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Review 2 Estate Tax Problems Problem 1 Based on the following data, how much is the value of the decedent’s interest if he died March 31, 2018?Cash in bank, joint account of the decedent and his wife ₱ 2 54,Interest on the bank deposit (Jan. 1 – June 30, 2018) 9,00 0Dividends from a domestic corpora...

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Review 2 Estate Tax Problems Problem 1 Based on the following data, how much is the value of the decedent’s interest if he died March 31, 2018? Cash in bank, joint account of the decedent and his wife Interest on the bank deposit (Jan. 1 – June 30, 2018)

₱254,000 9,000

Dividends from a domestic corporation: Date of declaration – February 5, 2018 Date of record – April 15, 2018 Date of payment – May 15, 2018

60,000

Share in 2017 net profit of partnership, distributed to partners on April 15 9,000 Winnings in lotto (Bet, March 30; April 1, 2018 draw)

500,000

Solution: Cash in bank (₱254,000 / 2)

₱127,000

Interest (₱9,000 / 2 x 3 / 6)

2,250

Share in partnership profit ( ₱9,000 / 2)

4,500

Lotto winnings (₱500,000 / 2)

250,000

Decedent’s interest

₱383,75 0

The winnings in lotto and the interest on bank deposit are presumed to common property of the spouses. Problem 2 Maine died leaving the following properties: 1. Stocks of Shang Corporation (2,000 shares. Listed in the Phisex – highest ₱40; lowest ₱39). 2. Common stocks of Hernan Corporation (1,500 shares) – not listed in the stock exchanges. Cost - ₱50 per share; Book value - ₱45 per share. 3. Car (cost - ₱600,000; book value - ₱350,000; market value - ₱400,000) 4. Real properties (zonal value - ₱120,000; assessor’s value - ₱72,000) The gross estate of Maine isSolution: Shares – Shang Corporation [(40+39) / 2 x 2,000] Shares – Hernan Corporation (45 x 1,500)

₱79,000 67,500

Car

400,000

Real properties

120,000

Gross estate

₱666,50 0

If the stocks are traded in the stock exchange, the market value is the average of the highest and the lowest of value of such share at a date nearest the date of death, it none is available on he date of death itself. If the common stocks are not traded, the market value is thee book value of the shares on such date while unlisted preferred shares are valued at par value. In the case of real property, the market value is the highest amount between the value as determined by the Commissioner of Internal Revenue (zonal value) and the Provincial or City Assessor (assessor’s value). Problem 3 Pah Mathay, Filipina, died in the US with the following properties: Condominium unit in New York City

₱2,000,000

Shares of stock in a foreign corporation

600,000

Interest in a partnership, domestic

475,000

Bank deposit in a New York City bank

150,000

Car in Cebu, donated inter vivos 5 years ago to her son

500,000

If the decedent was a non-resident alien (with reciprocity), how much is the gross estate?None. If the decedent was a non-resident alien (with no reciprocity), how much is the gross estate? ₱475,000.

Problem 4 On the belief that he was about to die of a liver cancer, Bangbang sold to Bongbong a property valued at ₱1,100,000 for the same amount. Six months later, Bangbang died of a car accident. At that time, the property had already a value of ₱1,300,000. For Philippine estate tax purpose, the amount includible in the gross estate of Bangbang isAnswer-None. No amount shall be included in the gross estate because the sale of the property was made for a full and adequate consideration.

Problem 5 Aldo died leaving the following properties: ₱ 300,000

Condo unit in Baguio City, bought into the marriage Rent income of condo unit in Baguio

60,000

Apartment unit in Cebu City, brought into marriage by wife Income of apartment unit in Cebu City

240,000 25,000

House in Camarines Sur, acquired by Aldo during marriage Income of house in Camarines Sur

375,000 50,000

Land in Iloilo City, earned by wife during the marriage

225,000

Income of land in Iloilo City

80,000

Taxi in Manila, inherit by Aldo during marriage

500,000

Income of taxi

175,000

Shares of stocks in Japanese Corporations, inherited by wife during the marriage

430,000

Dividend from Japanese Corporation

85,000

Passenger bus in Dagupan City, inherited by Aldo before marriage Income of bus in Dagupan City

100,000 10,000

Bank deposit in Canada, donated to Aldo before marriage Interest on bank deposit in Canada

350,000 5,000

1.Under the conjugal partnership of gains, the total value of conjugal properties of the spouses is: Solution: Rent income of condo unit in Baguio Income of apartment unit in Cebu City House in Cam Sur, acquired during the marriage Income of house in Cam Sur

₱

60,000 25,000 375,000 50,000

Land in Iloilo City

225,000

Income of land in Iloilo City

80,000

Income of taxi in Manila

175,000

Dividends from Japanese Corporation

85,000

Income of bus in Dagupan City

10,000

Interest on bank deposit in Canada

5,000 ₱1,090,000

Total Conjugal Properties

2. Under conjugal partnership of gains, the gross estate of Aldo amounts to Solution:

₱1,090,000

Conjugal properties Add: Exclusive properties of Aldo Condo unit in Baguio

₱ 300,000

Taxi in Manila

500,000

Bus in Dagupan

100,000

Bank Deposit in Canada

350,000

Total Conjugal Properties

1,250,000 ₱2,340,00 0

3. Under absolute community of property regime, the total community of property of the spouses is: Solution:

Condo unit in Baguio City Rent income of condo unit in Baguio Apartment unit in Cebu City Income of apartment unit in Cebu City House in Cam Sur, acquired during the marriage Income of house in Cam Sur Land in Iloilo City

₱

300,000 60,000 240,000 25,000 375,000 50,000 225,000

Income of land in Iloilo City

80,000

Passenger bus in Dagupan City

100,000

Income of bus in Dagupan City

10,000

Deposit in Canada, donated to Aldo before marriage

350,000

Interest on bank deposit in Canada

5,000 ₱1,820,000

Total Conjugal Properties

4. Under absolute community of property regime, the amount of gross estate of Aldo is: Solution:

₱1,820,000

Conjugal properties Add: Exclusive properties of Aldo Inherited during marriage (Taxi) ₱ 500,000 Income of taxi in Manila Total Conjugal Properties

175,000

675,000 ₱2,495,00 0

Problem 6: Angelo, married to Angel 3 years ago, died leavin the following properties:

Condo unit at West Tower Condominium, Makati City, acquired by him and his wife.

₱2,500,000

Apartment unit in Vancouver, Canada inherited from his parents who died 2 ½ years ago.

3,500,000

Volvo car registered in Canada, donated to him by his mother four (4) years ago

2,000,000

Toyota Fortuner in the Philippines, purchased by Angelo out of his exclusive property.

1,200,000

Jewelry in the Philippines, inherited last year by his wife, Angel, from her mother.

550,000

Cash in bank - Banco de Oro; 50% was earned by Angelo before marriage; 50% was earned by the spouse.

840,000

Interest on bank deposit (net of withholding tax)

8,000

Interest in a domestic partnership, acquired by Angel before marriage Investment with Acer Corp., foreign corporation, 85.5% of business is in the Philippines Dividends with Acer Corporation, date of record was made after death of Angelo Investment with Filipinas Company, domestic, 25,000 shares, traded in the stock exchange (highest- ₱23.00; lowest- ₱22.83). Receivable on a foreign insurance company for an accident insurance suffered six months before death

300,000 1,000,000 45,000 7,500 50,000

Proceeds of a life insurance taken by the employer corporation of Angelo on his life.

200,000

Receivable on life insurance taken by Angelo on his own life appointing his estate as the irrevocable beneficiary; common funds of the spouses were used in paying the insurance premium.

150,000

1.The amount of gross estate if Angelo was a non-resident citizen under the absolute community of property regimeSolution: Community Condo unit, Makati

₱2,500,000

Apartment unit, Canada Volvo, Canada

₱3,500,000 2,000,000

Toyota Fortuner, Philippines

1,200,000

Cash with Banco de Oro

840,000

Interest on bank deposit

8,000

Interest in a domestic partnership Investment - Acer Corporation Investment - Filipinas Company [(₱23.00 + 22.83)] / 2 x

300,000 1,000,000 572,875

25,000 Dividend - Filipinas Company

Exclusive

6,750

Receivable from a foreign insurance company

50,000

Receivable on life insurance, estate is beneficiary

150,000

Totals

₱7,427,62 5

Gross Estate ( ₱7,427,625 + ₱4,700,000)

₱4,700,000 ₱12,127,62 5

2.The gross estate if Angelo was a resident alien under the conjugal partnership of gainsSolution: Community Condo unit, Makati

Exclusive

₱2,500,000

Apartment unit, Canada

₱3,500,000

Volvo, Canada

2,000,000

Toyota Fortuner, Philippines

1,200,000

Cash with Banco de Oro

420,000

Interest on bank deposit

8,000

Investment - Acer Corporation

420,000

1,000,000

Investment - Filipinas Company [(₱23.00 + 22.83)] / 2 x

572,875

25,000 Dividend - Filipinas Company

6,750

Receivable from a foreign insurance company

50,000

Receivable on life insurance, estate is beneficiary

150,000

Totals

₱4,707,62 5

Gross Estate ( ₱4,407,625 + ₱4,700,000)

₱7,120,000 ₱11,827,625

3.The gross estate if Angelo was a non-resident alien without reciprocity under the absolute community of property regimeSolution: Community

Exclusive

Condo unit, Makati

₱2,500,000

Toyota Fortuner, Philippines

₱1,200,000

Cash with Banco de Oro

840,000

Interest on bank deposit

8,000

Interest in a domestic partnership

300,000

Investment - Acer Corporation

1,000,000

Investment - Filipinas Company

572,875

Dividend - Filipinas Company

6,750

Receivable on life insurance, estate is beneficiary Totals

150,000

₱5,377,62 5

Gross Estate ( ₱5,377,625 + ₱1,200,000)

₱1,200,00 0 ₱6,577,62 5

4. The gross estate if Angelo was a non-resident alien, with reciprocity, under the conjugal partnership of gainsCommunity Condo unit, Makati

₱2,500,000

Toyota Fortuner, Philippines Totals

Exclusive

₱1,200,000 ₱2,500,00 0

Gross Estate ( ₱2,500,000 + ₱1,200,000)

₱1,200,00 0 ₱3,700,00

Problem 7 The following expenses and obligations, were left by Bonni upon his death: Notes payable, not notarized Loans payable, PNB

₱

30,000 300,000

Accounts receivable, debtor not insolvent

40,000

Accounts receivable, debtor is insolvent

60,000

Death benefits from employer

200,000

Mortgage paid

50,000

Income taxes on income of decedent’s estate

7,500

The amount deductible from gross estate isSolution: Loans payable, PNB Bad debts RA 4917 Standard deduction Total Deduction

₱ 300,000 60,000 200,000 5,000,000

₱5,560,00 0

Problem 7 Path Ay, a Filipino resident, died on January 5, 2020 and his estate incurred losses due to: 1st loss: From fire on February 2, 2020 of improvements on his property; not compensated by insurance. 2nd loss: From flood on December 29, 2020 of household furniture; also not compensated by insurance. Both losses are deductible. To be deductible, losses must occur after the death of the decedent but within the period for the payment of the estate tax.

Problem 8 Ta Doe, a nonresident alien, single, died leaving the following properties and deductionsStocks in a domestic corporation Stocks in a foreign corporation Tangible personal property, Philippine Deductible expenses

₱ 500,000 500,000 1,500,000 500,000

Assuming there is no reciprocity, the estate tax due isSolution:

Shares, domestic corporation

₱ 500,000

Tangible personal property, Philippine

1,500,000

Gross estate

₱2,000,000

Less: Deductions

₱ 400,000

Expenses (20/25) x 500,000 Standard deduction

500,000

Net taxable estate

₱1,100,000

Rate of tax

6%

Estate tax due

₱ 66,000

Computation of Total Gross Estate: Shares, domestic corporation Shares, foreign corporation Tangible personal property, Philippine Gross estate

900,000

₱ 500,000 500,000 1,500,000

₱2,500,000 (25)...