Far Eastern University Estate Taxation Guide

FAR EASTERN UNIVERSITY - MAKATI
Tax 2 – Law on Transfer and Business Taxation Francis Manabat Javier, CPA, LL.B.
Estate Taxation – Exercises Accountancy
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ESTATE TAXATION
EXERCISES / PROBLEMS
A. State the amount of allowable deductions from the gross estate in each of the following:
______________ 1. Gross estate of P175,000 and funeral expanses of P15,000.
______________ 2. Gross estate of P3,000,000 and actual funeral expenses of P90,000, ¼ of which was
paid by friends.
______________ 3. Receivable of P75,000 from an insolvent debtor whose ratio of assets to liabilities
is 1:4
______________ 4. Hospitalization expenses until death: P3,000,000, 50% incurred 1 year prior to
death but only ½ of which is supported by receipts.
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______________ 5. Expenses for the probate of a will including P10,000 facilitation fee for a court
personnel, P100,000; amount paid to broker to convert some property in the estate
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to cash as authorized by the court P50,000.
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______________ 6. P75,000 indebtedness wit interest at 20% per annum contracted 3 months before
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death, not notarized and a deed of mortgage P200,000, contracted 6 months before
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death at 24% p.a.
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______________ 7. P100,000 notes payable notarized earning 18% p.a. dated September 30, 1998.
Decedent died March 15, 1999.
______________ 8. A conjugal family house with FMV of P900,000 and exclusive family lot worth
P500,000 owned by the decedent.
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______________ 9. Loss by fire of building worth P1M five months after decedent’s death, 75%
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compensated by insurance. Estate was settled in the 6th month.

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______________ 10. Funeral expenses of NRA decedent in the Philippines P85,000; gross estate worth
P2,000,000; 40% were from the Philippines.
______________ 11. Transfer for public purposes made inter-vivos, P1M.
______________ 12. A land worth P1,000,000 when inherited 3 ½ years ago by the decedent from his
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father, mortgage for P200,000, 60% of which was paid by the decedent before he
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died. FMV of land upon death P1,500,000. Gross estate is P8,000,000 and
deductions reached P750,000, 40% of which represents ELIT and TPP.
______________ 13. Loss of Car by theft, occurring 7 months after the decedent’s death, value of Car
P300,000, 60% to be paid by insurance.
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______________ 14. Transfer for public purposes donated by the decedent to Manila City Hall (shown in
the will) P200,000.
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______________ 15. Unpaid mortgage of P200,000 on a P1,100,000 house shown in the gross estate net
of the P200,000 mortgaged,
16. The decedent’s administrator claims the following funeral expanses:

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Expenses of Internment P40,000

Cost of burial plot (½ paid by friends & relatives) 20,000
Fees for performance of rites incident to internment 10,000
Mourning clothing of widow and unmarried minor children 5,000
Expenses during the wake before burial (25% paid by uncle) 20,000
Obituary Notice 3,000
Card of Thanks 2,000
The allowable funeral expenses assuming the decedent’s gross estate is:
a. P500,000 b. P1,500,000
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B. Determine whether the following properties are Conjugal/Community or Exclusive
AC CPG
1. Property acquired before marriage ___ ____
2. Property acquired during marriage
a. By onerous title ___ ____
b. By gratuitous title ___ ____
3. Income from 2-a earned during marriage ___ ____
4. Income from 2-b earned during marriage ___ ____
5. Other income of the couple earned during marriage ___ ____
6. Property acquired during marriage thru:
Exchange: Using exclusive property ___ ____
Using common property ___ ____
7. Jewelry acquired during marriage:
a. Using exclusive funds ___ ____
b. Using common funds ___ ____
8. Property for personal and exclusive use by either:
Husband or wife ___ ____
C. Determine whether the following are Exclusive or Conjugal/Community deductions.
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Exclusive Conjugal/
Community
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1. Funeral Expenses ________ __________
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2. Judicial Expenses ________ __________
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3. Loss of Exclusive property rs e ________ __________
4. Loss of Conjugal/Community property ________ __________
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5. Claims against exclusive estate ________ __________
6. Claims against Conjugal/Community estate ________ __________
7. Unpaid Tax on exclusive property ________ __________
8. Unpaid Tax on Conjugal/Community property ________ __________
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9. Unpaid mortgage on exclusive property ________ __________

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10. Unpaid mortgage on Conjugal/Community property ________ __________

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11. Claims against an exclusive insolvent debtor ________ __________

12. Claims against a Conjugal/Community insolvent debtor ________ __________
13. Transfer for public use ________ __________
14. Transfer for social welfare, charitable or cultural inst. ________ __________
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15. Vanishing deductions (conjugal partnership of gains) ________ __________

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16. Vanishing deduction of property inherited before the

Marriage (ACP) ________ __________
17. Vanishing deduction of property inherited during the
Marriage (ACP) ________ __________
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18. Family Home – Exclusive property ________ __________

19. Family Home – Conjugal/Community property ________ __________
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20. Medical Expenses ________ __________

21. Standard Deduction ________ __________
22. Amount received by heirs under R.A. 4917 ________ __________
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D. Multiple Choice
1. It refers to a mode of transferring and acquiring properties left by the decedent.

a. Estate Transfer c. Donation
b. Succession d. Execution of a will
2. The property, rights and obligations of a person which are not extinguished by death and those
which have accrued thereto since the opening of succession.
a. Inheritance c. Estate
b. Capital d. Devise
3. The estate tax accrues from the moment of:
a. The fixing of notice of death c. The death of the decedent
b. Expiration of a month after death d. The filing of state tax return.
4. The gift tax paid on a donation mortis causa: if any:

a. Exempts the property from estate tax
b. Has no effect since the gift will still be subject to another gift tax
c. Shall form as a tax credit to be deducted from estate tax due
d. Is invalid and the tax will not be credited at all.
5. Which shall not form part of the gross estate of a decedent:

a. Intangible personal property of a non-resident client without reciprocity law
b. Revocable transfer
c. Transfer under special power of appointment
d. Life insurance proceeds where the executor is the beneficiary and it is irrevocable.
6. A person who inherits a personal property thru a will:

a. Devisee b. Legatee c. Heir d. Successor
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7. All of the following are considered intangible personal properties situated in the Philippines, except:
a. Franchise which must be exercised in the Philippines;
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b. Share, obligations or bonds issued by any corporation or sociedad anonima organized or
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constituted in the Philippines in accordance with it laws;
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c. Shares, obligations or bonds issued by any foreign corporation if such shares, obligations
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or bonds have acquired a business situs in the Philippines;
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d. Shares or rights in any partnership, business or industry established in the Philippines.
8. A person who inherits a personal property thru a will:

a. Devisee b. Legatee c. Heir d. Successor
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9. Succession wherein the decedent did not leave any will:

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a. Voluntary succession c. Mixed succession

b. Legal succession d. Testamentary succession
10. Which statement is false about succession:

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a. The successor inherits all the transmissible properties of a decedent including his
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liabilities;
b. The successor can be made liable for the obligations of the decedent beyond the value of
assets he received. Persons under 18 years old cannot make a will.
c. In succession, fruits and credits maturing after the death of the decedent pass to the heirs
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even if they were not subjected to estate tax.

d. In succession, the successor can refuse the inheritance.
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11. One of the following statement is false:

a. Estate tax is an excise tax
b. Estate tax is a transfer tax on donation mortis causa
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c. The object of estate tax is to tax the property transferred from the dead to the living
d. Estate tax is synonymous to inheritance tax.
12. Which statement is wrong:

a. Claims against insolvent person should be included in the gross estate even if
uncollectible;
b. Transfer passing under special power of appointment is excluded from the gross estate;
c. Revocable transfers are includible whether or not the right to revoke is exercised.
d. Transfer in contemplation of death for adequate consideration is still includible in the
gross estate.
13. Which statement is incorrect about funeral expenses
a. The amount allowed is 5% of the gross estate or the actual expenses whichever is lower;
b. The actual funeral expenses must be paid from the estate or chargeable to it;
c. The allowed deduction can never be more than the actual expenses paid;
d. The expenses necessary for burial even if paid by friends are also allowed as deduction.
14. Which statement is incorrect about claims against insolvent persons;

a. They must be included in the gross estate even if uncollectible;
b. They must be duly notarized;
c. The deduction is only the uncollectible portion;
d. The insolvency of the debtor must be established.
15. Which statement is false about vanishing deduction:

a. It pertain to a property presently found in the gross estate;
b. The property must be previously subjected o a transfer tax or income tax;
c. The property was received by the decedent within 5 years prior to his death;
d. The property must be located in the Philippines.
16. A donation inter-vivos but due to thought of death is:
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a. Subject to donor’s tax;
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b. Subject to estate tax if for inadequate consideration;
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c. Subject to estate tax if a bonafide transfer;
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d. Subject to inheritance tax.
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17. In filing the estate tax return, a CPA Certified return is required when:
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a. Gross estate exceeds P2,000,000
b. Gross estate reaches P20,000
c. Gross estate exceeds P200,000
d. Gross estate reaches P2,000,000
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18. Captain Barbel died leaving house and a lot to darna on March 31, 2000 which was questioned
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by Barby. It is under litigation but the parties have started an extra-judicial settlement. The last
day for filing the estate tax return is:
a. April 30, 2001 c. September 30, 2000
b. April 30, 2003 d. October 30, 2000
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19. The last day for the payment of estate tax if extended, shall be:
a. March 21, 2002 c. September 30, 2005
b. September 30, 2002 d. April 30, 2002
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20. The taxpayer in the estate is:

a. The decedent c. The heirs or successors
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b. The deceased person’s estate d. The administrator or executor
21. The payment of estate tax is a personal liability of:

a. The heirs or successors
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b. The administrator in testamentary succession

c. The executor in voluntary succession
d. The estate itself
22. 1st Statement – The court may authorize the distribution of estate, to an heir if in it sound
discretion it believes that the heir badly needs his share.
2nd Statement – The administrator or any of the heirs, may however upon authorization of BIR withdraw
from the decedent’s bank P10,000 without the required certification that the estate has been paid.
a. True; True c. True; False
b. False; False d. False; True
23. 1st Statement – A died giving B power to appoint a person who will inherit A’s house and lot. B
however can only choose among C, D, E and F. B decided to transfer the property to C, in B’s
will when he was old already. The transfer from B to C is subject to estate tax.
2nd Statement – During A’s lifetime, he decided to give to B as gift his car subject to the
condition that if B does not become CPA within three years. A shall revoke the transfer. In the
second year however, A died. The car can no longer form part of A’s gross estate.
24. A died leaving a farm land. In his will, he transferred the ownership thereof to B but subject to
the condition that C will have the right to use the land for a period of 10 years (usufruct). In the
seventh year, however, C died and C’s will be surrendered his right over the land to B.
a. The transfer is subject to Donor’s tax
b. The transfer is subject to Estate Tax
c. The transfer is both an inclusion from the gross estate
d. The above is a tax exempt transfer.
25. The notice of death must be filed when:

a. Gross estate exceeds P200,000
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b. Gross estate exceeds P20,000
c. Gross estate reaches P200,000
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d. Gross estate reaches P2,000,000
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26. One of the following is not an exemption or exclusion from the gross estate:
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a. Capital or exclusive property of the surviving spouse
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b. Properties outside the Philippines of a non-resident Chinese decedent
c. Shares of stock of San Miguel Corporation of a non-resident Mexican
d. The merger of usufruct in the owner of naked title.
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A decedent left the following properties:

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Land in Italy (with 1M unpaid mortgage) P2,000,000

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Land in Davao City Philippines 500,000

Franchise in USA 100,000
Receivable from debtors – Philippines 50,000
Receivable from debtors – USA 100,000
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Bank deposit – Philippines 20,000

Bank deposit – USA
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80,000
Shares of Stock – PLDT 75,000
Shares of stock – ABC – Foreign corporation 75% of the
Business in the Philippines 125,000
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Other personal properties 300,000

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The Zonal value of the Land in Davao City is P750,000
27. If the decedent is a non-resident citizen his gross estate is:

a. P3,650,000 c. P2,500,000
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b. P3,600,000 d. P2,650,000
28. If the decedent is a non-resident alien his gross estate is:

a. P1,195,000 c. P1,320,000
b. P945,000 d. P1,070,000
29. If in the preceding number, reciprocity law can be applied the gross estate is:
a. P1,050,000 c. P1,250,000
b. P1,195,000 d. P1,070,000
30. Based on the original problem but assuming the SMART shares of stock are not listed in the
Local Stock Exchange, and there are 1,000 shares at the time of death, the company’s
outstanding shares were 10,000 shares. Its Retained Earnings was P50/share. The gross estate
should show the said shares at:
a. P75,000 c. P200,000
b. P250,000 d. P 0
31. 1st Statement – A note payable contracted 11 years ago is a deduction from the gross estate if
notarize.
2nd Statement – A note receivable against an insolvent person contracted by the decedent before
his death must be included in the gross estate in full even if only 50% is collectible.
32. 1st Statement – Unpaid mortgage indebtedness is deductible from the gross estate provided the
said property subject to the indebtedness is included in the gross estate net of the mortgage
indebtedness.
2nd Statement – A donation inter-vivos by the decedent to the Philippine government few months
before his death is a deduction from the gross estate.
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33. Mr. Bonifacio, administrator claims the following funeral expenses for a decedent:
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Expenses for Internment (paid by friend)
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Cost of burial lot and tombstone – ½ paid by relatives 42,000
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Other funeral parlor 36,000
Expenses during the wake:
Before burial 13,000
Obituary notice 7,500
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Card of thanks 3,500

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Mourning clothing of friends 15,000

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Mourning clothing of immediate family members 5,000

If the gross estate is P1,500,000, the allowable deduction for funeral expenses is:
a. P75,000 c. P174,500
b. P82,500 d. P93,500
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34. Based on the number 33 but the gross estate is P2,500,000 the allowable funeral expenses is:
a. P75,000 c. P125,000
b. P82,500 d. P93,500
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35. Mr. Nagulat died on March 20, 2000 leaving a gross estate of P8,000,000 including a land inherited from
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his uncle on October 15, 1996 and a car donated to him on April 20, 1994. The following data pertain to
the two.
Unpaid Mortgage FMV upon receipts FMV upon death
Land P100,000 P1,800,000 P1,250,000
Car 50,000 300,000 400,000
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The decedent was able to pay ½ of the unpaid mortgage on the land before his death. The deductions are:
Expenses, Losses, Indebtedness, Taxes (excluding the unpaid mortgage above but including
actual funeral expenses of P300,000 and medical expenses of P600,000) P1,200,000.
Transfer in favor of Government P 300,000
Transfer for charitable institution 100,000
Family Home – Included above 2,000,000
The allowable vanishing deduction is:
a. P213,000 c. P426,000
b. P462,000 d. P440,625
36. Mr. Nadapa, single, died on January 15, 2015, leaving the following properties and obligations:
Cash in Bank – 50% donated mortis causa to Makati City Gov’t P 300,000
House and Lot – Makati 1,500,000
Personal Properties 1,500,000
Farm Lot 825,000
Claims Against an Insolvent Debtor 225,000
Transfer in Contemplation of Death – Gratuitous 1,500,000
Transfer passing Special Power of Appointment 75,000
Deductions Claimed:
Funeral Expenses 575,000
Judicial Expenses 67,500
Donation Mortis Causa – Quezon City Government 150,000
Unpaid Mortgage – Farm Lot 75,000
Medical Expenses – Included in the Funeral Expenses 225,000
The farm lot was inherited 5 and ½ years ago by the decedent before his death with the value
then of P575,000 and a mortgage indebtedness of P150,000.
The total deduction from the gross estate is:
a. P1,867,500 c. P2,092,500
b. P867,500 d. P3,092,500
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37. Based on the preceding number, the taxable net estate is:
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a. P3,982,500 c. P2,757,500
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b. P4,982,500 d. P4,757,500
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38. Mr. Palito, Filipino died on April 10, 2015 with the following data:
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Gross Estate Deductions Estate Tax Paid
Philippines P375,000 P 75,000 P 0
USA 300,000 150,000 3,750
Canada 450,000 525,000 0
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Alaska 600,000 225,000 18,000

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The estate tax due after tax credit is:

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a. P13,500 c. P14,000
b. P9,000 d. P13,250
39. Mr. Kawazaki, non-resident Japanese, died leaving behind the following:
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Exclusive Properties – Philippines P 560,000

Conjugal Properties – Philippines
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420,000
Conjugal Properties – Abroad 1,820,000
Funeral Expenses 100,000
Judicial Expense 100,500
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Claims against the estate 150,500

Losses - 3 Months after the death due to theft 120,000
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Donation Mortis Causa – Makati City Hall 180,000

Family Home – Included above 500,000
The taxable net estate is:
a. P210,000 b. P516,500 c. P1,190,000 d. P2,100,000
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40. Mr. Juan, Filipino, married. Died leaving the following properties:
Car acquired before marriage by Mr. Juan P 300,000
Car acquired before marriage by Mrs. Juan 450,000
House and Lot acquired during the marriage 1,500,000
Jewelries of Mrs. Juan 100,000
Personal Properties inherited by Mr. Juan during marriage 250,000
Benefits from SSS 50,000
Land inherited by the surviving spouse during the marriage 1,000,000
Income earned from the land inherited by the wife 200,000
The gross estate under the Conjugal Partnership of Gains is:
a. P2,600,000 b. P3,600,000 c. P1,950,000 d. P2,350,000
41. Assuming the same fact in Number 40, except that the decedent’s property regime during his
marriage was the Absolute Community of Property. The gross estate would be:
a. P2,600,000 b. P3,600,000 c. P1,950,000 d. P2,350,000
42. Mr. Alatiris died intestate on September 30,2015. He is survived by his wife. An inventory of the
estate showed the following:
FMV – Tax declaration Zonal Value
Exclusive Estate
Commercial Land - 700 sq. mtrs. P 750,000 P 900/sq. mtr.
Residential Land – 900 sq. mtrs. 580,000 1,000/sq. mtrs.
Conjugal Estate
Farm Lot – 800sq. mtrs. 1,500,000 700/sq. mtrs.
Residential House 750,000
Car – Toyota 200,000
Other Property 280,000
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On January 1, 2015, the commercial land was mortgage with the Banco De Oro for P200,000 at
24% interest per annum. The residential house (certified family home) is likewise mortgage with
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an unpaid balance of P180,000 as of the time of death. The 900 square meters residential lot is
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the family home’s lot. Actual funeral expenses amounted to P250,000 but ½ of which is non-
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deductible. Medical expenses reached P600,000 but only ¾ of which was incurred within one
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year prior to the decedent’s death, Judicial expenses reached an amount of P150,000. The
decedent’s net estate is
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a. P101,500 b. P826,500 c. P1,076,500 d. P956,500
43. Mr. Yoso, married under the regime of Absolute Community of Property. Survived by his wife
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left behind the following properties and charges upon his estate:
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Real property acquired during the marriage P3,000,000

Family Home – Built using community fund 1,000,000
Real property received as a gift during the marriage 2,000,000
Lot – Where family home was built inherited during marriage 400,000
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Funeral expenses 300,000

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Taxes and licenses 1,300,000

Medical expenses 1,000,000
The allowed family home deduction is:

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a. P1,000,000 b. P900,000 c. P1,400,000 d. P700,000

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44. The deduction of share of surviving spouse is:

a. P2,500,000 b. P4,000,000 c. P1,250,000 d. P1,500,000
45. The net taxable estate in the above problems is:

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a. P1,250,000 b. P1,500,000 c. P2,500,000 d. P4,000,000
46. The estate tax to be paid by Mr. Yoso’s estate is:

a. P75,000 b. P95,000 c. P190,000 d. P355,000
47. The total deductions from the gross estate is:

a. P b. P c. P d. P
*END*
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FAR EASTERN UNIVERSITY - MAKATI

compensated by insurance. Estate was settled in the 6th month.

16. The decedent’s administrator claims the following funeral expanses:

Expenses of Internment P40,000

C. Determine whether the following are Exclusive or Conjugal/Community deductions.

9. Unpaid mortgage on exclusive property ________ __________

10. Unpaid mortgage on Conjugal/Community property ________ __________

11. Claims against an exclusive insolvent debtor ________ __________

15. Vanishing deductions (conjugal partnership of gains) ________ __________

16. Vanishing deduction of property inherited before the

18. Family Home – Exclusive property ________ __________

20. Medical Expenses ________ __________

1. It refers to a mode of transferring and acquiring properties left by the decedent.

4. The gift tax paid on a donation mortis causa: if any:

5. Which shall not form part of the gross estate of a decedent:

6. A person who inherits a personal property thru a will:

8. A person who inherits a personal property thru a will:

9. Succession wherein the decedent did not leave any will:

a. Voluntary succession c. Mixed succession

10. Which statement is false about succession:

even if they were not subjected to estate tax.

11. One of the following statement is false:

12. Which statement is wrong:

14. Which statement is incorrect about claims against insolvent persons;

15. Which statement is false about vanishing deduction:

16. A donation inter-vivos but due to thought of death is:

20. The taxpayer in the estate is:

b. The deceased person’s estate d. The administrator or executor

21. The payment of estate tax is a personal liability of:

b. The administrator in testamentary succession

25. The notice of death must be filed when:

A decedent left the following properties:

Land in Italy (with 1M unpaid mortgage) P2,000,000

Land in Davao City Philippines 500,000

Bank deposit – Philippines 20,000

Other personal properties 300,000

The Zonal value of the Land in Davao City is P750,000

27. If the decedent is a non-resident citizen his gross estate is:

28. If the decedent is a non-resident alien his gross estate is:

Card of thanks 3,500

Mourning clothing of friends 15,000

Mourning clothing of immediate family members 5,000

Alaska 600,000 225,000 18,000

The estate tax due after tax credit is:

Exclusive Properties – Philippines P 560,000

Claims against the estate 150,500

Donation Mortis Causa – Makati City Hall 180,000

Real property acquired during the marriage P3,000,000

Funeral expenses 300,000

Taxes and licenses 1,300,000

The allowed family home deduction is:

a. P1,000,000 b. P900,000 c. P1,400,000 d. P700,000

44. The deduction of share of surviving spouse is:

45. The net taxable estate in the above problems is:

a. P1,250,000 b. P1,500,000 c. P2,500,000 d. P4,000,000

46. The estate tax to be paid by Mr. Yoso’s estate is:

47. The total deductions from the gross estate is:

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9. Unpaid mortgage on exclusive property __

10. Unpaid mortgage on Conjugal/Community property __

11. Claims against an exclusive insolvent debtor __

15. Vanishing deductions (conjugal partnership of gains) __

18. Family Home – Exclusive property __

20. Medical Expenses __