CHAPTER 3 – DEDUCTIONS FROM THE GROSS ESTATE

PROBLEM 1
Included in
Determine the amount included in the Gross estate and the amount allowed as Allowable
the Gross
deduction deduction
Estate
Y, a Filipino resident, died on November 5, 2021, and his estate incurred losses:
First loss: From fire on February 2, 2021 of improvement on his property, not
compensated by insurance, P500,000
Second loss: From flood on February 25, 2022 of household furniture also not
compensated by insurance, P300,000
Third loss: From sale on February 20, 2022 of a property included in the gross estate,
P100,000
Fourth loss: From theft on April 5, 2022, P300,000, 70% compensated by insurance
Fifth loss: From robbery on May 5, 2022, P150,000, claimed as deduction from gross
income

PROBLEM 2

The heirs identified the following obligations of Mr. Natoy, a bachelor, who died on September 1, 2020:

Personal loan condoned by the creditor 400,000.00

Balance on the purchase price of a car, paid by the heirs
on September 28, 2020 200,000.00
Prescribed promissory note 100,000.00
Bank loan 300,000.00
Interest on bank loan, P30,000 accrued as of September 1, 2020 50,000.00

Compute the deductible claims against the estate?

PROBLEM 3

The executor of Mr. X compiled the following obligations:

Obligation of the exclusive properties of Mrs. X 500,000.00

Unpaid funeral expense 100,000.00

Unpaid medical expense 200,000.00

Obligations accruing after death 150,000.00

Obligations of family before decedent's death 300,000.00

Obligations of the separate properties of Mr. X 600,000.00

Unpaid mortgage on family properties 1,000,000.00

Compute the deductible claims against the estate?

PROBLEM 4

You were appointed by court as an administrator of the Estate of N.A Meet died on March 15, 2020. The following unpaid
taxes were presented to you:

Unpaid real estate tax for the second, third and fourth quarters of 2020 90,000.00
 Unpaid tax on the income received by the estate of N.A Meet 20,000.00

Estate tax on the Estate of N.A Meet 50,000.00

Unpaid tax on income received by N.A Meet for the period January 1 to March 14, 2020 3,000.00

What is the deductible unpaid taxes?

PROBLEM 5

A decedent had a family home worth P1,500,000 which was encumbered by a mortgage. Details about the mortgage
were as follows:
Original amount
900,000.00
Less: Paid before death 200,000.00
Paid after death 400,000.00
Present balance 300,000.00

The family home is a common property of the decedent and his spouse. The proceeds of the mortgage were used for the
family.

Compute the following:

1. Amount included in the Gross estate?

2. Allowable deduction for "Unpaid mortgage"?

PROBLEM 6

During the marriage, Mr. Y inherited a commercial lot with a zonal value of P4,000,000. When one of his children got sick,
he mortgaged the property for P2,000,000. He was able to pay P400,000 until his death.

Compute the following:

1. Amount included in the Gross estate?

2. Allowable deduction for "Unpaid mortgage"?

PROBLEM 7

Mr. kugar died with a total receivable of P200,000 from Mr. Kumag. The latter was adjudged bankrupt by the court with
only P800,000 total assets but with P2,000,000 in total liabilities.

Compute the following:

1. Amount included in the Gross estate?

2. Deductible claims against insolvent person?

3. Assuming Mr. Kumag is fully insolvent, what is the allowable deduction from the gross estate?

PROBLEM 8

Escolastica died with a claim against Juanico. Juanico has properties worth P250,000 and obligations of P350,000.
Included in the obligations of Juanico are P50,000 unpaid taxes owed to the Government of the Philippines and P90,000
payable to Ms. Escolastica.

The deductible claim against insolvent debtors is?

PROBLEM 9

Mr. A devised in his will the following properties:

Commercial land, to a public school 2,000,000.00

 Land and building, to a government-owned and
controlled corporation (GOCC) 3,000,000.00
Total 5,000,000.00

What is the allowable deductions under "transfer for public use"?

PROBLEM 10

Decedent was a citizen of the Philippines who was single at the time of death. Compute the vanishing deduction based on
the following information that were made available:

Properties inherited two and half years before death:

Located outside the Philippines 300,000

Located in the Philippines

FMV, when inherited 650,000

FMV, time of death 700,000

Unpaid mortgage on the property when inherited 150,000

Unpaid mortgage on the property at the time of death 100,000

Property acquired through own labor 2,000,000

Losses, indebtedness, taxes, etc. (excluding the unpaid mortgage of P100,000) 200,000

Transfer for public use 90,000

Medical expenses 100,000

PROBLEM 11

For the year 2020, determine the amount to be included in the GE, decedent's interest and the FH deduction
Gross estate Decedent's interest FH deduction

1. FH is conjugal property, P13,000,000

2. FH is conjugal property, P25,000,000

3. FH is exclusive property, 12,000,000

4. FH is exclusive property, P8,000,000

5. FH is partly common, partly exclusive

Exclusive lot - P5,000,000

Conjugal house - P16,000,000

PROBLEM 12

A non-resident alien decedent, single, died on January 1, 2018 left the following properties
Car, Manila (inherited 4 years before he died,
FMV, date of inheritance was P1,700,000) 1,500,000.00
Car, USA 2,600,000.00
Shares of stock, USA 900,000.00
Shares of stock, Manila 800,000.00
House and lot, USA 4,800,000.00
Bank deposit, PNB-Manila 1,000,000.00
Other tangible personal properties, Manila 500,000.00
 The administrator claimed the following deductions:
Actual funeral expenses 40,000.00
Judicial expenses 30,000.00
Loss of certain tangible personal properties 25,000.00
Claims against the estate 20,000.00
Unpaid taxes, accrued before death 15,000.00
Claims against insolvent person 10,000.00
Transfer for public use 10,000.00
Medical expenses 50,000.00

How much was the total deductions from Philippine gross estate in connection with Philippine estate tax?