B.

DEDUCTIONS FROM GROSS ESTATE

9.

An example of a funeral expense which is not deductible -

A Cost of coffin assumed by a family friend.

B. Funeral services paid out of decedent's estate

C. Mouming clothing of deceased's unmarried minor children and surviving

spouse.

D. Cost of tombstone.

Statement 1: The amount of funeral expenses within the P200,000 threshold,

which are still payable shall be allowed as a deduction from the gross estate.

Statement 2: The unpaid portion of the actual funeral expenses incurred which

is in excess of the P200,000 threshold shall be allowed as deduction under

"claims against the estate.

A. Both statements are true.

B. Only the first statement is true.

CPA REVIEWER IN TAXATION Ampongan

300

С.

D.

Only the second statement is true.

Neither statements are true.

61

Which of the following is deductible from gross estate as "funeral expenses?

A Mouming apparel of a 40-year old legitimate child of the deceased.

B Hospital bills during the last illness of the deceased.

C Burial expenses defrayed by the relatives of the deceased.

D. Obituary notices to relatives and friends

62

The amount of funeral expenses that may be deducted from gross estate

(RPCPA)

A 5% of the gross estate or actual funeral expenses, whichever is lower

B. Always 5% of the gross estate.

C. Actual funeral expenses incurred.

D. 5% of the gross estate or actual funeral expenses incurred whichever is

higher

63

The deductible amount of funeral expense is P200,000 if the actual expenses

and the gross estate amount to -

Actual Gross estate

AP 195.000 P 4,500,000

C. Both A and B

В. 210,000 4,300,000

D. Neither A nor B

Actual

5% x P4.300,000

Deductible (maximum)

P 210.000

215,000

200,000

64. How much is the deductible amount of funeral expenses under each of the
following independent cases?

STATE TAXATION – Multiple Choice Questions

301

Case 1

Case 2

Case 3

Actual

P 180,000

140.000

207,500

Gross estate

P 4,000,000

2.900.000

4,250,000

Case 2

Case 1

P 180.000

180.000

200 000

200,000

P 145,000

140,000

140 000

145,000

Case 3

P 207,500
200,000

200.000

212 500

65 Dan Olive died. The amount of his funeral expenses is covered by a memorial

plan up to P120,000. Other actual funeral expenses amounted to P75,000. The

amount of his tangible properties upon death was P3,700,000.

How much is the gross estate? How about the funeral expenses?

Gross Estate Funeral Expenses

A P 3,700,000 P 70,000

B 3.700,000

195,000

С 3.820,000

191.000

D 3.820,000

195,000

СC

3,700,000

120.000

3.820,000

Tanzible properties

Memorial plan

Gross estate

Other actual funeral expenses

Memorial plan

Total actual funeral expenses

Limit (3,820,000 x 5%)

Deductible

75,000
120.000

195.000

191.000

191,000

Wuch of the following statements about funeral expenses is wrong? For a

decoltant who was a -

A non esident citizen, there may be deductible funeral expenses even if such

expenses were incurred entirely outside the Philippines.

B non esident alien, there may be deductible funeral expenses even if such

expenses were incurred within and outside the Philippines

CPA REVIEWER IN TAXATION Ampongan

302

c. non-resident allen, the entire funeral expenses cannot be claimed as

deduction from gross estate if such expenses were entirely incurred outside

the Philippines

D. non-resident alien, the entire funeral expenses cannot be claimed as

deduction from gross estate even if such expenses were incurred entirely

within the Philippines

C.

Funeral expenses incurred on a non-resident alien decedent are deductible

whether incurred within or without the Philippines, but it shall be pro-rated

based on the ratio of the gross estate in the Philippines to the total gross

estate within and outside the Philippines.

67. Three of the four items of deduction below are required to be included in the

gross estate. Which one is not?

A Judicial expenses
B. Claims against insolvent persons

C. Benefits received under RA 4917

D. The undiminished value of the property mortgaged.

68. Which of the following statements about judicial expenses is false? The judicial

expenses that may be claimed as dochuction from the gross estate -

A. of a decedant are the expenses incurred for the settlement of the estate, but

within the period for filing the estate tax retum.

B. of a decedent are the entire expenses incurred for the settlement of the

estate regardless of time it was incurred by the decedent.

C. includes accountant's fees and payment for the appraiser of the value of the

properties.

D. shall be allowed even if the estate is settled extrajudicially.

Judicial expenses which are allowed as deduction from gross estate are limited

to those incurred during the settlement of the estate but not beyond the period

prescribed by law for the filing of the estate tax return.

69. Which of the following statements is correct about "Claims Against the Estate"?

A A loan contracted by the decedent which is secured by a mortgage of his lot

ESTATE TAXATION - Multiple Choice Questions 303

can still be claimed as deduction from gros estate feling under "celms

against the estate

Unpaid income tax and real estate taxes that accrued before the death,

being payable duning ilfetime are deductible from the gross estate of the

decedent as "claims against the estate".

C Claims against the estate, as deduction from the gross estate, represents

obligations enforceable during the lifetime of the decedent.

D Debt contracted during the lifetime of the decadent which is payable in

three (3) years but the decadent debtor died on the second year is not

deductible from the gross estate.

A loan which is secured by an unpaid mortgage at the time of death of the

decedent is deductible as an unpaid mortgage and not as claims against the

estate.

Similarly, unpaid income and real estate taxes that have accrued prior to the

death of the decedent are deductible as unpaid taxes and not as claims against

the estate.

70. The following are requisites in order that claims against the decedent's estate

may be deductible except (RPCPA)

A. They must be existing against the estata.

B. They must be reasonably certain as to amounts.

C. They must have been prescribed.

D. They must be enforced by the claimants.

71. One of the following is deductible as claim against the estate -

A. An obligation contracted by the decedent one (1) day before he died.

B. An obligation of the decedent which prescribed while the decedent was so

alive.

C. An obligation which was not reduced in writing under the Statutes of Fraud.

D. An obligation which shall be paid by the heirs.

72. All of the following, except one, are deductible from the gross estate of a

decedent who died September 30, 2014

CPA REVIEWER IN TAXATION Ampongan

304

A Income tax on Income eamed from January to September 29, 2014

B Gift taxes on donations given June 12, 2014,

S Roal property taxes payable during the last quarter of 2014

D. Income tax on income eamed during the last quarter of 2014.

To be deductible, taxes must accrue before the death of the decedent. Real

property taxes accrue on the 1st day of January of every year although the

payment is allowed to be made in the succeeding quarters of the year.

A.

B.

73. Which of the following options is correct? In claims against insolvent persons -

as deduction from gross estate, only the entire amount of uncollectible claims

shall be included in the gross estate of the decedent.

as deduction from gross estate, the full amount of receivable including

uncollectible, must be included in the gross estate.

C. such claim is not deductible from the gross estate if the decedent was also

insolvent at the time of his death.

D. if the entire debt is uncollectible, it may be omitted in the gross estate and as

deduction therefrom.

In claims against insolvent persons, the entire amount of claim, whether

collectible or uncollectible, must be included in the gross estate, regardless of

the solvency or insolvency of the decedent-creditor.

74. Statement 1: If the proceeds of a mortgage loan is merely an accommodation

loan, its value must be included in the gross estate as a receivable amount and

as a deduction thereof.

Statement 2: If there is legal impediment to recognize the accommodation loan

as receivable of the estate, the unpaid mortgage payable shall not be allowed as

a deduction from the gross estate.

A. Only the first statement is correct.

B. Both statements are correct

C. Only the second statement is comect.

D. Neither statement is correct.

B.

ESTATE TAXATION – Multiple Choice Questions

305

78. The following experises and obligations were left by Boning upon his death

Notes payable, not noterized

P30,000

Loans payable, PNB

Accounts receivable, debtor not insolvent

300,000

Accounts receivable, debtor is insolvent

40,000

60,000

Death benefits from employer

200,000

Mortgage paid

50,000
Income taxes on income of decedent's estate

7,500

The total amount deductible from gross estate is -

A. P 600,000

C. P1,560,000 550

B. 550,000

D. 560,000

Loans payable

P 300,000

Bad debts

60,000

RA4917

200,000

Standard deduction

1.000.000

Total deductions

1.560.000

To be deductible, claims against the estate out of debt instrument must be

duly notarized.

Claims of the estate against other persons are deductible only if the debtor is

declared insolvent.

Mortgages paid are allowed only as deduction from the value of the property

in computing a vanishing deduction. In computing for the net estate, the

deductible item is unpaid mortgage.

Taxes must have accrued before the death of the decedent. Taxes on income

of properties which have accrued after death are not deductible.

76. Which of the following statements is incorrect regarding an unpaid mortgage?

A. Unpaid mortgage, as deduction from the gross estate of a resident citizen,

must pertain to a property mortgaged which is situated either within or without

the Philippines

B. Unpaid mortgage, as deduction from the grc..estate of a non-resident alien,

must pertain to a mortgaged properly which is situated within the Philippines

only.

C. If the unpaid mortgage was contracted by a prior decedent on a property

inherited by the present decadent before marriage, it is chargeable against

the community property if it benefited the community property of the spouses.

D. If the unpaid mortgage was contracted by a prior decadent on a property

inherited by the present decedent during marriage, it is chargeable against

306

CPA REVIEWER IN TAXATION Ampongan

the community property of the spouses if it benefited the community property

of the prior decedent.

An unpaid mortgage on a property abroad of a non-resident alien decedent is

not deductible because the property subject of mortgage is not includible in the

gross estate.

An unpaid mortgage maybe classified either as an exclusive or a community

property deduction depending upon which property was benefited by the

proceeds of the mortgage. Thus, if it had benefited the family and/or the

community property of the spouses, such unpaid mortgage is deductible from

the community property. Otherwise, it is deductible from the exclusive

property of the decedent.

77. Casualty losses are deductible from the gross estate if (RPCPA).

1* Statement: Such loss was incurred during the settlement of the estate.
2nd Statement: Such loss was incurred not later than the last day for the

payment of the estate tax.

A. Both statements are false.

B. 1* statement is false, 2nd statement is true.

C. 15 statement is true, 2nd statement is false.

D Both statements are true.

78. Y, a filipino resident, died on November 5, 2014 and his estate incurred losses

due to: (RPCPA)

1* loss: From fire on February 2, 2014 of improvements on his property, not

compensated by insurance.

2nd loss: From flood on February 25, 2015 of household fumiture; also not

compensated by insurance.

A. 1 loss is not deductible and 2nd loss is deductible,

B. Both losses are not deductible.

C. Both losses are deductible from gross estate

D. 1" loss is deductible and 2nd loss is not.

ESTATE TAXATION - Multiple Choice Questions 307

To be deductible, losses must occur after the death of the decedent but within

the period for the payment of the estate tax.

79. Which statement is incorrect regarding "losses"?

A. A building that has been razed by fire immediately after the interment shall

still be included in the gross estate even if it does not exist anymore at the

time of filing the estate tax retum.

B.

In a casualty loss, the value of the property is included in the gross estate but

subsequently deducted therefrom.

с In a casualty loss, since the value of the property is included in the gross

estate but subsequently deducted therefrom, it may be omitted in both for

after all there is no effect on the net taxable estate.

D In estate taxation, the amount of loss deductible is based on the value of the

property lost minus indemnity from an insurance company

CС

To be deductible, the loss must take place after the death but within the period

for the payment of the estate tax.

In the computation of the gross estate, the market value of the property shall

be included. However, the value of the property lost shall be deducted

therefrom. Any indemnification from an insurance company shall be a

diminution from the deductible loss.

80. Which of the following losses is deductible?

А. Destruction of a house by an earthquake which seriously injured the

decedent who died after several days.

В.

Shipwreck which occurred before the death of the decedent but was only

discovered after his burial

C Total wreckage of a car in an accident but was fully compensated by a

comprehensive insurance

D Theft which occurred during burial of the decedent

81

Liza died on July 5 2014 leaving the following data on deductions

Unpaid 2013 real estate taxes

P 40,000
Unpaid 2014 real property taxes

40.000

Income tax on income from Jan. 1 to July 4, 2014

35,000

Losses from fire that occurred on July 3 (60% was

compensated by insurance)

800,000

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CPA REVIEWER IN TAXATION Ampongan

Casualty loss on September, 2014

450,000

Building destroyed by earthquake on Feb. 2015

1,300,000

Based on the above data, the amount deductible from gross estate is-

P1,365,000

C. P 845,000

565,000

D. 525.000

Unpaid 2013 real estate taxes

P 40.000

Unpaid 2014 real property taxes

40,000

Income tax

35,000

Casualty loss on September

450.000

Total deduction

565,000

The fire loss is not deductible because it occurred prior to the death of the

decedent; the cost of the building destroyed is not also deductible because

the casualty occurred after the deadline for the payment of estate tax.

82 Amount of claim against the debtor

P50,000

Total assets of the debtor

500,000

Total liabilities of the debtor

800,000

How much should be included in the gross estate of the decedent?

A P50,000

C P 500,000

B 800.000

D 300.000

The deductible claim against insolvent person is -

A P 50,000

C P 300,000

31,250

18.750

Amount of claim

Less: Collectible (500/800 x 50,000)

Uncollectible

50,000

31.250
18,750

Che Cua, a nonresident alien, died leaving the following assets -

Domestic shares

P 1.000.000

Foreign shares

3,000,000

ESTATE

309

Tangible personal property, Philippines

6,000,000

Expenses (deductible)

1.200,000

Note - The country where she is a citizen and resident does not impose

transfer tax on transmission of intangibles of Filipinos

The net estate subject to tax in the Philippines is

CP 4,800,000

3,800,000

D 4,280,000

A. P 5,280,000

Tangible personal property

P 6,000,000

Less: Deductions (6 M/10M) x 1,200,000

720,000

Net estate
5,280,000

Computation of Total Net Estate:

Domestic shares

P 1,000,000

Foreign shares

3,000,000

Tangible personal property, Philippines

6.000.000

Total

10,000,000

Nonresident aliens are taxable on properties situated in the Philippines only.

If there is reciprocity, intangible personal properties within are not subject to

estate tax.

Expenses, losses, indebtedness and taxes (ELIT) incurred are deductible but

shall be pro-rated by applying the following formula:

Philippine gross estate

Total gross estate XELIT

85. Ta Pue, a nonresident alien, single, died leaving the following properties and

deductions -

Shares , domestic corporation

P 500.000

Shares, foreign corporation

500,000

Tangible personal property

1.500.000

Deductible expenses

500,000

Assuming there is no reciprocity, the estate tax payable is -

A P 1,600,000
CP 103,000

B. 1,500,000

D 95,000

Shares, domestic corporation

Tangible personal property

P500,000

1.500.000

ESTATE

309

Tangible personal property, Philippines

6,000,000

Expenses (deductible)

1.200,000

Note - The country where she is a citizen and resident does not impose

transfer tax on transmission of intangibles of Filipinos

The net estate subject to tax in the Philippines is

CP 4,800,000

3,800,000

D 4,280,000

A. P 5,280,000

Tangible personal property

P 6,000,000

Less: Deductions (6 M/10M) x 1,200,000

720,000

Net estate

5,280,000

Computation of Total Net Estate:

Domestic shares

P 1,000,000

Foreign shares

3,000,000

Tangible personal property, Philippines

6.000.000

Total

10,000,000

Nonresident aliens are taxable on properties situated in the Philippines only.

If there is reciprocity, intangible personal properties within are not subject to

estate tax.

Expenses, losses, indebtedness and taxes (ELIT) incurred are deductible but

shall be pro-rated by applying the following formula:

Philippine gross estate

Total gross estate XELIT

85. Ta Pue, a nonresident alien, single, died leaving the following properties and

deductions -

Shares , domestic corporation

P 500.000

Shares, foreign corporation

500,000

Tangible personal property

1.500.000

Deductible expenses

500,000
Assuming there is no reciprocity, the estate tax payable is -

A P 1,600,000

CP 103,000

B. 1,500,000

D 95,000

Shares, domestic corporation

Tangible personal property

P500,000

1.500.000

CPA REVIEWER IN TAXATION Ampongan

310

2,000,000

400.000

1,600,000

Gross estate

Less: Deductions (2,000,000/2,500,000) x 500,000

Net taxable estate

On P 500,000

P15,000

1,100,000 x 8%

88.000

Estate tax payable

103,000

Computation of Total Gross Estate:

Shares, domestic corporation

Shares, foreign corporation

Tangible personal property

Total

P 500,000

500,000

1.500,000

2.500.000

Numbers 86 and 87 and based on the following information

Mhar Dehrer, a German residing in Munich, Germany had the following data at

the time of his death:

Expenses

Funeral expenses incurred in the Philippines

P 25,000

Funeral expenses incurred abroad

Accountant's fees and audit fees

5,000

Medical expenses-2 months before decedents death

50,000

Losses on the property located abroad

40,000

Claims against the estate

25,000

Properties.

Real property located in Osaka, Japan

P2,400,000

Lot situated in Davao City

1.000.000

Shares of stock in Japanese Corporation

600,000

Other tangible personal properties - Phils

1.000.000

86. The gross estate on the estate of Mhar Dehrer is -

A P 5,000,000

C. P 2,000,000

B 1,000,000

D 2,600,000

Lot In Davao City

Other tangible properties

Properties/gross estate - Philippines

P1,000,000

1.000.000

2,000,000

7 In Number 86 above, if the total deductions allowed amount to P60,000, how

much is the amount of funeral expenses abroad?

gan

ESTATE TAXATION - Multiple Choice Questions

311

P100,000

80 000

D
P 145,000

55.000

P 2,000,000

Properties - Philippines

Properties - Abroad:

Real property - Japan

Stocks - Japanese Corporation

Total gross estate

P 2,400,000

600.000

3.000.000

5.000.000

P 150,000

at

Total ELIT (P 5,000,000/2,000,000 x P 60.000)

Less: Available expenses

Funeral expenses - Philippines

25.000

Accountant's fees and audit fees

5,000

Losses, abroad

40,000

Claims against the estate

25.000

Funeral expenses abroad

95.000

55.000

To check:
Actual funeral expenses (P25,000 + 55,000)

5% x P 2,000,000

Deductible funeral expense (lower)

P 80.000

100.000

80,000

88 Which of the following properties of Etang who died December 4, 2015 is subject

to vanishing deduction?

Property 1 - Car purchased 3 years ago from Mitsubishi Motors, Batangas

City

Property 2 -

Land inhented from her mother in 2011 the estate tax thereon

have not been paid

Property 3 - Donation from a frend in 2010

Property 4 - Community property inherited December 2, 2010 or five (5)

days before mariage

Property 1

Property 3

Property 4

Yes

Yes

OOO

Property 2

No

No

No

Yes

No

No
Yes

Yes

Yes

No

Yes

No

No

No

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CPA REVIEWER IN TAXATION Ampongan

The car must have been acquired by the decedent either by donation or by

inheritance. Prior acquisition thru onerous transfer is not subject to

vanishing deduction on the estate of the present decedent.

To be entitled to a vanishing deduction, the tax on the prior transfer must

have been paid

Property 4 has been acquired by the present decedent for more than five (5)

years already at the time of her death.

89

Baby Villanueva died leaving a property which was inherited three years ago

from his father. In computing the vanishing deduction, which of the following

items shall serve as a multiplier deduction in computing the deduction from the

initial basis?

А.

B.

C.
D

Benefits received under RA 4917

Medical expenses

Standard deduction

Transfer for public purpose

90

Statement 1 Vanishing deduction is always a deduction from the exclusive

properties of the decedent

Statement 2: A property is subject to vanishing deduction if it has been acquired

thru exchange with a property inherited within 5 years pnor to the death of the

present decedent

A. Statement 1 is true, Statement 2 is false

B Statement 1 is false; Statement 2 is true

с. Both statements are true

D Both statements are false

91. Chnstopher died on October 5, 2013 leaving a parcel of land valued at P800,000

to his nephew, Mendell. On June 10, 2015, Mendell married Cristita. Prior to the

celebration of the marriage, they orally agreed that they shall be governed by the

conjugal partnership of gains.

Which statement is correct?

ESTATE TAXATION - Multiple Choice Questions

313

A. The spouses shall be govered by the conjugal partnership of gains. Thus, if

Mendell dies on May 20, 2016 the vanishing deduction shall be classified as
a deduction from his exclusive properties.

B. The spouses shall be govemed by the absolute community of property

reqime. Thus, if Cristita dies on May 20, 2016 the land shall be subject to

vanishing deduction of one-half of its value.

C. The spouses shall be govemed by the absolute community of property

regime. Nonetheless, the death of Cristita on May 20, 2016 will not subject

her share in the land to a vanishing deduction

The spouses shall be governed by the absolute community of property

regime. Thus, if Mendell dies on May 20, 2016 only his one-half share in the

land shall be subject to a vanishing deduction

Cс

The spouses shall be governed by the absolute community of property regime

because the pre-marital agreement was not reduced in writing.

The death of Cristita will not subject the property to a vanishing deduction

because it was Mendell, her husband, who acquired the property by

gratuitous title.

92.

Which of the following statements about "vanishing deduction is true?

A. For a vanishing deduction to be deductible, the property must have formed

part of the gross estate situated in the Philippines of the prior transferor

B. A family home of a non-resident alien maybe claimed as vanishing deduction

if it has been inherited within five (5) years and the estate tax on the

previous transfer has been paid at the time of death of the present decedent.

C. Vanishing deduction shall be allowed on the estate of the present decedent

even if the prior transferor is still alive

D. For a vanishing deduction to be deductible, there should always be two

deaths within five years from receipt of property

Cс
A vanishing deduction may be allowed even if the property was situated outside

the Philippines during the prior transfer, provided that it is situated in the

Philippines at the time of death of the present decedent.

A family home situated outside the Philippines is not deductible either as a

family home or as a vanishing deduction because these two items of deduction

require that the property must be situated within the Philippines.

In vanishing deduction, the first transfer of the property maybe inter vivos.

Thus, the prior transferor may still be living at the time of death of the present

314

CPA REVIEWER IN TAXATION Ampongan

decedent, and two deaths within a period of five years is not necessary for its

deductibility

93

All of the following, except one, are not deductible from the gross estate of a

nonresident alien

A. Vanishing deduction

С Family home

B. Medical expenses

D Standard deduction

Medical expenses, family home and standard deduction are not deductible

from the gross estate of a nonresident alien without condition.

Vanishing deductions are deductible if the usual requisites are complied and

the property is situated in the Philippines.

94

Rodolfo, a citizen of the Philippines and resident of Bacolod City, died testate on
May 10, 2015 Among his gross estate are properties inherited from his

deceased father who died April 4, 2012. What percentage of deduction will be

used in computing the amount of vanishing deduction? (RPCPA)

A 80% of the value taken as basis for vanishing deduction.

B 100% of the value taken as basis for vanishing deduction

с 60% of the value taken as basis for vanishing deduction

D 40% of the value taken as basis for vanishing deduction

The interval of time from the date of death of father to the date of death of

Rodolfo is 3 years, 1 month and 6 days, computed as follows:

Year Month Day

2015

2012

10

95. Val Hallada died on November 20, 2015. Some of the properties he left are the

following

Market Value

Mode of Date of Date Death of Val

Assets Acquisition Acquisition Acquired Hallada

Land

Donation

7-3-11

P 500.000 P 350.000

Car Purchase 10-2-14 800.000

980,000

ESTATE TAXATION - Multiple Choice Questions

315

Other information:

1. The gross estate of the decedent amounts to P3,000,000

2. The land was mortgaged for P50,000 when it was acquired and Val

Hallada paid the same before he died.

3 The allowable deductions total P125,000, which includes medical

expenses of P30,000. It excludes bequest to a charitable institution in the

amount of P50,000.

The vanishing deduction is (RPCPA) -

A. P 58,100

C. P.67,783

B. 57,500

D. 67,083

Lower value

P 350,000

Less: Mortgage paid

50,000

Initial basis

300,000

Less: Deductions (pro-rated)

[300,000/3,000,000 X (125,000-30,000)

9.500

Base
290,500

Rate (more than 4 years, not more than 5 years)

20%

Vanishing deduction

58,100

To be subject to vanishing deduction, the property must have been acquired

by the present decedent thru inheritance or donation inter vivos. Those that

were acquired by onerous transfers are not subject to said deduction.

Bequests to charitable institutions and medical expenses are not part of the

multiplier deductions. Only the items under expenses, losses, indebtedness,

taxes and transfers for public purpose, if any, are included as part of said

deductions.

96. In determining the net estate of the decedent, which of the following rules is

correct? (RPCPA)

A. A real estate abroad is included in the gross estate of a decedent who was a

nonresident alien.

B. Shares of stocks being intangible property shall be included in the

decedent's gross estate wherever situated.

C Vanishing deduction must be subject to limitations

D Funeral expenses are deductible to the extent of 5% of the total gross estate

but not exceeding P100,000,

316

CPA REVIEWER IN TAXATION Ampongan

97 Pepe died on August 15, 2015. His data are as follows:

Community properties
P 2,000,000

Exclusive properties of Pepe

3,000,000

Exclusive properties of Pepe's wife

1,000,000

Deductions (except standard deduction)

700,000

Included in the P3,000,000 is a parcel of land worth P200,000 and a car

worth P400,000, respectively.

The land was donated to him by his uncle on May 4, 2013 with a value of

P150,000. At the time of the donation, the land was mortgaged for P 30,000

which was paid by his uncle. The car had a value of P500,000 when it was

inherited by Pepe from his mother 2 %2 years ago and mortgaged for P50,000

which was paid by Pepe before he died.

The vanishing deduction on the estate of Pepe is -

A. P 258,000

C. P 283,800

B. 262,520

D. None

Lower value of:

Land

P 150,000

Car

400.000

Value to take

550,000

Less: Mortgage paid on car

50.000
Initial basis

500,000

Less: Deductions (500,000 / 5,000,000) x P700,000 70,000

Base

430,000

Rate (more than 2 years, not more than 3 years)

Vanishing deduction

258,000

If the same rate shall be applied to both properties, the vanishing deduction

shall be computed jointly for both properties. However, if different rates shall

be applied separate computation is necessary.

60%

98. Elopre, married June 5, 2013 died on April 29, 2015 with the following data:

Gross estate - community property, P3,000,000; exclusive, P2,000,000. Said

amount includes a land which he received as gift from his father a month before

the marriage, valued at P540,000. His father mortgaged the land for P20,000

which was paid by Elopre. Elopre mortgaged also said land for P50,000 but was

able to pay only P20,000 until his death. Expenses claimed (excluding the

unpaid mortgage) amounted to P170,000.

The vanishing deduction is -

317

ESTATE TAXATION - Multiple Choice Questions

A. P 388,800

C. P 384,000

В. None

D 380,000
I

540,000

40.000

500,000

Value to take

Less: Mortgage paid (20,000 + 20,000)

Initial basis

Less: Deductions (pro-rated)

Amount claimed

Unpaid mortgage (50,000 - 20,000)

Total

(500,000 / 5,000,000) X 200,000

Base

Rate (more than t year, not more than 2 years)

Vanishing deduction

170,000

30.000

200,000

20.000

480,000

80%

384,000

99. In Number 98 above, the net taxable estate is -

A P 2,016,000

C P 3,416,000

B. 1,208,000

D. 2,208,000

Total
5,000,000

Community Exclusive

Gross estate

3,000,000 2,000,000

Less: Deductions

Ordinary

Amount claimed

170,000

Unpaid mortgage

30,000

Vanishing deduction 384.000

Special (Standard deduction)

Net estate

Less: Share of surviving spouse

Gross community

3,000,000

Less: Community expenses

584,000

Net community property

2,416,000

Share (2,416,000/2)

Net taxable estate

( 584,000)

(1.000.000)

3,416,000

1.208.000

2.208.000

100. Statement 1: Unpaid loans contracted prior to death may be deducted even if
not notarized if notarization of contracts is not a business policy of the creditor

Statement 2: For estate tax purposes, several family homes may be deducted

provided the maximum amount is P1,000,000

317

ESTATE TAXATION - Multiple Choice Questions

A. P 388,800

C. P 384,000

В. None

D 380,000

540,000

40.000

500,000

Value to take

Less: Mortgage paid (20,000 + 20,000)

Initial basis

Less: Deductions (pro-rated)

Amount claimed

Unpaid mortgage (50,000 - 20,000)

Total

(500,000 / 5,000,000) X 200,000

Base

Rate (more than t year, not more than 2 years)

Vanishing deduction

170,000
30.000

200,000

20.000

480,000

80%

384,000

99. In Number 98 above, the net taxable estate is -

A P 2,016,000

C P 3,416,000

B. 1,208,000

D. 2,208,000

Total

5,000,000

Community Exclusive

Gross estate

3,000,000 2,000,000

Less: Deductions

Ordinary

Amount claimed

170,000

Unpaid mortgage

30,000

Vanishing deduction 384.000

Special (Standard deduction)

Net estate

Less: Share of surviving spouse

Gross community

3,000,000
Less: Community expenses

584,000

Net community property

2,416,000

Share (2,416,000/2)

Net taxable estate

( 584,000)

(1.000.000)

3,416,000

1.208.000

2.208.000

100. Statement 1: Unpaid loans contracted prior to death may be deducted even if

not notarized if notarization of contracts is not a business policy of the creditor

Statement 2: For estate tax purposes, several family homes may be deducted

provided the maximum amount is P1,000,000

318

CPA REVIEWER IN TAXATION Ampongan

B.

Only Statement 1 is correct.

Both Statements are correct.

Only Statement 2 is correct.

Both Statements are incorrect.

101. Which of the following statements is false relative to a "family home?

А.

A decedent who was married at the time of death may not have a deduction

for family home

The value of the family home must be included in the gross estate and

claimed as deduction therefrom to a maximum amount of P1.000.000

C A non-resident citizen shall include the value of his family in the gross estate

but cannot claim such amount as a deduction therefrom.

D. If the family home is allowed a vanishing deduction and a subject of an

unpaid mortgage, the deductible amount should be net of vanishing

deduction and unpaid mortgage

A decedent may not have a deduction for family home if he or the spouses do

not have such property.

The entire value of the family home is included in the gross estate if the

decedent was a resident or citizen of the Philippines.

To be deductible, the family home must be situated in the Philippines.

However, the maximum allowable deduction is P1,000,000 only.

If the family home is subject to a vanishing deduction and an unpaid

mortgage, the amount deductible shall not be diminished by the amount of the

vanishing deduction and unpaid mortgage.

102. Which of the following statements is true about "medical expenses?"

A Hospital expenses are deductible only from gross estate if unpaid at the

time of the death of the decedent even if it has already been paid at the

time of filing the estate tax retum.

B Hospital bills which have not yet been paid at the time of death is

deductible from gross estate as claims against the estate.

C.

If a person was hospitalized from July 1-30, 2014 and on July 10, 2015 he
died, the items of medical expenses listed in the hospital bill which cannot

be directly identified as to the exact date that they were incurred may be

computed proportionately based on the number of days covered by the

ESTATE TAXATION - Multiple Choice Questions

319

one year limit to the total number of days of his hospitalization

Medical expenses are deductible from the gross estate if they have been

incurred in the Philippines by a Hongkong national who visited the

Philippines as a tourist.

Hospital expenses are deductible as part of medical expenses whether paid or

unpaid at the time of death of the decedent.

Non-resident aliens are not entitled to claim deduction of medical expenses.

103 Statement 1: An unmarried individual cannot constitute a family home.

Statement 2: Unpaid medical expenses at the time of death are deductible as

claims against the estate."

A. Only Statement 1 is correct.

Both Statements are correct.

C. Only Statement 2 is correct

D Both Statements are incorrect,

A family does not refer only to a spouse and children. It may also pertain to

brothers, sisters and parents.

104 Which of the following statements is false?

A In estate taxation, the standard deductio.n from the gross estate is always
P1,000,000, whether the decedent was married or not

B If the decedent was a non-resident alien, the standard deduction shall be

pro-rated according to the ratio of the Philippine gross estate over the total

gross estate.

С A standard deduction is an item of deduction from gross estate which does

not diminish the distributable estate even if it diminishes the taxable estate

D Benefits received under RA 4917 must be included in the gross estate in

order to be deductible therefrom.

A standard deduction is not deductible from the gross estate of a non-resident

alien; it is not also deductible in computing the net distributable estate

regardless of the citizenship or residence of the decedent.

320

CPA REVIEWER IN TAXATION Ampongan

lems 105 to 109 are based on the following information

Decedent died leaving a family home composed of the following House

owned in common by the spouses worth P1,500,000, and the land in which he

exclusively owned valued at P400,000. At the time the house was constructed

had a cost of P300,000. They also own a vacation house in Baguio won

P1,200,000

105 I under conjugal partnership, after its liquidation the family home is classified as

C.

D.

Conjugal property
Exclusive property of the decedent

Exclusive property of the surviving spouse

Partly conjugal and partly exclusive of the decedent

106. Under conjugal partnership, the amount of conjugal portion of the family home

after liquidation is -

A. P 1,900,000

C. P 3,100,000

B. 1,600,000

D. 2,800,000

House

Land

Total

Less: Reimbursed amount

Family home

1,500,000

400,000

1,900,000

209.00

1,600,000

107 Before liquidation, the deductible amount of family home is -

A P 1,000,000

C. P 800,000

8. 950.000

D 1,600,000

House, conjugal (1,500,000/2)

Land, exclusive

Total
Deductible (limit)

750,000

400.000

1,150,000

1,000,000

321

108

ESTATE TAXATION - Multiple Choice Questions

Under absolute community of property regime, the value of the family home is

P 1.900.000

с P 3.100,000

В.

1.600.000

1.500.000

House, community

Land, exclusive

Total

1,500,000

400,000

1,900,000

109

Under absolute community of property regime, the deductible amount of tamily

home is -
A P 1.000.000

С P 1.900.000

B 1,500,000

1,150,000

House, community (1,500,000/2)

Land, exclusive

Total

Deductible, limit

750,000

400,000

1,150,000

1,000,000

110. Mama Mathay, widow, a citizen of the Philippines residing in Vancouver

Canada, died on December 20, 2015 leaving the following properties

Real property inherited from her husband on May 3,

2014 valued then at P2,600,000)

P2.960,000

Personal properties in Canada

1.300.000

Real and personal properties in the Philippines

670.000

Family home in Canada

2,500,000

Obligations

Funeral expenses incurred in Canada

250.000

Other deductible expenses

850.000
The gross estate of Mama Mathay is -

A. P7,430,000

C. P 6,760,000

В. 7,070,000

D 670,000

P 2,960,000

Real property

322

CPA REVIEWER IN TAXATION Ampongan

Personal properties, Canada

Real and personal properties

Family home, Canada

Gross estate

1,300,000

670,000

2.500.000

7.430,000

111

The deduction for family home is -

A P2,500,000

B. 1.000.000

C. P 1,250,000

D. None

A family home which is situated outside the Philippines is not deductible

from gross estate.

112. The vanishing deduction is -

A. P 1,786,056.52

B. 1,772,059.20

C. P 1,773,708.20

D. None

21

P2,600,000.00

Lower value / Initial basis

Less: Deductions (pro-rated)

Funeral expenses, maximum

P200,000

Other deductible expenses

850.000

Total

1,050,000

( 2,600,000/7,430,000 X 1,050,000)

Base

Rate (more than 1 year, not more than 2 years)

Vanishing deduction

367.429.34

2,232,570.65

80%

1,786,056.52

113. Decedent died leaving a family home composed of the following: House

conjugal property worth P800,000, and the land in which he exclusively owned

valued at P400,000. He also owns a vacation house in Baguio worth P700 000

The deductible amount of family home

A. P 800,000

C. P1,900,000

B 1,200,000

D. 1,000,000

House, conjugal (P800,000 x 12)

P 400,000

TRANSFER &

323

ESTATE TAXATION – Multiple Choice Questions

Land, exclusive

Deductible

400.000

800,000

114. The decedent, mamed, died leaving a family home valued at P1,500,000

composed of the house (conjugal property) and the lot (exclusive property)

Seventy percent (70%) of the value of the family home pertains to the

house, while thirty percent (30%) pertains to the lot.

The amount deductible from gross estate is -

A P 1,500,000

C. P 975,000

В. 1,000,000

D 525,000

CС

TODOS

House (P1,500,000 x 70%) x 112

Lot (P1,500,000 x 30%)

Amount deductible

P 525,000

450,000

275,000

115. Bong, single and a resident citizen, died with properties constituting his gross

estate of P4,000,000. Actual funeral expenses amounted to P150,000 and other

charges against the estate amounted to P210,000. The net taxable estate is

(RPCPA)

A P3,640,000

C. P 3,740,000

B 2,640,000

D. 2.590.000

B.

P 4,000,000

Gross estate

Less: Deductions

Funeral expenses

Other charges

Standard deduction

Net taxable estate

P 150,000

210,000

1.000.000

1.360.000

2,640,000

116. Decedent, mamied in 1986, died leaving the following

Real properties
Family house

Other real properties, exclusive of decedent

Family lot, exclusive of decedent

Funeral expenses

Medical expenses

Taxes and losses

P 3,000,000

1,000,000

2.000.000

400.000

275.000

650.000

1,300,000

324

CPA REVIEWER IN TAXATION Ampongan

The net taxable estate is -

A P 2,450,000

B 1,150,000

C. P 2,250,000

D 1,250,000

Conjugal Exclusive Total

Real properties

P 3,000,000

Family house

1,000,000
Other real properties

P2,000,000

Family lot

400,000

Gross estate

4,000,000 2,400,000 P6,400,000

Less: Deductions

Ordinary

Funeral expenses, limit 200,000

Taxes and losses

1.300,000

(1,500,000)

Special

Medical expenses, limit

(500,000)

Standard deduction

(1,000,000)

Family home

House (1,000,000/2)

500,000

Lot

400,000 ( 900.000)

Net estate

2,500,000

Share of surviving spouse(4,000,000-1,500,000) x 12 1.250,000

Net taxable estate

1,250,000

117 Paid medical expenses for confinement at Tigok Hospital

from May 15-23, 2015 (P20,000 still unpaid)

P 80.000

Hospitalization expenses (June 3.6. 2013)

21,500

Expenses for the settlement of the estate:

Acceptance fee, June 28, 2015

20.000

Court fees and other expenses, July 16, 2015

12.000

Appearance of lawyer in court, September 5, 2015

2,000

Appearance of lawyer in court, November 29, 2015

2,000

Based on the data given above, how much is the deductible medical and

judicial expenses if the decedent died May 23, 2015?

Medical expenses Judicial expenses

A.

P 80,000

P 36,000

100.000

36,000

80,000

34,000

100,000

34,000
can

ESTATE TAXATION - Multiple Choice Questions

325

P 80,000

20.000

100.000

Medical expenses:

Paid

Unpaid

Total

Judicial expenses:

Acceptance fee

Court fees

Appearance fee, September 5, 2015

Total

20,000

12,000

2.000

34.000

118 Statement 1 Under the conjugal partnership of gains, the vanishing deduction is

always a deduction from exclusive properties

Statement 2. Under the absolute community of property regime, the vanishing

deduction maybe deducted also from community property.

A True, True

False, False

B. True, False

D False, True
A

119. The following data relates to Cani, married two (2) years ago, died leaving the

following:

Gross estate

P 14,000,000

Land acquired by donation from his father 3 12 years ago

Market value, date of donation

200.000

Market value, date of death

300.000

Funeral expenses

35.000

Judicial expenses

15,000

Unpaid mortgage on land at the time of donation

100,000

Unpaid taxes

10,000

Losses

25,000

Transfer for public purposes

35,0

Medical expenses

45,0

Carl paid P60,000 to the mortgagee of the land a year before his deatt

Assuming Carl was under conjugal partnership of gains, the total of

deductions from exclusive property is -

A. P 49,600

C. P 124,600
В. 89,600

D. None

326

CPA REVIEWER IN TAXATION Ampongan

40,000

49,600

35.000

124.600

200,000

60.000

140,000

Deductions from exclusive property:

Unpaid mortgage on land (100,000-60,000)

Vanishing deduction

Transfer for public purpose

Total

Computation of vanishing deduction:

Value date of donation (lower value)

Less: Mortgage paid

Initial basis

Less: Deductions (pro-rated)

Funeral expenses

Judicial expenses

Unpaid mortgage (100,000 - 60,000)

Unpaid taxes
Losses

Transfer for public purpose

Total

(140,000/14,000,000 x 160,000)

Base

Rate

Vanishing deduction

35.000

15,000

40,000

10,000

25,000

35.000

160,000

16.000

124,000

40%

49,600

120

In Problem 119 above, assuming that Carl was under absolute community of

property regime, the total amount deductible from the community property is

А P 125.000

C. P 174,600

B 134,600

None

Funeral expenses

35.000

Judicial expenses
15,000

Unpaid mortgage

40,000

Unpaid taxes

10,000

Losses

25,000

Vanishing deduction

49.600

Total ordinary deductions from community property

174.000

The unpaid mortgage is an obligation of the community property because it

is considered as an ante-nuptial

debt which have redounded to the benefit of

the family

ESTATE TAXATION – Multiple Choice Questions

327

The vanishing deduction is a deduction from the community property

because the land is classified as a community property,

121. Alladin, filipino, mamied, died January 1, 2015, leaving the following properties

Inherited from his brother who died May 3, 2013:

Riceland

P 1,000,000

Residential land

2,000,000

Inherited from his mother who died April 12, 2011 or five days after his
marriage:

Coconut land

420,000

Acquired thru Alladin's wife's labor:

Family home

2,000,000

Car

500,000

Commercial land

1,000,000

Gold necklace (acquired by Alladin during a previous marriage

which had a legitimate descendant)

80,000

The riceland and the residential land were previously mortgaged for

P350,000 when inherited where P200,000 was paid by Alladin during his

lifetime.

The coconut land was mortgaged for P94,000 of which P14,000 was paid

before his death. Also Alladin, by will, bequeathed to Marikina City the sum of

P200,000 for exclusively public purpose.

The estate incurred the following expenses

Funeral expenses

P 140,000

Judicial expenses

80,000

Portion of family home destroyed by fire on Jan 5, 2015

100,000

Medical expenses

40,000

The gross estate of Alladin is-

A P3,500,000

C. P 5,250,000

B. 7,000,000

D. 3,957,020

Exclusive

Total

Family home

Car

Commercial land

Riceland

Residential land

Community

P 2,000,000

500,000

1,000,000

P 1,000,000

2,000,000

328

CPA REVIEWER IN TAXATION Ampongan

Necklace

80,000

Coconut land

420,000

Gross estate
3.500,000 3.500,000

P 7.000.000

Alladin was under absolute community of property regime because his

marriage took place on April 7, 2007 (five (5) days before the death of his

mother).

Marriages celebrated on or after August 3, 1988 (effectivity of the New

Family

Code) are governed by the absolute community of property regime

unless there was an ante-nuptial agreement between the duo that they shall

be governed by a different regime of property relationship.

122 In Number 121, the vanishing deduction is -

A P 2.032.000

CP 2.145.000

B 220,980

D None

Cс

Vanishing deduction on riceland and residential land:

Riceland

P1,000,000

Residential land

2.000.000

Value to take

3,000,000

Less: Mortgage paid

_200,000

Initial basis

2,800,000

Less: Deductions (pro-rated)

Funeral

P 140,000

Judicial

80,000

Losses

100,000

Unpaid mortgage (94,000- 14,000) 80,000

Unpaid mortgage(350,000–200,000) 150,000

Donation to Marikina City

200.000

Total

750,000

(2,800,000/7,000,000 x 750,000)

300.000

Base

2,500,000

Rate (more than 1 year, not more than 2 years)

80% P2,000,000

Vanishing deduction on coconut land:

Value to take

P 420,000

Less: Mortgage paid

14.000

Initial basis

406,000

Less: Deductions (406,000/7,000,000 x 750,000)

43.500

Base

362,500
Rate (more than 3 years, not more than 4 years)

40% 145.000

Total vanishing deductions

2,145.000

329

ESTATE TAXATION - Multiple Choice Questions

123. In Number 121, the net taxable estate is -

А.

B.

P 2.217,500

None

С.

D.

P 515,000

535,000

Community Exclusive Total

Gross estate

7,000,000

Deductions

Ordinary -

Funeral expenses

140,000

Judicial expenses

80,000

Losses
100,000

Unpaid mortgage, coconut land 80,000

Unpaid mortgage, rice/residential land

150,000

Donation to Marikina City

200,000

Vanishing deductions

2.145.000

Total

400,000 2,495,000 (2,895,000)

Special -

Family home (P2,000,000 x 12)

(1,000,000)

Standard deduction

(1,000,000)

Medical expenses

(40,000)

Net estate

2,065,000

Less: Share of surviving spouse (3,500,000-400,000) x 12 1.550,000

Net taxable estate

515,000

The unpaid mortgage on the coconut land is a deduction from the community

property because it is presumed that the amount on the mortgage had

benefited the community property of the spouses.

The unpaid mortgage on the riceland and residential land is chargeable

against exclusive properties because it was contracted by the brother and not

by Alladin.

124. Luis Raymund died leaving the following:

Exclusive properties

Conjugal properties

Judicial expenses

Funeral expenses

Notes payables (only / is notarized)

Claims against insolvent persons (50% is collectible)

Proceeds of life insurance (beneficiary is wife-revocable)

Death benefits under RA 4917

Medical expenses (1/2 is not supported by receipts)

P 2,000,000

2,500,000

45,000

150,000

100,000

120,000

200.000

180,000

550,000

330

CPA REVIEWER IN TAXATION Ampongan

The net taxable estate is -

A. P 1,892,500

B. 2,540,000

C. P 1,520,000

D. 1,882,500

11 A
Conjugal Exclusive Total

Exclusive properties

2,000,000

Conjugal properties

2,500,000

Claim against an insolvent

120,000

Proceeds of insurance

200,000

Death benefits under RA 4917 180,000

Gross estate

3,000,000 2,000,000 5,000,000

Less: Deductions

Ordinary -

Judicial expenses

45,000

Funeral expenses

150,000

Claims against the estate (1/2) 50,000

Bad debts (50%)

60.000

( 305,000)

Special -

( 180,000)

Medical expenses (550,000/2)

( 275,000)

Standard deduction

(1.000.000)

Net estate
3,240,000

Less: Share of surviving spouse (3,000,000 - 305,000)x12 1347.500

Net taxable estate

1.892.500

RA 4917

125. The following data relates to the estate of Abandonado:

House and lot (family home) in Quezon City, zonal value

(assessor's value, P1,150,000)

P2,230,000

Personal properties

2,500,000

Benefits received from employer as a consequence of his

death

150,000

Unpaid mortgage on a riceland with a value of P1,000,000 200,000

Claims against Dimalupig, Insolvent

35,000

Based on the above information, the value of the gross estate of

Abandonado is -

A. P 5,915,000

B. 4,835,000

C. P 4,685,000

D. 5,730,000

agan

ESTATE TAXATION - Multiple Choice Questions

331
1А

Family home

Personal properties

Riceland

RA 4917

Claims against insolvent person

Gross estate

P 2.230.000

2.500,000

1,000,000

150,000

35.000

5.915,000

Number 126 through 128 are based on the following information:

On October 15, 2015, Benjamin, a filipino citizen and a resident of Manila, died

intestate leaving his wife "Diana" and his two illegitimate children, Aubrey and

Barbara. The estate of the deceased consisted of the following

Real property - conjugal

House and lot (family home) - Manila. This property has an assessor's value of

P2,500,000 at the time of death but valued in the zonal valuation of the BIR for

P2.900,000.

Personal property -- conjugal

The total value was placed at P1,600,000.

Included in the P1,600,000 are proceeds of an irrevocable life insurance policy of

P100,000 from Phil-Am Life Insurance Company taken by Benjamin with Barbara as

the beneficiary. The premiums were paid out of conjugal property of the spouses

The following deductions were claimed by the heirs

a Funeral expenses

P100.000
b Unpaid loans, notarized

75,000

c. Losses incurred during the settlement of the estate 25,000

126. The total gross estate of Benjamin is -

AP 4,500,000

CP 4,000,000

B 4,100,000

D 4,400,000

See the solution in Number 128 below.

127 The deductible amount of family home is -

A. P 2.900.000

C. P 1,000,000

В 1.450.000

D. None

agan

ESTATE TAXATION - Multiple Choice Questions

331

1А

Family home

Personal properties

Riceland

RA 4917

Claims against insolvent person

Gross estate

P 2.230.000
2.500,000

1,000,000

150,000

35.000

5.915,000

Number 126 through 128 are based on the following information:

On October 15, 2015, Benjamin, a filipino citizen and a resident of Manila, died

intestate leaving his wife "Diana" and his two illegitimate children, Aubrey and

Barbara. The estate of the deceased consisted of the following

Real property - conjugal

House and lot (family home) - Manila. This property has an assessor's value of

P2,500,000 at the time of death but valued in the zonal valuation of the BIR for

P2.900,000.

Personal property -- conjugal

The total value was placed at P1,600,000.

Included in the P1,600,000 are proceeds of an irrevocable life insurance policy of

P100,000 from Phil-Am Life Insurance Company taken by Benjamin with Barbara as

the beneficiary. The premiums were paid out of conjugal property of the spouses

The following deductions were claimed by the heirs

a Funeral expenses

P100.000

b Unpaid loans, notarized

75,000

c. Losses incurred during the settlement of the estate 25,000

126. The total gross estate of Benjamin is -

AP 4,500,000

CP 4,000,000

B 4,100,000

D 4,400,000
D

See the solution in Number 128 below.

127 The deductible amount of family home is -

A. P 2.900.000

C. P 1,000,000

В 1.450.000

D. None

332

CPA REVIEWER IN TAXATION Ampongan

Cс

See the solution in Number 128 below.

128. The net taxable estate is

A. P 100.000

B. 150,000

C. P 950,000

D. None

P 2,900,000

1,500,000

4,400,000

P100,000

75,000

25.000 ( 200,000)

Family home

Personal property (P1,600,000 - 100,000)

Gross estate / gross conjugal

Less: Deductions

Ordinary -

Funeral expenses

Claims against the estate

Losses

Special

Family home (P2,900,000 x 12) limit

Standard deduction

Net estate

Less: Share of surviving spouse

Gross conjugal

Less: Conjugal deductions

Net conjugal

Share (P4,200,000 x 12)

Net taxable estate

(1,000,000)

(1.000.000)

2,200,000

4,400,000

200,000

4,200,000

2,100,000

100,000

129. Which of the following deductions cannot be claimed by a nonresident alien?

1. Vanishing deduction on a property situated in the Philippines.

IL Funeral expenses incurred abroad,

Ill. Family home situated abroad.

IV. Donation of a property use by a foreign government.

A. I only
B. I and II

C. III and IV

D. I and IV

332

CPA REVIEWER IN TAXATION Ampongan

Cс

See the solution in Number 128 below.

128. The net taxable estate is

A. P 100.000

B. 150,000

C. P 950,000

D. None

P 2,900,000

1,500,000

4,400,000

P100,000

75,000

25.000 ( 200,000)

Family home

Personal property (P1,600,000 - 100,000)

Gross estate / gross conjugal

Less: Deductions

Ordinary -

Funeral expenses
Claims against the estate

Losses

Special

Family home (P2,900,000 x 12) limit

Standard deduction

Net estate

Less: Share of surviving spouse

Gross conjugal

Less: Conjugal deductions

Net conjugal

Share (P4,200,000 x 12)

Net taxable estate

(1,000,000)

(1.000.000)

2,200,000

4,400,000

200,000

4,200,000

2,100,000

100,000

129. Which of the following deductions cannot be claimed by a nonresident alien?

1. Vanishing deduction on a property situated in the Philippines.

IL Funeral expenses incurred abroad,

Ill. Family home situated abroad.

IV. Donation of a property use by a foreign government.

A. I only

B. I and II

C. III and IV

D. I and IV
C

bongan

ESTATE TAXATION - Multiple Choice Questions

333

Number 130 through 132 are based on the following information

Wilson died of a car accident. He died intestate on October 10, 2015, survived

by his wife, Ging and a son

Exclusive properties of Ging:

Car

Lot in Quezon City

P 400.000

2,000,000

Other real and personal properties

800.000

Exclusive properties of Wilson:

House and lot in Sta. Rosa, Laguna, family home

1.900,000

Other personal properties

800,000

Other real properties

1,500,000

Conjugal properties of the spouses

Cash on hand and in bank

500.000

Receivable as prize in a raffle sponsored by PICPA

50,000
Receivable from an insurance company where the son, Gino

was designated as a revocable beneficiary. The premiums

were paid out of the conjugal funds

150,000

The following deductions were claimed:

Funeral expenses

195.000

Judicial expenses

15,000

Claims against the estate, not notarized

50.000

Claims against insolvent persons

30.000

Unpaid mortgage on other real properties (contracted for the

benefit of the conjugal property

200.000

Unpaid mortgage on house and lot in Laguna (the proceeds

350.000

of which did not redound to the benefit of the family)

Accrued income taxes

35,000

Income tax on income earned from October 11 to December

7.500

31, 2015

130. The gross estate is -

A. P 4.930,000

В. 4,900,000

C. P 4,850,000

D. 8,130,000
A

Exclusive

Total

Cash

Receivable from PICPA

Receivable from insurance company

Claims against insolvent persons

Conjugal

P 500,000

50,000

150,000

30,000

334

CPA REVIEWER IN TAXATION Ampongan

Family home

1.900,000

Other personal properties

.800,000

Other real properties

1.500.000

Gn6 eState

730,000 4.200,000 4.930,000

131. The deductible share of surviving spouse is -

A P 255,000

C. P 112,500

B. 127,500
D. 2,227,500

See the solution in Number 132

132. The net estate subject to tax is -

A P 1.962,500

B. 1,977,500

C. P 1,850,000

D. None

Gross estate

4,930,000

Less: Deductions

Ordinary -

Funeral

195,000

Judicial

15,000

Bad debts

30,000

Unpaid mortgage-real properties 200,000

Accrued taxes

35,000

Unpaid mortgage, Laguna'

350.000

Totals

475,000 350,000 ( 825,000)

Special -

Family home, limit

(1.000,000)
Standard deductions

(1.000.000)

Net estate

2,105.000

Less: Share of surviving spouse (730,000 - 475,000) x 1/2 127.500

Net estate subject to tax

1.977.500

Since the mortgage on real properties was contracted for the benefit of the

family, the same is considered as a deduction from conjugal partnership of the

spouses (Art. 121, par 2 & 3, Family Code).

133. Alanis, a resident citizen, single but head of family, died January 3, 2015. The

following are his data:

120,000

ESTATE TAXATION - Multiple Choice Questions

335

Properties

Real properties (excluding family home of P1,100,000)

P3,200,000

House and lot in Sydney, Australia

1,500,000

Other personal properties

800,000

Deductions

Funeral expenses

Claims against insolvent persons

100,000
Claims against the estate, not notarized

50,000

Unpaid mortgage on the family home

30,000

The personal properties do not include shares of stocks valued at P50,000

which were purchased by the decedent from Astra Company one month prior to

his death.

The house in Sydney was inherited by Alanis from his father who died 2 %

years ago. Said property was mortgaged for P200,000 which was paid by the

decedent before his death.

The gross estate is -

A: P 4,050,000

C. P 6,650,000

B. 6,750,000

-D 5,550,000

Real properties

Family home

House and lot, Australia

Other personal properties

Shares of stocks

Claims against insolvent persons

Gross estate

P3,200,000

1,100,000

1,500,000

800,000

50,000

100.000
6,750,000

134

The total deductions (excluding standard deductions) is -

A P 250,000

C. P1,250,000

B. 300,000

D. 2,001,111

CС

Funeral expenses

Bad debts

Unpaid mortgage on family home

Family home (maximum)

Deductible

P 120,000

100,000

30,000

1.000.000

1,250,000

336

CPA REVIEWER IN TAXATION Ampongan

The house in Australia is not subject to vanishing deduction because the

property is situated outside the Philippines. To be subject to this deduction,

the property "must form part of the gross estate situated in the Philippines,

135. Trillo, a resident of Quezon City, died on June 5, 2015 with the following data:

Property acquired by Trillo before marriage

P 1,500,000
Property acquired by his wife before marriage

1,000,000

Conjugal family house and lot, Quezon City, certified by

barangay chairman

1,600,000

House in Marbel City (exclusive of Trillo), certified as family

home by barangay captain

1,000,000

Proceeds of life insurance, irrevocable, beneficiary is the

estate

500.000

Claims against insolvent debtors (40% uncollectible)

100,000

Inter vivos donations to City Govemment of Quezon

200.000

Actual funeral expenses (50% paid by relatives)

300.000

Judicial expenses

250,000

The net taxable estate is -

A. P 6,040,000

C. P 1,550,000

B. 1,580,000

D.: 1,370,000

Conjugal

Total

Exclusive

1,500,000
1,600,000

· 1,000,000

500,000

100.000

2,200,000

2,500,000

4,700,000

Property acquired before marriage

Family home, Manila

House in Marbel City

Proceeds of insurance

Claims against insolvent

Gross estate

Less: Deductions

Ordinary

Funeral expenses (50%)

Bad debt (100,000 x 40%)

Judicial expenses

Special

Family home (1,600,000/2)

Standard deduction

Net estate

Less: Share of surviving spouse

Gross conjugal

Less: Conjugal expenses

Net conjugal

150,000

40,000

250,000
( 440,000)

(800,000)

(1.000.000

2,460,000

2,200,000

440.000

1,760,000

ESTATE TAXATION – Multiple Choice Questions

337

Share (1,760,000 x 1/2)

880,000

Net taxable estate

1,580,000

The house in Quezon City is the true family home because it is the place

where the family resides.

The amount of funeral expenses shouldered by the relatives of the deceased is

not deductible because it does not diminish the estate.

rems 136 through 139 are based on the following information

Penduko married in 2013 under the absolute community of property regime,

died on August 30, 2015. He left the following properties and obligations:

Properties

Cash in bank

P 200.000

Residential lot inherited from his father on June 12, 2012

1.200,000

Family home
louse (community property)

1,300,000

Lot (exclusive property of Penduko)

1,000,000

Personal properties acquired by the spouses during marriage

200,000

Receivable from his sister (insolvent)

100,000

Inter vivos donation from his mother on July 2015, revocable 150,000

Receivable from SSS as indemnity for hospitalization

12,000

Obligations:

Unpaid mortgage on the residential lot contracted by the father:

At the time of death of father

300,000

At the time of death of Penduko

100,000

Funeral expenses (40% were shouldered by relatives)

80,000

Judicial expenses (30% were incurred after 6 months)

35,000

Claims against the estate (includes unpaid medical expenses of

P12,000)

35,000

Unpaid mortgage on the house (loaned to Penduko's brother) 100,000

Casualty loss (50% was indemnified by the insurance company)

60,000

Donation to Barangay Engkantao (verbal donation)

25,000
136 The gross estate on the estate of Penduko is -

А. P 4,062,000

с. P 3,962,000

B. 3,900,000

D. 4,000,000

Total

Exclusive

Community

200,000

1,200,000

Cash

Residential lot

CPA REVIEWER IN TAXATION Ampongan

338

Family house

1.300,000

Family lot

1,000,000

Personal properties

200,000

Receivable from sister

100,000

Gross estate

1,000,000 3,000,000

4,000,000
The property subject of the revocable donation made by the mother

although physically transferred to Penduko does not transfer title to him

because it is actually an inter vivos donation subject to estate tax on the

mother.

Benefits received from SSS and GSIS are exempt from estate tax.

The claim against Penduko's sister is included already in the gross estate as

a "Receivable from his sister."

137. The vanishing deduction on the estate of Penduko is -

A P 357,450

C. P 300,500

В. 375,540

D 367,450

1,200,000

200.000

1,000,000

Value of property

Less: Mortgage paid (300,000 - 100,000)

Initial basis

Less: Deductions (pro-rated)

Unpaid mortgage on lot

Funeral expenses (80,000 x 60%)

Judicial expenses (35,000 x 70%)

Payable of the estate (35,000 – 12.000)

Unpaid mortgage on house

Bad debts (loan to sister)

Casualty loss (60,000 X 50%)

Total
100,000

48,000

24,500

23.000

100,000

100,000

30,000

425,500

(1,000,000/4,000,000 X 425,500)

Base

Rate (more than 3 years not more than 4 years)

Vanishing deduction

106.375

893,625

40%

357,450

138. The total ordinary deductions from the community property of Penduko is-

P 807,950

C.

P 782.950

582,900

D. 682,950

ESTATE

TAXATION

-
Multiple

Choice

Questions

339

Ordinary Deductions:

Funeral expenses

48,000

Judicial expenses

24.500

Payable of the estate

23,000

Unpaid mortgage on the house

100,000

Unpaid mortgage on residential lot

100,000

Bad debts

100,000

Casualty loss

30,000

Vanishing deduction

357.450

Total

782,950

The vanishing deduction is a deduction from the community property of the

spouses because the property subject of the vanishing deduction is a

community property - it having been inherited before the marriage of

Penduko.

Donations for public purpose must be testamentary in character. Oral

donations are not valid.

The unpaid mortgage on the lot is an obligation of the community property

because it is considered as an ante-nuptial debt which have redounded to the

benefit of the family.

139. The net taxable estate is -

A.

B.

None

P-46,525

D.

P 96,525

122,025

4,000,000

( 782,950)

Gross estate

Ordinary deductions

Special deductions:

Medical expenses

Family home (1,300,000/2) + 1,000,000 (limit)

Standard deduction

Net estate

Less: Share of surviving spouse (3,000,000 - 782,950)/2

Net taxable estate

(12,000)

(1,000,000)

(1000.000

1,205,050
1.108.525

90.525

140. Eleanor, resident citizen, married and under the absolute community of property

regime, died on August 20, 2014. The following are the data on properties and

obligations

340

CPA REVIEWER IN TAXATION Ampongan

P2.500 000

2.000.000

Exclusive properties of Eleanor

Personal properties

Family home

Community properties

Real properties

Personal properties

Funeral expenses

Judicial expenses incurred until February 20, 2016

Judicial expenses incurred after February 20, 2015

Unpaid taxes

Medical expenses

Casualty loss occurred November 2, 2014

Casualty loss occurred March 5, 2015

How much is the net taxable estate?

А P 3.268,500

С. P 3,238,000

B 3,278,750
D 3,228,000

1 400,000

1.750.000

220.000

30,000

20,000

12,500

550.000

350.000

130,000

Total

7.650,000

Exclusive Community

Personal properties

2,500,000 1,750,000

Family home

2,000,000

Real properties

1.400.000

Gross estate

4.500,000 3,150,000

Ordinary deductions:

Funeral expenses, limit

200.000

Judicial expenses

30.000

Unpaid taxes

12,500
Losses

350.000

Special deductions:

Family home

Standard deduction

Medical expenses, limit

Net estate

Less: Share of surviving spouse (3,150,000 - 592,500)/2

Net taxable estate

( 592,500)

(1,000,000)

(1,000,000)

500.000)

4.557.500

3.278.75

141. The net distributable estate is -

А. P 3,278,750

B. 3,483,750

P 5 483,750

5,418,750

341

ESTATE TAXATION - Multiple Choice Questions

Total
7,650,000

Exclusive Community

Personal properties

2,500,000 1,750,000

Family home

2,000,000

Real properties

1,400,000

Gross estate

4,500,000 3,150,000

Ordinary deductions:

Funeral expenses

220,000

Judicial expenses (30,000 + 20,000)

50,000

Unpaid taxes

12,500

Medical expenses

550,000

Losses (350,000 + 130,000)

480,000

Net estate

Less: Share of surviving spouse (3,150,000-1,312,500)/2

Net distributable estate

(1.312.500)

6,337,500

918.750

5,418,750

C.
TAX CREDIT & ADMINISTRATIVE

PROVISIONS

142. One is not entitled to tax credit for taxes paid to foreign country

A. Resident citizen

Resident alien

В. Nonresident citizen

D. Nonresident alien

143. All of the following, except one, are entitled to tax credit on estate tax paid in

in country:

C.

Resident alien

ut citizen