Net estate.
Section 89
SEC. 89. Net estate. — For the purpose of the taxes imposed in this Chapter the value of the net estate shall be determined: (a) In the case of a citizen or resident of the Philippines, by deducting from the value of the gross estate — (1) Expenses, losses, indebtedness, and taxes. — Such amounts — (A) For funeral expenses which shall, in no case, exceed five per centum of the gross estate; (B) For judicial expenses of the testamentary or intestate proceedings; (C) For claims against the estate; (D) 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 (E) For unpaid mortgages upon, or any 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 or inheritance taxes. 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 from income tax purposes in an income tax return. (2) 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 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 and inheritance taxes 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 net estate of the prior decedent no deduction was allowable under paragraph (2) in respect of the property or property given in exchange therefor. Where a deduction was allowed of any mortgage or other lien in determining the gift tax, or the estate and inheritance taxes 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 amounts 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), (3), and (4) of this subsection as the amount otherwise deductible under said paragraph (2) bears to the value of the decedent's gross 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. (3) Transfers for public purposes. — The amount of all bequests, legacies, devises, or transfers, to or for the use of the Government of the Philippines, or any political subdivision thereof, for exclusively public purposes. If the taxes imposed by sections 85 and 86 of this Chapter, or any estate, succession, legacy or inheritance taxes are either by the terms of the will, by the law of the jurisdiction under which the estate is administered, or by the law of the jurisdiction imposing the particular tax, payable in whole or in part out of the bequests, legacies, or devises otherwise deductible under this paragraph, then the amount deductible shall be the amount of such bequests, legacies, or devises, reduced by the amount of such taxes the amount of the deduction under this paragraph for any transfer shall not exceed the value of the transferred property required to be included in the gross estate. (4) Transfers to the surviving spouse and children. — The amount of all bequests, legacies, devises, or transfers to the surviving spouse and the legitimate or recognized natural or adopted children not exceeding three thousand pesos each. (b) Deductions allowed to non-resident estates. — In the case of non-resident not a citizen of the Philippines, by deducting from the value of that part of his gross estate which at the time of his death is situated in the Philippines — (1) 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; (2) 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 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 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 and inheritance taxes 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 and inheritance taxes 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 amounts 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 deductible under paragraph (2) bears to the value of that part of the decedent's 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 terms shall be used for the purpose of computing the deduction. (3) Transfer for public use. — The amount of all bequests, legacies, devises, or transfers to or for the use of the Government of the Philippines, or any political subdivision thereof for exclusively public purposes. If the taxes imposed by sections 85 and 86 of this Chapter, or any estate, succession, legacy, or inheritance taxes are, either by the terms of the will, by the law of the jurisdiction under which the estate is administered, or by the law of the jurisdiction imposing the particular tax, payable in whole or in part out of the bequests, legacies, or devises, otherwise deductible under this paragraph, then the amount deductible shall be the amount of such bequests, legacies, or devises reduced by the amount of such taxes. The amount of the deduction for any transfer shall not exceed the value of the transferred property required to be included in the gross estate. (c) 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. (d) Miscellaneous provisions. — (1) No deductions 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 93 the value at the time of his death of that part of the gross estate of the non-resident not situated in the Philippines. (2) 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 has made a transfer by trust or otherwise, within the meaning of subsection (b) or (c) of section 83 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.