A.
Properties owned by
the decedent actually and physically
present in his estate at the time of his death such as land, buildings,
shares of stock, vehicles, bank deposit, etc.
B.
Decedent’s Interest – Refers to the
extent of equity or ownership participation of the decedent on any property
physically existing and present in the gross estate, whether or not in his
possession, control or dominion. It also
refer to the value of ANY INTEREST IN PROPERTY OWNED OR POSSESSED by the
decedent at the time of his death (interest having value or capable of being
valued, transferred)
Example:
·
Dividends declared
before his death but received after death.
·
Partnership profit
which have accrued before his death
·
Usufructuary rights,
etc.
C.
Properties NOT PHYSICALLY IN THE ESTATE (these have already been transferred during the lifetime of the
decedent but are still subject
to payment of estate tax)
1. Transfer in
contemplation of death
- It is the thought of death, as a controlling motive which induces the
disposition of the property for the purpose of avoiding the tax.
- Value of properties transferred by the decedent during his lifetime in
anticipation of his death
a.
transfer of property
in favor of another person, but the transfer was intended to take effect only
upon the transferor’s death
b. transfer by gift intended to take effect at death, or after death, or
under which the donor reserved the income or the right to designate the persons
who should enjoy the income
Ø Exception: there is no
transfer in contemplation of death when the transfer of property is a bona fide
sale for an adequate and full consideration in money or money’s worth.
- Included within this concept is donation
mortis causa – becomes effective upon the death of the donor
2. Transfer with
retention or reservation of certain rights
- The decedent have transferred his property during his lifetime, but
retained for himself beneficial enjoyment of the thing or the right to receive
income from the same.
3. Revocable Transfers
- It is a transfer where the terms of enjoyment of the property may be
altered, amended, revoked or terminated by the decedent.
- It is sufficient that the decedent had the power to revoked though he
did not exercised the power.
4. Transfers under a
general power of appointment
Power of appointment
- the right to designate the person or persons who will succeed to the
property of the prior decedent.
General power of appointment
- when it authorizes the donee to appoint any person he pleases.
- The rule is the gross estate
shall include any property passing or transferred under a general power of
appointment exercised by the decedent
a) By will
b) By deed to take effect in possession or enjoyment at or after his death
.
c) 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.
d) The possession or enjoyment of, or the
right to the income from the property.
e) 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.
The donee of a general power of appointment holds the
appointed property with all the
attributes of ownership thus, the appointed property shall form part of
the gross estate of the donee of the power upon his death.
·
Transfers with Retention and Reservation of
Certain Rights Over the Income or Enjoyment of the Property Transferred
Transfers where the donor reserves the right to the income of the property
until death;
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These transfers do not actually convey full ownership over the property
transferred hence the property still remains part of the gross estate of the
transferor.
|
|
·
Transfers where the donor reserves the right
to the possession or enjoyment of the property until death.
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Special power of appointment
- when the donee can appoint only from a restricted or designated class
of persons other than himself
(NOTE: Property transferred under a special power
of appointment should be excluded from the gross estate.)
5. Transfer for
insufficient consideration
- Property transferred by virtue of a bonafide sale for a price less than
its fair market value at the time of sale.
- The excess of the fair market value of the transferred property at the
time of death over the value of the consideration received shall be included in
the gross estate.
- Two FMVs to be used:
a.
FMV of the property
at the time of sale – to determine whether or not the consideration was full
and adequate
b. FMV of the property at the time of death - to determine the amount to be included in the
gross estate if the consideration received is less than full and adequate a
compared to the FMV at the time of sale
6. Proceeds of life
insurance
- Proceeds of life insurance taken out by the by the decedent on his
own life shall be included in the gross estate if the following requisites
are present:
1.
it must be an
insurance on the life of the decedent
2.
the beneficiary must
be either of the following:
a.
his estate
b.
his executor
c.
his administrator
and
d.
any third person
provided that the designation is not irrevocable
NOTE: When the
problem is silent, the designation of beneficiary is revocable; irrevocable designation of beneficiary is
never presumed and for it to be valid, must be in writing.
- Life insurance taken out not by the decedent himself is not part of
the gross estate.
