ANSWERS TO ASSIGNMENT 1 AND PROBLEM EXERCISES Taxation2 Mr.

Salvador, Filipino, married on December 4, 1984, died on April 23, 1999 leaving the following property and expenses: Conjugal property: Personal property Apartment and lot Other property: Mode of acquisition: FMV-time of death Land inheritance P100,000 Jeep inheritance 20,000 San Miguel shares Donation 300,000 Claimed as deductions: Funeral expenses Mortgage on apartment and lot Loss of jeep 1. P 50,000 300,000 20,000 P1,300,000 1,000,000 date: 4/30/97 4/30/97 1/30/93 FMV-acquisition P50,000 100,000 400,000

The amount of P70,000 of the mortgage on the apartment and lot remain unpaid at the time of Mr. Salvadors death The land inherited had a mortgage of P30,000 which Mr. Salvador paid before he died The jeep was carnapped on November 4, 1999 Gross estate is:

a. 2.

P2,420,000

b. 2, 300,000

c. 2,720,000

d. 2,670,000

Vanishing Deduction is : a. P38,235 b. P 30,588 c. P 86,029.42 d. P 68,823.53

3.

Share of surviving spouse: a. P1,150,000 b. 2,180,000 c. 2,300,000 d. 1,090,000

4.

Net taxable estate is : a. P 2,569,412 b. P 419,412 c. 479,412 d.2,600,000

Solution : EXCLUSIVE TOTAL Gross Estate Personal property Apartment and Lot P 2,300,000 Land Jeep San Miguel shares 420,000 Total 2,720,000 Less: Ordinary Deductions P 1, 300,000 1,000,000 P 100,000 20,000 300,000 P420,000 CONJUGAL

_________ 2,300,000

Funeral (50,000) Unpaid mortgage on apartment & lot (70,000) Vanishing Deduction* (30,588) Net exclusive/conj estate P P 2,569,412

(50,000) (70,000) (30,588) 389,412 _________ P 2,180,000

Less: Special Deductions Standard Deduction (1,000,000) Net Estate 1,569,412 Less: share of surviving spouse (1/2 of 2180,000) ( 1,090,000) Net taxable estate P 479,412 *Schedule of Vanishing Deduction initial value Land Jeep Less: mortgage paid 40,000/2,720,000 x 120,000 Final Basis of vanishing deductions Vanishing Deductions (80%) For Nos. 24 -25, see problem below: Mr. Laurel, Filipino, married on December 4, 1989 died on Nov. 2, 1999. An inventory of the spouses property, expenses, charges and obligations follow: Acquired by purchase of Mr Laurel before the marriage: Lot with apartment in Quezon City Lot with apartment in Guadalupe, Makati P1,500,000 Farm in Nueva Ecija inherited during the marriage by Mr. Laurel 600,000 Deductions: Judicial expenses Unpaid mortgage on farm Funeral expenses Unpaid mortgage on fishpond Legacy to City of Makati Accounts payable to a communal Creditor Fire loss on apartment in Makati 5. Net Taxable Estate is: a. 6. P 350,000 b. P650,000 c. 2,950,000 d. P1,950,000 P200,000 150,000 100,000 100,000 100,000 70,000 30,000 P1,800,000 1,200,000 P 50,000 20,000

P70,000 30,000 40,000 1,765 P38,235 P30,588

Fishpond in Bulacan inherited during the marriage by Mrs. Laurel

Estate Tax is: a. P27,000 b. P7,500 c. P 239,500 d. P 131,000

Solution:

EXCLUSIVE TOTAL Gross Estate Lot with apartment, QC Lot w/apartment, Makati P 3,000,000 Farm, nueva ecija 600,000 Total P 3,600,000

COMMUNITY

P 1, 800,000 1,200,000 P 600,000 P 600,000 P3,000,000

Less: Ordinary Deductions Funeral P 100,000 Judicial Expense 200,000 Accounts Payable 70,000 Fire Loss 30,000 Unpaid mortgage on farm P150,000 P150,000 Legacy to Makati City 100,000 100,000 Net exclusive/community estate P350,000 P2,950,000 Less: Special Deductions Standard Deduction (1,000,000) Net Estate P 1,950,000 Less: share of surviving spouse (1/2 of2,600,000) P1,300,000 Net taxable estate P 650,000 Estate Tax Due on 500,000 150,000 x 8% P650,000 15,000 12,000 27,000

P 100,000 200,000 70,000 30,000

P2, 600,000

PROBLEM EXERCISES QUESTION NO. 1 Mr. Benjamin Borja, a citizen and a resident of the Philippines, died on October 10, 2009, leaving the following properties, rights and obligations and charges: Conjugal properties (including family home of P3, 000,000 and amount receivable P6,000,000 Under RA 4917 of P200,000) Exclusive properties (including cash of P500,000 inherited 4 years ago) 4,000,000 Medical expenses unpaid, January 2009 600,000 Funeral expenses 350,000 Judicial expenses 500,000 Other obligations 100,000 The net taxable estate is:

a. P3,808,000 b. P5,058,000 c. P1,150,000 d. P2,250,000

QUESTION NO. 2 Mr. Armand Costales, a citizen and a resident of the Philippines, died on October 5, 2009. He was married and the property relationship during the marriage was the absolute community of property. He left the following properties, with the market value and the obligations and charges thereon: Agricultural land House and lot acquired by inheritance before the marriage and 4 1/2 yrs ago, used as a family home(with FMV of 420,000 and a mortgage of 120,000 when acquired, 20,000 was paid by mr. Costales before he died) Jewelry of mrs. costales, acquired during the marriage With the income of mr. Costales Clothes acquired during the marriage with income During the marriage: For use of mr. Costales For use of mrs. Costales Cash on hand and in banks: income from unidentified sources Sources Cash in bank: From a sale at a loss of exclusive property Received as gift 6 years ago and before the marriage (current account) Other properties: Owned before the marriage Acquired during the marriage Total funeral expenses of P300,000 paid from the estate Judicial expenses Unpaid mortgage (already on the property at the time acquired) on : agricultural land house and lot Other obligations Legacy to the Philippine Govt (from current account) The net taxable estate is: a. b. c. d. P 660,932.33 857,310.34 698,620.70 767,310.34 P100,000

500,000 50,000 60,000 70,000 300,000 1,500,000 40,000 90,000 20,000 P58,000 120,000 20,000 100,000 20,000 10,000

QUESTION NO. 3 Country A: Net estate of P100,000 and estate tax paid of P8,000; Country B: Net estate of P200,000 and estate tax paid of P12,000; Philippines: Net estate of P1,200,000. The decedent was a resident and a citizen of the Philippines. Estate tax paid for foreign estate taxes paid? a. b. c. d. P19,000 18,333.33 20,000 12,000