SOLUTIONS MANUAL TRANSFER & BUSINESS TAXATION

2018 Edition By: TABAG & GARCIA

CHAPTER 4 – PROPERTY RELATIONS

PROBLEM SOLVING

P4.3

Decedent died before the effectivity of the TRAIN Law (a)P1,630,487; (b)P4,132,955 (c)P3,696,964;
(d)P321,666 Exclusive Common Total Exclusive properties, Phils. P2,000,000 Conjugal properties, Phils.*
P5,000,000 P7,000,000 ELIT** (867,045) Vanishing Deductions *** (169,513) Transfer for Public Use
**** (200,000) Net Estate P1,630,487 P4,132,955 P5,763,442 Share of the Surviving Spouse
(4,132,955/2) (2,066,478) Net Taxable Estate P3,696,964 1st P2,000,000 P135,000 In excess of
P2,000,000 @ 11% 186,666 ESTATE TAX DUE P321,666 *The problem is silent as to reciprocity, hence,
the gross estate should include tangible and intangible properties within the Philippines. **ELIT: Funeral
expenses P200,000 Judicial expenses 800,000 Claim against the estate 1,725,000 TOTAL ELIT P2,725,000
X 7,000/22,000 ALLOWABLE ELIT P867,045 **VANISHING DEDUCTIONS: Value to take P500,000 1st
Deduction: Mortgage paid - Initial basis P500,000 2nd Deduction: Proportionate deduction (500/7,000) x
(867,045 + 200,000) (76,218) Final Basis P423,782 x Vanishing rate 40% Vanishing Deduction P169,513
**** Since the properties were already classified as exclusive and common, it should be assumed that
the exclusive properties were already inclusive of transfer for public use

P4.4

(Decedent: Resident Alien; Single) (a) Net Taxable estate = P49,500,000; (b)Estate tax due = P2,970,000
House and lot, USA * P20,000,000 Investment in stock, Philippines 8,000,000 Investment in stock, USA
10,000 000 Investment in bonds, USA 7,000,000 Cash in bank, Philippines 3,000,000 Cash on hand,
Philippines 500,000 Accounts receivable (fully uncollectible) 2,000.000 Car, Philippines 8,000,000
Receivable under RA 4917 500,000 Devise to Quezon City for children’s playground** 700,000 Total
Gross Estate P59,700,000 Ordinary Deductions: Funeral expenses PJudicial expenses - Unpaid Philippine
income tax for income in 2017 1,200,000 Loss on December 31, 2018 due to theft 800,000 Devise to
Quezon City for children’s playground 700,000 Accounts receivable (fully uncollectible) *** 2,000,000
(4,700,000)

Special Deductions: Standard deduction (5,000,000) RA 4917 500,000 Medical expenses - Net Taxable
Estate P49,500,000 Estate Tax Due (P49,500,000 x 6%) P2,970,000 * *Family home is not allowed as a
deduction for single decedent **To be deductible, the legacy/devise should be included first in the
decedent’s gross estate ***Assume the debtor is an insolvent person.