PROBLEMS

P3.1. (LOSSES)
Various types of losses were incurred by a decedent/estate as follows:
 Loss due to typhoon, a day before the decedent's death, P1,000,000
 Loss due to shipwreck, two (2) months after the decedent's death,P500,000.
 Loss due to robbery, eight (8) months after the decedent's death, P2,000,000.
 Swindling loss incurred 2 months before death, 800,000
 Gambling losses before death, P2,250,000

REQUIRED

Question #1: How much is the deductible "losses from the gross estate of the decedent?
500K + 2M = 2.5M

Question #2: How much is the deductible "losses from the gross estate of the decedent
assuming the robbery loss was incurred 1 % years after the decedent's death?
= 500K

P3.2. (CLAIMS AGAINST THE ESTATE/INDEBTEDNESS, CAIP, etc.)

The heirs of a resident citizen decedent with a total gross estate of P15,000,000 provided the
following data

 Receivable from Juan, a debtor P500,000

 Amount collectible from Juan 400,000
 Unpaid taxes on the estate before death 150,000
 Unpaid taxes on the estate after death 50,000
 Unpaid mortgage on the estate 200,000
 Funeral expenses 182,000
 Medical expenses 82,000
 Judicial expenses 100,000
 Unpaid loans arising from debt instruments (notarized) 125,000
 Unpaid loans arising from debt instruments (not notarized) 75,000
 Casualty loss 65,000

REQUIRED: Determine the total amount of allowable deduction from gross estate of the
decedent including applicable special deduction.
OD:
100K
150K
200K
125K
75K
65K
SD: 5m
= 5,715,000

P3.3. (CLAIMS AGAINST INSOLVENT PERSONS - CAIP)

Case ACase B Case C Case D

Receivable from a debtor 500K 500K 500K 500K
Amount collectible 400K
Debtor's total assets 400K 1.2M 1.2M
Debtor's total liabilities
excluding tax payable 1.2M 800K 800K
Unpaid taxes 800K

Allowable deductions - CAIP

Case a – 500k – 400k = 100k

Case b – 500k – (400k/1.2m x 500k) = 333,333
Case c – 0 – debtor insolvent
Case d – 1.2m – 800k = 400k 500k – (400k/800k x 500k) = 250k

P3.4. (CLAIMS AGAINST INSOLVENT PERSONS)

The following data were taken from the estate of Pedro:
 Claims against Juan (insolvent), P100,000, fully uncollectible
 Claims against Manuel (insolvent), P200,000, 50% collectible book
 Claims against a person who absconded, P300,000.

REQUIRED: Based on the data provided, determine the allowable deduction from Pedro's gross
estate.
From Juan 100k
From manuel 100k (200k x 50%)
= 200k

P3.5. (CLAIMS AGAINST INSOLVENT PERSONS)

The gross estate of Juan includes P200,000 receivables which is duly notarized from a debtor
(Pedro) whose records show:
Assets 400k
Liabilities 800k

Pedro's liabilities composed of the following:

 Due to the BIR for unpaid taxes, P200,000
 Due to Juan, P200,000
 Due to other creditors, P400,000
REQUIRED: Determine the amount of allowable deduction from Juan's gross estate in relation
to its receivable from Pedro.
400k
(200k)
=200k

200k
(50k) (200k/800k x 200k)
=150k

P3.6. (VANISHING DEDUCTION)

Juan, a Filipino residing in Davao died on December 10, 2020, leaving a gross estate of
P45,000,000 including a parcel of land valued at P11,250,000, which he inherited from his father
who died on October 5, 2017; that the land was previously taxed with a fair value of P9,375,000
ber for estate tax purposes in the estate of his father, that the land was subjected to a mortgage
of P4,687,500 at the time it was inherited by the present decedent, which amount was deducted
from the net estate of the father, that the present decedent paid P1,875,000 of the mortgage
indebtedness and that the total deductions claimed for expenses, losses, including the unpaid
mortgage of P2,812,500 was P5,625.000. REQUIRED: Determine the correct amount of
vanishing deduction, if any.

P3.7. (STANDARD DEDUCTION)

Determine the allowable standard deduction from the following independent cases:

CASE PARTICULARS
A Decedent is single and a resident citizen of the Philippines
B Decedent is a head of the family and a resident citizen of the Philippines
C Decedent is a resident alien
D Decedent is a non-resident alien, reciprocity clause under the tax code is applicable
E Decedent is a non-resident alien, reciprocity clause under the tax code is not applicable

P3.8. (FAMILY HOME)

Determine the deductible family home in 2018 from the following independent cases:

CASE Particulars Family Home

A Decedent is single 10M

B Decedent is a head of a family 5M
C Decedent is married. The family home
is the exclusive property of the surviving
spouse 8M
D Decedent is married. The family home 10,000,00
 is the exclusive property of the decedent 10M
E Decedent is married. The family home is
classified as conjugal property 12M
F Decedent is married. Fifty percent (50%)
of the family home is classified as conjugal
property, the remainder is the exclusive
property of the decedent 10M

P3.9
The administration of a decedent’s estate (head of the family) provided the following data:

Property:
Domestic shares of 2,000 shares inherited 6 years ago P8,000,000
House and lot, family home, located in Davao, inherited
2 years ago at a value of P1,500,000 2m
Jewelry items, in the Philippines at the time of death 400k
Jewelry items kept abroad 200k
Bank deposit in a Philippine branch of a U.S. bank 5m
Interest from bank deposit after decedent's death 25k

Expenses and other charges:

Funeral expenses, abroad 80k
Funeral expenses, Philippines 200k
Judicial expenses, abroad 100k
Judicial expenses, Philippines 50k
Claims against the estate with the notarized debt instrument
issued in the Philippines, 120k
Donation to the Philippine government as provided in his will 250k

REQUIRED: Determine the net taxable estate assuming:

1. The decedent was a Filipino citizen but a resident of Australia
2. The decedent was not a Filipino citizen but a resident of Davao City

P3.10
A resident decedent, head of family, died leaving the following properties and obligations:

Cash in bank, 50%, donated mortis causa to Nat'l

Govt 50-% to Q.C. gov't
House and lot in Makati, Family Home
Other real properties
Farm lot
Claim against an insolvent debtor
Transfer in contemplation of death (gratuitous)
Transfer passing under power of appointment

Deductions claimed:
Funeral expenses
Judicial expenses
Donation mortis causa to Quezon City government
Unpaid mortgage on the farm lot

The farm lot was inherited 5 %2 years ago by the decedent before his death with a value then of
P575,000 and a mortgage indebtedness of P150,000.

REQUIRED: Determine the following:

1. The taxable net estate

2. The taxable net estate assuming the farm lot was inherited (5) years ago.

P3.11.
Juan died leaving a gross estate of P12,800,000 including a land inherited from his uncle 3 ½
years before his death and a car donated to him seven (7) years before his death. The following
data pertain to the two properties:

Unpaid Mortgage FMV upon receipt FMV upon death

Land P100,000 P1,800,000 P1,250,000
Car 50,000 300k 400k

The decedent was able to pay % of the unpaid mortgage on the land before his death.

Other deductions claimed are as follows:

Expenses, losses, indebtedness, taxes
(excluding the unpaid mortgages above) 300k
Transfer to the Govt. (included in the estate) 300k
Death Benefits from Employer under RA 4917 200k
Family home (included in the estate) 2m

REQUIRED: Determine the net following:

1. Vanishing deductions
2. The net taxable estate

TRUE OR FALSE

TRUE 1. Deductions from gross estate are highly disfavored in law; he who claims deductions
must be able to justify his claim or right
FALSE 2 Deductions from the gross estate are generally presufned to be conjugal deductions,
unless specifically provided otherwise
FALSE 3. Obligations contracted by a person during his lifetime are terminated upon his death,
FALSE 4 ALL claims against the insolvent person are deductible from the decedent's gross
estate.
TRUE 5. In a claim against insolvent person, the insolvency of the debtor must be proven and
not merely alleged.
FALSE 6. It could be that the amount to be included as part of the gross estate in a claim
against insolvent person is less than the full amount owed
TRUE 7. So that unpaid mortgage may be deducted from the gross estate, the fair market
value of the mortgage property must form part of the gross estate in full
TRUE 8. For unpaid taxes to be deductible from gross estate, such must have accrued at the
time or before the decedent's death
TRUE 9 Unpaid income taxes incurred before the decedent's death is deductible from the gross
estate
TRUE 10. Casualty loss is deductible from gross estate if such loss was incurred during the
settlement of the estate
FALSE 11. Casualty losses could be claimed as deduction from the gross income and from the
gross estate.
TRUE 12 In computing for vanishing deduction, the value to be taken is the lesser amount of
the value of the property at the date of the previous transfer or the value of the property
at the date of death of the decedent.
TRUE 13 Vanishing deduction is being allowed to lessen the impact of successive taxation of
the same property within a very short period
TRUE 14. The benefit of vanishing deduction may only be applied once.
TRUE 15. The maximum amount of deductible family home from the gross estate upon the
effectivity of the TRAIN Law is P10,000,000.

Chapter Exercises
MULTIPLE CHOICE
Choose the letter of the correct answer.

1. Which of the following statements is true?

a. Deductions from gross estate are highly disfavored in law, he who claims deductions
must be able to justify his claim or right
b. Receipts or invoices or other evidence to show that the expense was really incurred, if
applicable, must duly support deductions against the gross estate.
c. Both "a" and "b"
d. Neither 'a" nor "b"

2 Which is false?
a The estate tax is computed based on the net estate or taxable estate
 b The net estate is determined by subtracting from the gross estate the deductions
authorized by law.
c. Both "a" and "b"
d. Neither "a" nor "b"

ORDINARY DEDUCTIONS

LITE-Indebtedness or Claims against the Estate

3 Which among the following statements is correct?

I. An obligation that had prescribed already during the lifetime of the decedent, or that
was unenforceable against him when still alive, will not be claim against his estate
when he shall be dead
II. If a monetary claim against the decedent did not arise out of a debt instrument, the
requirement on a notarized debt instrument does not apply.

a. I only
b. Il only
c. Both I and II
d. Neither I nor II

4. The following statements pertain to indebtedness for estate tax purposes. Which is false?
I. When a person leaves property encumbered by a mortgage or indebtedness, his gross estate
must include the fair market value of the property, undiminished by the mortgage or
indebtedness.
II. Include in the computation for the gross estate only the equity of the decedent on the property

III. If the loan is merely an accommodation loan, where the proceeds of the loan went to another
person, the value of the unpaid loan must not be included in the receivable of the estate.
a I only
c I and I only
b. ll only
d. Il and Ill only

5. Which among the following is false?

I. If a claim against the estate arose out of a debt instrument, the debt instrument must
be notarized regardless of its source
II. If a monetary claim against the decedent did not arise out of a debt instrument, the
requirement on a notarized debt instrument does not apply
III. If the loan was contracted within three years before the death of the decedent, the
administrator or executor must submit a statement showing the disposition of the
proceeds of the loan
a. I only
b. II only
c. Ill only
 d. I and Ill only

6. Awa Nhen died on January 1, 2021 leaving among others the following charges and
obligations:
Real property tax for the year 2020 P100.000
Notarized interest bearing promissory note 100.000
Accrued interest on the promissory note at the time of death 20,000
Interest to accrue on the promissory note from the date 10,000
of death to the date of maturity
Income tax due for 2020 200,000
= 430,000

How much were the allowable ordinary deductions from the gross estate?

A. P420,000
b. P430,000
c P510,000
d. P520.000

7. Claims against the estate of the decedent who died on February 2021
Notes payable for money borrowed, not notarized 500,000
Accounts payable for supplies used in business 200,000
Debts from gambling losses 120,000

How much is the deductible claims against the estate?

a. P200,000
b. P320,000
c P470,000
d. P850,000

LITE-Claims against Insolvent persons

8 The following statements regarding "claims against insolvent persons are correct, except
a. It is a deduction even if the debtor had some properties
b. It can be a deduction even if secured by a mortgage
C. It should always be included in the gross estate
d Should be omitted in the computation for the net taxable estate if entirely uncollectible

9 Which of the following statements is correct?

a. A person is insolvent when his properties are not sufficient to pay his obligation.
b. The claims of the creditors will be satisfied out of the available properties of the insolvent
debtor.
c. For estate tax purposes, there are two kinds of creditors, preferred and ordinary creditors.
d. All of the above

LITE-Taxes

10. Which of the following is not deductible from the gross estate of a decedent?
I Income taxes on income received after death
II. Property taxes not accrued before death
III. Estate Tax
a. I and II only
b. II and III only
c. All of the above
d. None of the above

11. Which of the following taxes is deductible from the gross estate?
a. Income tax paid on income received after death
b. Property tax not accrued prior to death
c. Estate tax paid on, a foreign country
d. Donor's tax accrued prior or before death

12. On June 30, 2020, Juan Dela Cruz passed away. The following unpaid taxes relate to his
property, income on his property, and estate. Estate tax was filed and paid early on December
31, 2020.

2019 Income tax from practice of profession 300,000

Income tax-practice of profession for Jan, to June 2020 100,000
Income tax of the estate, July to December 2020 200k
Real property taxes for 2018 and 2019 150k
Business taxes for 2019 100k

The total taxes that may be deducted from the gross estate is

a P550,000
b. P750,000
c P850,000
d. P650.000

LITE-Losses

13. Which of the following is wrong? Losses deductible from the gross estate
a. Should only be of property included in the Philippine gross estate.
b. Should be incurred during settlement of the estate.
c. May be arising from storm..
d Should not be compensated by insurance or other form of indemnity.

14. Which is deductible from the gross estate of resident decedent?

a. Loss of portion of the estate incurred during settlement period such as those arising from
theft.
b. Loss of portion of the estate incurred 200 days before the death of the decedent.
c. Loss of portion of the estate incurred a month before the death of the decedent
d. Losses on the portion of exclusive capital of surviving spouse incurred during settlement of
the estate.

Use the following information for the next four questions:

Among the properties included in the gross estate of the decedent at the time of death is a
three-story commercial building with a fair market value of P12,000,000. During the settlement
of the estate and before the last day of paying the estate tax, the said property is destroyed by
fire. The fair market value at the time of the incident was P13,000,000.

15. The amount that should be included as part of the gross estate is
a. PO
c. P12,500,000
b. P12,000,000
d 13m

16. The amount of deductible loss will be

a. PO
b. P12,000,000
d P13,000,000
c. P12,500,000
d.
17 Assume that the property was insured for P10,000,000 and the amount recovered from the
insurance company was P9,000,000. The amount of deductible loss will be
a P1,000,000
b. P3,000,000
c P9,000,000
d P12,000,000

18. Assume that 70% of the property is destroyed by fire and the property deductible loss will be
is not insured. The
a. PO
c. P8,400.000
b. P3,600,000
d. P12,000,000
 Transfer for Public Use

19 It pertains to the amount of all the bequests, legacies, devises or transfers to or for the use of
the Government of the Republic of the Philippines, or any political subdivision thereof, for
exclusively public purposes.
a. Transfer for public use
b. Vanishing deduction
c. Property previously taxed
d. Inheritance

20. By "transfer for public use" as deduction from the gross estate is meant dispositions in:
I. A last will and testament in favor of the Government of the Philippines or any political
subdivision thereof, for exclusively public purposes.
II. Transfer to take effect after death in favor of the Government of the Philippines, or any
political subdivision thereof, for exclusively public purposes.
a. I only
b. Il only
c. Both I and II
d. Neither I nor II

21. Which of the following is not a remedy against double taxation

a. Estate tax credit
b. Vanishing deduction
c. Delivery of property from fiduciary heir to fideicommissary in a fideicommissary substitution
d. Transfer for public use

22. Which is wrong? Deduction for transfer for public use:

a. Means legacy in a last will and testament to the government
b. Means device in a last will and testament to the government
C. Includes any kind of transfer to the government for public purpose
d. Will not include legacies to charitable institutions

23. Yumao Na Rhin transferred a 3,000 square meter lot purposely to be converted as a zoo to
be administered by the city government of Taw tawi The lot was acquired by the decedent 10
years ago for P50,000 Its fair market value at the time of Yumao Na Rhin's death was
P5,000,000. The deduction from the gross estate relative to this transfer is
a P50,000
b. P2,500,000
c. P5,000,000
d. P0
 Vanishing Deductions

24. Pedro died leaving a car he acquired by purchase from Juan 4 years ago. The car was
correctly included in his gross estate. The applicable vanishing rate is
a 0%
b. 40%
c. 60%
d. 80%

25. Vanishing deduction is availed by taxpayer to

1. Reduce his output vat
11. Reduce his gross income
III. Reduce his gross estate
a. I only
b. Il ony
c. IlI only
d. II and III only

26. Which of the following statements regarding gross estate is incorrect?

a. Vanishing deduction is being allowed to lessen the impact of successive taxation of the same
property within a very short period due to the death of the decedent-transferor
b. Even property previously taxed situated outside the Philippines of a non-resident alien
decedent, for estate fax purposes, can be allowed vanishing deduction
C So that unpaid mortgage may be deducted from the gross estate, the fair market value of the
mortgaged property must form part of the gross estate in full.
d. For unpaid taxes to be deductible from the gross estate, such must have accrued at the time
or before the decedent's death

27. Which of the following properties of Namayapa Nha who died December 1, 2021 is subject
to vanishing deduction?
Property 1: Rest House in Tagaytay purchased in 2019
Property 2: Commercial lot and building inherited from her mother in 2018 and where the estate
tax thereon had not been paid.
Property 3: Donation from a friend in 2020.
Property 4: Property won in a lottery six (6) months before death.

Property 1 Property 2 Property 3 Property 4

A no no yes yes
B no no yes no
C yes yes no yes
D yes yes no no
28. Ded Nha, a citizen of the Philippines and a resident of Bacolod City. died testate on May 10,
2021. Among his gross estate are properties inherited from his deceased father who died on
April 4, 2018. What percentage of leduction will be used in computing the amount of vanishing
deduction?
a 80% of the value taken as basis for vanishing deduction;
b 100% of the value taken as basis for vanishing deduction;
c. 60% of the value taken as the basis for vanishing deduction
d. 40% of the value taken as the basis for vanishing deduction

29. On September 4, 2021, Yumao N. Rin died leaving an apartment building which has a fair
value of P1,000,000 which he inherited from his mother. The property was valued at P9,000,000
at the time of inheritance dated July 28, 2018. The building has a previous mortgage of
P1,500,000 of which P500,000 was paid by Yumao N. Rin prior to his death. In computing for
the vanishing deduction, what percentage will be used and how much will be the vanishing
deduction?
a. 40%; P3,060,000
b. 60%; P3,000,000
c. 40%; P3,230,000
d. 20% P3,050,000

SPECIAL DEDUCTIONS

Standard Deduction

30. Upon effectivity of the TRAIN Law, which is not true about standard deduction?
a. It need not be substantiated
b. It does not apply to nonresident alien decedent
c. It must be reflected in the estate tax return
d. None of the above

31. Statement 1. The P5,000,000 standard deduction for estate tax purposes is a short-cut,
legal mechanism to further exempt the less privileged estate and heirs from the tax burden

Statement 2: The BIR may examine the bank deposit of a decedent for the purpose of
determining his gross estate without violating the Bank Secrecy Law.
a Statements 1 & 2 are false
b Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true

Family Home
32 Statement 1: The maximum amount of deductible family home from the gross estate is
P10,000,000

Statement 2: If the family home is exclusive property of the surviving spouse and has a current
market value of P10,000,000, such amount is not subject to estate tax.

a Statements 1 and 2 are correct

b. Only statement 2 is correct
c Only statement 2 is correct
d. Statements 1 and 2 are incorrect

33. Only one statement is correct? A deduction for family home

A Shall be allowed if the family home is in the Philippines.
b. Shall be at a maximum of P10,000,000, based on cost.
c. May be allowed for two family homes (one in the city and another in the province), both in the
Philippines and with certifications of the barangay captains.
d. Shall be deducted at lesser than P10,000,000 if, with vanishing deduction and unpaid
mortgage or indebtedness, the value of the family home is already reduced to zero

34. A resident citizen had family home in the Philippines. He worked abroad and was
temporarily absent from his family home when he died. Which of the following statements is
correct?

a. The decedent would not be allowed family home deduction because he was abroad when he
died.
b. The decedent would not be allowed family home deduction because he was a nonresident
citizen when he died.
C The decedent would be allowed family home deduction because actual occupancy of the
family home was not interrupted or abandoned because of his temporary absence.
d. The decedent would be allowed family home because all decedents were allowed family
home deduction.

Amount received under RA 4917

35 Which of the following statements regarding amount(s) received or receivable under RA4917
is not correct?

a. Any amount received by the heirs from the decedent's employer as a consequence of the
death of the decedent employee in accordance with Republic Act 4917 shall be included in the
gross estate of the decedent.
b. Any amount received by the heirs from the decedent's employer as a consequence of the
death of the decedent employee in accordance with Republic Act 4917 shall be deductible from
the gross estate of the decedent.
c. Both "a" and "b"
d. Neither "a" nor "b"

36 A decedent has one year left to complete 30 years of continuous service with his employer
when he died. His only heir received P1,500,000 as benefit under RA 4917. What should be the
amount to

be included in the gross estate?

a. P1,500,000
b. P500,000
c. P1,000,000
d. PO

37. Based on the preceding problem, what amount should be included as part of deductions
from gross estate?

a. P1,500,000
b. P500,000
c. P1,000,000
d0

Deductions for Nonresident Alien Decedents

38. One of the following is allowed as a deduction from the gross estate of a non-resident alien
under the Tax Code as amended by RA 10963 (TRAIN Law), but is prorated between Philippine
gross estate and the total or world gross estate

a Losses, indebtedness, claims against the estate and taxes

b. Share of the surviving spouse
c. Vanishing deduction
d Standard deduction

39. A nonresident alien decedent left the following assets:

Domestic shares
Foreign shares Tangible personal property, Philippines 60,000,000
Losses, unpaid indebtedness and 12,000,000
taxes

The country where the decedent is a citizen and resident does not impose transfer tax
transmission of intangibles of Filipinos residing therein.

The taxable net estate in the Philippines is

a. P38,000,000
b. P42,800,000
c. P47,800,000
d. P52,800,000

40. A nonresident alien died on March 10, 2021 leaving the following
properties and deductions
Shares, domestic corporation P5,000,000
Shares, foreign corporation 5m
Tangible personal property 15m
Deductible losses ,taxes indebtedness 5,000,000

Assuming there is no reciprocity, the estate tax due is and

a. P960,000
c. P15,000,000
b. P660,000
d. P16,000,000