MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

ESTATE TAXATION

NET DISTRUBATABLE ESTATE VERSUS NET TAXABLE ESTATE

Net Distributable Estate - Gross Estate Less ACTUAL expenses or payments.

Net Taxable Estate - Gross Estate Less expenses prescribed by the Tax Code.

Summary:

NET TAXABLE ESTATE NET DISTRIBUTABLE

ESTATE

GROSS ESTATE

Real or Immovable INCLUDED INCLUDED

Tangible Personal Property INCLUDED INCLUDED

Intangible Personal Property INCLUDED INCLUDED

Transfer in Contemplation of INCLUDED NOT INCLUDED

Death

Revocable Transfer INCLUDED NOT INCLUDED

Transfer under GPA INCLUDED NOT INCLUDED

Proceeds of Life Insurance INCLUDED INCLUDED

Exclusion such as SSS, GSIS, NOT INCLUDED INCLUDED

etc.

ALLOWABLE DEDUCTIONS:

Funeral Expenses REPEALED ACTUAL

Judicial Expenses REPEALED ACTUAL

Claims against the Estate ACTUAL ACTUAL

Claims aginst Insolvent Persons ACTUAL ACTUAL

TPU ACTUAL ACTUAL

Vanishing Deduction AS COMPUTED NOT CONSIDERED

Standard Deduction FIXED AMOUNT NOT CONSIDERED

Family Home WITH LIMIT NOT CONSIDERED

Amount Received under RA ACTUAL NOT CONSIDERED

4917

Share of Surviving Spouse AS COMPUTED AS COMPUTED

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

NET TAXABLE ESTATE PXX

Estate Tax Due PXX (PXX)

NET DISTRIBUTABLE PXX

ESTATE

EXERCISES

1. The gross estate of a decedent shall be compromised of the following properties and
interest therein at the time of his death, including revocable transfers and transfers for
insufficient consideration:

I.Residents and citizens – all properties, real or personal, tangible or intangible, wherever
situated;

II.Non-resident aliens – only properties situated in the Philippines provided, that, with
respect to intangible personal property, its inclusion in the gross estate is subject to the
rule of reciprocity.

a.Both I and II are correct

b.Both I and II are incorrect

c.Only I is correct

d.Only II is correct

2. Which of the following proceeds from a life insurance shall be included in the decedent’s
gross estate?

I.To the extent of the amount to be received by the estate of the deceased, his executor,
or administrator, as insurance under policies taken out by the decedent upon his own life,
irrespective of whether or not the insured retained the power of revocation;

II.To the extent of the amount to be received by any beneficiary designated in the policy of
insurance, except when it is expressly stipulated that the designation of the beneficiary is
irrevocable.

a.I only

b.II only

c.Neither I nor II

d.Both I and II

3. John Johnson, an American domiciled in South Africa, died in 2011.

He left the following property:

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

a.Rest house in Hawaii;

b.A villa in Switzerland;

c.Shares of stock in LA Corporation, USA;

d.Shares of stock in San Miguel Corporation, Philippines;

e.Shares of stock in Union Corp, a foreign corporation where 85% of its business is in the
Philippines;

f.Time deposit, Philippine National Bank, Manila;

g.Lease contract over his Manhattan, New York, USA apartment leased to the Philippine
Consulate.

John Johnson’s Philippine gross estate shall consist of:

a.All properties enumerated above

b.Only properties d, e, and f

c.Only properties a, b, and d

d.None of the property enumerated above

4. Using the data in the preceding question, assuming there is reciprocity, John Johnson’s
Philippine gross estate shall consist of:

a.All properties enumerated above

b.Only properties d, e, and f

c.Only property f

d.None of the property enumerated above

5. The widow and children of a passenger who died in an airplane crash were paid P3,500,000
by the airline. This figure was released after negotiation between the heirs of the deceased
and the insurer of the airline, the latter having received indubitable evidence that the deceased
had a net income of P350,000 at the time of his death and that 10 productive years would have
insured financial stability for his family. Should the heirs declare this amount in the estate tax
return?

a. No. The heirs should not declare the P3,500,000 in the estate tax return because the
amount is not part of the decedent’s property at the time of death.

b. No. The heirs should not declare the P3,500,000 in the estate tax return because it was a
result of a negotiation between the heirs and the airline company.

c. Yes. The heirs should declare the P3,500,000 in the estate tax return because the
designation of the beneficiary is not known, hence, revocable.

d. Yes. The heirs should declare the P3,500,000 in the estate tax return because the amount
would have been earned by the decedent if he did not die.

6. The following statements are subject to your evaluation:

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

Statement I. Unlisted common shares are valued based on their book value while unlisted
preferred shares are valued at par value;

Statement II. For shares which are listed in the stock exchanges, the fair market value shall be
the arithmetic mean between the highest and lowest quotation at a date nearest the date of
death, if none is available on the date of death itself.

a.Both I and II are correct

b. Both I and II are incorrect

c.Only I is correct

d.Only II is correct

7. In the absence of a marriage settlement, or when the regime agreed upon is void, the
property relations of the spouses who married on or after August 3, 1988 shall be governed by:

a.Conjugal partnership of gains

b.Absolute community of properties

c.Complete separation of properties

d.None of the above

8. Under this system there is a merger of all the properties of the husband and the wife owned
by them at the time of the celebration of the marriage, or those acquired thereafter.

a.Conjugal partnership of gains

b.Absolute community of properties

c.Complete separation of properties

d.None of the above

9. Under this system the spouses retain the ownership of the property which they respectively
brought to the marriage as well as those they acquired during the marriage by gratuitous title
or by right of redemption, barter, or exchange with separate property and those which they
purchased with their own money.

a.Conjugal partnership of gains

b.Absolute community of properties

c.Complete separation of properties

d.None of the above

10. Properties owned before marriage and brought into the marriage are generally classified
as:

I.Conjugal properties under conjugal partnership of gains

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

II.Exclusive properties under absolute community of properties

a.Only I is correct

b.Only II is correct

c.Both I and II are correct

d.Both I and II are incorrect

11. The net fruits as well as the income received during the marriage from the exclusive
properties of the spouses are classified as:

I.Conjugal properties under conjugal partnership of gains

II.Exclusive properties under absolute community of properties

a.Only I is correct

b.Only II is correct

c.Both I and II are correct

d.Both I and II are incorrect

12. During their last anniversary, the wife brought an expensive coat for her husband using
salary she earned during the marriage. Shortly thereafter, the husband died. For Philippine
estate tax purposes, the expensive coat shall be classified as:

a.Common property

b.Exclusive property of the husband decedent

c.Exclusive property of the wife-surviving spouse

d.Exclusion from the gross estate

13. You were appointed by court as an administrator of the Estate of N.A. Mete. N.A. Mete
died on March 15, 2019. The following unpaid taxes were presented on you:

Unpaid real estate tax for the second, third and

fourth quarters of 2018 P 90,000

Unpaid tax on the income received by the estate

of N.A. Mete 20,000

Estate tax on the Estate of N.A. Mete 50,000

Unpaid tax on income received by N.A. Mete for the

period January 1 to March 14, 2019 3,000

How much should be the deductible unpaid taxes?

14. The following selected data were taken from the Estate of Ed Sados:

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

Claim against an insolvent person

(fully uncollectible) P500,000

Claim against a person who absconded

(fully uncollectible) 300,000

Claim against an insolvent person

(20% collectible) 100,000

How much should be included in and deducted from the gross estate?

15. A piece of land was included in the gross estate at a value of P 2,000,000. Upon closer
examination, you found out that the value used was net of P 500,000 unpaid mortgage on the
same land. How much should have been included and deducted from the gross estate?

16. The following are the requisites for vanishing deduction to be allowable, except one.

a.The estate tax of the prior succession must have been finally determined and paid.

b.The present decedent died within five (5) years from date of death of the prior decedent.

c.The property with respect to which deduction is sought can be identified as having been
received by the present decedent from the prior decedent.

d.The property must have formed part of the gross estate situated outside the Philippines of
the prior decedent.

17. Rudolfo, a citizen of the Philippines and resident of Bacolod City, died testate on May 10,
2019. Among his gross estate were properties inherited from his deceased father who died on
April 4, 2017. What percentage of the deduction would be used in computing the amount of
vanishing deduction?

18. An unmarried decedent died leaving properties he inherited 4 ½ years ago which had fair
market value of P 800,000 at the time of his death (P 650,000 at the time of inheritance, and
unpaid mortgage of P 50,000 paid by the present decedent). Other properties in his gross
estate had fair market value of P 1,000,000. The total expenses, losses, indebtedness, taxes
and transfer for public purpose amounted to P 300,000.

How much was the vanishing deduction?

19. The following real properties were owned by a decedent, head of family, who was a
Filipino citizen at the time of his death:

Vacation house, USA P20,000,000

Beach house, Bohol 1,500.000

House and lot (family home), Masbate 11,000,000

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

House and lot (dwelling place when in the city), Manila 2,500,000

How much should be included in and deducted from the gross estate?

20. During the engagement ceremony before their marriage, the man gifted his woman an
expensive diamond necklace. The necklace was for the exclusive of the woman. How would
this necklace be classified for Philippine estate tax purpose, assuming the man died and was
survived by the woman and they were under absolute community of properties?

A. Communal property

B. Exclusive property of the decedent

C. Exclusive property of the surviving spouse

D. Excluded from the gross estate

21. Under conjugal partnership of gains, which of the following is an exclusive property?

A. Property acquired during the marriage using common fund for the exclusive use of one of
the spouses

B. Properties acquired through occupation such as fishing or hunting

C. Property acquired during the marriage by gratuitous title

D. Property acquired by chance, such as winning from gambling or betting

For items 22-25:

Mr. X, a Citizen of the Philippines, single. Died a resident of the United States, leaving the
following properties:

Real property in the PH, inherited from the father 1 and a half

years ago P2,000,000

Personal property in the PH 1,600,000

Family home in the US 11,500,000

Lot transferred to the PH Government 850,000

LIT:

Obligations contracted within the last two years 1,300,000

Loss due to Fire 60,000

22. The gross estate subject to Philippine Estate Tax is?

23. The deduction for Family home is?

24. The Vanishing deduction is?

25. The net taxable estate is?

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MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

END