this page to your professor. Cut here and submi Chapter 4 Deductions from Gross Estate 1. Name: Score: at ee ae isis Exercise 4-1 TRUE OR FALSE Write True if the statement is correct, or False if the statement is incorrect, 1. Funeral expenses incurred after the internment are not deductible but could be claimed as claims against the estate. 2. Judicial expense incurred within 6 months from the date of death is allowed as deduction from the gross estate. 3. Claims against the estate are unpaid lawful obligations by the decedent which should be paid by heir if the value of the estate is inadequate. 4. The claim against the estate including its interest is deductible only to the extent of the accrued amount as of the decedent's death 5. Loans granted by banks must be notarized to be deductible from gross estate. 6. The claim against an insolvent person is deductible only if included in the gross estat 7. An accommodation loan is deductible if it is included as part of the gross estate. 8. Unpaid taxes from the date of death until the burial or before the burial are deductible from gross estate. 9. Losses claimed as deductions from gross income are deductible from gross estate if not compensated by insurance. 10. Donations to forcign government are deductible from gross estate. 11. A vanishing deduction is not allowed for the current decedent if his immediate predecessor deducted the same from his gross estate. 12. A special deduction is allowed to all kinds of decedent taxpayers. 13. A medical expense is deductible whether paid or unpaid,160 TRANSFER AND BUSINESS TAXATION ‘maha Score: Problem 4-2 TRUE OR FALSE Write True if the statement is correct, or False if the st incorrect, market 1. The deductions from gross estate are valued at the fair value at the time of fling and paying the estate tax 2. Outstanding obligations \by a person during h terminated upon his death. 3. Deductions from the gross estate are allowed to ct the interest of the innocent third party who have claims over the properties of the decedent. 4. To be deductible, judicial expense must have been incurred before the decedent's death. as it was 5. A loss is deductible from gross estate for as lon; sustained before the decedent's death 6. Asa rule, a deduction is allowed from the gross estate if it is proven that the estate of the decedent is entitled to such deduction as provided by law. 7. Asa rule, deductions from the gross estate are presumed to be conjugal deductions, unless specifically identified as exclusive. 8. Expenses incurred during the interment are allowed as deductions from gross estate including those defrayed by the decedent's relatives. 9. The allowed deduction for funeral expense is P200,000. 10. The amount of judicial expense is limited to P200,000 or 5% of the gross estate or the actual amount whichever is lower. 11. Funeral expenses derived from assistance by sympathizers are deductible from gross estate. 12, Brokerage fees for selling property of the estate are part of the deductible expenses, 13. Receipts or invoices or other evidences to show that the expense was really incurred must duly support the funeral expense.cut here ‘Chapter 4 Deductions from Gross Estate 16 Name: Score: Exercise 4-3 TRUE OR FALSE Write True if the statement is correct, or False if the si incorrect. 1. The amount received by heirs under RA. 4917 is 2 deduction, 2. The share of a surviving spouse is a special deduct 3. Funeral expense is deductible whether paid or unpaid 4. To be deductible, judicial expenses should be incurred dun the settlement of the estate but not beyond the last prescribed by law, or the extension thereof, for the filing of t estate tax return, 5. Where a decedent owns less than all of the property covered by a mortgage, only a proportionate amount is deductibie. rom the 6. All claims against the insolvent person are deductible decedent's gross estate. 7. Casualty losses could be claimed as deduction from the gross income and from the gross estate. 8, Estate tax is deductible from the gross estate to determine the taxable base. ©. Unpaid income taxes incurred before the death of the decedent are deductible from the gross estate. 10. Property tax not accrued before the decedent's death is deductible from the gross estate. 11. No deduction is allowed on the property which is not included in the decedent's gross estate. 12. Expenses primarily incurred by an heir intended to establish his interest in the estate are deductible judicial expenses from the gross estate 13. A vanishing deduction is allowed for property received from donation if it is part of the gross estate.Exercise 44 TRUE OR FALSE Write True if the statement is correct, incorrect or False if the statement iy 1. A vanishing deduction is a special deduction. 18 the 2. In computing vanishing deduction, the value to De lesser amount of the property's value at the date of prewous transfer or the value of the property at the date of dea the decedent. 3. The share of a surviving spouse in the estate shall be deducted equal to % of the gross conjugal property. 4. If the heirs cannot substantiate funeral expense with docume or receipts it can still be allowed as deduction by getting the of the gross estate or P200,000 whichever is lower. 5. In general, funeral expense is deducted first from the exclusive 4 Property of the decedent. 6. The maximum amount of a family home deductible irom the gross estate is P1,000,000. 7. Af the family home is an exclusive property of the surviving , spouse and has a current market value of P1,000,000, such amount is not subject to estate tax. 8. Medical expenses as of the last illness will not form part of the funeral expense. 9. If the amount of medical expenses is P600,000, only P500,000 is deductible from gross estate if the medical expense is unpaid 10. Any amount of medical expenses incurred within one year amounting to P600,000 shall no longer be allowed as deduction from gross estate. i 11, Standard deductions are in leu of actual itemized deductions | from the gross estate 12. standard deduction of P1,000,000 should be substantiated with official receipts to be deductible from gross estates” 13. If the decedent is a nonresident alien, no deduction ‘ction is allowed if the estate tax return docs not include properties sao Philippines. tside thea 0 Chapter 4 Deductions from Gross Estate Name: a Score: Problem 4-5 Multiple Choice (Theory) Encircle the letter that contains 1 the best answer. Which of the following expenses is not allowed to be ded already paid? a. Medical expense. b. Funeral expense, ©. Judicial expense d. Any of the above, Which of the following special deduction is an act Standard b. Medical Family home . Accounts receivable under R.A. 4917 al expense? ue of the decedent's Which of the following items does not require that the said deductible amount should be included as part o! interest reflected in the gross estate? a, Claims against insolvent person b. Receivable under R.A. 4917 c. Claims against the estate d. Accommodation loan Which of the following expenses or losses is not deductible if incurred after death? a. Funeral b., Judicial c. Casualty d. Taxes The following ordinary deductions from the gross estate actually reduce the value of the estate, except Vanishing deduction Funeral expenses Judicial expenses Transfer for public use ‘The excess amount of funeral expense threshold limit of P200,000 is a. Allowed to be deducted as claims against the estate. b. Allowed to be included as part of medical expense. ¢. Not deductible from gross estate to determine the net distributable estate. d. Not deductible from the gross estate to determine the amount of net estate subject to estate tax.164 TRANSFER AND BUSINESS TAXATIgg Ai ¢ b. Actual medical expenses within one year from within the limit of P500,000 ©. Both choice “a” and *b” 4. Judicial expenses supported by a shown issued and signed by the creditor The following requisites are needed for s against the estate, except : cg a. All personal obligations existing at the time o! . death, including medical expenses prior h b. The liability was contacted in good fait r nd full consideration in money or money's wort ¢. The creditor's claim must be enforceable in c 4. The indebtedness was not have been condon: z Which of the following existing loan contract at the ath does not require notarization to be deductible as claims against the estate? Mortgage contract by a friend.at the time when the loan was granted b. Mortgage contract by commercial banks at the time when the loan was granted © Pecedent’s unpaid balance, including interest as of the time of death, certified by the creditor 4, Declaration by the creditor of his capacity of lend at the time when the loan was granted jaigtement 1: Deductions from gross estate are highly dls law; he who claims deductions must be able to justify his against the exclusive portion of the gross esta identified as conjugal. a. Only statement 1 is correct, b. Only statement 2 is correct. ©. Both statements are correct d. Both statements are not correct.age to Chapter 4 Deductions from Gross Estate a! Name: — Problem 4-6 ‘Multiple Choice (Theory) Encircle the letter that contains the best answer 1. The medical expense is not deductible from gross estate decedent is a a. Resident Filipino citizen. b. Nonresident Filipino citizen. c. Resident alien d. Nonresident alien 2. The following are required to be listed as part of the gross estate, bu are exempted from estate tax, except a. Share of surviving spouse b. Transfer for public use. c. Exclusive property of the decedent. d. Amount received by heirs under R.A. 4917. 3. All of the following items are allowed as deduction against a conjugal portion of the estate, except a. unpaid taxes. b. claims against insolvent persons. c. share of surviving spouse. 4. family home. 4, The following it oft b. transfer for public use, . family home. d._ medical expenses. ms are deductible only against the exclusive portion estate, except ‘The following deductions from gross estate are subject to a limited amount, except a. funeral expenses. b. unpaid taxes. c. medical expenses, d. family home. ‘The following deductions from the gross estate are deductible in full, except a. family home. b. transfer for public use. cc. losses. d. judicial expense.166 10. TRANSFER AND BUSINESS TAXATION soscnntoasasnibatd Statement 1: Al deducuble in fall amount tess than 5 more than 200,000 a. Only statement 1 is correct. | b. Only statement 2 is correct. | ¢. Both statements are correct d. Both statements are not correct, Statement 1: Losses incurred on an item of gross estate are deductible from gross estate and could be allowed as ded income of the estate. Statement 2: The deductible loss against the estate must be afer the decedent’s death, but before the final settlement of the estate. 5 fatement 1 is correct. b. Only statement 2 is corre Both statements are correct. d. Both statements are not correct. Which of the following unpaid taxes is allowed as a deduction from | the gross, a. Unpaid income tax on earings prior to b. Estate tax, c._ Unpaid real property tax incurred after death but before payment of estate tax d. Capital gains tax on sale of real property included in the gross estate to defray funeral expense the decedent's death. Which of the following is not allowed with standard deduction? a. The exclusive property of decedent who died single and as a tizen of the Philippines b. The conjugal property of husband and wife for property located within the Philippines i c. The gross estate of nonresident citizen { 4. The gross estate of nonresident alienChapter 4 Deductions from Gross Estate 167 Problem 4-7 Encircle the letter t Score: es Multiple Choice (Theory) that contains the best answer. Amounts received under R.A. 4917 is appropriately classified as Exclusive and ordinary deduction. Conjugal and ordinary deduction, Exclusive and special deduction Conjugal and special deduction. apse Which of the following losses actually incurred should be allowed as deduction from the gross estate? a, Losses from theft occurred a week after the date of death b. Losses from fire that happened after death fully covered with insurance ©. Losses from earthquake which happened a week before date of death 4. Losses that occurred after the distribution of the estate Which of the following deductions will reduce the taxable estate but not the inheritance? a, Funeral expenses b. Family home c. Losses d. Judicial expenses For estate tax computation, which of the following is not included in the determination of the share of surviving wife? a. Funeral expense b. Judicial expenses c. Claims against insolvent person Gd. Transfer of decedent's exclusive property for public use Which of the following statements is not correct about the deductible funeral expenses? mount deductible shall not exceed the actual amount incurred aid. ‘ount deductible must not exceed P200,000. sount deductible must not exceed 5% of gross estate @. The funeral expense must be paid through the contribution of the decedent's relatives. Which ofthe following fs not allowed au deductible funeral expense? Morning apparel of widow and children Expenses of wale belore burial Pat lt donated by brother {Death notces poblished168 10. gross estate 0 lower but not f the gross estate or actual fu: Actual funeral expenses incurred d. 5% of the gross estate or actual funeral expenses whichever is lower. Which of the following is deductible from the conjugal portior gross estate? a. Unpaid mortgage pertaining to property acquir after marriage. b. Losses incurred during administration of the estate on pr included in the gross estate Claim against the exclusive portion of the estate 4. Transfer for public use Casualty losses are deductible from gross esta It Statement: Such loss was incurred during the settle estate fatement: Such loss was incurred not later than the last day for Payment of the estate tax a, Both statements are false. b. 1% statement is false whil ¢, 15 statement is true while 4. Both statements are true. 2nd statement is tru 2nd statement is false Which of the following would prohibit the deductibility of vanishing deduction? a. The property is located in the Philippines. b. The period from preceding decedent to the current decedent is within 5 years, Prior vanishing deduction has been deducted on the same property from the preceding decedent. d. The estate or donor's tax has been paid previously on the propertyChapter 4 Deductions from Gross Estate [ Name: Sees: Problem 4-8 Multips le Choice (Theory) lowing deductions from the gross estate . Medical expense Funeral expense Family home d. Standard deduc 2. This expense is subject to allocation alien. a. Ordinary deduction b. ELITE, c. Transfers for public use dd. Vanishing deduction the de In the computation of vanishing deduction allowed to be deducte of a, Ordinary deduction ITE. c. ELITE and transfer for public use d._ ELITE and share of survi ig spouse 4, The decedent was married and under the conjugal partnership of gains. An obligation of P100,000, incurred during the marriage and secured by a mortgage of exclusive property, is a deduction of a, P100,000 against conjugal property b. P100,000 against exclusive property cc. P50,000 against conjugal property. d. 100,000 against exclusive property, but with a receivable of 50,000 from the surviving spouse. tatement No. 1: A P1,000,000 standard deduction is allowed to be deducted from the gross estate of a citizen or resident decedent. Statement No, 2: The standard deduction could be opted in liew of an itemized allowable deduction from the gross estate. fa. Only statement No. 1 is correct. b. Both statements are correct. . Both statements are incorrect Only statement No. 2 is correct. 6. Which of the following unpaid taxes is not deductible from the gross estate? {() e property taxes accrued prior to decedent's date170 10. b. Income taxes on income earned decedent's death da c. Gift taxes on life time gifts which remains unpaid at date ¢ death 4. Capital gain tax on transfers before death and paid death n of the Which of the following is deductible from the exclusive port gross estate? fa. Vanishing deduction pertaining to property inher! decedent prior to marriage under conjugal property ownership b. Transfer for public use pertaining to joint donation of husba: and wife to the government c. Bad debts for uncollectible claims against insolvent person @. Family home pertaining to house and lot acquired during marriage. Which of the following is allowed as a deduction from the gross estate of a nonresident alien? ‘a. Family home with respect to residential house located in his country. b. Standard deduction of P1,000,000. ¢. Prorated amount of medical expenses incurred 18 months prior to date of death. d. Vanishing deduction with respect to property located in the Philippines which was acquired through gratuitous title 4 years prior to death of present decedent. Mrs. Maria Bermudez, a Filipino, died on May 10, 2015. Her gross estate included a property she received on June 8, 2010 as a gift from her uncle who died on March 10, 2014. In computing the vanishing deduction on the property received as gift, the percentage of deduction to be applied on the gift previously taxed will be: a. 60%. b. 80%. cc. 40%. d. 20%. Which of the following medical expenses will be allowed in full amount as deduction from the gross estate? am9550,000 medical expenses incurred during the last 6 months prior to death. s bp. P300,000 medical expenses incurred 13 months pri ‘and paid a month before the date of death. Prior to death ¢, 400,000 hospitalization expenses incurred and paid uri last one month prior to the date of death. Pald. during the d. All of the above.Chapter 4 Deductions from Gross Estate m Problem 4-9 Short Problems Instruction: unless stated The problems below are independent from eac otherwise. Compute their respective requirement 1 flow much is the deductible funeral expense if the administ failed to present documentary evidences and the gross estate iS 6,000,000? a 2. D, a resident decedent, has a P500,000 collectible from B. an insolvent person. How much is D's deductible claims against insolvent person if B has total assets of P600,000 and total liabilities of P2,400,000? 3. A Filipino citizen received a real property located in Japan with 3,000,000 market value three yeare ago when inherited.I the said Filipino died with funeral expense of P50,000, and the said inheritance has a market value of P5,000,000 at the time of his death, how much is the vanishing deduction? 4, The administrator’ of a nonresident alien decedent reported P10,000,000 properties located in the Philippines. If the total funeral and judicial expenses reported amounted to P500,000 and P200,000, respectively, how much is the allowed deduction for Philippine es: tax purposes? 5. How much is the total amount of special deductions from the gross estate of a nonresident alien decedent with properties located within and outside the Philippines if at the time of his death, he has death benefits receivable under R.A 4917 amounting to P500,000? 6, How much is the amount of claims against the estate if a Filipino decedent has a gross estate of P3,000,000; excess of unpaid funeral expense of P50,000; and mortgage loan of P100,000? 7. How much is the amount of special deduction within if a resident alien that has gross estate within of P3,000,000 and outside the Philippines of P2,000,000, assuming that his gross estate within comprise of family home and he has untraceable medical expense within and outside amounting to P400,000? 8. How much is the deductible transfers for public use if the decedent taxpayer donated P1,000,000 to the Philippine government and 2,000,000 to the foreign government? 9, How much is the deductible loss if the P500,000 property of the decedent was stolen with insurance recovery of P300,000 if the Estate tax has been filed and paid within 8 months after the date of death?172 TRANSFER AND BUSINESS TAXATION Problem 4-10 Deduction Against the Gross Ess The grose eotate of the nonresident alien is F3.000.0%% Philippines, and P2,000,000 located outside the PRINPPS Soostht of LETS Aatursien t» POCOOOL acct aoneers © Government is P100,000. jocated in the nes. The entire lippine ss estate? How much is the allowable deduction against the Philippine &F° omar a P-0- c. 400,000 b. P300,000 d. P500,000 Problem 4-11 Funeral Expense Troehet amount is allowed as ordinary deduction from P3,500) 000 gross. id funeral expense of estate of a resident alien decedent with unpai . £590,000 actual for internment, burial lot, and mourning apparels a. P220,000 c. P175,000 b. P200,000 d. None Problem 4-12 __ Funeral Expense ‘The estate is P3,150,000 after payment of funeral expenses amounting {0 P175, 000. The deductible funeral expense is: a, P157,500. c. P175,000. b. P166,250. d, P200,000. Problem 4-13 Funeral Expenses The conjugal portion of the estate is P2,000,000 and the exclusive portion is P1,000,000, Actual funeral expense is P180,000. How much would be the allowed deductible funeral expenses? a. P150,000 c. P180,000 b. P175,000 d._P200,000 Problem 4-14 Funeral Expense Mr. Estrado, an unmarried resident of the Philippines, died on January 15, 200A leaving real properties in Manila with a fair market value of 1,960,000. Deductions claimed by the administrator of the decedent estate are as follows: Medical expenses during the decedent's sickness aid out of the decedent's cash available at date of death —_P 45,000 Expenses during the wake paid out of the decedent's cash 85,000 Memorial plan already paid 40/000. Claims against insolvent persons eo c00 How a. P9i,500 c. P78,000 b. P83,000 d. P40,000 uch funeral expense is allowed as deduction from the grossChapter 4 Deductions from Gross Estate 173 Problem 4-15 _ Funeral Expense and Claims Against the Estate If five percent (526f of the gross estate is P130,000 and the total amount incurred is P220,000 where P30,000 thereof is still id, Oe oe that can be claimed as deduction from gross estate would be Funeral expense Claims against estate a 220,000 90,000 b 200,000 70,000 © 190,000 40,000 a P130,000 P-o- Problem 4-16 Judicial Expense To defray the expense incurred in connection of the death of the owner, the real property, which is the only item of the estate, was sold. The Broceeds of sale ate PI,780,000, net of capital gains tax and 5% broker's ee. The total deducible judicial expense is: a. P 93,000, ce. P120,000. b. P100,000. d._ P220,000. Problem 4-17 Judicial Expense Yuma Yao, a citizen of the Philippines, died on January 1, 200A leaving properties with a value of P10,000,000 which is under litigation. His executor presented the following judicial expenses to determine the allowed deductible amount: Philippine judicial proceedings ~ May 1, 200A: Agreed contract price of lawyers service 10% of the value of including: the property P 80,000 Court appearances fee 20,000 Excluding: Extra-judicial settlement of the estate 500,000 How much is the amount of deductible judicial expenses if only 30% of the agreed contract price is paid? a, 400,000 ©. P1,500,000 b. 600,000 4. P1,600,000 Problem 4-18 Deductible Loss Past of the grgss estate is a jewelry pawned to a local pawnshop for P48,000. It is the practice of the pawnshop to extend loan at 40% of the far value of the collateral. Prior to the distribution of the estate, the uelry was redeemed from the pawnshop but was snatched along the ‘tay. How much is the deductible loss? a. P19,200 er b. 48,000 4. 168,000