TRANSFER & BUSINESS TAXATION, 2015 Edition

By: TABAG & GARCIA

CHAPTER 1 – SUCCESSION & TRANSFER TAXES

TRUE OR FALSE
1. TRUE 6. TRUE 11. FALSE 16. TRUE
2. TRUE 7. FALSE 12. TRUE 17. FALSE
3. FALSE* 8. FALSE 13. TRUE 18. TRUE
4. FALSE 9. TRUE 14. TRUE 19. TRUE
5. FALSE 10. FALSE 15. FALSE 20. TRUE
*The taxpayer for estate tax purposes is the estate as a juridical person.
MULTIPLE CHOICE
1. D 12. C 23. D 34. D 45. B
2. A 13. C 24. B 35. B 46. C
3. D 14. B 25. D 36. B 47. D
4. C 15. D 26. D 37. D 48. D
5. C 16. C 27. B 38. B 49. A
6. A 17. B 28. D 39. D 50. B
7. B 18. D 29. A 40. D 51. A
8. A 19. C 30. D 41. B 52. D**
9. B 20. B 31. B 42. D 53. D
10. A 21. B 32. A 43. B 54. D
11. D 22. B 33. D 44. B 55. B
**Inheritance and repudiation takes effect upon death of the decedent

CHAPTER 2 – GROSS ESTATE

PROBLEM SOLVING
(P2.1) (1) P19,300,000 (2) P19,300,000 (3) P11,800,000 (4) P14,300,000

(P2.2)
Total Gross Estate P78,000,000

(P2.3)
Total Gross Estate P4,075,000
***Mean value shall be used only if the quotation price at the date of death is not determinable (RR 2-2003)

(P2.4) (1)P230,0000; (2)P1,100,000; (3)P0; (4)P5,000,000; (5)P1M + [1M x (1M x 10% x 1.5)] = P1,150,000

MODIFIED IDENTIFICATION
EXERCISE A
1. Included 6. Excluded
2. Included 7. Excluded *
3. Excluded 8. Included **
4. Included 9. Excluded
5. Excluded 10. Included***
*Designated by the prior decedent
**Exclusions from the gross estate. Nonetheless, the tax code requires these items to be included first in the gross
estate before deducting the same from the gross estate.
*** Bequests to charitable institutions are considered exclusions from the gross estate only if the problem clearly states
that not more than 30% were used for administrative purposes. However, even if not more than 30% of the bequests
were used for administrative purposes, the tax code still require these items to be included first in the gross estate
before deducting the same for estate tax purposes.

EXERCISE B EXERCISE C
1. P0; valid sale 1. P10M
2. P0; valid sale 2. P20M
 3. P0; valid sale 3. P5M
4. P4,000,000 4. P10M
5. P6,000,000 5. P0

TRUE OR FALSE
1. TRUE 6. FALSE 11. FALSE 16. TRUE
2. TRUE 7. FALSE 12. TRUE 17. TRUE
3. TRUE 8. FALSE 13. TRUE 18. FALSE
4. FALSE 9. TRUE 14. FALSE 19. TRUE
5. TRUE 10. TRUE 15. FALSE 20. FALSE

MULTIPLE CHOICE
1. A 16. D 31. C 46. D 61. A
2. B 17. C 32. B 47. C 62. A
3. D 18. B 33. A 48. C 63. C
4. B 19. D 34. B 49. D 64. D
5. C 20. A 35. B 50. D 65. B
6. C 21. D 36. D 51. D 66. A
7. A 22. A 37. C 52. C 67. C
8. B 23. B 38. B 53. C 68. C
9. A 24. A 39. C 54. C 69. D
10. A 25. C 40. C 55. B 70. D
11. A 26. C 41. C 56. D 71. D
12. B 27. C 42. B 57. C 72. A
13. D 28. D 43. C 58. C 73. D
14. A 29. B 44. B 59. A 74. D
15. C 30. D 45. C 60. A 75. B

CHAPTER 3 – DEDUCTIONS FROM THE GROSS ESTATE

PROBLEM SOLVING
(P3.1) (Funeral Expenses)
Case A: P150,000
Case B: P200,000
Case C: P150,000
Case D: P150,000

(P3.2) P0
Mourning clothing (donated by the decedent’s employer) P-
Expenses paid by relatives -
Telecommunication charges paid by the friends -
Cost of burial plot, coffin, interment fees and other funeral charges -
paid by an insurance company
DEDUCTIBLE FUNERAL EXPENSE -nil-

(P3.3) P183,500 computed as follows:

NOTE: Hospital bills for two months of confinement before decedent’s death should be charged to “medical expenses”

(P3.4) (Claim Against Insolvent Persons)

Case A: P100,000
Case B: P333,333 computed as follows:
Case C: P0. Debtor is not insolvent

CaseD: P250,000
(P3.5) P133,333 computed as follows:
(P3.6) P2,097,000 computed as follows:
(P3.7)
Question 1: P217,500
Question 2: P217,500
 Same answer with question #1. Whether or not the estate was settled judicially is
irrelevant in the determination of allowable deduction for judicial expenses.
(P3.8) P265,000 computed as follows:
(P3.9) P2,500,000 computed as follows:
(P3.10) P262,500 computed as follows:
(P3.11) STANDARD DEDUCTION
Case A: P1,000,000
Case B: P1,000,000
Case C: P1,000,000
Case D: P0
Case E: P0
(P3.12) MEDICAL EXPENSES
Case A: P500,000
Case B: P500,000
Case C: P150,000
Case D: P500,000
Case E: P0

(P3.13) FAMILY HOME

Case A: P1,000,000
Case B: P500,000
Case C: P0
Case D: P500,000
Case E: P600,000
Case F: P750,000; [ (1M/2) + (500,000/2)]

(P3.14) P1,550,000 computed as follows:

(P3.15)
Question 1: P2,430,000 (Decedent: Resident Citizen)
Question 2: P2,430,000 (Decedent: Resident Alien) (same computation with Q#1).
(P3.16) Question 1: P2,757,500 computed as follows:
Question 2: P2,672,330 computed as follows:
(P3.17) Question 1: P426,000 computed as follows:

TRUE OR FALSE
1. TRUE 7. TRUE 13. FALSE 19. TRUE 25. TRUE
2. TRUE 8. TRUE 14. FALSE 20. TRUE 26. TRUE
3. TRUE 9. TRUE 15. TRUE 21. TRUE 27. FALSE
4. TRUE 10. FALSE 16. FALSE 22. FALSE 28. TRUE
5. TRUE 11. FALSE 17. TRUE 23. TRUE 29. FALSE
6. FALSE 12. FALSE 18. TRUE 24. TRUE 30. TRUE

MULTIPLE CHOICE
1. C 11. C 21. A 31. C 41. C
2. D 12. B 22. A 32. A 42. A
3. D 13. A 23. B 33. C 43. A
4. C 14. A 24. B 34. B 44. C
5. B 15. A 25. B 35. B 45. D
6. B 16. D 26. C 36. D 46. A
7. D 17. D 27. A 37. A 47. A
8. C 18. C 28. C 38. D 48. A
 9. A 19. D 29. D 39. D 49. B
10. B 20. P650,000 30. C 40. D 50. D

CHAPTER 4 – PROPERTY RELATIONS

ERRATUM: PAGE 127, ILLUSTRATION #2, CASE B: The P300,000 jewelry shall be classified as conjugal property. Net
Taxable estate shall be P625,000

CHAPTER 5 – ESTATE TAX CREDIT AND ESTATE TAX DISTRIBUTABLE

PROBLEM SOLVING
P5.1
(1)P200,000 (2)P0; not allowed

P5.2
Estate tax payable after tax credit P67,500
ALLOWED TAX CREDIT P67,500

P5.3
(a) Net Taxable estate = P3,570,000; (b)Estate tax due after tax credit = P142,770
(c ) Net Distributable Estate = P4,427,230

P5.4
NET TAXABLE ESTATE P1,325,000
ESTATE TAX PAYABLE P81,000
NET DISTRIBUTABLE ESTATE P2,994,000

ULTIPLE CHOICE
1. B 8. A 15. A 22. C 29. C
2. C 9. D 16. C 23. A 30. D
3. D 10. A 17. C 24. C 31. A
4. C 11. D 18. A 25. D 32. B
5. C 12. D 19. D 26. C
6. C 13. A 20. A 27. A
7. C 14. D 21. C 28. B