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Estate Tax
Estate Tax
Estate Tax
Estate tax is a tax levied upon the transfer of the net estate of a decedent to his
heirs.
A. Important Definitions
1. All the property owned by the spouses at the time of the celebration of the
marriage; or
2. Those acquired during the marriage.
1. Property acquired during the marriage by gratuitous title by either spouse, and
the fruits as well as the income thereof, if any, unless it is expressly provided by
the donor, testator or grantor that they shall form part of the community
property;
2. Property for personal or exclusive use of their spouse. However, jewelry shall
form part of the community property.
3. Property acquired before the marriage by their spouse who has legitimate
descendants by a former marriage, and the fruits as well as the income, if any,
of such property.
All property acquired during the marriage, whether the acquisition appears to
have been made, contracted or registered in the name of one or both spouses, is
presumed to be conjugal unless the contrary is proved.
The following are not conjugal because they shall be the exclusive property of
each spouse:
A. ORDINARY DEDUCTIONS
1. Must have been contracted in good faith and for an adequate and full
consideration in money or money’s worth;
2. The debt instrument must be duly notarized except loans granted by
financial institutions where notarization is not part of the business
practice/policy of the financial institution-lender;
3. It must not have been condoned by the creditor; and
4. The action to collect from the decedent must not have prescribed.
d. Unpaid mortgages upon the property left by the decedent. The requisites for
the deductibility are the following:
f. Unpaid income and property taxes which have accrued as of the death of the
decedent which were unpaid as of the time of death.
g. Losses – requisites:
1. The loss must arise during the settlement of the estate but not beyond
the deadline for the payment of the estate tax.
2. It must arise from fires, storms, shipwreck, or other casualties, or from
robbery, theft or embezzlement.
3. Such losses have not been claimed as deduction for income tax purposes.
4. Must not be compensated by insurance or otherwise.
Note:
2. Transfers for public purpose. The amount of all bequests, legacies, devisees or
transfers to or for the use of the Government of the Philippines, or any political
subdivision thereof, for exclusively public purposes.
3. Vanishing deductions
Requisites for deductibility:
a. The property is situated in the Philippines;
b. The property must have been acquired thru inheritance or donation
within five (5) years before the death of present decedent;
c. Such property can be identified as the one received from prior
decedent or donor or which can be identified as having acquired in exchange for
property so received.
d. Prior gift tax or estate tax has been paid.
e. The property is included in the gross estate or gross gift of prior
decedent/donor.
Vanishing rates:
More than Not More Than Percentages
1 year 100%
1 year 2 years 80%
2 years 3 years 60%
3 years 4 years 40%
4 years 5 years 20%
5 years x x 0%
B. SPECIAL DEDUCTIONS
1. Amounts received by heir from employer under RA 4917. – Amounts received
by the heirs from the decedent’s employer as a consequence of the death of the
decedent-employee. Provided, that such amount is included in the gross estate
of the decedents.
2. Medical Expenses. This includes cost of medicines, hospital bills, doctor’s fees,
etc. Incurred whether paid or unpaid at the time of death of the decedent.
Requisites:
a. Incurred by the decedent within one (1) year prior to his death.
b. Maximum amount deductible is P500,000.
c. Duly substantiated with receipts.
4. Family Home. The dwelling house, including the land on which it is situated,
where the husband and wife, or a head of the family, and members of their
family reside, as certified by barangay captain of the locality. The deductible
amount is the higher between the assessor’s value, however, must be included
as part of the gross estate of the decedent.
1. Notice of death. This required when the transfer is subject to tax or the gross
value of the estate exceeds P20,000 even if exempt from tax. This written notice should
be made within 2 months –
a. After death, or
b. After the executor or administrator qualifies.
2. Filing of estate tax return (within 6 months from the decedent’s death). An
estate tax return is required to be filed –
a. If the transfer is subject to tax, or
b. Through exempt, if the gross value exceeds P200,000.
c. Regardless of gross value of estate, when it consists of registered or
registrable property.
5. Statements accompanying the return. – When the gross value of the estate is
P2,000,000 or more, the return should be accompanied by a statement certified by a
Certified Public Accountant containing the following:
a. Itemized assets of the decedent with corresponding value;
b. Itemized deductions from gross estate; and
c. Tax due and payable.
1. Benny Tai died leaving his daughter, Fina Tai, as sole heir to a residential
house and lot, his only property.
a. property
b. public office
c. rights not extinguished by death.
d. obligations not extinguished by death.
3. Estate tax is
4. Which of the following is not a distinction between estate tax and donor’s
tax?
5. Statement 1: The estate tax accrues at the moment of death of the decedent.
Statement 2: In estate taxation, the taxpayer is the decedent.
8. The following are the motives of a taxpayer that preclude the transfer
contemplation of death, except one (RPCPA)
10. H and W are married. They have legitimate children A and B. H died,
survived by W, A and B. His estate of P12,000,000 should be divided as
follows:
W A B Free portion
11. Based on the following data, how much is the value of the decedent’s interest
if he died March 31, 2015?
Cash in bank, joint account of the decedent and his wife P254,000
Interest on the bank deposit (Jan 1 – June 30, 2015) 9,000
Dividends from a domestic corporation:
Date of declaration – February 5, 2015
Date of record – April 15, 2015
Date of payment - May 15, 2015
Share in 2014 net profit of partnership, distributed to
Partners on April 15 9,000
Winnings in Lotto (Bet, March 30; April 1, 2014 draw) 500,000
a. P383,750 c. P 145,000
b. 138,000 d. 388,250
12. For estate tax purposes, the estate of the decedent shall be valued at the
time
a. P 618,500 c. P 624,000
b. 867,500 d. 666,500
14. Ulyanov Kerivsky, Ukrainian, died in the Philippines. The properties situated
in his own country will not be subject to estate tax if he was –
Dina Mathay, Filipina, died in the United States with the following
properties:
16. If the decedent was a non-resident alien (with reciprocity), how much is the
gross estate?
a. P 3,725,000 c. P 500,000
b. 975,000 d. None
17. If the decedent was a non-resident alien (no reciprocity), how much is the
gross estate?
a. P 3, 725,000 c. P 500,000
b. 975,000 d. 475,000
20. One of the following donations is not included as part of gross estate
a. revocable transfers
b. transfers with reservation of certain rights
c. transfers under special power of appointment
d. transfers in contemplation of death
23. When Albino was informed by his physician that he was about to die of
cancer, he sold his properties:
Land P2,500,000 P1,500,000 P2,700,000
Jewelries 500,000 300,000 300,000
Shares of stocks 200,000 220,000 250,000
Transfer under limited power
Of appointment 1,000,000 600,000 800,000
From among the data given, how much should be included in the gross
estate of Albino upon his death?
a. P 1,200,000 c. P 1,430,000
b. 1,230,000 d. 1,400,000
24. On the belief that he was about to die of a liver cancer, Bongbong sold to
Bengbeng a property valued at P1,100,000 for the same amount. Six months
later, Bongbong died of a car accident. At that time, the property had already
a value of P1,300,000. For the Philippine estate tax purposes, the amount
includible in the gross estate of Bongbong is –
a. P1,100,000 c. P200,000
b. 1,300,000 d. None
25. On February 1, 2005, Angel prepared a will on his property in favour of his
children. Angel died September 5, 2005 survived by his children Bersabe and
Contado who immediately took over the possession and made an extrajudicial
partition on September 20, 2005 but without registering the same in the
Register of Deeds. Bersabe sold the property to Contado on May 7, 2015
inorder to finance his expenses for hospitalization. Which date should be used
as the basis in valuing the property for purposes of computing the estate tax?
In which of the above cases will the proceeds be exempt from estate tax,
assuming that the beneficiary of the life insurance proceeds is neither the
estate, the executor nor the administrator of the estate?
a. Revocable c. Irrevocable
b. Revocable or irrevocable d. The executor
29. Proceeds of life insurance includible in the taxable gross estate (RPCPA)
30. Which of the following proceeds of life insurance policies is exempt from
estate tax?
I. Life insurance policy on the life of Kristine, appointing her sister as the
irrevocable beneficiary.
II. Life insurance policy on the life of Kristine, appointing her brother as
the revocable beneficiary.
III. Life insurance policy on the life of Kristine, appointing her executor as
the irrevocable beneficiary.
IV. Life insurance policy on the life of Kristine, appointing her children as
the beneficiary. The policy is silent as to whether the appointment is
revocable or irrevocable.
31. Bodol-bodol insured his life for P500,000 with Philcharter Insurance
Company designating his estate as the revocable beneficiary. Are the
proceeds subject to estate tax?
32. The following transactions and acquisitions exempt from transfer tax, exempt
(RPCPA)
33. A devised in his will a piece of land, naked title to B and usufruct to C for as
long as C lives, thereafter to B. The transmission from A to B and C is subject
to estate tax but the merger of the usufruct and the naked title to B upon the
death of C is exempt.
X devised in his will real property to his brother Y who is entrusted with
the obligation to preserve and transmit the property to Z, a son of Y, when Z
becomes of age. The transmission from Y to his son Z is subject to tax.
(RPCPA)
36. Malakas is married to Maganda. From among the properties below, which
one is considered as their conjugal property?
38. Fat Tai died. From among the properties enumerated below, which one is
not considered as part of his gross estate.
a. conjugal property
b. community property
c. exclusive property of the decedent
d. exclusive property of the surviving spouse
39. When a person dies and during the marriage the property relationship
between the husband and the wife was not that of conjugal partnership of
gains, the gross estate of the decedent would include (RPCPA)
Which of the above properties are included in the gross estate of the
decedent?
a. A and B c. A and C
b. A, B AND C d. All of the above properties
41. Properties acquired by gratuitous title before the marriage are generally
classified as:
a. A only c. B only
b. A and B d. Neither A nor B
42. Under the conjugal partnership of gains, the total conjugal properties of the
spouses is:
a. P1,170,000 c. P1,990,000
b. 1,820,000 d. 2,495,000
a. P1,170,000 c. P1,990,000
b. 2,495,000 d. 1,820,000
44. Under absolute community of property regime, the total community property
of the spouses is:
a. P1,820,000 c. P2,495,000
b. 1,990,000 d. 1,170,000
45. Under absolute community of property regime, the gross estate of Aldo is:
a. P1,170,000 c. P1,990,000
b. 2,495,000 d. 1,820,000
Pepe married Pilar on January 20, 2015 without any prior agreement in writing
as to the system of property relationship that will govern their properties when they are
already married. Pepe brought into the marriage an old Spanish house in Vigan, Ilocos
Sur worth P2,000,000 while Pilar brought with her a 200 hectare of pineapple plantation
in Bukidnon which she acquired while she was still single.
As a consequence of her marriage, she received as gift from her parents another
200 hectare banana plantation in Davao City on January 31, 2015.
Twelve (12) years thereafter, Pilar died of a car accident. The joint account
deposit of the spouses with Metrobank was P5,000,000.
She was insured with an insurance company for P2,500,000 with Pepe as the
appointed irrevocable beneficiary.
For numbers 46 to 50, classify the properties identified above by choosing your
answer from the options below:
Options:
Angelo, married to Angel 3 years ago, died leaving the following properties:
a. P12,127,625 c. P6,577,625
b. 11,827,625 d. 3,700,000
52. The gross estate if Angelo was a resident alien under the conjugal
partnership of gains –
a. P10,127,625 c. P3,700,000
b. 11,827,625 d. 6,577,625
53. The gross estate if Angelo was a non-resident alien without reciprocity under
the absolute community of property regime –
a. P10,127,625 c. P3,700,000
b. 11,827,625 d. 6,577,625
54. The gross estate if Angelo was a non-resident alien, with reciprocity, under
the conjugal partnership of gains –
a. P10,127,625 c. P6,577,625
b. 11,827,625 d. 3,700,000
a. Sol because he paid more than what was assumed by the conjugal fund.
b. Roma because she is the wife of Sol.
c. The conjugal partnership because the full payment was made during the
marriage.
d. Sol because the ownership was vested to him before the
marriage.
Exclusive Conjugal
a. P100,000 P60,000
b. 100,000 60,000
c. 115,000 45,000
d. 160,000 None
57. Ivan and Sarah are married. Ivan inherited a residential lot valued at
P1,000,000 from his parents. Out of the conjugal funds, the spouses
constructed a house on the land which cost them P2,000,000. Who owns the
land immediately upon the death of either the wife or the husband? How
about the residential house?
Residential Lot Residential House
a. Conjugal Conjugal
b. Exclusive of Ivan Conjugal
c. Exclusive of Ivan Exclusive of Ivan
d. Conjugal Exclusive of Ivan
58. Tong Siok, a Chinese billionaire and a Canadian resident, died and left assets
in China valued at P80 billion and in the Philippines assets valued P20 billion.
For the Philippine estate tax purposes the allowable deductions for expenses,
losses, indebtedness, and taxes, property previously taxed, transfer for public
use, and the share of his surviving spouse in their conjugal partnership
amounted to P15 billion. Tong’s gross estate for Philippine estate tax purpose
is