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THEORIES

1. The estate tax rate is


a. Proportional c. Regressive
b. Progressive d. none of the above

2. The estate tax rate applicable to net estate taxable is


a. 5% - 20% c. 2% - 15%
b. 12% d. 6%

3. The following cannot be claimed as deduction for estate tax purposes, except
a. Funeral expenses c. Taxes
b. Judicial expense d. All are non-deductible

4. For purposes of estate tax, a standard deduction can be claimed by residents and citizens in the
amount of
a. P1,000,000 c. P10,000,000
b. P5,000,000 d. P500,000

5. Non-residents can avail of standard deduction in the amount of


a. P5,000,000 c. P1,000,000
b. P500,000 d. none

6. A special deduction for family home is allowed up to


a. P1,000,000 c. P10,000,000
b. P5,000,000 d. P15,000,000

7. Ms. Wa died single leaving a family home amounting P20,000,000. How much can the estate of Ms.
Wa avail of special deduction for family home?
a. P1,000,000 c. P20,000,000
b. P10,000,000 d. none

8. Special deductions from gross estate are allowed, except


a. Standard deduction c. Family home
b. R.A. 4917 d. Medical expense

9. Notice of death must be submitted to the BIR


a. 2 months after death c. 6 months after death
b. 1 month after death d. not required

10. The estate tax return shall be filed


a. 6 months after death c. 1 year after death
b. 2 months after death d. not required

11. Payment of estate tax shall be made


a. 6 months after death c. upon filing
b. 2 months after death d. 6 months after filing

12. Estate tax return shall be certified by accountants when the value of ________ exceeds_______
a. Gross estate; P2,000,000 c. Net estate; P2,000,000
b. Gross estate; P5,000,000 d. Net estate; P5,000,000

13. Payment of estate tax by instalment is allowed for


a. 2 years c. 4 years
b. 3 years d. 5 years

14. Bank deposit of the decedent can be withdrawn subject to


a. 20% FWT c. 6% FWT
b. 20% CWT d. 6% CWT

15. Prorated deductions for estate of NRAs, excludes


a. Funeral expense c. Unpaid mortgage
b. Claims against the estate d. Taxes

16. Statement 1: Obligations condoned before debt are not deductible.


Statement 2: Deductions can be claimed by NRAs even if properties abroad are not included in his
estate.
a. Both statement are true.
b. Both statement are false.
c. The first statement is true, but the second statement is false.
d. The first statement is false, but the second statement is true.

17. Which of the following statements is correct?


a. The gross estate of a resident citizen decedent would not include all properties, whether real or
personal and whether within or without.
b. The gross estate of an American decedent who was a resident of the Philippines includes all
properties in the Philippines only.
c. The gross estate of a Filipino decedent who was residing in Australia would include all properties
regardless of location.
d. The personal property of a non-resident alien is not included in the gross estate in the
Philippines if they are intangible.

18. In computing the gross estate of a decedent:


a. If he was a non-resident, but citizen of the Philippines, tangible and intangible properties,
regardless of location, shall be included
b. If he was a resident who was not a citizen of the Philippines, tangible and intangible properties,
regardless of location, shall be included
c. If he was a non-resident who was not a citizen of the Philippines, tangible and intangible
personal properties, located in the Philippines, shall be included.
d. All above statements are correct.

19. Which of the following is not included in the gross estate?


a. Revocable transfer where the consideration was not sufficient
b. Revocable transfer where the power of revocation was not exercised
c. Transfer under a general power of appointment where the consideration was not sufficient
d. Transfer under a special power of appointment

20. Which of the following is not included in the gross estate?


a. Transfer in contemplation of death where the consideration is not sufficient
b. Revocable transfer where the power of revocation was not exercised
c. Proceeds of life insurance where the beneficiary designated is the executor and the designation
is irrevocable
d. Proceeds of life insurance where the irrevocably designated beneficiary is the mother

21. Which of the following is to be classified as intangible for estate tax?


a. Cash
b. Goodwill
c. Franchise
d. All of the above

22. This item is not included as part of the gross estate of the decedent
a. Claims against insolvent person
b. His fully depreciated building
c. Proceed of life insurance with irrevocable beneficiary
d. Properties already given in contemplation of death
23. One of the following is not included in the gross estate
a. Property left by the decedent
b. Accrued interest after death
c. Transmissible rights and obligations existing at the time of death
d. Accrued dividends on or before death

24. Which of the following item is considered situated outside the Philippines
a. Franchise in the name of the decedent which is exercised in the Philippines
b. Share of stock holdings of decedent in a foreign corporation whose business is 90% done in the
Philippines
c. Bond certificate issued by a domestic corporation owned by a nonresident decedent
d. Foreign currency deposited in bank outside the Philippines

25. The value included in determining the book value of unlisted common share is
a. Retained earnings
b. Appraisal surplus
c. Liquidating value of preferred shares
d. Unrealized gain or loss

26. Which of the following is not included in the gross estate


a. Transfer under mortis causa
b. Transfer for insufficient consideration
c. Transfer for an adequate and full consideration in money’s worth
d. Transfer in contemplation of death

27. Which of the following is considered as “constructive receipt”?


a. Retirement benefits
b. Fees paid to a public official
c. Deposits for rentals to answer for damages, restricted as to their use
d. Interest coupons that have natured and are payable but have not been cashed

28. Mr. Cobacha makes a transfer of property in trust, income payable to himself for 10 years,
thereafter to Miss Cobi or his estate. Mr. Cobacha dies after 2 years.
a. Only transfer No. 1 is to be included in the gross estate
b. Only transfer No. 2 is to be included in the gross estate
c. Both transfers are to be included in the gross estate
d. Both transfers are not to be included in the gross estate

29. Which of the following exempt transactions will still require inclusion of the property in the gross
estate?
a. Legacies to social welfare, charitable and cultural institutions, which the administrative
expenses exceed 30% of the legacy
b. Amount received as war damages
c. Transfer from the first heir to the second heir designated by the decedent
d. Merger of usufruct in the owner of the naked title

30. The value of the common stock not listed in the stock exchange included in the gross estate at the
time of death would be
a. Mean value
b. Book value
c. Par value
d. Market value

PROBLEMS
Problem A. Jose Cernan, Filipino citizen, married to Maria Cernan, died in a vehicular accident in NLEX
on July 10, 2016. The spouses owned, among others, a 100-hectare agricultural land in Sta. Rosa, Laguna
with current fair market value of P20 million, which was the subject matter of a Joint Venture
Agreement about to be implemented with Star Land Corporation (SLC), a well-known real estate
development company. He bought the said real property for P2 million fifty years ago. On January 5,
2017, the administrator of the estate and SLC jointly announced their big plans to start conversion and
development of the agricultural lands in Sta. Rosa, Laguna, into first-class residential and commercial
centers. As a result, the prices of real properties in the locality have doubled. The Administrator of the
Estate of Jose Cernan filed the estate tax return on January 9, 2017, by including in the gross estate the
real property at P2 million. After 9 months, the BIR issued deficiency estate tax assessment, by valuing
the real property at P40 million.

What is the correct value of the property for estate taxation purposes?

Problem B. Beethoven died leaving the following properties:


Within Outside
Condominium P5,000,000
Commercial building P10,000,000
Shares of stock – nonresident foreign corp. 3,000,000
Business transferred to his son, the decedent enjoys the
income until his death 8,000,000
Investments in lands:
Acquisition cost 4,000,000 2,500,000
Fair market value at time of death 5,000,000 2,000,000
Proceeds of life insurance, his wife is the irrevocable
beneficiary 3,000,000
Proceeds of life insurance, the estate is the irrevocable
beneficiary 2,000,000
Proceeds of property insurance 3,000,000 7,000,000
Cash in bank 2,500,000 4,000,000
Franchises 1,500,000 2,000,000

Required: Compute the reportable gross estate in the Philippines if the decedent is a:
1. Filipino citizen or resident alien.
2. Nonresident alien without reciprocity.
3. Nonresident alien with reciprocity.

Problem C. Mr. X died on April 30, 2017 with some 5,000 shares of stock of “A” Corporation. “A”
Corporation has 10,000 outstanding shares The total assets and liabilities of “A” Corporation in its latest
audited financial statements (AFS) are P20,000,000 and P5,000,000, respectively. The book value of all
its assets and liabilities is also the market value with the exception of its real property. Supposing, the
market value of the real properties of “A” Corporation are as follows:

Book Value per MV per Tax Zonal Valuation Independent Appraiser


AFS Declaration
Land A 2,000,000 2,500,000 5,000,000 6,000,000
Land B 2,000,000 2,200,000 4,000,000 3,500,000
Building A 1,000,000 2,400,000 3,000,000
Building B 500,000 2,000,000 1,950,000

What is the value of shares of the decedent?

Problem D. Mang Kanor, a Canadian citizen, donated to his Filipina girlfriend, through a will, a P10-
million worth shares of stocks of SM Corporation, a domestic company, and another P15-million worth
of cash deposited in Bank of America. While they were living together, as residents, in Madagascar,
Africa, Mang Kanor suffered heart attack and died. Canada and Madagascar grant non-resident Filipino
citizens exemptions on intangible personal properties from transfer taxes.
The BIR asks your opinion if how much of the properties of the decedent will be subject to Philippines
estate tax.

Problem E. A citizen and resident of the Philippines died on October 5, 2010. He was a married and the
property relationship during the marriage was absolute community of property. He left behind
properties with market values as follows:

Agricultural land P 100,000


House and lot acquired by inheritance before the marriage 4-1/2 yrs. ago, used as
family home (with a FMV of P420,000and a mortgage of P120,000 when acquired: 500,000
P20,000 was paid by the decedent before he died)
Jewelry of wife, acquired during the marriage with her income 50,000
Clothes acquired during the marriage , with income during the marriage:
For use of the decedent 60,000
For us of the wife 70,000
Cash on hand and in banks:
Income from unidentified sources 300,000
From a sale at a loss of exclusive property 1,500,000
Received as gift six yrs. ago and before the marriage (current account) 40,000
Other properties:
Owned before the marriage 90,000
Acquired during the marriage 20,000

How much is the gross estate?

Problem F. A citizen and resident of the Philippines, married, died, leaving the following properties:

Real and personal properties acquired during the marriage P3,000,000


Land and building inherited from the father 11/2 years ago (with a fair market value
at that time of P1,500,000), and used at the time of his death as home for his family.
2,000,000
Car, purchased with cash received as gift from the mother during the year
500,000
Cash (including P500,000 received by inheritance from the father ) 1,500,000
Claims against conjugal properties 600,00
Unpaid mortgage on the land and building inherited (from an original of P600,000
when inherited) 100,000

How much is the vanishing deduction?

Problem G. Don Nico Sison, a Filipino citizen, died on November 1, 2018. He got married eight years
before his death. He left the following properties to his wife, Pretti Ensi, two legitimate children and one
acknowledged illegitimate child:

Family Home P 30,00,000


Building apartment brought into marriage 20,000,000
Income specifically identified from building apartment 3,000,000
Bank deposit – equitable Bank 5,000,000
Agricultural land inherited by Don Nico Sison, 3 years ago 800,000
Family car 550,000
Jewelries 600,000
Other personal properties 1,000,000
Underwear of Mr. Sison brought into the marriage 100,000
Underwear of Mr. Sison bought during the marriage 200,000
Undergarments of Pretti Inse brought into the marriage 300,000
Undergarments of Pretti Inse bought during the marriage 400,000

Deductions claimed:
Funeral expenses P350,000
Judicial expenses 600,000
Claims against the estate of which P200,000 without
Proper documentation as prescribe by the law 800,000
Claims against insolvent person 100,000
Transfer for public use (part of agricultural land) 200,000
Unpaid mortgage – agricultural land 300,000
Medical expenses – incurred but unpaid six months ago
(with official receipts) 800,000
Receivable under RA 4917 1,000,000

Required: Compute for the following:


1. Exclusive property of the decedent under CPG
2. Exclusive property of the decedent under ACP
3. Conjugal Property of the decedent under CPG
4. Conjugal Property of the decedent under ACP
5. Total gross estate
6. Ordinary deduction
7. Special deduction
8. Net estate