‘Mannah’ from a beloved aunt

Q.I received a substantial amount of inheritance from my beloved aunt who recently passed away. Is this inheritance subject to income tax and, if so, what is the percentage that should be deducted?

A.Thank heaven (I’m pretty sure you know where your aunt now is!) for your beloved aunt for giving you "mannah".

Talk about death and taxes. Gross income does not include property transfers from one who has departed to an heir, such as the inheritance you received from your aunt.

Such transfers are, however, subject to estate tax, which is computed using progressive rates, from zero to 20%.

First, the gross value of the estate is determined, which would be the market value of the assets left behind, including real estate (valued at zonal value announced by the Bureau of Internal Revenue or market quotations, whichever is higher), bank accounts, money market placements, stock investments (at quoted prices as of the day of death), jewelry and other belongings. Second, outstanding debts are computed, including interest due.Third, burial and other death related expenses are added up.

The gross value of the estate less outstanding debts and allowable expenses equals the net estate, which is the basis of computing estate tax.

(Raymund S. Gallardo is tax partner of Laya Mananghaya & Co./KPMG. Questions and comments are welcome. Messages to the author can be sent by e-mail at [email protected]).