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TagsInheritance Will And Testament Taxes Estate Tax In The United States Tax Deduction
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Table of Contents
                            TAXATION Atty. Macmod
	Handout No. 002
			Unpaid mortgage
			FMV upon receipt
			FMV upon death
		ESTATE TAX Page 10
			Zonal Value
Document Text Contents
Page 2


2) Decedent married
Gross estate
Exclusive of the decedent P xx
Common property of the couple xx P xx
Allowable deductions
From exclusive property xx
From common property xx xx
Net estate before share of surviving spouse xx
Less: Share of surviving spouse xx
Net estate before special deductions xx
Less: Deduction for family home/medical exp./s.deductions xx
Taxable net estate P xx
Estate tax due (0%-20%) P xx
*Computation of the share of surviving spouse
Gross common property of the H & W P xx
Less: Deductions from common property xx
Net xx
Divided by 2
Share of the surviving spouse P xx

3) Estate tax due P xx
*Deduct estate tax credit for the tax paid abroad xx
Estate tax still due P xx
*Formula for estate tax credit:
Under Limitation (used it only 1 foreign country is involved: By country limitation.)

Actual E.T. paid to FC P xx
Or TNE,FC/TNE, W x E.T. due in the Phil. xx
Allowable tax credit (whichever is lower)
For the foreign country P xx
Limitation B: (by total, used if 2 or more foreign countries
Are involved together with limitation A)
Total actual E.T. paid to all FC’s P xx
Or TNE, all FC’s/TNE, W x E.T. due in Phil. xx
Allowable tax credit (whichever is lower) P xx

Note: If there are 2 or more FC’s both limitations (A &B) should be used, then get whichever is lower between the
two as the final allowable tax credit.

A. Under Sections 85 & 86, NIRC

1. Capital or exclusive property of the surviving spouse.
2. Properties outside the Philippines of a Non-Resident Alien decedent
3. Intangible personal property in the Philippines of a Non-Resident alien under the Reciprocity Law.

B. Under Section 87, NIRC
1. The merger of usufruct in the owner of the naked title.
2. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the

3. The transmission from the first heir or legatee in favor of another beneficiary in accordance with the

desire of the predecessor-similar to transfers passing S.P.A.
4. All bequests, devises, legacies, or transfers to social welfare, cultural, charitable institutions, no part or the

net income of which insures to the benefit of any individual provided that not more than 30% of the said
bequests, devises, legacies, or transfers shall be used by each institution for administrative purposes:

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C. Under Special Laws
1. Benefits from GSIS by reason of Death
2. Benefits form SSS by reason of Death
3. Benefits from Philippines and US government for war damages
4. Benefits from US Veteran Administration
5. Retirement benefits of officials/employees of private firms
6. Life insurance proceeds on insurance policy upon his own life, where the beneficiary is a third person, and

the designation is irrevocable
7. Life insurance proceeds on insurance policy (group insurance) taken out by the employer on the

employees’ life regardless of who is the beneficiary and the designation.

1. What is a notice of death?

It is a written notice from the executor, administrator, or any of the legal heirs, as the case may be,
informing the Commissioner of the Internal Revenue about the decedent’s death.

2. When should the notice of death of death be filed?
Within two (2) months after the decedent’s death or within 2 months after the executor or
administrator shall have qualified.

3. It is required in all cases of death?
No, only where the gross value of the estate exceeds P20,000

4. Is an estate tax return required to be filed in all cases?
No, only where the gross value of the estate exceeds P200,000

5. How should the return be filed? What information should be contained?
It shall be filed under oath and in duplicate. It should show the following:

a. The value of the gross estate at the time of the decedent’s death, or in case of non-resident alien
decedent, that part of his gross estate in the Philippines:
b. The allowable deductions under Section 86:
c. Such other information as may be necessary to establish the correct tax due.

6. What is the additional requirement if the gross estate exceeds P2,000.000?
The estate tax return shall be accompanied by a statement showing:
a. Itemized assets of the decedent with their corresponding gross value at the time of his death, or in
case of non-resident alien decedent, that part of his gross estate in the Philippines:
b. Itemized deductions from the gross estate allowed under Section 86:
c. The amount of tax due whether paid or still due and outstanding duly certified by a CPA

7. What is the time for filing of the estate tax return? It is extendable?
It shall be filed within six (6) months after the decedent’s death. In meritorious cases, the BIR

Commissioner may give a reasonable extension of the time, not exceeding 30 days.
8. Where and to whom it should be filed?

The return shall be filed with the RDO, collection agent or duly authorized treasurer of the
municipality (or city) in which the decedent was domiciled at the time of his death, or if there be no
legal resident in the Philippines, the with the Office of the BIR Commissioner.

9. When should the estate tax be paid?
At the time the return is filed by the executor, administrator or the heirs. (Pay as you file system)

10. May the time for payment be extended?
Yes, in meritorious cases, if payment of such tax should cause undue hardship upon the estate or any
of his heirs, the BIR Commissioner may extend the time as follows:

a. If the estate is settled through the courts (juridically) – 5years.
b. If the estate is settled through extra-juridically – 2 years.

11. Who is liable to pay the estate tax?
It shall be paid by the executor or administrator before delivery to any beneficiary of his distributive
share of the estate. Such beneficiary shall be subsidiary liable for the payment of such portion of the
estate tax as his distributive share bears to the value of the total net estate.
12. What if there is no executor or administrator appointed or qualified?

Any person in actual or constructive possession of any property of the decedent.
13. Is the tax a personal liability of the administrator or executor?

Yes, under Section 85 of NIRC

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14. May he be discharged from such personal liability? How?
Yes, by making a written application to the BIR Commissioner for the determination of the estate tax
and his discharge from personal liability. He shall thereafter be notified by the BIR Commissioner
and upon payment of the amount of which he is notified, he shall be discharged from such personal
liability and shall be entitled to a receipt or writing showing such discharge.

15. May a judge allow the execution or administrator to deliver a distributive share to an heir at anytime?
No, unless the executor or administrator can show a certification from the BIR that the estate tax has
been paid.

16. What is the duty of a bank upon knowing of the death of a person who maintained a joint account with
It shall not allow any withdrawal by a surviving depositor from the said joint account unless the BIR
Commissioner has certified that the estate tax has been paid. However, the administrator of the estate
or any one of the heirs of the decedent may w/draw without such certificate an amount not exceeding
P20,000.00 upon authorization by the BIR Commissioner.

A. State the amount of allowable deductions from the gross estate in each of the following:

_______________ 1. Gross estate of P500, 000 and funeral expenses of P75, 000.
_______________ 2. Gross estate of P3,000,000 and actual funeral expenses of P90,000 ½ of which was
paid by friends.

_______________ 3. Receivable of P75,000 from an insolvent debtor whose ratio of assets to liabilities is 1:3
_______________ 4. Hospitalization expenses until death: P3,000,000, 50% incurred 1 yr. Prior to death but

only ½ of which is supported by receipts.
_______________ 5. Expenses for the probate of a will including P10,000 facilitation fee for a court
personnel , P100,000: amount paid to broker to convert some property in the estate to

cash as authorized by the court P50,000.
_______________ 6. P75,000 indebtedness with interest at 20% p.a. contracted 3months before death, not
notarized and a deed of mortgage P20,000, contracted 6 months before death at 24% p.a.
_______________ 7. P100,000 note payable notarized earning 18% p.a. died September 30, 2000. Decedent

dated March 15, 2001.
_______________ 8. A conjugal family house with FMV of P900,000 and exclusive family lot worth
P500,00 owned by the decedent.
_______________ 9. Loss by fire of building worth P1M 5 months after decedent’s death, 75% compensated
by insurance. Estate was settled in the 6th month.
_______________ 10. Funeral expenses of a NRA decedent in the Phil. P85,000 gross estate worth
P2,000.000 40% from Philippines.
_______________ 11. Transfer for public purposes made inter vivos, P1M.
_______________ 12. A land worth P1M when inherited 4 ½ years ago by the decedent from his father with

mortgage of P200,000, 60% of which was paid by the decedent before he died . FMV
of land upon deathP1,500,000. Gross estate is P8M and deductions reached P750,000

40% of which represents ELIT & TPP. Compute for VD only.
________________ 13. Loss of car by theft, occurring 8 months after the decedent death, value of car

P300,000, 60% to be paid by insurance.
________________ 14. Transfer for public purposes donated by the decedent to Manila City Hall (shown in

the will) P200,000.
________________ 15. Unpaid mortgage of P200,000 on a P1,1000,000 house shown in the gross estate

net of the P200,000 mortgaged.
________________ 16. The decedent’s administrator claims the following funeral expenses
Expenses of internment P40,000

Cost of the burial lot (paid ½ paid by friends & relatives, 50%) 20,000
Fees for performance of rites incident to internment 10,000

Mourning clothing of widow & unmarried minor children 5,000
Expenses during the wake before burial (paid by uncle, 25%) 20,000
Obituary notice

Card of thanks 2,0

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The allowable funeral expenses assuming the decedent’s gross estate is:
a. P2,000,000 b. P1,500,000

B.Determine whether the following properties are conjugal/community or exclusive:

1. Property acquired before marriage _______________ _______________
2. Property acquired during marriage _______________ _______________

a. By onerous Title _______________ _______________
b. By gratuitous Title _______________ _______________

3. Income from 2-a earned during marriage _______________ _______________
4. Income from 2-b earned during marriage _______________ _______________

5. Other income of the couple earned during marriage _______________ _______________
6. Property acquired during marriage thru exchange:
Using exclusive prop. _______________ _______________
Using common property _______________ _______________
7. Jewelry acquired during marriage
a. Using exclusive funds _______________ _______________
b. Using common funds _______________ _______________
8. Property for personal & exclusive use
of either husband or wife _______________ _______________

C.Multiple Choice
1. It refers to a mode of transferring & acquiring properties left by the decedent.

a. Estate transfer b. Succession c. Donation d. Execution of a will
2. The property, rights & obligations of a person which are not extinguished by his death & those which

have accrued thereto since the opening of succession.
a. Inheritance b. Capital c. Estate d. Devisee

3. The estate tax accrues from the moment of:
a. The fixing of notice of death c. The death of the decedent
b. Expiration of a months after death d. The filing of estate tax return

4. The gift tax paid on a donation mortis causa, if any:
a. Exempts the property from estate tax.
b. Has no effect since the gift will be subject to another gift tax.
c. Shall form as a tax credit to be deducted from the estate tax due.
d. Is invalid & the tax will not be credited at all.

5. Which shall not form part of the gross estate of a decedent:
a. Intangible personal property of non-resident alien decedent without reciprocity law
b. Revocable transfer
c. Transfer passing special power of appointment
d. Life insurance where the executor is the beneficiary & it is irrevocable

6. All of the following are considered intangible in the Philippines, except:
a. Franchise which must be exercised in the Phil.
b. Shares obligations or bonds which issued by any corporation or sociedad anonime organized or
constituted in the Philippines in accordance with it laws.
c. Shares, obligations or bonds by any foreign corporation 75%.of the business of which is located
in the Philippines.
d. Shares, obligations of bonds issued by any foreign corporation of such shares, obligations or
bonds have acquired a business situs in the Philippines.
e. Shares or rights in any partnership, business or industry established in the Philippines.

7. A person who inherits personal property thru a will:
a. Devisee b. Legatee c. Heir d. Successor

8. A person who inherits real property thru a will:
a. Devisee b. Legatee c. Heir d. Successor

9. Succession wherein the decedent did not leave any will:
a. Voluntary succession b. Legal succession c. Mixed succession d. Testamentary succession

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10. Which statement is false about succession:
a. The successor inherits all the transmissible property of a decedent including his liabilities.
b. The successor can be made liable for the obligations of the decedent beyond the value of the asset

he received.
c. In succession, fruits and credits maturing after the death of the decedent pass to the heirs even if

they were not subjected to estate tax.
d. In succession, the successor can refuse the inheritance.

11. One of statement is false:
a. Estate tax is an excise tax.
b. Estate tax is transfer tax on donation mortis causa.
c. The object of estate tax is to tax the transfer of the property from the dead to the living.
d. Estate tax is synonymous to inheritance tax.

12. Which statement is wrong:
a. Claims against insolvent person should be included in the gross estate even if uncollectible.
b. Transfer passing under special power of appointment is excluded from the gross estate.
c. Revocable transfers are includible whether or not the right to revoke is exercised.
d. Transfer contemplation of death for adequate consideration is still includible in the gross estate.

13. Which statement is incorrect about funeral expenses allowed:
a. The amount allowed is 5% of the gross estate or the actual expenses which ever is lower.
b. The actual expenses must be paid from the estate or chargeable to it.
c. The allowed deduction can never be more than the actual expenses paid.
d. The expenses necessary for burial even if paid by friends are also allowed as deduction.

14. Which statement is incorrect about claims against insolvent persons?
a. They must be included in the gross estate even if uncollectible.
b. They must be duly notarized.
c. The deduction is only the uncollectible portion.
d. The insolvency of the debtor must be established.

15. One of the following is incorrect:
a. Taxes to be deductible must accrue before the decedent’s death.
b. Losses must occur also before the decedent’s death to be deductible.
c. Medical Expenses must be incurred within 1 year prior to the decedent’s death.
d. Transfer for public purposes order to be deducted must be mortis causa in character.

16. Which statement is false about vanishing deduction:
a. It pertains to a property presently found in the gross estate.
b. The property must be previously subjected to a transfer tax or income tax.
c. The property was received by the decedent within 5 years prior to his death.
d. The property must be located in the Philippines.

17. A donation inter vivos but due to thought of death is;
a. Subject to donor’s tax
b. Subject to estate tax if for inadequate consideration
c. Subject to estate tax a bonafide transfer
d. Subject to inheritance tax

18. In filing the estate tax return , a CPA certificate is required when:
a. Gross estate exceeds P2,000,000
b. Gross estate reaches P20,000
c. Gross estate exceeds P200,000
d. Gross estate reaches P2,000,000

19. A died leaving a house and lot to B March 31, 2000 which was questioned by C and it is under litigation but
the parties have stated an extra-judicial settlement. The last day for filing the estate tax return is

a. April 30, 2001 b. April 30, 2003 c. September 30, 2000 d. October 30, 2000
20. The last day for the payment of estate tax may be extended, until;

a. March 21, 2002
b. September 30, 2002
c. September 30, 2005
d. April 30, 2002

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21. The taxpayer in estate tax is:

a. The decedent
b. The deceased person’s estate
c. The heirs or succession
d. The administrator or executor

22. The payment of estate tax is a personal liability of
a. The heirs or successors
b. The administrator in testamentary succession
c. The executor in voluntary succession
d. The estate itself

23. 1st statement: The court may authorize the executor or administrator if in its sound discretion it believes
that the heir badly needs his share.

2nd statement: The administrator or any of the heirs may however upon authorization of BIR withdraw
from the decedent’s bank P10,000 without required certification that the estate tax has been paid.

a. True, True b. False, False c. True, False d. False, True
24. 1st statement: A died giving B power to appoint a person who will inherit A’s house and lot. B, however
can only choose among C, D and F. B decided to transfer the property to C, in B’s will when

he was old already. The transfer from B to C subject to estate tax.
2nd statement: During A’s lifetime, he decided to give B as gift his (A) car subject to the condition that if B
does not become a CPA within 3 years. A shall revoke the transfer. In the second year
however, A died. The car no longer form part of A’s gross estate.

a. True, True b. False, False c. True, False d. False, True
25. A died leaving a farm land, In his will, he transferred the ownership thereof to B but subject to the
condition that C will have the right to use the land for a period of ten years (Usufruct) in the seventh year,
however, C died and C’s will be surrendered his over the land to B.

a. The transfer is subject to donor’s tax
b. The transfer is subject to estate tax
c. The transfer is both an inclusion and exclusion from the gross estate
d. The above is a tax-exempt transfer.

26. The notice of death must be filed when:
a. Gross estate exceeds P200,000
b. Gross estate exceeds P20,000
c. Gross estate reaches P200,000
d. Gross estate reaches P2,000,000

27. One of the following is not an exemption or exclusion from the gross estate:
a. Capital or exclusive of the surviving spouse
b. Properties outside the Philippines of non-resident Chinese decedent
c. Shares of stocks of San Miguel Corporation of a non-resident Mexican.
d. The merger of usufruct in the owner of the naked title
Questions 28 through 31 are based on the following information:
A decedent left the following properties:
Land in Italy (with P1M unpaid mortgage) P2,000,000
Land in Davao City, Phil. (zonal value 750,000) 500,000
Franchise in USA 100,000
Receivable from debtor in Phil. 50,000
Receivable from debtor in USA 100,000
Bank deposit in Phil. 20,000
Bank deposit in USA 80,000
Shares of stocks of PLDT, Phil. 75,000
Shares of stock of ABC, foreign corporation 125,000
75% of the business in the Phil.
Other personal properties 300,000

28. If the decedent is a non-resident citizen his gross estate is:
a. P3,650,00 b. P3,600,000 c. P2,500,000 d. P2,650,000

29. If the decedent is non-resident alien his gross estate is:
a. P1,195,000 b. P945,000 c. P1,250,000 d. P1,070,000

30. If in the preceding number, reciprocity law can be applied the gross estate is:
a. P1,050,000 b. P945,000 c. P1,250,000 d. P1,070,000

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31. Based on the original problem but assuming the PLDT shares of stocks (PLDT) are not listed in the Local
Stock Exchange,& there are 1,000 shares at the time of death, the company’s outstanding shares were 10,000
shares. Its retained earnings was P2,000,000, par value per share was P50/share.The gross estate should show
the said shares at:

a. Still at P75,000 b. P250,000 c. P200,000 d. PO
Questions 32 & 33 are based in the following information:

Building, USA P5,000,000
House & lot in Bulacan (500 sq. meters) zonal value is P10,000 per square meter 4,500,000
Life insurance proceeds, beneficiary is the wife, the administratix, irrevocable 500,000
Life insurance proceeds with another company beneficiary, his son, revocable 200,000
Claims against a debtor who died a year ago (50% collectible) 50,000
Death benefits from US Veteran Administration 100,000
Death benefits from SSS 40,000
Paraphernal property of his surviving wife 2,000,000

He also transferred mortis causa the following:
S Price FMW- Transfer FMV - Death

Car, Mla. P 500,000 P1,000,000 P 800,000
Land, Mla. 1,500,000 2,000,000 1,000.000

Land, USA 2,000,000 1,800,000 3,000,000
32. If the decedent is a Filipino citizen, his gross estate is:

a. P10,850,000 b. P12,900,000 c.P10,050,000 d. P11,050,000
33. If the decedent is a non-resident alien and his country does not impose transfer tax on any intangible

properties left by a Filipino decedent, his gross estate is:
a. P5,350,000 b. P5,300,000 c. P6,500,000 d. P6,000,000

34. The gross estate of a non-resident alien is P2,000,000, 75% of which is from abroad. The actual funeral
expenses totaled to P80,000, ¼ of which was paid by his employer. The deductible funeral expense is:

a. P25,000 b. P20,000 c. P6,250 d. P80,000
35. Based on the preceding number (the same world G.E.) but the decedent is a non-resident citizen, the

deductible funeral expense is:
a. P25,000 b. P60,000 c. P5,000 d. P80,000

36. lst statement: A note payable contracted 11 yrs. Ago is a deduction from the gross estate if notarized.
2nd Statement: A note receivable against an insolvent person contracted by the decedent before his death
must be included in the gross estate in full even if only 50% is collectible.

a. True, True b. False, False c. True, False d. False, True
37. lst Statement: Unpaid mortgage indebtedness is deductible from the gross estate provided the said

property subject to the indebtedness is included in the gross estate net of the mortgage
2nd Statement: A donation inter vivos by the decedent to the Phil. government few months before his death

is a deduction from the gross estate.
a. True, True b. False, False c. True, False d. False, True
38. Purobuto, non-resident Japanese, died leaving the following:
Exclusive properties, Philippines P 560,000
Conjugal properties, Philippines 420,000
Conjugal properties, Abroad 1,820,000
Deductions claimed:
Funeral expenses 100,000
Judicial expenses 100,500
Unpaid expenses 150,500
Losses: occurring 3 mos. After death due to fire 120,000
Donation mortis causa to Makati City Hall 180,000
Family Home (inc. above) 1,000,000
Standard deduction 1,000,000
The taxable net estate is:
a. P210,000 b. P516,500 c. P1,900,000 d. P2,100,000

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39. JR, administrator claims the following funeral expenses for a decedent:

Expenses of interment (paid by friend) P 60,000
Cost of burial & tombstone (1/2 paid by relatives) 42,000
Other funeral parlor expenses 36,000
Expenses during the wake
Before burial 13,000
Obituary notice 7,500
Card of thanks 3,500
Mourning clothing of friends 15,000
Mourning clothing of immediate family members 5,000

If the gross estate is P1,500,000 the allowable funeral expense is:

40. Based on Number 39 but the gross estate is P2,500,000 the allowable funeral expenses is:
a. P75,000 b. P82,500 c. P125,000 d. P93,500
41. Mr. Nabigla died on March 20, 2005 leaving a gross estate of P7,800,000 including a land inherited from his

uncle on October 15, 2001 and a car donated to him on April 20, 1999. The following data pertain to the two

Unpaid mortgage FMV upon receipt FMV upon death
Land P 100,000 P1,800,000 P1,250,000
Car 50,000 300,000 400,000

The decedent was able to pay ½ of the unpaid mortgage on the land before his death. The deductions are:

Expenses, losses, indebtedness, taxes (excluding the unpaid mortgages above but
including actual funeral expenses of (P300,000 and medical expenses of P600,000) P1,200,00
Standard Deductions 1,500,00
Transfer for government entities 300,000
Death Benefits from Employer 200,000
Family home (included above) 2,000,000

The allowable varnishing deduction is:
a. P213,000 b. P626,000 c. P426,000 d. P440,625
42. The taxable net estate based on the preceding number is:
a. P4,056,250 b. P5,555,300 c. P3,974,000 d. P4,175,000
43. Mr. Dinakahinga, head of family died on January 15, 2005, leaving the following properties and obligations:

Cash in bank, 50%, donated mortis causa to National Red Cross P 300,000
House and lot in Makati, F. Home 1,500,000
Personal properties 1,500,000
Farm lot 825,000
Claim against an insolvent debtor 225,000
Transfer in contemplation of death (gratuitous) 1,500,000
Transfer passing special power of appointment 75,000
Deduction claimed:
Funeral expenses 575,000
Judicial expenses 67,500
Donation mortis causa to Quezon City government 150,000
Unpaid mortgage on the farm lot 75,000
Medical expenses (included in the funeral expense incurred within
the 1 year period with receipts) 225,000

The farm lot was inherited 5 ½ years by the decedent before his death with a value then of P575,000 and a
mortgage indebtedness of P150,000.

The total deduction from the gross estate is:
a. P1,867,500 b. P867,500 c. P2,092,500 d. P3,092,500
44. Based on the preceding number, the taxable net estate is:
a. P3,982,500 b. P4,982,500 c. P2,757,500 d. P4,757,500

a. P75,000 b. P82,500 c. P174,500 d. P93,500

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