SOLUTIONS MANUAL TRANSFER & BUSINESS TAXATION

2018 Edition By: TABAG & GARCIA

CHAPTER 3 – DEDUCTIONS FROM THE GROSS ESTATE

PROBLEM SOLVING

(P3.18)

CASE A – Decedent died prior to effectivity of the TRAIN Law:

Question No. 1

VALUE TO TAKE (LAND) P1,250,000 MORTGAGE PAID (50,000) INITIAL BASIS 1,200,000 Proportionate
Deduction: (1,200/7,800 x P900,000**) (138,462) FINAL BASIS P1,061,538 VANISHING DEDUCTION %
20% VANISHING DEDUCTION P212,308 Correct ELIT + TFPU: =1,200+100-100-600+300=900,000***

Question No. 2

Gross Estate P7,800,000 ELIT (600,000) TFPU (300,000) Vanishing deduction (212,308) Standard
deduction (1,000,000) Family Home (1,000,000) Medical expenses (500,000) Death benefits (RA4917)
(200,000) Net taxable estate P3,987,692

CASE B – Decedent died after the effectivity of the TRAIN Law:

Question No. 1

VALUE TO TAKE (LAND) P1,250,000 MORTGAGE PAID (50,000) INITIAL BASIS 1,200,000 Proportionate
Deduction: (1,200/7,800 x P700,000**) (107,692) FINAL BASIS P1,092,307 VANISHING DEDUCTION %
20% VANISHING DEDUCTION P218,462 Correct ELIT + TFPU: =1,200k+100k-300k-600k+300k
TFPU=P700,000***