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EXERCISES ON ESTATE TAXATION

A. Gross Estate
Questions 1-4 are based on the following information. A decedent left the following properties:
Land in Italy (with 1M unpaid mortgage)
2,000,000
Land in Davao City, Phil. (zonal value 750,000) 500,000
Franchise in USA 100,000
Receivable from debtor in Phil. 50,000
Receivable from debtor in USA 100,000
Bank deposit in Phils. 20,000
Bank deposit in USA 80,000
Shares of stock of PLDT, Phils. 75,000
Shares of stocks of ABC, Foreign Corp. 125,000
75% of the business in the Philippines
Other personal properties 300,000

1. If the decedent is a non-resident citizen, his gross estate is:


2. If the decedent is a non-resident alien his, gross estate is:
3. If in the preceding number, reciprocity can be applied, the gross estate is:
4. Based on the original problem but assuming the PLDT shares of stock are not listed in the
local stock exchange and there are 1,000 shares at the time of death, the company’s
outstanding shares were 10,000. Its retained earnings was 2,000,000, par value per share was
50. The gross estate should show the said shares at:

Questions 5 & 6 are based on the following information:

Building, USA 5,000,000


House & Lot in Bulacan (500 sq.m.) zonal value is 10,000 per sq.m. 4,500,000
Life insurance proceeds, beneficiary is the wife, the administrator, irrevocable 500,000
Life insurance proceeds with another company; beneficiary, his son, irrevocable 200,000
Claims against a debtor who died a year ago (50% collectible) 50,000
Death benefits from from US veteran administration 100,000
Death benefits from SSS 40,000
Paraphernal property of his surviving wife 2,000,000

He also transferred mortis cause the following:


SP FMV-Transfer FMV-Death
Car, Manila 500,000 1,000,000 800,000
Land, Manila 1,500,000 2,000,000 1,000,000
Land, USA 2,000,000 1,800,000 3,000,000

5. If the decedent is a Filipino citizen, his gross estate is:


6. If the decedent is a non-resident alien and his country does not impose transfer tax on any
intangible properties left by a Filipino decedent, his gross estate is:

7. The gross estate of a non-resident alien is 2,000,000, 75% of which is from abroad. The
actual funeral expenses totaled to 80,000; 1/4 of which was paid by his employer. The
deductible funeral expense is:

8. Based on the preceding number (the same world G.E.) but the decedent is a non-resident
citizen, the deductible funeral expense is:
B. State the amount of as allowable deductions from the gross estate in each of the following:
9. Unpaid taxes of the decedent of 3,000,000; 25% of which accrued after death already
10. Receivable of 75,000 from an insolvent debtor whose ratio of assets to liabilities is 1:3.
11. Hospitalization expenses until death: 3,000,000, 50% incurred 1 year prior to death but only
½ of which is supported by receipts
12. Expenses for the probate of a will including 10,000 facilitation fee for a court personnel,
100,000; amount paid to broker to convert some property in the estate to cash as authorized
by the court 50,000
13. 75,000 indebtedness with interest at 20% per annum contracted 3 months before death; not
notarized and a deed of mortgage 20,000 contracted six months before death at 24% per
annum.
14. 100,000 note payable notarized earning 18% per annum dated September 30, 2009. Decedent
died March 15, 2010.
15. A conjugal family house with FMV of 900,000 and exclusive family lot worth 500,000
owned by the decedent
16. Loss by fire of building worth 1,000,000; 5 months after decedent’s death, 75% compensated
by insurance. Estate was settled in the 6th month.
17. Funeral expenses of a NRA decedent in the Phils. 85,000 gross estate worth 2,000,000 40%
from the Phils.
18. Transfer for public purposes made inter vivos 1,000,000.
19. A land worth 1,000,000 when inherited 4 ½ years ago by the decedent from his father with
mortgage of 200,000; 60% of which was paid by the decedent before he died. FMV of land
upon death 1,500,000. Gross estate is 8,000,000 and deductions reached 750,000; 40% of
which represents ELIT and TPP. Compute for VD only.
20. Transfer for public purposes donated by the decedent to Manila City Hall (shown in the will)
200,000.
21. Unpaid mortgage of 200,000 on a 1,100,000 house shown in the gross estate net of 200,000
mortgage.

C. Multiple Choice
1. Which of the following is not included in the decedent’s gross estate?
a. Extent of decedent’s interest in property
b. Transfer in contemplation of death
c. Revocable transfer
d. Property passing under special power of appointment
2. 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
3. Case 1: X transfers shares of stock to Y on the condition that X shall receive or enjoy the
dividends during X’s lifetime, thereafter to Y or his estate.
Case 2: B makes a transfer of property in trust, income payable to himself for 6 years, thereafter
to C or his estate. B dies before the six 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 is exempt, the second is taxable
4. One of the following is not a requisite for deduction from gross estate of losses.
a. Losses are incurred during the settlement of the estate arising from fires, storms,
shipwreck, or other casualties, or from robbery, theft or embezzlement
b. Losses are not compensated for by insurance or otherwise
c. Losses have been claimed as a deduction for the income tax purposes in an income tax
return
d. Losses are incurred not later than the last day for the payment of the estate tax
5. The following are the requisites in order for claims against the decedent’s estate to be deductible,
except which one?
a. They must be existing against the estate
b. They must be reasonably certain as to amount
c. They must have been prescribed
d. They must be enforced by the claimant
6. In case of a simple loan, which of the following requirement/documents need to be complied with
or submitted?
I. Debt instrument duly notarized at the time the indebtedness was incurred
II. Duly notarized Certification from the creditor as to the unpaid balance as of the time of
death
III. Proof of financial capacity of the creditor to lend the amount at the time the loan was
granted, as well as its latest audited balance sheet with a detailed schedule of its
receivable showing the unpaid balance of the decedent-debtor
IV. A statement under oath executed by the administrator or executor of the estate reflecting
the disposition of the proceeds of the loan was contracted within three years prior to the
death of the decedent.
a. I,II,III and IV
b. I and II only
c. III and IV only
d. I and IV only
7. Which of the following taxes shall be deductible from gross estate of the decedent?
a. Income tax for income received after death
b. Income tax for income received before death
c. Property taxes not accrued before his death
d. Estate tax due from the transmission of his estate
8. The following are the requisites for vanishing deduction to be allowable, except one.
a. The estate tax of the prior succession must have been finally determined and paid
b. The present decedent died within five years from date of death of the prior decedent
c. The property with respect to which deduction is sought can be identified as having been
received by the present decedent from the prior decedent
d. The property must have formed part of gross estate situated outside the Philippines of the
prior decedent
9. Which of the following statements is incorrect regarding standard deduction?
a. A deduction in the amount of P5 million shall be allowed as an additional deduction
without need of substantiation
b. The full amount of P5 million shall be allowed as a deduction for the benefit of the
decedent
c. Standard deduction is a deduction from the conjugal or community properties of married
decedents
d. Standard deduction is not allowed to decedents who are non-resident aliens