CHAPTER 3

3-1. DISCUSSION QUESTIONS / PROBLEMS

1. January 5, 2005 or ten years after his disappearance.
2. On January 5, 2005, the same date that he was presumed to be dead.
3.

3. a. Nonresident alien ( with reciprocity)

House and lot, Manila P2,000,000
b. Nonresident alien (no reciprocity)
House and lot, Manila P2,000,000
Shares of stock, Philippine corporation 125,000
Shares of stock, Hongkong Corporation with business situs 175,000
Accounts receivable, Philippine debtor 60,000
Proceeds of revocable life insurance 150,000
Savings deposit, Manila Bank 45,000
Gross estate P2,555,000
4. a. Nonresident alien (with reciprocity)
No gross estate shall be subject to tax because all properties are intangible personal within the
Philippines. Only real properties and tangible personal properties within are included in the gross
estate of a nonresident alien (with reciprocity) decedent.

b. Nonresident alien (no reciprocity)

Shares of stock, Po Lu Tan Corporation P 225,000
Bonds, Tsi Tsa Company 60,000
Franchise, Philippines 200,000
Gross estate 485,000

3-2. DISCUSSION QUESTIONS / PROBLEMS

1. No. Since the account is opened under "and/or signatures" the presumption is that the bank deposits are
jointly owned by the spouses. This rule holds whether the conjugal partnership of gains or absolute
community of property regime governs the spouses.
2. a. The amount includible in the estate is the salary from September 1 to 15 minus the five- day cash advance.
b. Included because the rent income for August had already accrued before the death.
c. The interest is already included although it has not yet been withdrawn.
d. Not included because the decedent died before the date of record.
e. Included, but limited to his interest in the co-ownership.
f. Included. He had already inherited the property even if he did not take possession because his uncle had
predeceased him.
g. The proceeds are included in the gross estate because the designation of the beneficiary is revocable.
3. a. Yes, the salary had already accrued to Cathay. Considerably, this is already part of her gross estate.
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 b. The P5,000 benefit is includible in her gross estate because Cathay complied with the condition set by the
employer.
4. a. This is a case of a transfer in contemplation of death because (1) it was the thought of date that induced
Mat Sr. to donate the property, and (2) of the stipulation that Mat Takutin shall retain possession or
enjoyment to the property until his death. Hence, the transfer is subject to estate tax.
b. Even if the transfer of possession and enjoyment had already been made, it is still a case of a transfer in
contemplation of death. Therefore, subject to estate tax.
5. a. Yes. In a revocable transfer, it is not necessary that the donor should exercise his reserved right to alter,
amend, revoke or terminate the transfer. What is important is that he had made such reservation which
can be exercised anytime he wanted to.
b. It does not change the nature of the transfer. Whether the decedent has exercised the power of
revocation or not, it shall always be a part of his estate.
6. a. Yes, because it is a case of a revocable transfer. In a life insurance, if the designation of the
beneficiary is revocable, the proceeds thereof shall be part of the gross estate.
b. The proceeds shall be excluded from the gross estate because the designation of the wife as beneficiary
is irrevocable, provided that she is neither appointed as executor or administrator.
7. This is a case of a special power of appointment because Bakling, the trustee, cannot choose the person
whom he wants to succeed to the property. His power is restricted because the appointment is limited only to
his children. Therefore, the property shall not form part of his gross estate.

8. a. Special power of appointment. Baldomero is disqualified to appoint his creditor.

b. General power of appointment. There is no restriction on whomsoever he wants to appoint as his
heir.
c. Special power of appointment. He is allowed only to appoint somebody from among the descendants
of Alacamo.
d. Special power of appointment up to 40% because he is allowed only to appoint his estate up to that
extent. General power of appointment on the balance of 60% because there is no restriction on
whomsoever he wants to designate as heir.
9. I will advise him that he should provide in his will the limitation on the persons to be appointed by Maatik as
his heirs thereby making it a special power of appointment. In which case, the transfer of the property from
Maatik to his family will not be subject to estate tax.
10. Case 1 Case 2 Case 3
a) FMV, time of transfer P 950,000 P 950,000 P 950,000
b) Consideration received -0- 950,000 800,000
c) FMV, time of death 1,000,000 1,000,000 1,000,000
Amount to be included in the Gross Estate P1,000,000 None P 200,000

Note: In Case 2, no amount is to be included in the gross estate because the property transferred for a full and
adequate consideration.
11. a. The amount to be included in the gross estate of Sigurista is P450,000 (P750,000 - 300,000).
b. If the sale is discovered to be fictitious, the entire amount of P750,000 is to be included in the gross
estate of Sigurista because there was actually no payment made to her at the time of sale.

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12. The action filed by Curiadora against Atacador will prosper. The donation made by Bonador in favor of
Atacador is a donation mortis causa due to a reservation of rights over the property in favor of Bonador.
Thus, the donation made during lifetime did not prosper. There is also no donation mortis causa because in
order to be effective, it must have been provided in the will of Bonador that the property is being donated
mortis to Atacador.

13. a. The proceeds of life insurance shall only be excluded from the gross estate if the irrevocably designated
beneficiary in the policy is not the estate of the deceased, his executor or administrator.
These requisites are not satisfied. Therefore, the proceeds shall be part of the gross estate of
Bokdoy.
b. Even if the designation is irrevocable since the beneficiary named in the policy is his estate, the proceeds
shall form part of the gross estate of Bokdoy.
c. Since the problem does not clearly specify, it is presumed that Oyang is neither the executor nor the
administrator. However, if the designation is revocable the proceeds of the life insurance policy shall
still be part of the gross estate, subject to estate tax.
It is shall only be exempt if (1) Oyang, the beneficiary, is not the estate, the executor or the
administrator and (2) his designation as the beneficiary is irrevocable.

14. Family home 1,450,000

Car 525,000
Jewelries 60,000
Shares of stocks, Malakas Corp. 78,000
Proceeds of life insurance payable to estate 350,000
Land (P450,000 – 150,000) 300,000
Motorbike 40,000
Apartment 3,000,000
Gross estate 5,803,000

Notes:
1. The condominium unit is under special power of appointment because of the restriction on the privilege
of Mando to choose his heirs.
2. The motorbike is presumed to be transferred in contemplation of death because the date of sale and the
date of death were relatively close.
3. The resthouse in Tagaytay is revocably transferred to him by his friend. Therefore, it should be a
donation mortis causa to him. Considering that he was not named in the will, Mando is not the proper
heir to the property.
4. The donation of the apartment was a revocable transfer. Hence, its value should be included in his gross
estate.

EXERCISE 3-3.

For purposes of the corporation, there being no change in ownership of the

questioned shares in its stock and transfer book, the rightful owner of the dividends would
be the estate of the deceased Antero.

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 The corporation is bound, in so far as ownership of its shares is concerned, by its
stock and transfer book, and as far as the questioned shares are concerned, their owner is
still Antero, and it is therefore to his estate that the dividends should be paid.
Neither Banayo nor Corona would be entitled to the dividends.