CDD: Estate Taxation

CDD In-house CPA Review

Rex B. Banggawan, CPA, MBA
TAXATION
TRANSFER TAXATION: ESTATE TAXATION
Succession a mode of transmission of the ownership, rights, interests and obligations
over property by reason of death of the owner in favor of certain persons designated by
the owner himself or by operation of law.
Elements:
1. Decedent the person who died whose properties, rights and obligations are
transmitted
2. Successor the person to whom the property, rights and obligations of the decedent
will pass
3. Estate the properties, rights and obligations of the decedent (inheritance)
Kinds of succession:
1. Testate (Voluntary) succession is carried out according to the wishes of the testator
expressed in a will executed in the form prescribed by law
2. Intestate (Involuntary) succession without a will or with one invalid, succession will
took effect by operation of law
Estate Tax tax on the privilege of the decedent to transmit his estate at death to his
lawful heirs or beneficiaries
GROSS ESTATE
General Principles:
1. The properties of citizens and resident aliens located within or outside the Philippines
shall be included in gross estate
2. The properties of non-resident alien located within the Philippines shall be included in
gross estate; however, intangible properties within the Philippines shall be subject
to reciprocity.
There is exemption reciprocity only when:
1. the foreign country of the non-resident alien do not impose estate tax
2. the foreign country of the non-resident alien to which he or she is a resident allows
the same exemption for intangible properties for non-residents
GROSS ESTATE COMPUTATION
Properties existing at the point of
death
Taxable transfers
Exempt transfers
Exclusion by law
Gross estate

XXX
XXX
(XXX
)
(XXX
)
XXX

Taxable Transfers transfers with insufficient considerations

1. transfer in contemplation of death as distinguished from motives associated with life
2. revocable transfers
3. properties passing under a general power of appointment
Exempt Transfers no title to property
1. the merger of usufruct in the owner of the naked title
2. the transmission or delivery of the inheritance or legacy by the fiduciary heir or
legatee to the fideicomissary
3. the transmission from the first heir, legatee, or donee in favor of another beneficiary,
in accordance with the desire of the predecessor (special power of appointment)
Exclusion in the gross estate of a citizen or resident alien decedent by law:
1. all bequest, devises, legacies or transfers to social welfare, cultural and charitable
institution, no part of net income of which inures to the benefit of any individual;
provided, however, that not more than 30% of the said bequest, devises, legacies or
transfers shall be used by such institutions for administration purposes
2. separate property of the surviving spouse
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3. proceed of irrevocable life insurance policy payable to beneficiary other than the
estate, executor or administrator
4. proceeds of group insurance taken out by a company for its employees
5. proceed of GSIS policy or benefits from GSIS
6. benefit received from SSS
Valuation of the Estate:
1. Usufruct consider into account the probable life of the beneficiary in accordance
with the latest Basic Standard Mortality Table. (same rule apply with annuity)
2. Properties the estate shall be appraised at its fair value as at the time of death.
However, the appraised value of the property as of the time of death shall be
whichever is higher of:
a. Fair market value as determined by Commissioner
b. Fair market value as shown in the schedule of values fixed by the Provincial or City
Assessors
Fair Value the price at which property would change hands between a willing seller
and a willing buyer, neither of whom is under compulsion to sell or to buy
MARRIED DECEDENTS
A. ABSOLUTE COMMUNITY OF PROPERTY
Exclusive Property:
1. property acquired before the marriage by either spouse who has legitimate
descendants by a former marriage, and the fruit of such property
2. property acquired during the marriage by gratuitous title by either spouse and the
fruits thereof; unless, it is expressly provided by the donor or testator that they
shall form part of the community property
3. property for personal and exclusive use of either spouse, except jewelry.
Community Property - all other properties owned by the spouses after marriage or
acquired thereafter
B. CONJUGAL PARTNERSHIP OF GAINS
Exclusive Property:
1. that which one already owns before his or her marriage, except fruit of such
property
2. that which one acquired after the marriage by gratuitous title ( e.g. donation or
inheritance) or by exchange with an exclusive property, except the fruits of such
property.
Conjugal Property all other properties are presumed to be conjugal (gains from
labor and fruits of exclusive property)
DEDUCTIONS FROM GROSS ESTATE
1. Expenses, Losses, Indebtedness and Taxes (ELIT)
a. citizen or resident alien deductible fully
b. non-resident alien the deductible amount shall be the prorated total world ELIT
by which the Philippine gross estate bears with the total world gross estate
2. transfer for public purpose (government or any political subdivisions)
3. deductions for properties previously taxed (vanishing deductions)
4. family home with maximum value deductible not to exceed P1,000,000.00
5. standard deduction for citizen or resident alien decedent only of P1,000,000.00
6. retirement benefit received by employees of private firms form private pension plan
approved by the BIR under RA 4917
7. medical expenses paid or incurred within 1 year prior to decedent death duly
substantiated with receipts but not to exceed P500,000.00 for citizen or resident alien
8. net share of the surviving spouse in the conjugal partnership property or community
property as diminished by the expenses properly chargeable to such property shall be
deducted from the estate
Deductible Amount of Expenses, Losses, Indebtedness, and Taxes:
1. Funeral expenses Limit: 5% of the gross estate but not exceeding P200,000
2. Judicial expenses for the testamentary or intestate proceeding unlimited
3. Losses due to fire, storm, shipwreck or other casualty
4. Losses due to theft, robbery, or embezzlement
Requisites for deductibility of losses:
a. the loss is not compensated by insurance or otherwise
b. the loss is not claimed as a deduction in the estate income tax return
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5.
6.

7.
8.
9.

c. the loss must occur not later than the last day for payment of the estate tax (6
months from the decedents death)
claims of the decedent against insolvent person, where the value of the decedents
interest therein is included in gross estate
claims against the estate:
Debt instrument notarization at the time of incurrence; if contracted within three
years before the death of the decedent, a statement showing the disposition of the
proceed must accompany the estate tax return.
unpaid mortgage, where the value of the decedents interest, undiminished by the
mortgage, is included in the gross estate
income tax on income prior to the death of the decedent
property taxes which have accrued prior to death of decedent

Vanishing Deduction
Requisites:
1. property is part of the gross estate of the present decedent situated in the Philippines
2. the present decedent acquired the property by inheritance or donation within 5 years
prior to his death;
3. the property subject to vanishing deduction can be identified as the one received from
the prior decedent, or from the donor, or can be identified as having been acquired in
exchange for the property so received;
4. the property acquired form part of the gross estate of the prior decedent, or of the
taxable gift of the donor;
5. the estate tax on the prior transfer or the gift tax on the gift must have been paid; and
6. the estate of the prior decedent has not previously availed of the vanishing deductions
Percentage of Vanishing Deduction:
- based on the interval of the death of the present decedent and the time of death of the
prior decedent or the date of gift whichever is relevant
More
Not more
Percenta
than
than
ge
1 year
100%
1 year
2 year
80%
2 year
3 year
60%
3 year
4 year
40%
4 year
5 year
20%
5 year
0%
How to compute Vanishing Deductions?
1. Determine the initial value which is whichever is lower between the fair market
value of the property used in computing the first transfer tax paid (estate or donors
tax) and the fair market value of the property in the present decedent.
2. Compute initial basis by deducting from initial value any encumbrances or liens on
the property that are paid by the present decedent where such lien or encumbrances
are deductions on the prior decedents gross estate or on the donors taxable gift.
3. Compute the final basis by reducing the initial basis by an amount representing
what the initial basis bears with the gross estate to the expenses, losses, indebtedness
and taxes (ELIT) and transfer for public purpose.
To illustrate:
Initial Basis
Gross Estate

ELIT plus transfer for

=
public purpose

Prorated
deduction to initial
basis

4. Determine the vanishing deduction by multiplying the final basis by the

corresponding rate that apply for the time period from the point the property was
transferred by the prior decedent (i.e.: point of death) or by the donor (i.e.: date of
gift).
Family Home
composed of the land and the dwelling house to which the decedent and his family
resides
shall be included in gross estate at whichever is higher between its zonal value and
assessed value at the point of death of the decedent
Requisites:
1. death of the decedent shall be after July 28, 1992
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2. total value of the family home must be included in gross income

3. the family home must be the actual residence of the decedent and his family at the
time of death, as certified by the Barangay Captain of the locality where the family
home is situated
4. deduction cannot exceed whichever is higher between the zonal or assessed value at
the time of death and P1,000,000.00
5. it is a deduction from either common or personal property or separate properties of
the decedent
NET TAXABLE ESTATE
Unmarried decedent
Real Properties
Personal Properties
Gross Estate
Ordinary Deductions:
Funeral Expenses
Other Deductions
Special Deductions:
Family Home
Standard Deductions
Medical Expenses
Net Taxable Estate

P xx,xxx,xxxxx,xxx,xxxP xx,xxx,xxxP

xxx,xxx
xxx,xxx

P xxx,xxx
1,000,000
xxx,xxx

xxx,xxx)

x,xxx,xxxP xx,xxx,xxx-

Married Decedent
Real property
Personal property
Gross Estate

Ordinary
Deductions:
Funeral Expenses
Other Deductions
Net Estate after
OD
Special
Deductions
Family Home

Separate

Common

P
x,xxx,xxx.xx
xxx,xxx.
xx
P
x,xxx,xxx.xx

P
x,xxx,xxx.xx
xxx,xxx.
xx
P
x,xxx,xxx.xx

xxx,xxx.
xx
P
x,xxx,xxx.xx

xxx,xxx.xx
x,xxx,xxx.
xx
P
x,xxx,xxx.xx

Total
P
xx,xxx,xxx.xx
xxx,xxx.
xx
P
x,xxx,xxx.xx

x,xxx,xxx.
xx)
P
x,xxx,xxx.xx

xxx,xxx.x
x)
( 1,000,000.
00)
(
xxx,xxx.x
x)
Px,xxx,xxx.xx
( x,xxx,xxx.x
x)
Px,xxx,xxx.xx

Standard
Deductions
Medical
Expenses
Net Estate
Less: Share of surviving spouse
x
Taxable
net
estate
ESTATE TAX TABLE:
Over
-

Not Over
P
200,000

Exempt

Taxation by Rex B. Banggawan,CPA, MBA

Plus x%
of excess
over
-

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CDD: Estate Taxation

P
200,000
500,000
2,000,000
5,000,000
10,000,00
0

500,000
2,000,000
5,000,000
10,000,00
0
-

P
0
15,000
135,000
465,000

5%
8%
11%
15%

1,215,000

20%

P
200,000
500,000
2,000,000
5,000,000
10,000,00
0

Tax Credit for Estate Tax Paid to a Foreign Country:

- claimable only by individual whose taxable estate comprise of properties within and
outside the Philippines (citizens and resident alien)
- the deductible tax credit shall be whichever is lower of the amounts as computed by
the following limits (A and B) similar to deductible tax credit in income taxation:
A. Total tax credit per foreign country
The deductible amount per foreign country shall be whichever is lower between the
actual estate tax paid to the foreign country and the amount representing what the
net foreign estate on that country bears to the total net estate multiplied by the
Philippine estate tax
To illustrate:

Net estate on a foreign

country
Net world
estate

vs.

Philippine estate tax

due

Actual amount paid

B. Total prorated tax credit for all foreign country
To illustrate:

Total foreign net estate

Philippine estate tax

Net world estate

BIR Reporting and Filing Requirements:

Written Notice of Death

Filing
of
Estate
Return
Payment of Tax

Tax

Extrajudicial
Settlement
2 months after death
6 months after death
Upon filing of the
return

Judicial Settlement
2 months after the time the
executor or administrator
qualifies
6 months after death
Upon filing of the return

Where to file?
1. Authorized Agent Bank
2. Revenue District Office
3. Collection Agent
4. Duly authorized Treasurer of the City of Municipality with which the decedent was
domiciled at the time of his death
5. Office of the Commissioner, if there is no legal residence in the Philippines
Notice of Death is required only when:
1. the transfer is subject to tax
2. the gross value of the estate exceeds P20,000, even if tax exempt
Filing of an Estate Tax Return is required only when:
1. the transfer is subject to tax
2. the gross value of the estate exceeds P200,000, even if exempt from tax
3. when gross estate consists of registered or registrable property, irregardless of the
value of the gross estate clearance from the BIR is a condition precedent to the
transfer of title to registrable property
Registrable Properties includes, but is not limited, to:
1. real property
2. motor vehicle
3. shares of stock
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CPA Certification is required only when the value of the gross estate exceeds
P2,000,000.00. Such certification to include:
1. itemized asset of the decedent with valuation
2. itemized deductions
3. tax due and payable
Extension of Filing
The Commissioner shall have authority to grant, in meritorious cases, a reasonable
extension not exceeding thirty (30) days for filing the return.
When the Commissioner finds that the payment on the due date of the estate tax or of
any part thereof would impose undue hardship upon the estate or any of the heirs, he
may extend the time for payment of such tax or any part thereof not to exceed five (5)
years, in case the estate is settled through the courts, or two (2) years in case the
estate is settled extrajudicially. In such case, the amount in respect of which the
extension is granted shall be paid on or before the date of the expiration of the period
of the extension, and the running of the Statute of Limitations for assessment as
provided in Section 203 of this Code shall be suspended for the period of any such
extension.
Where the taxes are assessed by reason of negligence, intentional disregard of rules
and regulations, or fraud on the part of the taxpayer, no extension will be granted by
the Commissioner.
If an extension is granted, the Commissioner may require the executor, or
administrator, or beneficiary, as the case may be, to furnish a bond in such amount,
not exceeding double the amount of the tax and with such sureties as the
Commissioner deems necessary, conditioned upon the payment of the said tax in
accordance with the terms of the extension.
Beneficiary shall to the extent of his distributive share of the estate, be subsidiarily liable
for the payment of such portion of the estate tax as his distributive share bears to the
value of the total net estate.
DRILL PROBLEMS:
1. A legatee, heir or devisee is also known as?
a. the estate
b. successor
c. administrator

d. decedent

2. A decedent who died without a will or with an invalid one is called

a. testate
b. intestate
c. voluntary succession

d. donor

3. The following transfers are taxable, except?

a. Transfer passing under special power of appointment
b. Transfers with a right to revoke but not exercised by the decedent to the time of
his death
c. Transfer in contemplation of death
d. Properties passing under general power of appointment
4. Gross estate includes all his property, real or personal, tangible or intangible
wherever situated, except
a. Resident citizen
b. Non-resident alien
c. Resident alien
Non-resident citizen

d.

5. The following transfers are exempt and hence excluded from gross estate, except?
a. Merger of the usufruct in the owner of the naked title
b. All bequest, devise, legacies and transfers to social welfare, cultural and charitable
institution no part of the income of which inures to the benefit any person and not
more than 30% of such bequest, devise or legacies or transfers are used for
administration purposes
c. The transmission or delivery of the inheritance or legacy by the fiduciary heir or
legatee to the fideicomissary
d. The transmission from the first heir, legatee, or donee in favor of another
beneficiary, in accordance with the desire of the predecessor
6. I. In taxable transfers, the value to include in gross estate is the fair value of the
property at the time of death, any
consideration given by the counterparty is treated as an obligation deductible to
gross estate
II. In taxable transfers, if the fair value at the time of death is lesser than the
consideration given, no value is
included in gross estate
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III. In taxable transfers, if at the date of transfer the fair value is higher than the
consideration received, the fair
value at the time of death is included in gross estate regardless of whether at the
time of death the value of the property is lower than the consideration given
Which is correct?
a. I only

b. I and II only

c. II and III only

d. II only

7. The reciprocity on exemption of intangible properties located in the Philippines of

non-resident aliens may apply on the following conditions, except when the foreign
country where the non-resident alien is a citizen
a. do not have an estate tax law.
b. has estate tax only to residents or citizens therein.
c. has estate tax only to properties of a citizen thereon regardless of nature.
d. has no income tax imposed on income earned by the estate but imposes transfer
taxes.
8. Even if physically existing at the time of death, the following are not included in gross
estate, except?
a. Properties arising from proceeds of a life insurance irrevocably designated to the
wife
b. Benefits received from GSIS
c. Benefits claimed by the surviving spouse as arising from GSIS policy but no
adequate documents could be presented in support thereof
d. Separate properties of the surviving spouse
9. A made the following transfers inter vivos
B
C
P
P
Cost
100,000 100,000
FMV, time of
transfer
140,000 140,000
Consideration
received
100,000 100,000
FMV, time of death
of A
120,000
70,000

to the following:
D
E
P
P
100,000 100,000
80,000

80,000

100,000

120,000

90,000

The amount to be included in the gross estate of A is

a. P410,000
b. P100,000
c. P130,000

d. P110,000

10.The gross estate of this decedent shall be comprised of properties situated in the
Philippines only:
a. Filipino residing in the Philippines;
c. Filipino residing in the US;
b. American residing in the Philippines;
d. American residing in the US.
11.One of the following is not included in the gross estate of a citizen decedent:
a. Land situated outside the Philippines;
c. Investment in stock in a Japanese
corporation;
b. Car situated within the Philippines;
d. Benefits received from group
insurance.
12.For estate tax purposes, the rule of reciprocity applies:
I. When the decedent is a non-resident alien;
II. With respect to intangible personal properties situated in the Philippines;
a. Only I is correct;
c. Both I and II are correct;
b. Only II is correct;
d. Neither I nor II are correct.
13.One of the following is not an intangible personal property situated in the Philippines:
a. Shares, obligations or bonds issued by any corporation or sociedad anonima
organized or constituted in the Philippines in accordance with its laws;
b. Shares, obligations or bonds issued by any foreign corporation 85% of the business
of which is located in the Philippines;
c. Shares, obligations or bonds issued by any foreign corporation if such shares,
obligations or bonds have acquired business situs in the Philippines;
d. Shares, obligations or bonds issued by a non-resident foreign corporation.
14.For estate tax purposes, one of the following is not an intangible personal property.
a. Accounts receivable;
c. Bank deposit;
b. Investment in stock;
d. Livestock.

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15.John Johnson, an American domiciled in South Africa, died in 2005. He left the
following property:
a. Rest house in Hawaii;
b. A Villa in Switzerland;
c. Shares of stock in LA Corporation, USA;
d. Shares of stock in San Miguel Corporation, Philippines;
e. Shares of stock in Union Corp, a foreign corporation where 85% of its business is
in the Philippines;
f. Time deposit, Philippine National Bank, Manila;
g. Lease contract over his Manhattan, New York, USA apartment leased to the
Philippine Consulate.
John Johnsons Philippine gross estate shall consist of:
a. All property enumerated above;
c. Only property a. b. and d.;
b. Only property d. e. and f.;
d. None of the property enumerated above.
16.Using the same data in the preceding question, assuming there is reciprocity, John
Johnsons Philippine gross estate shall consist of:
a. All properties enumerated above
c. Only property f
b. Only properties d, e and f
d. None of the properties enumerated above
17.Mr. Juan Cruz, Filipino citizen, died in the United States of America in 2005. He left
the following properties:
a. House and lot, California, USA
b. Shares of stock in PLDT, domestic corporation
c. Bank deposit, First Bank of California, USA
d. Bank deposit, BPI-Manila
e. Tax-free long term Philippine government bonds
f. Car, registered in the name of his 21-year old son
The Philippine gross estate shall consist of:
a. All properties enumerated above
c. All properties enumerated
above except e and f
b. All properties enumerated above except f
d. Only properties a and d
18.One of the following transfers is not included in gross estate
a. Transfer with reservation and retention of certain rights
b. Transfer passing under general power of appointment
c. Transfer for adequate and full consideration
d. Transfer in contemplation of death
19.Case I X transfer shares of stock of Y on the condition that X shall receive or enjoy
the dividends during Xs lifetime, thereafter to Y or his estate.
Case II B makes a transfer of property in trust, income payable to himself for six (6)
years, thereafter to C or his estate. B dies before the six (6) years lapsed.
a. Both transfers are with retention and reservation of certain rights, hence taxable
b. Both transfers are exempt from estate tax
c. The first transfer is taxable, the second is exempt
d. The first transfer is exempt, the second is taxable
20.One of the following is not included in the gross estate of a decedent
a. Cash dividend that accrued before death
b. Shares of stock transferred in contemplation of death
c. Land held in trust but in the decedents possession before death
d. Rent income on property that accrued before death
21.X, decedent, owns a property valued at P1,500,000 at the time of his death. The said
property was sold by X during his lifetime to Y for P700,000 when it was valued at
P1,200,000. IT was agreed by X and Y that the transfer of ownership will take after
Xs death. For Philippine estate tax purposes, which of the following statement is
correct?
a. The transaction is a transfer for inadequate consideration, hence, the amount of
P800,000 shall be included in the gross estate
b. The transaction is a bona fide sale for adequate consideration, hence, no amount
shall be included in gross estate
c. The amount is a transfer in contemplation of death, hence, the amount of
P1,500,000 shall be included in the gross estate
d. The transaction is a transfer for insufficient consideration, hence, the amount of
the P500,000 shall be included in the gross estate.
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22.One of the following is not a motive which precludes a transfer from category of one
made in contemplation of death.
a. To reward services rendered
c. To settle family litigated and unlitigated
disputes
b. To save on donors and estate tax
d. To relieve the donor from burden of
management
23.Which of the following proceeds shall be included in the taxable gross estate?
a. Insurance proceeds from SSS and GSIS
b. Amount receivable by any beneficiary, irrevocably designated in the policy by the
insured
c. Amount receivable by any beneficiary designated in the insurance policy
d. Proceeds of group insurance taken out by a company for its employees
24.The following are transactions and acquisitions exempt from transfer taxes, except
a. Transmission from the first heir or donee in favor of another beneficiary in
accordance with the desire of the predecessor
b. Transmission or delivery of the inheritance or legacy by the fiduciary heir or
legatee to the fideicommissary
c. The merger of the usufruct in the owner of the naked title
d. All bequests, devises, legacies or transfers to social welfare, cultural and
charitable institutions
25.Which of the following exempt transactions will still require the inclusion of the
property in the gross estate?
a. Merger of the usufruct in the owner of the naked title
b. Bequest, devises, legacies or transfers to social welfare, cultural and charitable
institutions the administration expenses of which do not exceed 30% of such
bequest, devises, legacies or transfers
c. Transfer from the first heir to a second heir designated by the decedent
d. Death benefits received from SSS and GSIS
26.Case I Y devised in his will a piece of land; naked title to B and usufruct to C for as
long as C lives, thereafter to B. The transmission from Y to B and C is subject to estate
tax but the merger of the usufruct and the naked title in B upon the death of C is
exempt.
Case II Z devised in his will real property to his brother D who is entrusted with the
obligations to preserve and to transmit the property to E, a son of D, when he
becomes of age. The transmission from D to his son E is subject to tax.
a. Both statement as to the taxability and non-taxability of the transmissions are
correct
b. Both statement as to the taxability and non-taxability of the transmissions are
incorrect
c. Only the first statement as to the taxability and non-taxability of the transmissions
is correct
d. Only the second statement as to the taxability and non-taxability of the
transmission is correct
27.X died in 1990 leaving a will which directed all real estate owned by him not to be
sold or disposed of for a period of 10 years after his death and ordered that the
property be given to Y upon the expiry of the 10-year period. in 1990, the estate left
by X had a fair market value of P1,000,000. In 2002, the fair market value of said
estate increased to P3,000,000 and the Commissioner of Internal Revenue assessed
thereon estate tax based on P3,000,000. Is the Commissioners assessment based on
P3,000,000 correct?
a. Yes. The assessment of the Commissioner is correct because on matters of
assessment he has the authority to determine the value to be assessed;
b. No. The assessment of the Commissioner is incorrect because the assessment
should have been based on the fair market value at the time of death which is
P1,000,000;
c. Yes. The assessment of the Commissioner is correct because it was based on the
value at the time of assessment;
d. No. The assessment of the Commissioner is incorrect because estate tax is not
subject to any assessment.
28.Which of the following value is not generally used for estate valuation purposes?
a. Fair market value at the time of death;
b. Fair market value at the time the return is filed;
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c. Fair market value, assessed value o zonal value whichever is the highest in case of
real property;
d. Book value, in case of shares of stock not traded in the local stock exchange.
29.Real properties owned by the decedent at the time of death shall be valued at:
a. Zonal value or value per tax declaration whichever is higher;
b. Book value or acquisition cost, whichever is clearly determinable;
c. Acquisition cost;
d. Acquisition cost or fair market value whichever is higher.
30.Mr. X died. He was survived by his wife and children. The couple had exclusive and
common properties. The gross estate of Mr. X would include:
a. Common and capital properties;
b. Common and paraphernal properties;
c. Common, capital and paraphernal properties;
d. Common properties only.
31.In the absence of a marriage settlement, or when the regime agreed upon is void, the
property relations of the spouses who married on or after August 3, 1988 shall be
governed by:
a. Conjugal partnership of gains;
c. Complete separation of properties;
b. Absolute community of properties;
d. None of the choices.
32.Properties owned before marriage and brought into the marriage are generally
classified as:
I. Conjugal properties under conjugal partnership of gains;
II. Exclusive properties under absolute community of properties
a. Only I is correct;
c. Both I and II are correct;
b. Only II is correct;
d. Both I and II are incorrect.
33.The net fruits as well as the income received during the marriage from the exclusive
properties of the spouses are classified as:
I. Conjugal properties under conjugal partnership of gains;
II. Exclusive properties under absolute community of properties
a. Only I is correct;
b. Only II is correct;

c. Both I and II are correct;

d. Both I and II are incorrect.

34.The community properties shall include all properties owned by the spouses at the
time of the celebration of the marriage or acquired thereafter. One of the following,
however, is not a community property.
a. Properties inherited by the spouses before the marriage;
b. Properties acquired by the spouses as donation before the marriage;
c. Properties acquired using the salary of either spouse earned before the marriage;
d. Properties acquired before marriage by either spouse who had legitimate
descendants by a former marriage.
35.During their last anniversary, the wife bought an expensive coat for his husband using
her salary earned during the marriage. Shortly thereafter, the husband died. For
Philippine estate tax purposes, the expensive coat shall be classified as:
a. Common property;
c. Exclusive property of the wife-surviving
spouse;
b. Exclusive property of the husband-decedent; d. Exclusion from the gross estate.
36.During the engagement ceremony before their marriage, the man gifted his woman an
expensive diamond necklace. The necklace was for the exclusive use of the woman.
How would this necklace be classified for Philippine estate tax purpose, assuming the
man died and was survived by the woman and they were under absolute community of
properties?
a. Communal property;
c. Exclusive property of the surviving
spouse;
b. Exclusive property of the husband-decedent; d. Excluded from the gross estate.
37.Which of the following is an exclusive property?
a. Properties acquired during the marriage using common fund for the exclusive use
of one of the spouses;
b. Properties acquired through occupation such as fishing or hunting;
c. Properties acquired during the marriage by gratuitous title;
d. Properties acquired by change, such as winning from gambling or betting.
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CDD: Estate Taxation

38.Are properties owned by the spouses at the time of marriage presumed common
unless proven to be exclusive?
A. Yes, under conjugal partnership of gains;
B. Yes, under absolute community of properties.
a. Both answers are correct;
c. Only A is correct;
b. Both answers are incorrect;
d. Only B is correct.
39.A decedent left the following properties:
Land in Italy (with 1M unpaid mortgage)
Land in Laguna, Philippines
Franchise in USA
Receivable from debtor in Philippines
Receivable from debtor in USA
Bank deposit in USA
Shares of stocks of PLDT, Philippines
Shares of stocks of ABC, foreign corporation 75% of the business
in the Philippines
Other personal properties
Zonal value of the land in Laguna
If the decedent is a non resident citizen, his gross estate is
a. P3,650,000
b. P3,600,000
c. P2,500,000
P2,650,000

P
2,000,000
500,000
100,000
70,000
100,000
80,000
75,000
125,000
300,000
750,000
d.

40.Using the above data, if the decedent is a non resident alien, his gross estate is
a. P1,195,000
b. P945,000
c. P1,320,000
d. P2,650,000
41.If the preceding number reciprocity law can be applied, the gross estate is
a. P1,050,000
b. P1,195,000
c. P1,250,000
d.
P1,070,000
42.Based on the above problem but assuming that the PLDT shares of stocks are not
listed in the local stock exchange, and there are 1,000 shares at the time of death, the
companys outstanding shares were 10,000 shares. Its retained earnings was
P2,000,000, par value per share was P50. The gross estate should show the said
shares at
a. Still at P75,000
b. P250,000
c. P200,000
d. P0
43.The estate should be valued at the time
a. The heirs are ascertained
distribution to the heirs
b. The estate tax is paid

c. the estate is ready for

d. of the death of the decedent

For items 45 to 48, choose from the following choices:

a. Revocable
c. whether revocable or irrevocable
b. Irrevocable
d. partly revocable, partly irrevocable
Proceeds of life insurance shall be included in the gross estate if the beneficiary
designated is:
44.The estate and the designation is
__________
45.The executor and the designation is
__________
46.The administrator and the designation is __________
47.A person other than the estate, executor or administrator and the designation is
__________
48.The amount of funeral expense that may be deducted from the gross estate is
a. 5% of the gross estate or P200,000 whichever is lower
b. Actual funeral expense or P200,000 whichever is lower
c. 5% of the gross estate or the actual funeral expenses whichever is lower
d. 5% of the gross estate or the actual funeral expenses or P200,000 whichever is
the lowest
Items 50 and 51 pertain to the following information
If it will cause undue hardship on the part of the estate, the estate tax may be paid within
49.In case the estate is settled through the courts
a. 2 years
b. 3 years
c. 4 years
d. 5 years
50.In case the estate is settled without courts intervention
a. 2 years
b. 3 years
c. 4 years
Taxation by Rex B. Banggawan,CPA, MBA

d. 5 years
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51.Written notice shall be given to the CIR if the gross estate exceeds
a. P20,000
b. P50,000
c. P100,000
d. P150,000
52.From the time of death, notice of death should be given within
a. One month
b. Two months
c. 3 months

d. 6 months

53.As a rule, estate tax return should be filed under oath if the gross estate exceeds
a. P100,000
b. P200,000
c. P500,000
d. P1,000,000
54.This in not part of the gross estate of the decedent
a. Conjugal property
c. share of the surviving spouse
b. Community property
d. exclusive property of the surviving
spouse
55.The following do not form part of the communal properties of the spouses, except?
a. Property acquired prior to the current marriage by either spouses who has
dependents by a prior marriage
b. The fruits of the properties mentioned in a.
c. jewelries
d. properties for personal use of either spouses
56.A. Expenses incurred from the performance of the rites and ceremonies incident to
interment and those incurred
after interment, such as prayers, masses and entertainment are part of funeral
expense
B. The administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan if
the claims against the estate was contracted within five years before the death of
the decedent
a. True, true
b. True, false
c. False, True
d.
False, False
57.A. If the property is inherited before marriage it will belong to both spouses while if it
is inherited during marriage
it is exclusive
B. Unless, stipulated, the property relations shall be governed by conjugal partnership
of gains for marriages
celebrated on or before Aug 3, 1988
a. True, true
b. True, false
c. False, True
d.
False, False
58.A. Unless stipulated, the property relations shall be governed by absolute community
of property for marriages
celebrated on or after August 3, 1988
B. Under the regime of absolute community of property, property for personal and
exclusive use of either
spouses except jewelry shall belong to both spouses
a. True, true
b. True, false
c. False, True
d.
False, False
59.A resident alien has a gross estate of P5,000,000. The following are its items of
funeral expenses:
Cost of food and prayers services/masses during the
P
decedents wake
80,000
Payments for burial plot, casket and interment services of
100,000
Eternal Gardens, Inc.
Cost of publication of notice of decedents death to relatives
10,000
Cost of thanksgiving cards and newspaper thanksgiving
20,000
publication
Cost of prayer services during the 30th and 40th day of the
10,000
decedent
How much is the deductible funeral expenses of the decedent?
a. P190,000
b. P180,000
c. P200,000
d. P250,000
60.The estate may claim a standard deduction of
a. P1,000,000
b. P2,000,000

c. P200,000

d. P500,000

61.Medical expenses to be deductible, must be incurred by the decedent within

a. One year prior to his death
c. two years prior to his death
b. One year after his death
d. three years prior to his death
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CDD: Estate Taxation

62.The medical expense shall in no case exceed

a. P200,000
b. P400,000
c. P500,000
d. P1,000,000
63.Statement 1 The court may authorize the distribution of estate, to an heir if in its
sound discretion it believes that the heir badly needs his share
Statement 2 The administrator or any of his heirs, may however upon authorization
of BIR withdraw from the decedents bank deposits P20,000 without the required
certification that the estate tax has been paid
a. True, true
b. True, false
c. False, True
d.
False, False
64.Statement 1 A died giving B power to appoint a person who will inherit As house
and lot. B however can only choose C, D, E and F. B decided to transfer the property
to C, in Bs will when he was old already. The transfer from B to C is subject to estate
tax
Statement 2 During As lifetime, he decided to give B as gift his car subject to the
condition that if B does not become a CPA within 3 years, A shall revoke the transfer.
In the second year however, A died. The car no longer form part of As gross estate
a. True, true
b. True, false
c. False, True
d.
False, False
65.A died leaving a farm land. In his will he transferred the ownership thereof to B but
subject to the condition that C will have the right to use the land for a period of ten
years (usufruct). In the seventh year, however, C died and in Cs will he surrendered
his right over the land to B
a. The transfer is subject to donors tax
c. The transfer is both an inclusion
from the gross estate
b. The transfer is subject to estate tax
d. The above is a tax exempt transfer
66.One of the following is not an exemption or exclusion from the gross estate
a. Capital or exclusive property of the surviving spouse
b. Properties outside the Philippines of a non-resident Chinese decedent
c. Shares of stock of San Miguel Corporation of a non-resident Mexican
d. The merger of usufruct in the owner of the naked title
67.Statement 1: Unpaid mortgage indebtedness is deductible from the gross estate
provided the said property subject to the indebtedness is included in the gross estate,
net of the mortgage indebtedness
Statement 2: A donation inter vivos by the decedent to the Philippine government
few months before his death is a deduction from the gross estate
a. True, true
b. True, false
c. False, True
d. False,
False
68.If the estate consists of registrable property, such as real property, motor vehicle,
shares of stock or other similar property from which a clearance from the BIR is
required as a condition for the transfer of ownership, an estate tax return should be
filed under oath
a. if the gross estate exceeds P200,000.
c. If the gross estate exceeds
P1,000,000.
b. if the gross estate exceeds P500,000.
d. regardless of the value of the gross
estate.
69.The estate tax return shall be supported with a statement duly certified by a CPA. If
the gross estate exceeds
a. P1,000,000
b. P2,000,000
c. P5,000,000
d.
P10,000,000
70.From the decedents death, the estate tax return shall be filed within
a. 2 months
b. 1 month
c. 6 months
d. 18 months
71.The CIR, in meritorious cases may grant a reasonable extension to file the return, not
exceeding
a. 30 days
b. 60 days
c. 3 months
d. 6 months
72.Mr. A, Filipino, married, died on January 1, 2007 leaving the following
1. Property inherited from his father who died January 2, 2006:
1. Agricultural land
P1,800,000
2. Residential land
3,000,000
2. Property inherited from his mother who died on Nov. 1, 1995, one day after Mr. As
marriage to Mrs. A
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CDD: Estate Taxation

1. Fish pond
P1,200,000
2. Jewelry
1,000,000
3. Property acquired thru Mr. As labor:
1. Residential house and lot used as family homeP1,900,000
2. Motor vehicles
800,000
3. Commercial land
4,000,000
4. Cash
2,000,000
The agricultural land and residential land were previously mortgage for P800,000
when inherited where P450,000 was paid by Mr. A during the lifetime. The
commercial land has a mortgage of P1,000,000 of which P600,000 was paid by Mr. A
before his death. Mr. A by will bequeathed to the City of Manila for exclusively public
purpose the sum of P200,000.
The estate claimed the following expenses:
a. Funeral expenses
P 250,000
b. Judicial expenses
100,000
c. Claims against the estate
150,000
d. Medical expense
400,000
Required: Compute the taxable net estate.
73.Mr Y. an American, single and residing in USA, died leaving the following:
P
Land in Makati
2,000,000
Land in Manila
3,000,000
Gross estate, USA
5,000,000
Deductions claimed by the estate:
Actual funeral expense
200,000
Judicial expenses
100,000
Claims against the estate
120,000
Transfer of land in Makati to the Philippine government
(in decedent's will)
2,000,000
The land in Manila when inherited 31/2 years ago had a value of P2,400,000 with a
mortgage thereon of P400,000 which was paid prior to Mr. Ys death
The land in Makati when inherited 41/2 years ago has a value of P1,500,000
Required: Determine the net estate subject to estate tax
74.Z, a resident citizen died leaving the following:
Net estate (before standard deduction):
Philippines
P5,000,000
USA
3,000,000
Australia
2,000,000
Estate tax paid:
USA
280,000
Australia
220,000
Required: Determine the estate tax due after tax credit

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Taxation by Rex B. Banggawan,CPA, MBA

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