Problem 25

TRANSFER TAXES ESTATE (PROBLEMS)1. Pin Nathay died on May 1, 2014 and left a real property costing P5,500,000, with book value of P5,250,000. On May 2, 2014, the propertys market value is P4,750,000. The amount to be included in the gross estate isa. P5,250,000b. P5,000,000c. P4,750,000d. P5,500,000

2. Two Dash died leaving a house and lot and a land in Quezon City. The Quezon City Assessors Office determined that the value of the house and lot and the land are P4,500,000 and P12,000,000 respectively. Whereas, the BIR Commissioners valuation indicated P5,000,000 for house and lot, and P11,400,000, for the land. The total value of these properties that should be included in Two Dashs gross estate is

a. P17,000,000

b. P16,500,000

c. P16,400,000

d. P15,900,000

Whichever is higher.

3. Who One, an American residing in New York Cubao, died leaving the following properties:Vacation House in Mexico Pampanga, PhilippinesP 10,000,000

Mitsubishi, Philippines500,000

Unit in Sun Residences, Quezon City Philippines1,500,000

Shares of stocks, New York USA2,000,000

Business, New York USA15,000,000

Receivable, Philippines1,000,000

The gross estate of Who One is

a. P13,000,000

b. P15,000,000

c. P30,000,000

d. P29,500,000All4. Juan, a citizen, is an investor of 1,000 shares, P100 par of Imang, Inc., a domestic corporation. In 201A, Juan died due to cancer. During that time, the shares are selling in the Philippine Stock Exchange at P120 to P150 per share. What amount related to these shares shall be included in the gross estate?a. P100,000

b. P120,000

c. P135,000

d. P150,000

(120 + 150) / 2 = 135 x 1,000 = 135,0005. When Jose died, his wife received the proceeds amounting to P1,000,000 of the life insurance he has been paying when he was still alive. Jose paid a total of P350,000. What amount should be reported as part of the gross estate if Jose designated his wife as the revocable beneficiary?a. P1,000,000

b. P650,000

c. P350,000

d. P0

Proceeds is included in gross estate if (1) beneficiary is revocable, and (2) beneficiary is estate, executor, administrator, whether the designation is revocable or not. Excluded if beneficiary is 3rd person, designated as irrevocable.

In general, if beneficiary is not stated, revocable designation.Group insurance taken by employer, and proceeds from SSS and GSIS, excluded.6. Refer to previous item, what item should be reported as part of the gross estate if Jose designated his wife, the administrator, as irrevocable beneficiary?a. P1,000,000b. P650,000

c. P350,000

d. P0

7. How much of the following revocable transfers with consideration is to be included in the gross estate?FMV at time of transferP2,100,000

FMV at time of death2,700,000

Consideration received2,400,000

a. P2,700,000b. P2,100,000

c. P600,000

d. P300,000

8. Maria donated her house and lot valued at P10,000,000 to her son Mario, retaining the power to amend or terminate the transfer at will. Five months after donation, Mario died due to car accident. Which of the following is true?a. The house and lot should be included in Marios gross estate

b. If Mario accepted the donation, the donation is perfected.c. Upon the death of Maria, the house and lot shall be included as part of her gross estated. Upon the death of Maria, the house and lot shall no longer be included as part of her gross estate because it was already included in Marios gross estate

This is a revocable transfer. Maria still owns the property.

9. Mr. Tah Kot was diagnosed to have a stage four lung cancer. Fearing that he will die soon, he donated his apartment costing P3,000,000 to his daughter Ma Saya, and his Honda City car costing P1,100,000 to his son, Masma Saya. 10 months after he was diagnosed, Mr. Tah Kot died. At that time, the apartment has P2,800,000 market value based on the schedule of values fixed by the assessors office, while the car has P1,000,000 book value, but can be sold for P800,000. Also, the apartment earned P855,000 rental income, net of 5% CWT. How much of the above mentioned values shall be included in Mr. Tah Kots gross estate?a. P0

b. P855,000

c. P4,500,000

d. P4,700,0002,800,000 + 800,000 + (855,000/95%) = 4,500,00010. Mr. Aksi Dente died in a bus accident. His wife received the following in relation to his death:

P3,000,000 from Eagle Life Insurance Company. The estate of Mr. Dente is the irrevocable beneficiary.

P1,500,000 from Maya Life Insurance Company, with Mrs. Dente as the revocable beneficiary.

P900,000 from Florida Bus Company after extra-judicial court settlements.

How much of the above receipts are to be included in Mr. Dentes gross estate?

a. P900,000

b. P2,400,000

c. 4,500,000

d. 5,400,000

3,000,000 + 1,500,000 = 4,500,000

11. (VDR) The following are the properties of Mr. Lay Bing.Fair market valueConsideration

At transferAt deathReceived

Revocable transfer

LandP 8,000,000P 10,400,000P 6,000,000

Car2,000,00001,200,000

Shares of stocks1,000,000600,000800,000

Bonds400,000400,000500,000

Transfer under power of appointment

Land and building, general power4,000,0003,600,0002,000,000

Farm land, special and limited power3,000,0001,000,0002,400,000

How much is the gross estate?

a. P1,600,000

b. P6,000,000

c. P4,400,000

d. P14,000,000(10,400,000 6,000,000) + (3,600,000 2,000,000) = 6,000,00012. Mr, Estallila left the following properties upon his death:

Personal tangible properties

Acquisition cost

P 1,200,000

Book value

400,000

Fair market value

600,000

Real properties

Assessed value

P 800,000

Zonal value

1,300,000 Tangible personal properties

1) Stocks of Camix Company, 3,000 shares listed in local stock exchange (highest P 35; lowest, 33)

2) Stocks of Dam Company, 2,000 shares not listed in local stock exchange. Cost per share, P60; book value per share, P55

The gross estate the decedent would be

a. P 2,125,000

b. P 2,112,000

c. P 2,010,000

d. P 2,126,000

600,000 + 1,300,000 + (3,000 x 34) + (2,000 x 55) = 2,112,00013. (VDR) A resident decedent reported the following properties (at market values)Family home (land and residential house in the Philippines)P 2,000,000

Vacation house and lot in Malaysia1,500,000

Farm land in the Philippines, with P600,000 mortgage in favour of BPI1,000,000

Shares of stock:

Of a domestic corporation deposited in a bank safety deposit box in Malaysia200,000

Of a foreign corporation the entire business of which is in the Philippines,

Deposited in a bank safety deposit in Malaysia100,000

Receivable from a friend who has no property, whatsoever50,000

Receivables life insurance policies taken by decedent, beneficiary is

Estate, revocable500,000

Daughter, revocable400,000

Son, irrevocable300,000

Life insurance taken by employer of the decedent, beneficiary is the estate50,000

Property insurance, for loss of property 250,000

Accident insurance, for injury sustained20,000

The gross estate is?

a. P5,920,000

b. P5,020,000

c. P4,920,000

d. P6,020,000

FOR ITEMS 14-20, REFER TO THE FOLLOWING INFORMATION:

22On November 1, 2011, Mr. Marquez, married and survived by his legitimate spouse, died leaving the following properties within and outside the Philippines.CGPACP

Land in Cebu, received as gift before marriageP 1,500,000Ex Com

Land in Davao, inherited from his father, during marriage2,000,000ExEx

Car, received by Mrs. Marquez as gift, during marriage3,500,000--

House and lot in Davao, acquired during marriage900,000ConCom

Apartment, inherited by Mrs. Marquez during marriage2,800,000--

Condominium unit in QC, acquired before marriage3,400,000ExCom

Income of land in Cebu450,000ConCom

Income of land in Davao600,000ConEx

Rental income of condominium150,000ConCom

Rental income of apartment300,000Con-

Jewelry of Mrs. Marquez purchased using her exclusive money250,000-Com

Unidentified property as when and who acquired800,000ConCom

Notes: For CGP, exclusive properties are those received by gratuitous title during marriage, those brought to marriage as his own, and those purchased using exclusive money For ACP, exclusive properties are those received by gratuitous title during marriage, and the fruits of the exclusive properties14. Under the Conjugal Partnership of Gains, Mr. Marquezs exclusive properties amount to P6,900,00015. Under the Absolute Community Property, Mr. Marquezs exclusive properties amount to P2,600,00016. Under the Conjugal Partnership of Gains, the conjugal properties are P3,200,00017. Under the Absolute Community Property, the conjugal properties are P7,450,00018. Under the Conjugal Partnership of Gains, the amount to be included in Mr. Marquezs gross estate is P8,500,00019. Under the Absolute Community Property, the amount to be included in Mr. Marquezs gross estate is P6,325 ,00020. If Mr. Marquez has legitimate descendants from previous marriage, under absolute community property, how much is his exclusive property? 12,400,000Property acquired before marriage including its fruits become exclusive. Therefore, the following become exclusive:

Land in Cebu (1,500,000) + Condominium (3,400,000) + their income 450,000 + 150,000 + 6,900,000 = 12,400,00021. Mr. Deds died on March 31, 2013 and left a real property worth P1,560,000. Deductions claimed by the administrator follow:Medical expenses during decedents sickness paid out of decedents cash Available at date of deathP 45,000

Expenses during wake paid out of decedents cash85,000

Cost of burial lot and tombstone40,000

Claims against insolvent persons.100,000

How much funeral expense is allowed as deduction from gross estate?

a. P170,000

b. P78,000

c. P86,500

d. P91,500

(1,560,000 + 45,000 + 85,000 + 40,000 + 100,000) x 5% = 91,500 vs. 125,00022. Mr. Patrick, just before his death, has total claims against debtor of P2,000,000. One of the debtors whom Mr. Patrick was a claim of P 500,000 has total assets of P 3,000,000 and total liabilities of P 10,000,000. The court accordingly declared the said debtor insolvent. The claims against insolvent person as allowable deduction from the gross estate would be

a. P 150,000

b. P 350,000

c. P 500,000

d. P 2,000,000

P500,000 (3M/10M x P500,000) = P350,00023. Among the properties included in the gross estate of Mr. Laurence at the time of death was two-storey commercial building with a fair market value of P 6,000,000. During the settlement of the estate and before the last day of paying the estate tax, the said property was destroyed by fire. The fair market value of the property at the time of the accident was P 6,500,000. Assume that the property was insured for P 5,000,000 and the amount recovered from the insurance company was P 4,500,000, the amount of the deductible loss will be

a. P 500,000

b. P 1,500,000c. P 4,500,000

d. P 6,000,000

P6,000,000 4,500,000 = P1,500,00024. The following are liabilities related to the death of a resident citizen:Unpaid mortgage on real property included in gross estateP 250,000

Accounts payable condoned by creditors100,000

Unpaid medical expenses incurred related to sickness which

Caused the death of the decedent100,000

Unpaid funeral expenses50,000

How much would be deducted as claims against the estate?

a. P250,000

b. P300,000

c. P350,000

d. P400,000

25. Mr. Pa Yapa died with the following donations in a testamentary succession:Donation to San Antonio ParishP 200,000

Donation to City Government of Tacloban350,000

Donation to Chinese Government500,000

Donation to GMA Foundation120,000

How much of the above transfer for public use are allowed as deduction from gross estate?

a. P850,000

b. P670,000

c. P550,000

d. P350,000

26. Mr. Albert, a non-resident Filipino, died during the taxable year with the following information:

The amount of ordinary deductions against the gross estate is

a. P 150,000

b. P 210,000

c. P 260,000

d. P 345,000

Claims against insolvent person (900,000 x 15%)

P135,000Funeral expenses (4.2M x 5%) vs. actual

150,000

Judicial expenses

60,000Total

345,000FOR TEMS 27 29, REFER TO THE FOLLOWING INFORMATION:

27. The following information relates to the predecessor, Mr. Alfonso Sr., and present decedent, Mr. Alfonso Jr.:

Data on Alfonso Sr.

2-storey commercial building, fair market value at the time of deathP 3,000,000

Hi-ace van, fair market value at the time of death

P 900,000

The estate taxes on the above properties were properly paid and such were accordingly transferred to his only son, Alfonso Jr. The commercial building has an unpaid mortgage of P 1,000,000 at the time of transfer.

Data on Alfonso Jr.

At the time of death Mr. Alfonso Jr., which is more than three years after the death of his father, the two-storey commercial building has a fair market value of P4,000,000 while that of the hi-ace van was P 800,000. The mortgage has an unpaid balance of P 300,000.

The total amount of ordinary expenses accounted properly was P 1,200,000 comprising of funeral expenses, the judicial and administrative expenses, and transfer for public use. The gross estate of Mr. Alfonso Jr. at the time of death amounted to P15,500,000.The amount of initial basis is

a. P3,800,000b. P3,500,000c. P3,100,000d. P2,800,000

Lower fair market values at time of death( P3M + P800,000)P3,800,000Less: Mortgage paid (P1M 300,000)

700,000

P3,100,00028. The amount of proportionate deduction for initial basis is

a. P294,194

b. P270,968

c. P240,000

d. P216,774

P1,200,000 x (P3.1M / P15.5M) = 240,000

29. The amount vanishing deductions isa. P 1,168,000

b. P 1,205,678

c. P 1,144,000

d. P 1,808,516

P3,100,000 240,000 = P2,860,000 x 40% = P1,144,000If within 1 year, 100%; >1yr to 2yrs, P80%; >2yrs to 3yrs, 60%; >3yrs to 4 yrs, 40%; >4yrs to 5yrs, 20%.

30. How much is the amount of family home subject to estate tax if the said family home has a value of P4,000,000 of which P1,600,000 represents the exclusive lot of the decedent and the balance represents the conjugal part?

a. P2,800,000

b. P1,800,000

c. P1,200,000

d. P1,000,000 1,600,000 + (2,400,000 / 2) = 2,800,000 1,000,000 = 1,800,000FOR ITEMS 31 33, REFER TO THE FOLLOWING INFORMATION:31. Mr. Lee Bing a resident decedent, left the following estate:

Exclusive real estateP 2,800,000

Conjugal real estate family home1,600,000

Conjugal personal property800,000

During marriage, the couple borrowed P400,000 from a bank, which is secured by the exclusive real property. At the time of Mr. Lee Bings death, there was a P300,000 balance of the mortgage payable. Actual funeral expenses amounted to P245,000 and judicial expenses of P100,000

How much is the net estate?

a. P3,800,000

b. P2,800,000

c. P2,100,000

d. P1,900,000

32. How much is the estate tax?a. P143,000

b. P135,000

c. P127,000

d. P120,000

33. How much is the net distributable estate?a. P2,210,000

b. P3,142,500

c. P3,550,500

d. P4,420,000

FOR ITEMS 34 36, REFER TO THE FOLLOWING INFORMATION:

34. (VDR) Decedent was single at the time of death:Real and personal properties in the PhilippinesP 6,000,000

Proceeds of life insurance:

Receivable by the estate, as revocable beneficiary1,000,000

Receivable by the spouse, as irrevocable beneficiary500,000

Medical expenses within one year prior to death:

Paid by the time of death300,000

Unpaid at the time of death400,000

Funeral expenses

Paid by the time of death100,000

Unpaid at the time of death150,000

Other obligations of the decedent1,000,000

Compute the net taxable estate

a. P5,000,000

b. P4,052,000

c. P4,300,000

d. P5,300,000

35. The estate tax?

a. P465,000b. P360,720

c. P388,888

d. 510,000

36. The net distributable estate?a. P5,450,000b. P3,912,000

c. 5,062,000

d. 4,052,000

TaxableDistributable

Gross estateP 6,000,000P 6,000,000

Receivable from life insurance1,000,0001,000,000

Total7,000,0007,000,000

Medical expenses(500,000)(400,000)

Funeral expenses(200,000)(150,000)

Other obligations(1,000,000)(1,000,000)

Standard deduction(1,000,000)

Total deductions(2,700,000)

Net taxable estate4,300,000

Estate tax(388,000)

Net distributable estateP 5,062,000

37. A citizen decedent was under the system of absolute community of property during the marriage. He died with P7,000,000 and P4,000,000 properties in the Philippines and USA, respectively. Deductions, excluding the share of the surviving spouse, amount to P2,000,000 and P3,000,000 in the Philippines and USA, respectively. The administrator paid P50,000 of estate tax in the USA.How much is the net taxable estate?

38. How much is the estate?

39. How much is the estate tax still due after tax credit?

PhilsUSATotal

PropertiesP 7,000,000P 4,000,000

Deductions2,000,0003,000,000

Net estate5,000,0001,000,000P 6,000,000

Less: share of SS3,000,000

Net taxable estate3,000,000

Estate tax245,000

Less: estate tax credit

Foreign estate tax paid50,000

(1M / 6M) x 245,000 40,833

Allowed40,833

Estate tax still dueP 204,167

OverBut not OverThe TaxShall bePlusOf theExcess Over

P 200,000.00Exempt

P 200,000.00500,000.0005 %P 200,000.00

500,000.00 2,000,000.00P 15,,000.008 %500,000.00

2,000,000.00 5,000,000.00 135,000.0011 % 2,000,000.00

5,000,000.00 10,000,000.00 465,000.0015 % 5,000,000.00

10,000,000.00 1,2l5,000.0020 % 10,000,000.00

KAYA PA?Only those who plant will reap.House and lot in the Philippines as family homeP 2,000,000

Car in SingaporeP 800,000

Pieces of jewelry in the PhilippinesP 500,000

Receivable in Singapore where 15% is proven to beP 900,000

uncollectible due to insolvency of the debtor

Funeral expensesP 150,000

Judicial expensesP 60,000