Mr. X, a Filipino residing in Alabama, U.S.A., died on January 2, 2013 after undergoing a major heart surgery. He left behind to his wife and two (2) kids several properties, to wit: (4%)
(1) Family home in Makati City;
(2) Condominium unit in Las Piñas City;
(3) Proceeds of health insurance from Take Care, a health maintenance organization in the Philippines; and
(4) Land in Alabama, U.S.A.
The following expenses were paid:
(1) Funeral expenses;
(2) Medical expenses; and
(3) Judicial expenses in the testate proceedings.
(A) What are the items that must be considered as part of the gross estate income of Mr. X?
(B) What are the items that may be considered as deductions from the gross estate?
Suggested answer only. Not an official answer and not legal advice.
(A) All listed properties form part of Mr. X's gross estate. (B) Funeral, medical, and judicial expenses are allowable deductions. Under Sec. 85, NIRC, a Filipino citizen's gross estate includes all properties wherever
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Quick check
What property is included in the gross estate of a deceased Filipino citizen under Section 85 of the NIRC?
The gross estate of a Filipino citizen includes all real and personal property wherever situated.
Under Section 86 of the NIRC applicable in 2013, what was the statutory ceiling for deductible funeral expenses?
Deductible funeral expenses for a 2013 decedent were capped at actual cost or 5% of gross estate, not exceeding P200,000.
How are real properties located in a foreign country treated for estate tax purposes of a deceased Filipino citizen?
Real property located abroad is included in the gross estate of a deceased Filipino citizen under worldwide estate taxation.
What was the maximum allowable medical expense deduction for a decedent who died in 2013 under Section 86 of the NIRC?
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Are health maintenance organization insurance proceeds payable to the estate included in the gross estate?
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Learn more about these topics
1. Gross Estate Inclusions
Under Section 85 of the National Internal Revenue Code, the gross estate of a decedent who was a Filipino citizen or resident alien includes all real and personal property, tangible and intangible, wherever situated. Citizenship or residency at the time of death establishes worldwide estate taxation authority. Consequently, real properties located outside the Philippines, such as foreign land, as well as domestic real estate, condominium units, and health maintenance organization insurance proceeds, form part of a citizen decedent's taxable gross estate.
2. Allowable Estate Deductions
Under Section 86 of the Tax Code applicable to a 2013 decedent, statutory deductions from gross estate include actual funeral expenses up to five percent of gross estate or two hundred thousand pesos, judicial expenses of testate proceedings, and medical expenses incurred within one year prior to death up to five hundred thousand pesos. Additional statutory deductions include the family home value up to one million pesos and a standard deduction, reducing the net taxable estate.
3. Health Insurance Proceeds
Proceeds from health maintenance organization contracts or health insurance policies payable to the estate or designated beneficiaries form part of the decedent's gross estate under Section 85 of the Tax Code. Intangible personal properties and insurance claims accruing to the estate upon death constitute receivable assets, which must be fully included in gross estate before applying statutory deductions.