PRACTICE EXERCISES

ON
ESTATE TAX
QUESTION No. 1
Mr. Juan Basco, filipino, married and resident of Caloocan City
died intestate on April 5 2018. He was survived by his wife
Fidela and two children.
He left the following estate:
Exclusive real estate:
Land, 500 Sq. M. with fair market value of P1,000,000.
Land, 200 Sq. M. with fair market value of P500,000.
This land, 200 Sq. M. was donated by the decedent to his brother,
Jose Basco, the donation to take effect upon the death of the
donor. The donor’s taxes were not paid.

Continued…
Conjugal real estate:
Residential house and lot (family home) with fair market value
of P5,000,000.
This real estate is mortgaged for P120,000 in the bank and at the
time of death the mortgage is unpaid.
Conjugal personal properties:
Miscellaneous personal properties with FMV of P800,000.
Time deposit in bank, P50,000.
The time deposit is a joint time deposit. The co-depositor
is the decedent’s brother, Jose Basco.
The actual funeral expenses amounted to P180,000. The judicial
expenses amounted to P60,000.

COMPUTE: Estate tax on the Intestate Estate of Juan Basco.

Solutions: No. 1
Conjugal Exclusive Total  
Family home P5,000,000  

.
Miscellaneous personal properties
Time deposit (P50,000 x ½)
800,000
25,000
 
 
Real estate (P1,000,000 + 500,000) ________ 1,500,000  
Gross estate 5,825,000 1,500,000 7,325,000  
Deductions:  
Ordinary -  
Unpaid mortgage P 120,000  
Total 120,000 (120,000)
Special:
Family home (2,500,000)
Standard deductions (5,000,000)
Net estate -
Share of surviving spouse (5,825,000 –
120,000) x 1/2
2,852,500
Net taxable estate -_______
Estate tax due 0
 QUESTION No. 2
• Mr. MatiasPunla, filipino, resident of Quezon City died on
December 31, 2015. He was survived by his wife, and three (3)
children. An inventory of his estate as of December 31 shows
the following:
• Real estate:
Real estate:
Commercial land, 400 sq.m. with FMV of P 1,400,000
Residential land, 500 sq.m. with FMV of 250,000
Residential house, with FMV of 1,300,000
Fishpond, 2 hectares with FMV of 280,000
Personal property:
Motor vehicle, with FMV of 160,000
Time deposit with the PNB 90,000
Other personal properties 800,000
Continued…
QUESTION No. 2
The commercial land, 400 sq.m. is the exclusive property of the
decedent and is pledged as a collateral to a mortgage loan from the
PNB obtained on April 1, 2015 in the total amount of P200,000 at
18% per annum. The loan and accrued interest are not paid at the
date of death of the decedent. The rest of the estate are conjugal.
The residential land and the residential house (which pertains to
the family home) are mortgaged at the Metrobank for P300,000.
The unpaid balance of the mortgage loan on December 31 per
certificate of the bank is P220,000. The actual funeral expense is
P55,000 and the judicial expense is P15,000.
 
REQUIRED: Prepare a statement showing the gross estate and
deductions and the amount subject to estate tax as of December 31.
 Solutions: No. 2
Conjugal Exclusive Total
Commercial land 1,400,000
Family home (250,000 + 1,300,000) 1,550,000
Fishpond 280,000
Motor vehicle 160,000
Time deposit, PNB 90,000
Other personal properties 800,000 ________
Total 2,880,000 1,400,000 4,280,000
Deductions:
Ordinary -
Unpaid mortgage, commercial land 200,000
Claim against the estate(200,000 x
27,000
18% x 9/12)
Unpaid mortgage, family home 220,000
Funeral expenses 55,000
Judicial expenses 15,000 (517,000)

Continued…
Solutions: No. 2
Conjugal Exclusive Total
Special -
Standard deductions (1,000,000)

Family home (1,550,000 x ½) ( 775,000)

Net estate 1,988,000

Less: Share of surviving spouse 1,181,500

(2,880,000 – 517,000) x 1/2

Net taxable estate 806,500

Tax on P500,000 39,520

306,500 x 8% 24,520

Estate tax due 15,000

QUESTION No. 3
Wilson died in a car accident. He died intestate on January 10, 2018.
Exclusive properties of the wife -
Car P 400,000
Lot in Quezon City 2,000,000
Other real and personal properties 800,000
Community properties -
Cash on hand and in bank 500,000
Receivable as prize in a raffle contest sponsored by PICPA 50,000
Receivable from an insurance company where his son, Gino was designated in
the policy as the revocable beneficiary 150,000
House and lot in Sta. Rosa, Laguna, used as family home 1,900,000
Other personal properties 800,000
Other real properties 10,500,000

Funeral expenses 195,000

Judicial expenses 15,000
Claims against the estate, not notarized 50,000
Claims against insolvent persons 30,000
Unpaid mortgage on lot in Quezon City 200,000
Unpaid mortgage on house and lot in Sta. Rosa, Laguna 350,000
Accrued income taxes 35,000
Income tax on income earned from October 11 to December 31, 2015 7,500

REQUIRED: Compute the estate tax due.

Solution No. 3
Community properties: Exclusive Community Total
Cash 500,000
Prize in a raffle 50,000
Proceeds of insurance 150,000
House and lot, family home 1,900,000
Other personal properties 800,000
Other real properties 10,500,000
Claims against insolvent persons 30,000
Gross estate 13,930,000
13,930,000
Less: Deductions
Ordinary
Bad debts 30,000
Unpaid mortgage, Laguna 350,000
Unpaid taxes 35,000 ( 415,000

CONTINUED
Solution No. 3
Community properties: Exclusive Community Total
Special -
Family home (1,900,000/2) (950,000)
Standard deduction (5,000,000)
Net estate 7,565,000
Less: Share of surviving spouse
Gross conjugal 13,930,000
Less: Community deductions 415,000
Net 13,515,000
Share (13,515,000 x 1/2) 6,757,500
Net estate subject to tax 807,500
Estate Tax Due 48,450
• THANK YOU!
 QUESTION No. 4
Minerva, single but head of family, a resident of Cagayan de Oro
City, died, leaving the following properties and obligations:
House and lot in Cagayan de Oro, used as family home 1,500,000

House in Manila 2,200,000

Proceeds from Philamlife insurance, payable to her mother as the irrevocable 300,000
beneficiary
Share of stock of E.T. Company, 5,000 shares, par value P80 per share. The shares were traded in
the stock exchange at the time of death as follows: Highest-P110; Lowest-P105

The executor had claimed the following as deductions:

Funeral expenses 135,000
Judicial expenses 25,000
Legacy to the Philippine National Red Cross 15,000
Legacy to Xavier University for scholarship 45,000
Payable to Verba Corporation, notarized 50,000
Bequests to the poor as provided in her will 150,000
Amount received from employer as a consequence of the death of Minerva 80,000

REQUIRED: Compute the estate tax due.

SOLUTION No. 4
Exclusive Community Total
Family home 1,500,000
House in Manila 2,200,000
Shares of stock (110+105)/2 x 5,000 537,500
Amount received from employer 80,000
Gross estate 4,317,500
Less: Deductions
Ordinary
Funeral expenses 135,000
Judicial expenses 25,000
Legacy to Red Cross 15,000
Claims against the estate 50,000 ( 225,000)
Special
Family home, limit 1,000,000
Standard deduction 1,000,000
Received from employer (RA 4917) 80,000

Net taxable estate

Tax on P2,000,000 135,000
12,500 x 11% 1,375
Estate tax 136,375
QUESTION No. 5
Jerry, widower, physician, an employee of Bicol Medical Center, died leaving
the following properties:
Cash P135,000
Car 80,000
House and lot (not family home) 950,000
Medical equipment 450,000
Land in Camarines Sur, assessed value, P390,000 465,000

The following deductions were claimed:

Cremation expenses P150,000

Cost of coffin 20,000
Expenses of the wake 60,000
Cost of burial plot and tombstone 22,000
Accountant’s fees 5,000
Loans, notarized 80,000
Accrued taxes on salary 23,000
Hospitalization expenses 15,000

Continued…
QUESTION No. 5
The land was inherited by Jerry from his wife who died 2 ½
years prior to his death. At the time of her death, the property
was valued at P420,000 and subject to a mortgage of P100,000
of which P30,000 was paid until his death.
The car was borrowed from a friend and was used by him
without returning it until his death. It was registered in the
name of the friend.
• The entire accrued taxes on salary were withheld by the
employer and remitted to the Bureau of Internal Revenue.

• REQUIRED: Compute the following:

Gross estate
Net estate subject to tax and estate tax due.
Solution No. 5
Community properties: Exclusive Community Total
Cash 135,000
House and lot 950,000
Medical equipment 450,000
Land in Camarines Sur 465,000
Gross estate 2,000,000
Less: Deductions
Ordinary
Funeral expenses
Cremation 150,000
Cost of coffin 20,000
Expenses of the wake 60,000
Burial plot and tombstone 22,000

Total 252,000
Limit (2,000,000 x 5%) 100,000

Continued…
Solution No. 5
Community properties: Exclusive Community Total
Judicial expenses   5,000
Loans 80,000
 
Unpaid mortgage (100,000 – 30,000) 70,000
Vanishing deduction (Schedule 1)   204,165 ( 459,165)
Special  
Standard deduction   (1,000,000)
Medical expenses   ( 15,000)
Net estate subject to tax   525,835
Tax on P500,000   P15,000.00
25,835 x 8%   2,066.80
Estate tax   17,066.80

Continued…
Solution No. 5
Community properties: Exclusive Community Total
Schedule 1: Vanishing Deduction
P420,000
Lower Value
30,000
Less: Mortgage paid
390,000
Initial Basis
Less: Deduction (pro-rated)
Funeral expenses 100,000
Judicial expenses 5,000
Loans 80,000
Unpaid mortgage 70,000
Total 255,000
(390/2,000) x 255,000 49,725

Base 340,275

Rate 60%

Vanishing deduction 204,165

QUESTION No. 6
Mr. Lopez, a citizen and resident of the Philippines died. He was
survived by his wife and two legitimate sons. He left the following
estate with the corresponding fair market value as of date of death:
Conjugal real estate (family home) P 4,600,000
Conjugal personal properties 400,000
Exclusive estate which Mr. Lopez inherited from his deceased
father who died 2 ½ years ago:
a. 400 square meters land 800,000
b. Commercial building 500,000
c. Motor vehicle, car 900,000

• Two years and four months prior to his death, the 400 square
meters land (a) and the commercial building (b) had fair market
value of P600,000 each and was mortgaged at P200,000. This
mortgage was claimed as deduction from the gross estate of the
deceased father and was paid by Mr. Lopez during his lifetime.
The fair market value of the motor vehicle, car as of both date
of death is the same.
Continued..
QUESTION No. 6
The following were claimed as deductions from the
gross estate of Mr. Lopez:
Funeral expenses P 300,000
Judicial expenses 200,000
Mortgage payable (family home) 150,000

REQUIRED: Indicate the correct amount of:

Gross estate
Net share of surviving spouse
Property previously taxed
Solution No. 6
Conjugal Exclusive Total

Family home 4,600,000

Personal properties 400,000
Land 800,000
Building 500,000
Car ________ 900,000
Gross estate 5,000,000 2,200,000 7,200,000
Less: Deductions
Ordinary
Funeral expenses (maximum) 200,000
Judicial expenses 200,000

Unpaid mortgage, family home 150,000

Vanishing deduction _______ 997,500

Total 550,000 997,500 (1,547,500)

Continued…
Solution No. 6
Conjugal Exclusive Total
Special
Family home, maximum (1,000,000)
Standard deduction (1,000,000)
Net estate 3,652,500
Less: Share of surviving spouse
2,225,000
(5,000,000 – 550,000) x ½
Net estate subject to tax 1,427.500

Continued…
Solution No. 6
Schedule 1: Computation of Vanishing Deduction / Property
previously taxed
Lower value:
Land P 600,000
Commercial building 500,000
Car 900,000
Total 2,000,000
Less: Mortgage paid 200,000
Initial basis 1,800,000
Less: Deductions (pro-rated) (1,800,000/7,200,000) x P 550,000 137,500
Base 1,662,500
Rate (more than 2 years, not more than 3 years) 60%
Vanishing deduction 997,500
END