and lowest quotation near the date of death</p> Signup and view all the answers

    What should not be included in the valuation of gross estate properties?

    <p>Properties without any stated beneficiaries</p> Signup and view all the answers

    What properties are included in the gross estate of a resident citizen at the point of death?

    <p>All properties, both tangible and intangible</p> Signup and view all the answers

    For a non-resident alien (NRA) with reciprocity, which types of properties are included in the gross estate within the country?

    <p>All properties except intangible personal properties</p> Signup and view all the answers

    Which of the following is NOT considered an exempt transfer?

    <p>Transfer of properties to a charity after death</p> Signup and view all the answers

    What is the first procedure in establishing gross estate?

    <p>Conducting an inventory count of existing properties</p> Signup and view all the answers

    Which type of property is exempted from the gross estate for an NRA abroad?

    <p>None of the above</p> Signup and view all the answers

    What is subtracted from the inventory of properties when calculating gross estate?

    <p>Exempt transfers and properties not owned</p> Signup and view all the answers

    Which of the following is considered a taxable transfer?

    <p>Transfer of properties to the government</p> Signup and view all the answers

    Which property would NOT be considered in the gross estate of a resident at the point of death?

    <p>Ownership rights in a company abroad</p> Signup and view all the answers

    What must be withheld by a bank upon withdrawal from a decedent’s account within one year after their death?

    <p>6% final withholding tax</p> Signup and view all the answers

    Which of the following properties are exempt from estate tax if proven to be acquired using exempt benefits?

    <p>Properties acquired using SSS accruals</p> Signup and view all the answers

    Which condition is necessary for a donation to be excluded from estate tax under the conditional exclusion?

    <p>No more than 30% is used for administration by the done institution</p> Signup and view all the answers

    What type of transfer includes properties where the decedent retained possession until death?

    <p>Transfer with retention of certain rights</p> Signup and view all the answers

    What is the definition of transfers in contemplation of death?

    <p>Donations made by the decedent motivated by a thought of imminent death</p> Signup and view all the answers

    Which type of transfers involves possession given during the lifetime but not ownership?

    <p>Revocable transfers</p> Signup and view all the answers

    What is true about amounts subjected to the 6% final tax?

    <p>They must be included in the gross estate</p> Signup and view all the answers

    Which of the following is NOT considered a taxable transfer?

    <p>Gifts made to public schools</p> Signup and view all the answers

    What happens to the proceeds of an irrevocable life insurance policy upon the decedent's death?

    <p>They are no longer owned by the decedent at the time of death.</p> Signup and view all the answers

    Which of the following is excluded from the gross estate?

    <p>Properties held in trust by the decedent.</p> Signup and view all the answers

    What type of transactions are considered onerous and not subject to estate tax?

    <p>Transfers by way of bonafide sales.</p> Signup and view all the answers

    Which of the following may be included in the gross estate if the beneficiary is designated revocably?

    <p>Proceeds from a life insurance policy payable to the decedent's estate.</p> Signup and view all the answers

    What is true regarding the separate properties of a surviving spouse?

    <p>They are excluded from the gross estate of the decedent.</p> Signup and view all the answers

    Which of the following benefits are excluded from estate taxes?

    <p>Accruals from the Social Security System (SSS).</p> Signup and view all the answers

    What percentage of bequests to charitable institutions can be used for administrative purposes?

    <p>30%</p> Signup and view all the answers

    Which of the following is a characteristic of a bonafide sale?

    <p>It involves a transaction where something of value is exchanged.</p> Signup and view all the answers

    Study Notes

    Gross Estate Composition

    • Includes all decedent's properties (tangible/intangible, real/personal) at death, regardless of location.
    • Summary: Real, tangible personal, and intangible personal properties are included in the gross estate for residents/citizens (both within and abroad). For non-resident aliens (NRAs), inclusion depends on reciprocity and location.

    Exempt Transfers (Excluded from Gross Estate)

    • Properties not owned by the decedent at death.
    • Legally excluded properties owned by the decedent but exempt by law from estate tax.
      • Proceeds of irrevocable life insurance policies payable to beneficiaries other than the estate, executor, or administrator.
      • Proceeds of group insurance, GSIS policies, SSS accruals, USVA benefits, and war damage payments.
      • Bequests to social welfare, cultural, and charitable institutions (up to 70% for administration).
      • Acquisitions/transfers explicitly declared non-taxable by law.
      • Bank deposits withdrawn from the decedent's account during estate settlement (subject to 6% withholding tax if withdrawn within one year of death).
      • Properties acquired using exempt benefits (GSIS, SSS, USVA, group insurance, war damage payments). Heirs/administrators must prove acquisition using these funds.

    Taxable Transfers (Included in Gross Estate)

    • Transfers in contemplation of death (motivated by impending death).
    • Revocable transfers (transfers of possession, not ownership, during the decedent's lifetime).
    • Property passing under a general power of appointment (allowing the holder to control the property as their own).
    • Transfers with retention of rights (decedent retains possession, enjoyment, or income from transferred property).

    Determining Gross Estate

    • Inventory: List properties at the time of death.
    • Adjustments: Subtract exempt transfers and add taxable transfers.
    • Formula: Inventory of properties - Exempt Transfers + Taxable Transfers = Gross Estate.

    Valuation of Gross Estate

    • Fair market value at death: Generally accepted accounting principles (GAAP) guide valuation where specific rules don't exist.
    • Real Properties: Higher of CIR's zonal value or the provincial/city assessor's value.
    • Shares of Stocks:
      • Preferred shares: Par value.
      • Unlisted common shares: Book value.
      • Listed shares: Arithmetic mean of highest and lowest stock exchange quotations nearest the death date.
    • Usufruct and Annuities: Calculated based on the beneficiary's probable life expectancy using a standard mortality table.
    • Other Properties: Valued according to GAAP unless otherwise specified.
    • Additional Valuation Guidelines:
      • Newly purchased property: Purchase price.
      • Used properties: Second-hand value.
      • Pawned properties: Grossed-up pawn value adjusted by the loan-to-value ratio.
      • Properties fixed in monetary terms: Value specified in the contract, including accrued income.

    Presentation of Gross Estate in Estate Tax Return (BIR Form 1801)

    • Real properties.
    • Family home.
    • Personal properties.
    • Business interests.

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    Description

    This quiz explores the concept of gross estate composition, detailing various types of properties included in the decedent's estate at death. Additionally, it examines exemptions and transfers that are legally excluded from the gross estate, such as certain insurance proceeds and charitable bequests. Test your understanding of estate tax regulations and exemptions.

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