BM1903

Name: Padilla, Aries christian S. Section: BSMA 401

Deductions from Gross Estate (15 items x 2 points: 1 point for each correct answer and 1 point for the
solution)
Encircle the letter of the correct answer and provide a solution to the space provided.
1. The gross estate of the decedent includes a real estate with a market value at the date of death
equivalent to P4,000,000. The heirs of the decedent compiled the following accrued taxes, which were
not yet paid at the date of death:
Before Death After Death
Real property tax P 40,000 P 0
Income tax P 80,000 P 110,000
Estimated estate tax P 0 P 400,000
Which value shall be deductible taxes?
a. P120,000 b. P230,000 c. P510,000 d. P630,000

Solution: 110,000 + 400,0000 = P510,000

2. The following losses of properties occurred during the settlement of the estate of Mrs. Ramos:
Losses of separate properties of Mr. Ramos P 60,000
Losses of common properties P 40,000
Losses of separate properties of Mrs. Ramos P 80,000
Which value shall be deducted as losses from the gross estate?
a. P60,000 b. P80,000 c. P100,000 d. P120,000

Solution: 40,000 / 2 = 20,000

20,000 + 80,000 = P100,000

3. The following properties were lost soon after the death of Mr. Ramos:

Cash from decedent’s professional income P 300,000

Jewelry inherited a year ago by Mrs. Ramos P 500,000

Upon discovery, the event was immediately reported to the BIR. What is the deductible amount of loss
against gross income?
a. P 0 b. P300,000 c. P500,000 d. P800,000

Solution: 300,000 + 500,000 = P800,000

4. Mr. Ramo n donated the following properties in his last will and test ament:
Cash – to Takusa, a social welfare institution P 500,000
Land – to Benguet State University at purchase cost P 1,000,000
Additional information:
a. The donation mortis causa to Takusa was restricted for program expenses. None of it would be used for
administrative purposes.
b. The lot devised to Benguet State University had a fair value of P1,600,000 at the decedent’s death.
Which of the following is the amount of the deductible transfer for public purpose?
a. P500,000 b. P1,000,000 c. P1,500,000 d. P1,600,000

Solution: 500,000 + 1,000,000 = P1,500,000

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5. The following relate to the estate of a decedent:

Gross Estate (P1,000,000 is exclusive) P 3,000,000
Indebtedness and Taxes 150,000
Losses 250,000
Which of the following is the share of the surviving spouses?
a. P800,000 b. P1,000,000 c. P1,200,000 d. P2,600,000

Solution: 2,000,000 – 400,000 = 1,600,000

1,600,000 / 2 (since it is common it’s equally divided)
=P800,000

6. A decedent died, leaving an estate with the following properties and deductions:

Gross Estate (P2,000,000 is exclusive) P 4,000,000

Indebtedness and Taxes 250,000
Losses 150,000

Which of the following is the share of the surviving spouses?

a. P800,000 b. P1,600,000 c. P2,000,000 d. P3,600,000

Solution: 2,000,000 = 400,000 = 1,600,000

1,600,000 / 2 = P800,000

7. The follow ing data pertains to the estate of a decedent:

Separate Common
Gross estate P 2,000,000 P3,000,000
Indebtedness and taxes 200,000 300,000
Losses 50,000 150,000
Transfer for public use 100,000
Which of the following is the share of the surviving spouse?
a. P825,000 b. 1,275,000 c. P2,100,000 d. P2,550,000

Solution: 3,000,000 – 450,000 = 2,550,000

2,550,000 / 2 = P1,275,000

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8. Mr. Ramos died, leaving a family home valued at P1,800,000, which he inherited during the marriage
when it was worth P800,000. What is the deduction for the family home?
a. P800,000 b. P1,000,000 c. P1,800,000 d. P10,00,000

Solution: the fair value of family home is from the amount value the day after Mr. Ramos died.

9. During the marriage of Mr. and Mrs. Ramos, they constructed a house using their salaries amounting
to P1,200,000. The lot was inherited by Mrs. Ramos when it was P800,000. Mr. Ramos died when the
house and the lot had fair values of P1,500,000 and P1,200,00, respectively. What is the deduction
for family home?
a. P 0 b. P750,000 c. P1,200,000 d. P1,500,000

Solution: 1,500,000 / 2 = P750,000

(1,500,000 is the amount because it is the fair value of house when Mr. Ramos died)

10. A decedent died, leaving a family home to his children:

Lot – separate property of the decedent P 3,000,000

House – common property P12,000,000

Which of the following is the amount deductible as family home?

a. P3,000,000 b. P9,000,000 c. P10,000,000 d. P15,000,000

Solution: 12,000,000 / 2 = 6,000,000

6,000,000 + 3,000,000 = P9,000,000

11. The estate of the decedent received P80,000 benefit under R.A. 4917. The heirs want to claim the
benefit as part of special deduction. What is the deductible amount of benefits under R.A. 4917?
a. P 0 b. P40,000 c. P80,000 d. None of these

Solution: P80,000 According to R.A 4917 special deduction is still part of benefits that can receive and can
be deductible.

12. A nonresident alien decedent died leaving a substantial estate in the Philippines. He is married with six
dependents. How much standard deduction he can claim?
a. P 0 b. P500,000 c. P5,000,000 d. P10,000,000

Solution: P500,000 because in nonresident alien decedent the standard deduction can only be up to
P500,000

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13. A non-resident alien decedent had the following possible deductions:

Obligations (40% are payables in the Philippines) P 500,000

Losses of properties (60% occurred in the Philippines) P 1,000,000
Transfer of Philippine property for public use P 400,000

The decedent had a P4,000,000 Philippine gross estate and P6,000,000 foreign gross estate. Which of
the following is the total deduction allowable?
a. P1,700,000 b. P1,900,000 c. P4,000,000 d. P6,000,000

Solution: 500,000 + 1,000,000 + 400,000 = P1,900,000

14. On November 1, 2x18, Alex died leaving the following properties:

Mortgage assumed on the

Agricultural land inherited Feb. 2, 2x16 P1,200,000 agricultural land P 500,000
House and lot 2,000,000 Other indebtedness 1,200,000
Cash 2,800,000 Losses 400,000
Car 500,000 Total Ordinary Deductions P2,100,000
Other personal properties 1,000,000
Total Properties P7,500,000

The prior estate paid the estate tax on the agricultural land, which was then valued at P1,000,000.
Compute the vanishing deduction.
a. P140,000 b. P216,000 c. P360,000 d. P500,000

Solution: Initial Value 1,000,000

Less: mortgage assumed 500,000
Initial Basis 500,000
Less: Other deductions
(500,000 / 7,500,000) x 2,100,000 140,000

Final Basis 360,000

Multiplied Percentage 60%
Vanishing Deduction 216,000

15. Mr. Ramos was single when he died, leaving properties he inherited 2 ½ years ago with a current fair
market value of P800,000. The property was inherited when it was worth P1,000,000 and had a
P850,000 unpaid mortgage. Mr. Ramos paid P550,000 until his death. Other properties of Mr. Ramos
had a fair market value of P1,200,000 at the time of his death. The losses, taxes, and transfer for
public purpose is P160,000. How much is the vanishing deduction?
a. P138,000 b. P160,000 c. P230,000 d. P250,000

Solution: Initial Value (lower) 800,000

Less: Mortgage 500,000
Initial Basis 250,000
Less: other deductions
(250,000/2,000,000) x 160,000 20,000

Final Basis 230,000

Multiplied percentage 60%
Vanishing Deduction 138,000

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