TAXATION 2

1. In a transfer in contemplation of death, revocable transfer and transfer under a general power of
appointment, there are rules to observe to determine what amount to include in the gross estate, which is
not a rule to observe?
a. If the transfer was in the nature of a bona fide sale for an adequate and full consideration in money or
money’s worth, no value shall be included in the gross estate.
b. If there was no consideration received on the transfer as in donation inter-vivos, the value to include in
the gross estate shall be the fair market value of the property at the time of transfer.
c. If the consideration received on the transfer was less than adequate and full, the value to include in the
gross estate shall be the excess of the fair market value of the property at the time of decedent’s death
over the consideration received.
d. If there was no consideration received on the transfer as in donation mortis causa, the value to include
in the gross estate shall be the fair market value of the property at the time of the decedent’s death.

2. Proceeds of life insurance where a third person other than the executor, or administrator, or the decedent
is the beneficiary is:
a. Part of gross income whether revocable or irrevocable
b. Not part of gross income whether revocable or irrevocable
c. Part of gross estate whether revocable or irrevocable
d. Not part of gross estate whether revocable or irrevocable

3. The gross estate of A includes P 80,000 receivable which is duly notarized from debtor B whose records
show:
a. Assets P 100,000
b. Indebtedness to:
1. Government by way of taxes P 40,000
2. A P 80,000
3. Other creditors P 20,000

The deductible claims against insolvent person is:

a. 80,000
b. 29,285
c. 48,000
d. 32,000

4. On February 14, 2014, A donated to B a residential land with a fair market value of P 2M. On February 14,
2018, A dies. At the time of A’s death, the residential land has a fair market value of P 3M. As a result, the
estate of A
a. Will include the residential land at P 2M as part of A’s gross estate
b. Will claim a vanishing deduction rate of 40%
c. Will claim a vanishing deduction rate of 20%
d. Cannot claim deduction for property previously taxed
5. Mr. Paul Cruise, was an American citizen residing in the Philippines. He died in the USA when he visited
his son. For Philippine estate tax purposes, the Estate of Paul Cruise would include:
a. All properties wherever situated.
b. All properties situated in USA only.
c. All properties situated in the Philippines only.
d. None of the choices.

6. The administrator of the Estate of Juan Santos claims as deduction from the gross estate a receivable from
a person who absconded. His assertion is that the claims against that person can no longer be collected.
He also explains that for income tax purposes bad debts are deductible from the gross income so the
receivable from a person who absconded shall also be treated in the same manner as in estate tax.
Despite the administrator’s contention the BIR disallowed as deduction the claim against a person who
absconded. Is the BIR correct?
a. Yes, to be allowed as deduction from the gross estate, the claim must be against an insolvent debtor
and that the incapacity of the person must be a fact and not merely alleged.
b. No, not to follow if it to be deducted from the gross estate will be a great injustice because of the fact
that collection is almost impossible.
c. No, all items that are deductible from gross income for income tax purposes are also allowed to be
deducted from the gross estate.
d. Yes, the regulations are not clear and it requires BIR ruling for such claim to be allowed as deduction.

7. The decedent dies on May 31, 2018, the available cash of the estate is insufficient to pay the total estate
tax due. Which of the following is correct?
a. Payment by instalment shall be allowed within 2 years from statutory date for its payment without civil
penalty and interest.
b. Payment by instalment shall be allowed within 2 years from statutory date for its payment subject to
civil penalty and interest.
c. Payment by instalment shall be allowed within 1 year from statutory date for its payment without civil
penalty and interest.
d. Payment by instalment shall not be allowed under the TRAIN.

8. Your client dies on March 15, 2018. The estate’s gross estate is P 10,000,000 which includes car, land,
and shares of stock. The total deductions amounts to P 15,000,000. Which of the following is not required
to be filed?
a. Notice of death
b. Estate tax return
c. Statements certified to by a CPA
d. All of the choices
9. Your client dies on July 14, 2018. You are appointed as administrator. You withdraw from his bank deposit
P 100,000 because the estate needs cash to settle some obligations. What is the consequence of your
withdrawal from the decedent’s bank deposit?
a. Subject to final withholding tax of 6%
b. Subject to creditable withholding tax of 6%
c. Not subject to withholding tax
d. Subject to penalty and interest because such withdrawal is not allowed

10. An unmarried decedent died leaving properties he inherited 4 ½ years ago which had fair market value of P
800,000 at the time of his death (P 650,000 at the time of inheritance, and unpaid mortgage of P 50,000
paid by the present decedent). Other properties in his gross estate had fair market value of P 1,000,000.
The total expenses, losses, indebtedness, taxes and transfer for public purpose amounted to P 300,000.

How much was the vanishing deduction?

a. 500,000
b. 225,000
c. 200,000
d. 100,000

11. Assuming that the inherited property in item number 10 had no unpaid mortgage when received by the
present decedent. It was the present decedent who mortgaged the property for P 50,000 when he already
owned it. He paid the mortgage indebtedness before he died. How much was the vanishing deduction?
a. 508,333
b. 225,000
c. 208,333
d. 108,333

Items 12 and 13 are based on the following:

The decedent is a married man with a surviving spouse with the following data:
Conjugal real properties P 6,000,000
Conjugal family house P 1,000,000
Exclusive family lot P 400,000
Other exclusive properties P 4,500,000
Conjugal ordinary deductions P 1,500,000
Exclusive ordinary deductions P 500,000

12. The taxable net estate is:

a. 9,900,000
b. 3,750,000
c. 3,500,000
d. 1,250,000
13. Using the same data in the preceding number, how much is the estate tax payable?
a. 594,000
b. 225,000
c. 210,000
d. 75,000

14. One of the properties left by a decedent was gutted by fire during the settlement of the estate. The
executor decided to claim the losses in computing income tax of the estate. One of the heirs objected to
the executor since even before deducting the said losses, the taxable income of the estate is already zero.
However, the executor stood his ground and insisted on claiming the losses as deduction in computing
income tax. Which of the following statements is correct?
a. The losses can no longer be deducted in computing the estate tax.
b. The losses can still be claimed as deduction in computing the estate tax since there is no prohibition
against it under the laws, rules and regulations.
c. The losses can still be claimed as deduction in computing the estate tax since there was no tax benefit
resulted in the deduction in the computation of income tax.
d. The losses cannot be claimed as deduction both in the computation of estate tax and income tax since
it occurred during the settlement of the estate.

15. The following properties will be classified uniformly under Conjugal Partnership of Gains and Absolute
Community of Property, except:
a. Property inherited or received as donation during the marriage
b. Property acquired from labor, industry, work or profession of spouses
c. Fruits or income due or derived during the marriage coming from common properties
d. Fruits or income due or derived during the marriage coming from exclusive properties

16 and 17 are based on the following:

Russel, a resident alien, died on November 2, 2018. He left the following properties, expenses and obligations:

Community properties, Philippines (including family P 12,000,000

home valued at P 6,000,000)
Community properties abroad P 4,000,000
Exclusive properties, Philippines P 5,000,000
Actual funeral expense P 300,000
Judicial expenses P 200,000
Medical expenses incurred within one year before P 750,000
death
Claims against the estate P 800,000
Devise to national government P 500,000
Devise to local government P 700,000

16. The net taxable estate shall be:

 a. 400,000
b. 2,700,000
c. 3,200,000
d. 3,400,000

17. The net taxable estate assuming the decedent is a non-resident alien shall be:
a. 8,900,000
b. 9,500,000
c. 4,400,000
d. 3,400,000

18 and 19 are based on the following:

Juan Dela Cruz, married to Susan, died leaving the following:

Car acquired before marriage by Pedro P 300,000

Car acquired before marriage by Susan P 450,000
House and lot acquired during the marriage P 1,500,000
Jewelries of Susan P 100,000
Personal properties inherited by Pedro during P 250,000
marriage
Land inherited by Susan during marriage P 1,000,000
Rental income on land inherited by Susan (25% of P 200,000
which was earned after Juan’s death)
Benefits from SSS P 350,000
Retirement benefits P 480,000
Proceeds of group insurance taken by Juan’s P 175,000
employer

18. How much is the correct gross estate if the property relationship is conjugal partnership of gains?
a. 1,950,000
b. 2,200,000
c. 2,600,000
d. 3,600,000

19. How much is the correct gross estate if the property relationship is absolute community property?
a. 1,950,000
b. 2,200,000
c. 2,600,000
d. 3,600,000

20. Allowable deduction from gross estate of a decedent who died on or after January 1, 2018:
 a. Losses arising from calamities after settlement of the estate
b. Medical expenses
c. Optional standard deductions
d. None of the above

21. Marlon, married on June 5, 2016 died on April 29, 2018 with the following data: Gross estate – conjugal, P
3,000,000; exclusive, P 2,000,000. Said amount includes a land which he received as wedding gift from his
father, valued at P 540,000. His father mortgaged the land for P 20,000 which was paid by Marlon before
his death. He mortgaged again the land for P 50,000 after marriage but was able to pay only P 20,000 until
his death. Losses and indebtedness claimed (excluding the unpaid mortgage) amounted to P 170,000.

The vanishing deduction should be:

a. 399,360
b. 384,000
c. 299,520
d. 288,000

22. The law provides for an extension of payment of estate tax. The period of extension shall not exceed:
a. 5 years in case of judicial settlement, and 2 years in case of extrajudicial settlement.
b. 2 years in case of judicial settlement, and 5 years in case of extrajudicial settlement.
c. 2 years in case of judicial settlement, and 3 years in case of extrajudicial settlement.
d. 3 years in case of judicial settlement, and 2 years in case of extrajudicial settlement.

23. Alex devised in his will a piece of land; naked title to Gringo and usufruct to Bimbo for as long as the latter
lives, thereafter to Gringo. The transmission from Alex to Gringo and Bimbo as well as the merger of the
usufruct and the naked title to Gringo upon death of Bimbo is:

TRANSFER A B C D
From Alex to Taxable Taxable Exempt Exempt
Gringo and Bimbo
From Gringo to Taxable Exempt Taxable Exempt
Bimbo

24. The records pertinent to same properties of a resident citizen, who died on February 14, 2018, reveal the
following information:

  Date Acquired FMV, Date Acquired FMV, February 14, 2018

Land (inherited) February 1, 2017 500,000 700,000
Car (donated) December 25, 2014 300,000 200,000
Jewelry (inherited) January 1, 2013 100,000 150,000
The car donated to the decedent was mortgaged by the donor for P 60,000 which was paid by decedent before
he died. The gross estate of the decedent amounted to P 10,000,000 while total of deductible losses,
indebtedness, taxes, and donation to the Government for public purpose amounted to P 2,000,000.

The vanishing deduction is:

a. 360,000
b. 364,800
c. 380,800
d. 524,800

25. Trump, an American residing in China, died leaving the following properties:
A. Real property in the United States
B. A resort in England
C. Shares of stock in a China Corporation doing business only in China
D. Shares of stock in a China Corporation operating in, and with office at, the Philippines
E. Money market placement with a Philippine Bank
F. Philippine treasury bills
G. Lease contract on his real property in the United States, leased to the Philippine Embassy

Statement 1: His gross estate shall include all the properties.

Statement 2: His gross estate shall include only the properties in the Philippines.
a. Both statements are correct
b. Both statement are wrong
c. Only statement 1 is correct but not statement 2
d. Only statement 1 is wrong but not statement 2

26. Which of the following statements is wrong?

a. The standard deduction is against the total of exclusive and conjugal estate.
b. The retirement benefit under RA 4917 is a deduction from the total of exclusive and community estate
at ½ of its value.
c. If the family home is conjugal property, the deduction for family home is ½ of its value, and from the
gross conjugal estate to arrive at the net conjugal estate.
d. If the family home is community property, the deduction for family home is ½ of its value, and from the
total of exclusive and community estate.

27-33 are based on the following:

Malou Wang, a married Filipino decedent, was under absolute community of properties when she died on
October 15, 2018. Her estate provided the following information:

Real properties inherited before the marriage from her father who died 3 years before
the present decedent's death 500,000
Real property given as a gift by her uncle during the marriage 4 and 1/2 years before 1,
the present decedent's death 500,000
 Land inherited during the marriage from an aunt who died 6 years before the present 10,
decedent's death 000,000
12,
House built on the inherited land using community fund
000,000
Cash income from the real property received as gift
500,000
2,
Real properties received by the surviving spouse before the marriage
000,000
2,
Real properties acquired by the spouses during the marriage
500,000
1,
Personal properties acquired by the spouses during the marriage
000,000
   
The following were being considered as deductions from the gross estate:  
Actual funeral expenses
800,000
Judicial expenses
300,000
1,
Medical expenses
000,000
Obligations incurred before marriage that benefited the community properties
250,000
Claims against an insolvent debtor
70,000
Unpaid mortgage on inherited land
100,000
Loss of car through theft on December 31, 2018 (part of personal properties acquired
by the spouses during marriage 300,000
Unpaid realty tax on real property received as gift from her Uncle
30,000

Additional information:
- The value of the properties at the time of inheritance was P 300,000.
- The value of the real properties received as gift from an uncle was P 1,000,000 at the time of donation.
- The inherited land and the house built on it were certified as the family home of the decedent and her
family by the Barangay Captain in the locality where they were situated.

27. How much was the total exclusive property?

a. 12,000,000
b. 16,000,000
c. 18,000,000
d. None of the choices

28. How much was the total community property?

a. 12,000,000
b. 16,000,000
c. 18,000,000
d. None of the choices
29. How much was the exclusive vanishing deductions?
a. 150,000
b. 175,500
c. 195,000
d. None of the choices

30. How much was the total exclusive deductions?

a. 280,000
b. 325,000
c. 795,500
d. None of the choices

31. How much was the community vanishing deduction?

a. 135,000
b. 175,500
c. 195,000
d. None of the choices

32. How much was the total community deductions?

a. 325,000
b. 755,000
c. 795,500
d. None of the choices

33. How much was the taxable net estate?

a. 5,277,250
b. 5,342,500
c. 5,772,500
d. None of the choices

34-48 are based on the following.

The decedent, resident alien, a married man with a surviving spouse under conjugal partnership of gains, with
the following data died on March 1,2018:

Real properties

Family lot acquired by the decedent

before marriage FMV P 500,000

 Family house built using the salary earned

by the surviving spouse during the marriage, FMV P 900,000

Coconut farm inherited by the surviving spouse

during the marriage, FMV P 100,000

Mango orchard, FMV P 800,000

Personal properties

Bank deposit under the name of the decedent

Representing salary earned before marriage P 2,150,000

Gold necklace inherited by the surviving spouse

during the marriage P 120,000

Several pieces of jewelry acquired during the marriage

using the exclusive money of the decedent P 300,000

The following expenses/deductions are claimed:

Funeral expenses (40% shouldered by relatives) P 100,000

Judicial expenses (including P 50,000 lawyer’s fee

incurred on September 5,2018 P 120,000

A piece of jewelry lost through theft on August 15,2018 P 50,000

Gambling debts of the decedent P 70,000

Unpaid realty tax (coconut farm) for the three (3)

quarters of 2018 P 150,000

Claims against an insolvent debtor (25% can be

collected) P 80,000

Medical expenses P 600,000

34. How much is the conjugal properties?

a. P 1,780,000 c. P 900,000
b. P 1,700,000 d. None of the choices

35. How much is the exclusive properties?

a. P 7,950,000 c. P 2,650,000
b. P 7,450,000 d. None of the choices
36. How much is the family home deduction?
a. P 1,000,000 c. P 700,000
b. P 950,000 . d. None of the choices

37. How much is the total ordinary deductions (excluding share of surviving spouse)?
a. P 460,000 c. P 180,000
b. P 310,000 d. None of the choices

38. How much is the taxable net estate?

a. P 2,740,000 c. P 2,110,000
b. P 2,240,000 d. None of the choices

39-43 are based on the following. The decedent was under the system of absolute community or property. He
died on January 15,2018 leaving certain properties. The executor of the estate also claimed certain
deductions. The following data are presented to you:

Land and house acquired during the marriage, used

as family home P 3,000,000

Clothes of the decedent purchased with exclusive

money P 500,000

Car inherited during the marriage six years before the

decedent died P 1,500,000

Memorial plan procured using the surviving spouse’s

salaries earned during the marriage P 2,000,000

Other real property (date acquired unknown)

Other personal property (acquired by surviving spouse

Before marriage) P 1,000,000

Medical expenses (60% upaid) P 600,000

Other funeral expenses P 100,000

Family home razed by fire six months after death

(80% of the value compensated by insurance) P 3,000,000

Judicial expenses (including P 50,000 lawyer’s fee

incurred on July 31,2018) P 350,000

Claims against an insolvent debtor (debtor-asset/debt

 Ratio is P1:2) P 100,000

Unpaid real estate taxes for second, third and fourth

quarters of 2018 P 150,000

Claims against the exclusive estate of the decedent P 200,000

Unpaid mortgage on car P 250,000

39. How much was the total community property?

a. P 6,250,000 c. P 6,000,000
b. P 6,100,000 d. None of the choices

40. How much was the exclusive property?

a. P 2,150,000 c. P 1,500,000
b. P 2,000,000 d. None of the choices

41. How much were total community deductions excluding the share of the surviving spouse?
a. P 1,550,000 c. P 800,000
b. P 1,500,000 d. None of the choices

42. How much was the exclusive deductions?

a. P 600,000 c. P 250,000
b. P 450,000 d. None of the choices

43. How much was the taxable net estate?

a. P 2,225,000 c. (P 2,475,000)
b. P 1,675,000 d. None of the choices

An unmarried non-resident alien, died inestate on November 2,2018. The following data were provided by his
estate:

House and lot, USA (family home) P 2,000,000

Investment in stock, Philippines P 800,000

Investment in stock, USA P 1,000,000

Investment in bonds, USA (85% of the business of

the USA corporation in the Philippines) P 700,000

Cash in bank, Philippines P 300,000

Cash on hand, Philippines P 50,000

Accounts receivable from a debtor who resides

in USA (fully uncollectible) P 200,000

Car, Philippines P 800,000

Actual funeral expense P 150,000

Judicial expenses P 300,000

Unpaid Philippines income tax for income in 2017 P 120,000

Loss on December 31, 2018 due to theft of cash on hand P 10,000

Loss on sale of a portion of investment in stock, Philippines P 20,000

Devise to Quezon City for children’s playground P 70,000

Medical expenses P 500,000

44. How much was the Philippine gross estate?

a. P 2,850,000 c. P 1,950,000
b. P 2,650,000 d. None of the choices

45. How much was the total deductions from the Philippine gross estate?
a. P 700,000 c. P 128,889
b. P 628,889 d. None of the choices

46. How much was the net taxable estate in the Philippines?
a. P 2,521,111 c. P 128,889
b. P 2,325,192 d. None of the choices

47. How much was the estate tax payable in the Philippine?
a. P 151,267 c. P 121,267
b. P 139,512 d. None of the choices