Diso, Hafisah B. Mr.

Chris De Guzman, CPA

ACT205 February 11, 2023

1. The administrator of a decedent’s estate (head of the family) provided the following data:

Property:
Domestic shares of 2,000 shares inherited 6 years ago 8,000,000
House and lot, family home, located in Davao, inherited
2 years ago at a value of P 1,500,000 2,000,000
Jewelry items, in the Philippines at the time of death 400,000
Jewelry items kept in vault abroad 200,000
Bank deposit in a Philippine branch of a US bank 5,000,000
Interest from bank deposit after decedent’s death 25,000

Expenses and other charges:

Funeral expenses, abroad 80,000
Funeral expenses, Philippines 200,000
Judicial expenses, abroad 100,000
Judicial expenses, Philippines 50,000
Claims against the estate with notarized debt
Instrument issued in the Philippines 120,000
Donation to the Philippine government as provided in his will 250,000
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.
Solution:
Domestic shares 8,000,000
Family home 2,000,000
Jewelry 400,000
Jewelry, abroad 200,000
Bank deposit 5,000,000
Total gross estate 15,600,000

Allowable deductions:
Claims against the estate 120,000
TPU 250,000
VD 1,171,538
SD 5,000,000
FH 2,000,000
Total allowable deductions 8,541,538

Net estate 7,058,462

2. A resident decedent, head of the family, died leaving the following properties and obligations:
Cash in bank, 50%, donated mortis causa to National Govt; 50% to QC govt. 300,000
House and lot in Makati, Family home 1,500,000
Other real properties 15,000,000
Farm lot 825,000
Claims against an insolvent debtor 225,000
Transfer in contemplation of death (gratuitous) 1,250,000
Transfer passing under special power of appointment 750,000

Deductions claimed:
Funeral expenses 575,000
Judicial expenses 67,500
Donation mortis causa to QC government 150,000
Unpaid mortgage on the farm lot 75,000
Medical expenses (included in the funeral expenses
Incurred within the 1 year period with receipts) 225,000

The farm lot was inherited 5 ½ years ago by the decedent before his death with a value then of P
575,000 and a mortgage indebtedness of P 150,000.

REQUIRED: Determine the following:

1. The taxable net estate
2. The taxable net estate assuming the farm lot was inherited five (5) years ago.
Gross estate 19,100,000
Deductions 600,000
VD 96,859 (696,859)
Net estate before spec. deduction 18,403,141
SD (5,000,000)
FH (1,500,000)
Net estate 11,903,141

3. Juan died leaving a gross estate of P 12,800,000 including a land inherited from his uncle 3 ½ years
before his death and a car donated to him seven years before his death. The following data pertain to
the two properties:

Unpaid mortgage FMV upon receipt FMV upon death

Land P 100,000 P 1,800,000 P 1,250,000
Car 50,000 300,000 400,000

The decedent was able to pay ½ 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 but including actual funeral expenses of P 300,000 and medical
expenses of P 600,000) 1,200,000
 Standard deductions 1,500,000
Transfer to the govt. included above 300,000
Death benefits from employer under RA 4917 200,000
Family home (included above) 2,000,000

REQUIRED: Determine the following:

a. Vanishing deductions

b. The net taxable estate:

Solution:
Gross estate 12,800,000
Allowable deductions:
ELIT (1.2M – 300T – 600T) 300,000
Unpaid mortgage 50,000
TPU 300,000
RA 4917 200,000
VD 448,125
FH 2,000,000
SD 5,000,000 8,298,125
Net estate 4,501,875

VD:
Initial basis 1,250,000
Mortgage paid (50,000)
Initial value 1,200,000
Deduction:
1.2M/12.8M x 850,000 (79,688)
Final value 1,120,312
X rate 40%
VD 448,125

4. From the records of the estate of a citizen decedent who die in 2018:
Properties – land inherited from mother (during marriage) two (2) years before death;
Valued at P 15M when inherited 24,000,000
Other personal property owned before marriage 16,000,000
Other personal property acquired during marriage 5,000,000

Deductions claimed:
Casualty losses 500,000
Unpaid taxes 400,000
Claims against the estate 600,000
 Funeral expenses 300,000
Medical expenses, incurred and paid within one
Year before death 400,000
Unpaid medical expenses, incurred within one year
Before death 300,000
Judicial expenses 120,000

Required: Determine the following:

a. Net exclusive property of the decedent
b. net community property
c. Net taxable estate
Solution:

Exclusive Community Total

Land inherited 24,000,000
Personal property 16,000,000
before marriage
Personal property 5,000,000
during marriage
Gross estate 24,000,000 21,000,000 45,000,000
Allowable (11,600,000) - VD (1,500,000) (13,100,000)
deductions:
Net 12,400,000 19,500,000 31,900,000
Special
deductions:
Share of the SS 19,500,000/2 (9,750,000)
SD (5,000,000)
Taxable net estate 17,150,000

Vanishing Deduction
Initial value 15M
Deduction
15M/45M x 1.5M (500T)
Final value 14.5M
Vanishing rate 80%
VD 11,600,000
5. A nonresident alien, married, died in September 2018. He left the following:
• Conjugal properties, Philippines, P 5,000,000
• Exclusive properties, Philippines, P 2,000,000
• Conjugal properties, USA, P 10,000,000
• Exclusive properties, USA, P 5,000,000

The following deductions were claimed:

• Actual funeral expenses, P 1,250,000
• Judicial expenses, P 800,000
• Claims against the estate, P 1,725,000
• Transfer for public use, P 200,000
• Medical expenses, P 875,000

Included in the Philippine gross estate (conjugal) were the following:

• Domestic shares, 500,000
• Share in a partnership, 1,000,000
• Other tangible personal properties, 3,500,000

The Philippine exclusive properties were all tangible personal properties. These included a car,
which was inherited 3 ½ years before the present decedent’s death, and had a fair market value
of P 500,000.

Required: Determine the following:

a. Net exclusive property of the decedent
b. Net community property
c. Net taxable estate
d. Estate tax due.
Exclusive Conjugal Total
Properties 2,000,000 5,000,000 7,000,000
Deductions:
Ordinary ded.
(1,725,000 x 5M/15M) (575,000)
TPU (200,000)
VD (177,857)
Net estate before spec. ded. 1,622,143 4,425,000 6,047,143
Special deductions:
SD (500,000)
Share of the SS
(4,425,000/2) (2,212,500)
Net estate after special deduction 3,334,643

VD:
Initial value 500,000
Prop. Ded.
500T/7M x 775,000 55,357
Final value 444,643
 Vanishing rate 40%
VD 177,857

6. A resident alien, single died intestate on November 2, 2018. The following data were provided to you.
House and lot, USA (family home) P 20,000,000
Investment in stock, Philippines 8,000,000
Investment in stock, USA 10,000,000
Investment in bonds, USA (85% of the business of the USA
Corporation is in the Philippines) 7,000,000
Cash in bank, Philippines 3,000,000
Cash on hand, Philippines 500,000
Accounts receivable from a debtor who resides in USA
(fully uncollectible) 2,000,000
Vehicles in the Philippines 8,000,000
Actual funeral expenses 1,500,000
Judicial expenses 3,000,000
Unpaid Philippine income tax for income in 2017 1,200,000
Loss on December 31, 2018 due to theft 800,000
Devise to QC for children’s playground 700,000
Receivable under RA 4917 500,000
Medical expenses 5,000,000
Determine the following:
a. Net taxable estate
b. estate tax due
Solution:

Gross Estate 58,500,000

Allowable deductions (3,200,000)
Claims against insolvent person (2,000,000)
Family home (10,000,000)
SD (5,000,000)
Taxable net estate 38,300,000
Tax due (6%) 2,298,000

7. Pedro Cruz died intestate on September 30, 2018. He was survived by his wife and his two children.
He left the following properties:
• Land (1,000 sq. meter) inherited from his father 15 months before Pedro’s death. Fair market
value per tax declaration at the time of Pedro’s death, P 20,000,000; Zonal value at the time of
Pedro’s death, P 30,000 per sq. m.
• House and lot (Family home) acquired during the marriage, FMV, P 50,000,000.
• Other tangible personal properties (mode of acquisition unknown), FMV, P 22,000,000.

The following were considered as deductions from the gross estate:

• Actual funeral expenses, P 480,000
• Judicial expenses, P 1,000,000
 • Other claims against conjugal properties, P 5,000,000
• Unpaid taxes, P 1,200,000
• Claims against insolvent person, P 500,000
• Medical expenses, P 1,200,000

The estate of the decedent’s father paid the estate tax on the land at the fair market value of P
25,000,000. During the marriage, Pedro mortgaged the inherited land for P 7,000,000 for the benefit of
the family. He paid P 3,500,000 before the died.

Determine the following:

a. Vanishing deduction
b. net taxable estate
c. estate tax due
Exclusive Conjugal Total
Land 30,000,000
Family home 50,000,000
Others 20,000,000
Claims against 500,000
insolvent person
Gross Estate 30,000,000 72,500,000 102,500,000
Allowable
deduction:
Claims against 5,000,000
conjugal properties
Unpaid taxes 1,200,000
Claims against 500,000
insolvent person
Unpaid mortgage 3,500,000
VD 11,886,439
Net estate before 14,631.561 65,800,000 80,431,561
special ded.
FH 10,000,000
SD 5,000,000
Share of the SS 32,900,000
(65,800,000/2)
Taxable net estate 32,531,561
Estate tax 1,951,894

Vanishing Deduction
Initial basis 20,000,000
Assumed mortgage (3,500,000)
Initial value 16,500,000
Deduction
16.5M/102.5M x 10.2M (1,641,951)
 Final value 14,858,049
Vanishing rate 80%
VD 11,886,439

8. The administrator of a decedent (single) died with the following information:

Net estate before special deduction, Philippines 6,000,000
Net estate, France 4,000,000
Estate tax paid, France 200,000

Required:
a. Assume the decedent was a resident citizen (single), determine the estate tax payable.
b. Assume the decedent was a nonresident alien (single), determine the estate tax payable.

A.
Net estate, world 10,000,000
SD (5,000,000)
Taxable net estate 5,000,000
Estate tax 300,000
Tax credit 200,000
Tax payable 100,000
Limitation:
4M/5M x 300,000 = 240,000 vs. 200,000

B. Net Estate Phil 6,000,000

SD (500,000)
Taxable net estate 5,500,000
Tax due 330,000

9. A Filipino decedent, residing in US died in 2018 leaving the following:

Net taxable estate, Philippines P 10,000,000
Net taxable estate, Canada 8,000,000
Net taxable estate, USA 2,000,000
Estate tax paid in USA 90,000
Estate tax paid in Canada 520,000

Required: Determine the estate tax payable.

 Net estate, world 20,000,000
SD (5,000,000)
Taxable net estate 15,000,000
Estate tax 900,000
Tax credit (570,000)
Tax payable 330,000

Limitation A:
Canada: 8M/15M x 900,000 = 480,000 vs. 520,000 = 480,000
USA: 2M/15M x 900T = 120,000 vs. 90,000 = 90,000
Total = 570,000

Limitation B:
8M + 2M/ 15M x 900T = 600,000 vs. (90,000 + 520,000) = 600,000

10. A resident alien decedent died in 2018 leaving the following:

Net estate, Philippines P 10,000,000
Net taxable estate, Singapore 5,000,000
Net taxable estate, China 3,000,000
Net taxable estate, Japan 2,000,000
Estate tax paid in Singapore 200,000
Estate tax paid in China -
Estate tax paid in Japan 100,000

Required: Determine the estate tax payable.

Net estate, world 20,000,000
SD (5,000,000)
Taxable net estate 15,000,000
Estate tax 900,000
Tax credit 300,000
Payable 600,000

Limitation A:
Sing: 5M/15M x 900T = 300,000 vs. 200,000 = 200,000
China: 3M/15M x 900T = 180,000 vs. 0 = 0
Japan: 2M/15M x 900T = 120,000 vs. 100,000 = 100,000
Total 300,000

Limitation B:
10M/15M x 900T = 600,000 vs. 300,000 = 300,000