Section 101. Net estate. —
For the purpose of the tax imposed in this Chapter, the value of the net estate shall be determined:
In the case of a citizen or resident of the Philippines, by deducting from the value of the gross estate.
Expenses, losses, indebtedness, and taxes. —
Such amounts —
For actual funeral expenses or in an amount equal to five per centum of the gross estate, whichever is lower, but in no case to exceed P100,000;
For judicial expenses of the testamentary or intestate proceedings;
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 years before the death of the decedent, the administrator or executor shall submit a statement showing the disposition of the proceeds of the loan;
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; and
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 taxes 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 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 84.
Property previously taxed. —
An amount equal to the value specified below of any property forming a part of the gross estate situated in the Philippines of any person who died within five years prior to the death of the decedent, or transferred to the decedent by gift within five 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 per centum of the value if the prior decedent died within one 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 per centum of the value if the prior decedent died more than one year but not more than two 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 per centum of the value if the prior decedent died more than two years but not more than three 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 per centum of the value if the prior decedent died more than three years but not more than four 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 per centum of the value if the prior decedent died more than four years but not more than five 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.
These deductions shall be allowed only where a gift tax, or estate tax imposed under this Title were finally determined and paid by or on behalf of such donor, or the estate of such prior decedent, as the case may be and only in the amount finally determined as the value of such property in determining the value of the gift, or, the gross estate of such prior decedent, and only to the extent that the value of such property is included in the decedent's gross estate, and only if in determining the value of the estate of the prior decedent no deduction was allowable under paragraph (2) in respect of the property or properties given in exchange therefor. Where a deduction was allowed of any mortgage or other lien in determining the gift tax, or the estate tax of the prior decedent, which were paid in whole or in part prior to the decedent's death then the deduction allowable under said paragraph shall be reduced by the amount so paid. Such deduction allowable shall be reduced by an amount which bears the same ratio to the amounts allowable as deductions under paragraphs (1) and (3) of this subsection as the amount otherwise deductible under said paragraph (2) bears to the value of the decedent's estate. Where the property referred to consists of two or more items the aggregate value of such items shall be used for the purpose of computing the deduction.
Transfers for public use. —
The amount of all bequests, legacies, devises, or transfers to or for the use of the Government of the Republic of the Philippines, or any political subdivision thereof, for exclusively public purposes.
The family home. —
An amount equivalent to the current or fair market value or zonal value of the decedent's family home, whichever is higher: Provided, however, That, if the said current or fair market value or zonal value exceeds One million pesos (P1,000,000), the excess shall be subject to estate tax. As a sine qua non condition for the exemption or deduction, said family home must have been the decedent's family home as certified by the barangay captain of the locality.
Deductions allowed to non-resident estates. —
In the case of a non-resident not a citizen of the Philippines, by deducting from the value of the part of his gross estate which at the time of his death is situated in the Philippines —
Expenses, losses, indebtedness, and taxes. —
That proportion of the deductions specified in paragraph (1) of subSection (a) of this Section which the value of such part bears to the value of his entire gross estate wherever situated;
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 years prior to the death of the decedent, or transferred to the decedent by gift within five 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 or property so received;
One hundred per centum of the value if the prior decedent died within one 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 per centum of the value if the prior decedent died more than one year but not more than two 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 per centum of the value if the prior decedent died more than two years but not more than three 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
Forty per centum of the value if the prior decedent died more than three years but not more than four 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 per centum of the value if the prior decedent died more than four years but not more than five 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.
These deductions shall be allowed only where a gift tax, or estate tax imposed under this Title were finally determined and paid by or on behalf of such donor, or the estate of such prior decedent, as the case may be, and only in the amount finally determined as the value of such property in determining the value of the gift, or the gross estate of such prior decedent, and only to the extent that the value of such property is included in that part of the decedent's gross estate which at the time of his death is situated in the Philippines, and only if in determining the value of the net estate of the prior decedent no deduction was allowable under paragraph (2) of subSection (b) of this Section, in respect of the property or properties given in exchange therefor. Where a deduction was allowed of any mortgage or other lien in determining the gift tax, or the estate tax of the prior decedent, which were paid in whole or in part prior to the decedent's death, then the deduction allowable under said paragraph shall be reduced by the amount so paid. Such deduction allowable shall be reduced by an amount which bears the same ratio to the amounts allowed as deductions under paragraphs (1) and (3) of this subSection as the amount otherwise deducted under paragraph (2) bears to the value of that part of the decedent gross estate which at the time of his death is situated in the Philippines. Where the property referred to consists of two or more items the aggregate value of such items shall be used for the purpose of computing the deduction.
Transfers for public use. —
The amount of all bequests, legacies, devises, or transfers to or for the use of the Government of the Republic of the Philippines, or any political subdivision thereof, for exclusively public purposes.
Share in the conjugal property. —
The net share of the surviving spouse in the conjugal partnership property as diminished by the obligations properly chargeable to such property shall, for the purpose of this Section, be deducted from the net estate of the decedent.
Miscellaneous provisions. —
No deduction shall be allowed in the case of a non-resident not a citizen of the Philippines unless the executor, administrator, or anyone of the heirs, as the case may be, includes in the return required to be filed under Section 105 the value at the time of his death of that part of the gross estate of the non-resident not situated in the Philippines.
For the purpose of this Chapter, stock in a domestic corporation owned and held by a non-resident not a citizen of the. Philippines, shall be deemed property within the Philippines, and any property of which the decedent had made a transfer by trust or otherwise, within the meaning of subSection (b) or (c) of Section 100 of this Chapter shall be deemed to be situated in the Philippines if so situated either at the time of the transfer or at the time of the decedent's death.