Determination of Income and Estate Tax Liabilities of a Decedent and His Estate

November 29, 1983 REVENUE MEMORANDUM CIRCULAR NO. 37-83 SUBJECT : Determination of Income and Estate Tax Liabilities of a Decedent and His Estate 1. Taxable Periods In case of death of an individual taxpayer, there shall be included in computing net income for the taxable period in which falls the date of his death, amounts accrued up to the date of his death if not otherwise properly includible in respect of such period or a prior period. (Section 39, NIRC.) Likewise, there shall be allowed as deductions for the taxable period in which falls the date of his death, amounts accrued up to the date of his death if not otherwise properly allowable in respect of such period. (Section 40, NIRC.) cd 2. Returns to be Filed in Case of Death of an Individual 2.1 Pursuant to the provisions of Sections 39 and 40, in case an individual dies, the following tax returns shall be filed 2.11 An income tax return covering the income and deductions of the decedent from January 1 to the date of his death shall be filed. Although the period covered by the return consists of less than 12 months, such period shall be considered as a "taxable year" pursuant to Section 20 (p). 2.12 If the settlement of the estate of the decedent is the object of judicial testamentary or intestate proceedings: 2.12/1 An income tax return for the estate as a taxable person shall be filed by the fiduciary or administrator. The estate's income tax return shall cover the income and deductions of the estate for the period from the date immediately following the death of the decedent to the end of the taxable year. Thereafter, annually a return for the estate shall be filed until the estate is terminated. 2.12/2 An individual return for each of the spouse, heirs/beneficiaries covering their respective income and deductions for the period from the date immediately following the death of the decedent to end of the taxable year. Such individual income tax returns shall include the income received by them from the estate pursuant to Section 57. 2.13 In the case of an estate of the decedent, the settlement of which is not the object of judicial testamentary or intestate proceedings, the income of the properties left by the decedent is taxable directly to the heirs or beneficiaries. Each heir or beneficiary must include in his income tax return his distributive share of the net income of the estate or co-ownership. cd i 3. When to File the Returns Although the period covered by the fractional returns required to be filed under the preceding paragraphs consists of less than 12 months, such period shall be considered as a taxable year pursuant to Section 20(p) and each such return shall be filed in accordance with the provisions of Section 45. 4. Personal and Additional Exemption The personal and additional exemption prescribed in Section 23 shall be allowed in full for the decedent and for the heirs/beneficiaries. The estate is likewise entitled to the exemption prescribed in Section 58. 5. Publicity All Internal Revenue Officers and others concerned are hereby enjoined to give this Revenue Memorandum Circular as wide a publicity as possible. cdt (SGD.) RUBEN B. ANCHETA Acting Commissioner