BUSINESS TAXATION

Jehan Franz B. Primo

BSA-2A
2019-01086

1. Identify whether the following properties are includible in the estate of the decedent or
not:

a. Included
b. Included
c. Excluded
d. Excluded
e. Excluded
f. Included
g. Included
h. Included
i. Excluded

2. Cathay’s employer owed Cathay P5, 000 on salary that had not been paid at the time of
death
.
a. Is Cathay’s right to that amount includible in her gross estate?

 Yes, the value of the receivable from Cathay’s employer shall be included in
her gross estate, but under the decedent’s interest.

b. What if the P5, 000 is a benefit that Cathay’s employer agreed to pay to Cathay or her
estate
only if she continued to work from the employer until her death or retirement, and Cathay
worked until the day she died

 The benefit shall also be included in Cathay’s gross estate. It should be

noted that the employee may not be obligated to pay the benefit unless it is
part of the bargained for employment contract.

3. Sue Tek insured his life for P450,000. In the policy, he designated his wife as the
revocable beneficiary.

a. In case of death of Sue Tek, will the proceeds of the life insurance become part of his
estate?

 Yes, since the insurance designated by the decedent is revocable the

proceeds shall be included in his gross estate and shall be subject to
estate tax.

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 b. How about if the designation to his beneficiary wife is irrevocable?

 Since the designated beneficiary is irrevocable the proceeds of the

insurance is not included in the decedent’s gross estate and shall be
exempt from estate tax

4. Sigurista sold to Tagapagmana a real property valued at P650, 000 for P300, 000 only.
The sale contains a reserved power to revoke the same while Sigurista is alive, which
she failed to exercise until his death. When Sigurista died, the property had a value of
P750, 000.

a. How much should be included in the gross estate of Sigurista?

 The total amount to be included in the gross estate of Sigurista is

P450,000.This amount is obtained by subtracting the sales price amounting
to P300,000 from the value of the property at the time of Sigurista’s death
amounting to 750,000.

b. How about if it is discovered that the sale is fictitious?

 If the sale is discovered to be fictitious, the entire amount 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.

5. Yolly took a life insurance policy upon her own life. The face value is P400, 000. When
she died, the insurance company paid her only daughter, Marietta, the proceeds of the
insurance. Marietta did not include the P400, 000 in the computation of the gross estate.
Upon assessment, the BIR official contends that there is deficiency tax having failed to
include the insurance proceeds in the gross estate. Is the tax official correct?

 The official claim of BIR is shall be considered correct and appropriate if

the case is a revocable transfer. In this case, if the beneficiary designated
is revocable then the proceeds shall be included in the computation of the
gross estate of Marietta. However, if the designation of beneficiary is
irrevocable, and she is neither appointed as executor or administrator, the
proceeds of life insurance is excluded from gross estates which makes the
claim of BIR invalid.

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 6. Ara Nina, 85 years old and aware of her serious illness, sold a property with a value of
P800, 000 for a consideration of P300, 000 to Dina Ngona. After a month, she died
leaving a net estate after the deducting the estate tax of P3, 000, 000. How much is the
net distributable estate of Ara Nina if the Property sold to Dina Ngona Had a value of
P840, 000 at the time of death?

Solution: FMV at the time of death > consideration, therefore it is a transfer of

insufficient consideration.

= FMV – Consideration
= P840,000 – 300,000
=P540,000

P3,000,000 net estate + 540,000 = P3,540,000

Gross estate P3,540,000

Tax on 2,000,000 P402,500

Tax excess (1,540,00 x 30%) 462,000
Total estate tax P864,500

Gross estate tax P3,540,000

Less: Total estate tax 864,500
Net distributable tax P2,675,500

Explanation:
The above transaction involved the sale of property due to contemplation
of death. At the time of death, the fair value of the property is appreciated to
P840,000. Due to the reason that the sale is due to contemplation of death
therefore, the transfer shall be deemed as transfer of insufficient contribution. The
remaining balance after the deducting the P300,000 from the fair value shall be
included to the net estate of P3,000,000 to come up with the gross estate of
P3,450,000. To get the amount of net distributable estate, total tax estate is
deducted from the gross estate of P3,540,000. Thus, the distributable estate of Ara
Nina is amounted to P2,675,500.

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 7. Bonador donated to Atacador a parcel of land in 2010. Bonador made the deed of
donation entitled “Donation Inter Vivos” in a publc instrument and Atacador accepted the
donation in the same document. It was provided in the deed that the land donated shall
be immediately delivered to Atacador and Atacador shall have right to enjoy the fruits
fully. The deed also provided that Bonador was reserving the right to dispose of said land
during his (Bonador’s) lifetime, and that Atacador shall not register the deed of donation
until Bonador’s death. Upon Bonador’s death, Curiadora, Bonador’s widow and sole heir,
filed an action for the recovery of the donated land, contending that the donation made
by Bonador is a donation mortis causa and not donation inter vivos. Will said action
prosper?

 Curiador Bonador’s widow will not prosper in filing for the recovery of the
decedent’s property. The donation is valid by having the requisites of such
as the deed of donation and written in public instrument and the said land
is therefore a “Donation Inter Vivos”. The donation takes effect during the
donor’s lifetime or independently of the donor’s death and the full
ownership of the donated properties of Bonador passes to Atacador during
his lifetime, not by reason of his death but because of deed of donation.

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