TAX FT QUIZ AND Seatwork PDF

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Test I. Multiple Choice-True or False a. Both statements are true b. Only statement 1 is true c. Both statements are false d. Only statement 2 is true Taxation of the estate shall be governed by the statute or law in force at the time of distribution of the estate to the heirs. F Succession takes pl...

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Test I. Multiple Choice-True or False a. Both statements are true b. Only statement 1 is true c. Both statements are false d. Only statement 2 is true 1. Taxation of the estate shall be governed by the statute or law in force at the time of distribution of the estate to the heirs. F Succession takes place upon the determination of the respective shares of the heirs in the estate of the decedent. F 2. 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 mortgage indebtedness. F A donation inter-vivo by the decedent to the Philippine government a few months before his death is a deduction from the gross estate. F 3. Under CPG, the sale of separate property may produce a separate property and conjugal property. T Under CPG, the sale of conjugal property may produce a separate property and conjugal property. F 4. The fruit of inherited properties before marriage are exclusive under absolute community of properties. F All fruits, accruing before or after the marriage, are conjugal properties. F 5. Listed stocks are valued at their par value in gross estate. F Properties not owned by the decedent may be included in gross estate. F 6. No estate tax is due if the net taxable estate is negative. T Once there is death, the estate tax is always payable. F 7. The vanishing deduction is applicable only to properties inherited by the decedent within five years before his death. F Special deductions do not reduce the hereditary estate of the heirs. T 8. Non-resident alien can claim standard deductions. T Casualty loss of the estate can be claimed as deduction either in income tax return or estate tax return of the decedent. T 9. Non-resident aliens can claim only a fractional part of expenses, losses, indebtedness, taxes and transfers for public purpose in getting the deductible LIT. F Non-resident aliens may claim a family home in the special deduction. F 10. Bank deposits withdrawn from the decedent account during the settlement of the estate is a legal exclusion in the gross estate of the decedent if made within one year from the decedent’s death and said withdrawn was already subjected to the 6% final tax . T

Properties acquired using GSIS benefits can still be exempt or legal exclusion in gross estate of the decedent so long as the heirs or administration can prove that the properties were acquired using the exempt benefits. T

11. The income of donated properties before marriage are exclusive properties under conjugal partnership. T The property inheritance before the marriage is common property under absolute community of property. T 12. Jewelry is generally considered community property. T Jewelry inherited during the marriage is exclusive property. T 13. The spouses can stipulate the conjugal partnership of gains as their property regimes even in the current time. T In default of agreement as to the property relation between the spouses, the absolute separation of property is presumed. F 14. All fruits before the marriage are conjugal properties. F All fruits during the marriage are communal properties. F 15. All properties brought into the marriage are separate under the conjugal partnership of gains. T All properties brought into the marriage are common properties under ACP. F Test II. Problem Solving. Use number only in the final answer. Do not use period, comma, parenthesis and negative or positive sign. Do not round the rates Example you are getting the pro-rata: 1,500,000/2,700,000= 0.55555555556 (use the whole rate) and do not round it like 0.56. Or use direct computation, 1,500,000/2,700,000 x 1,000,000 (amount you are allocating). The answer in this equation is 555,556. And lastly, round your final answers to the nearest whole number. (Item 16-19) A decedent left the following properties: Band deposits in Japan Franchise in Japan Land in France (with P1M unpaid mortgage) Land in Cebu, Philippines Other personal properties Receivable from debtor in Philippines Receivable from debtor in Japan Shares of stock of ABC, foreign corporation, 75% of the business in the Philippines Shares of stocks of PLDT, Philippines Zonal value of the land in Cebu

80,000 100,000 2,000,000 500,000 300,000 70,000 100,000 125,000 75,000 750,000

16. If the decedent is a non-resident citizen, his gross estate is 3,600,000 Band deposits in Japan

80,000

Franchise in Japan

100,000

Land in France (with P1M unpaid mortgage)

2,000,000

Other personal properties

300,000

Receivable from debtor in Philippines

70,000

Receivable from debtor in Japan

100,000

Shares of stock of ABC, foreign corporation, 75% of the business in the Philippines

125,000

Shares of stocks of PLDT, Philippines

75,000

Zonal value of the land in Cebu

750,000 3,600,000

17. If the decedent is a non-resident alien, his gross estate is 1,195,000 Other personal properties Receivable from debtor in Philippines Shares of stocks of PLDT, Philippines Zonal value of the land in Cebu

300,000 70,000 75,000 750,000 1,195,000

18. If in the preceding number there is reciprocity, the gross estate is 1,050,000 Other personal properties

300,000

Zonal value of the land in Cebu

750,000 1,050,000

19. Based on the above problem, assuming that the PLDT shares of stocks are not listed in the local stock exchange, and 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. The gross estate should show the said shares at 250,000 outstanding shares 10,000 x P50 par value Retained earnings

500,000 2,000,000 2,500,000

Divided by BV per share Multiply by

10,000 shares 250 1,000 shares 250,000

Item 20 Leonardo Manuel died on April 15, 2019, leaving the following properties 1,000 shares in Nice Corporation 1,000,000 Cash 600,000 Investment in ILY Partnership 400,000 Other personal properties 300,000 Real properties 1,500,000

Cash of P600,000 does not include the following amounts which were received after death:  P100,000 representing cash dividend declared by Nice Corporation on January 2019, and received by Leonardo Manuel’s estate on April 30, 2019;  Share of partnership profits for calendar year 2018 in the amount of P50,000 received by the estate on May 5, 2019; and  Rental income of apartment of P40,000 due from January to April 2019 at P10,000 a month received by the estate on May 2, 2019. 20. Determine the gross estate of Leonardo Manuel. 3,985,000 1,000 shares in Nice Corporation

1,000,000

Cash

600,000

Investment in ILY Partnership

400,000

Other personal properties

300,000

Real properties

1,500,000

Add: Cash dividend

100,000 50,000

Share of partnership profits Rental of apartment (10,000 x 3.5 months)

35,000

185,000 3,985,000

Item 21 Mario, Filipino, married to Maria, died in July 2019, leaving the following: Allowable ordinary deductions-conjugal 1,200,000 Family home-exclusive (Maria) 1,400,000 Real properties-conjugal 4,000,000 Real property-exclusive (Mario) 3,800,000 21. Determine the net taxable estate. 200,000 Exclusive Gross Estate

3,800,000

Allo Deductions 3,800,000

Common

Total

4,000,000

7,800,000

(1,200,000)

(1,200,000)

2,800,000

6,600,000

Std deduction

(5,000,000)

Share of SS (2.8m/2)

(1,400,000)

Net taxable estate

200,000

Item 22 Peter, Filipino married to Girly, died in July 2019, leaving the following: Allowable ordinary deductions-conjugal Family home conjugal Real properties-conjugal

1,600,000 6,000,000 5,000,000

Real property-exclusive (Peter) Real property-exclusive (Peter)- (Lot where the family home stands)

1,200,000 10,400,000

22. Determine the net taxable estate. 1,300,000 Real property-exclusive (Peter) Real properties-conjugal Real property-exclusive (Peter)- (Lot where the family home stands) Family home conjugal Gross Estate Allowable ordinary deductions-conjugal

Exclusive 1,200,000

Common 5,000,000

10,400,000 11,600,000 11,600,000

6,000,000 11,000,000 -1,600,000 9,400,000

FH Std deduction Share of SS (9.4 m/ 2) Net taxable estate

Total 1,200,000 5,000,000 10,400,000 6,000,000 22,600,000 -1,600,000 21,000,000 -10,000,000 -5,000,000 -4,700,000 1,300,000

Item 23 Greg, non-resident alien, married to Hanna, died in 2019 leaving the following: Allowable ordinary deductions- conjugal 2,400,000 Personal properties in Pampanga-exclusive (Greg) 1,800,000 Real properties in Pampanga-conjugal 7,000,000 Real property abroad-exclusive (Greg) 1,400,000 Real property in Davao- conjugal 800,000 23. Determine the net taxable estate. 4,000,000 Personal properties in Pampanga-exclusive (Greg) Real properties in Pampanga-conjugal Real property in Davao- conjugal Gross Estate Allowable ordinary deductions- conjugal

Exclusive 1,800,000

1,800,000 1,800,000

Std deduction Share of SS (5.4 m/ 2) Net taxable estate

Common 7,000,000 800,000 7,800,000 (2,400,000) 5,400,000

Total 1,800,000 7,000,000 800,000 9,600,000 (2,400,000) 7,200,000 (500,000) (2,700,000) 4,000,000

Item 24-26 Under CPG: Mr. Aniceto, Filipino, married to Brenda with whom he has two children died on February 14, 2019. The inventory of the properties of the spouses show the following: 1. Agricultural land owned by Brenda before the marriage 1,200,000 2. Apartment house inherited by Brenda during marriage from her 4,000,000 mother who died on February 14, 2004 3. Commercial building in Makati inherited by Aniceto during marriage 2,000,000 from his father who died on February 14, 1987 4. Family home acquired during marriage 2,200,000 5. House and lot in Manila owned by Aniceto before the marriage 3,000,000 6. Personal property acquired during marriage 1,400,000 7. Proceeds of life insurance where Brenda was designated as the 2,000,000 irrevocable beneficiary

8. Proceeds of life insurance where the estate of Aniceto was designated as the irrevocable beneficiary (conjugal) 9. Real property acquired during marriage Deductions claimed by the estate: Claims against the estate Funeral expenses Judicial expenses Legacy given in favor of Philippines government in decedent's will Unpaid mortgage on agricultural land (number 1 above) 24. Compute the gross estate of Mr. Aniceto. 11,600,000

1,000,000 2,000,000

100,000 180,000 600,000 300,000 400,000

Exclusive 3. Commercial building in Makati inherited by Aniceto during marriage from his father who died on February 14, 1987 4.

Family home acquired during marriage

5.

House and lot in Manila owned by Aniceto before the marriage

6.

Personal property acquired during marriage

Total

2,000,000 2,000,000 2,200,000 3,000,000

2,200,000 3,000,000

1,400,000

8. Proceeds of life insurance where the estate of Aniceto was designated as the irrevocable beneficiary (conjugal) 9.

Common

1,400,000

1,000,000 1,000,000

Real property acquired during marriage

2,000,000 2,000,000

Gross Estate Claims against the estate

5,000,000

TFPU

(300,000) 4,700,000

6,600,000

11,600,000

(100,000)

(100,000) (300,000)

6,500,000

11,200,000

FH (2.2m/2)

(1,100,000)

Std deduction

(5,000,000) (3,250,000)

Share of SS Net taxable estate

25. Determine the share of the surviving house in the conjugal properties. 3,250,000 26. Determine the net taxable estate of Mr. Aniceto. 1,850,000

1,850,000

Item 27-32 Mr. O., Filipino, married, died on August 1, 2019, exactly three years after his marriage to Mrs. O. He left the following: A Property inherited by Mr. O from his father who died February 14, 2014 3,000,000 B Property inherited by Mrs. O from her father who died February 14, 2015 1,200,000 C Property inherited by Mr. O from his mother who died February 14, 2016 1,800,000 D Property inherited by Mrs. O from her mother who died February 14, 2017 1,400,000 E Property acquired thru the labor of Mr. O 2,000,000 Mrs. O 1,500,000 Mr. & Mrs. O (family home) 2,400,000 F Other personal property 1,600,000 Deductions claimed by the estate: A Funeral expense B Unpaid mortgages on property in letters: a. 500,000 b. 300,000 c. 180,000 C Claims against the estate D Accrued taxes (before the death of Mr. O)

d. 200,000 170,000 80,000

27. Determine the vanishing deduction under absolute community of property. 872,533 28. Determine the net taxable estate under absolute community of property. (501,267) 29. Determine the gross estate under conjugal partnership of gains. 12,300,000 30. Determine the vanishing deduction under conjugal partnership of gains. 665,561 31. Determine the share of the surviving spouse under conjugal partnership of gains. 3,625,000 32. Determine the net taxable estate under conjugal partnership of gains. 879,439

(Item 27-28) ACP Exclusive

Common

Property inherited by Mr. O from his father who died February 14, 2014

3,000,000

Property inherited by Mrs. O from her father who died February 14, 2015

1,200,000

Property inherited by Mr. O from his mother who died February 14, 2016

1,800,000

Total 3,000,000 1,200,000 1,800,000

Property acquired thru the labor of: Mr. O

2,000,000

2,000,000

Mrs. O

1,500,000

1,500,000

Mr. & Mrs. O (family home

2,400,000

Other personal property

1,600,000

1,600,000

13,500,000

13,500,000

(500,000)

(500,000)

(300,000)

(300,000)

(180,000)

(180,000)

(170,000)

(170,000)

Gross estate Unpaid mortgage

Claims against the estate Accrued taxes

VD

2,400,000

(80,000)

(80,000)

(872,533)

(872,533)

11,397,467

11,397,467

FH (2.4m/2 )

(1,200,000)

Std deduction

(5,000,000)

Share of SS (11,397,467/2)

(5,698,734)

Net estate taxable

Initial value

(501,267)/0

1,200,000

1,800,000

Initial basis

1,200,000

1,800,000

1.2/13.5 x 1,230,000

(109,333)

Less: paid mortgage

1.8/13.5 x 1,230,000 Final basis

(164,000) 1,090,667 20%

VD

218,133

1,636,000 40% 654,400

872,533

(Item 29-32) CPG Exclusive Property inherited by Mr. O from his father who died February 14, 2014 Property inherited by Mr. O from his mother who died February 14, 2016

Common

Total

3,000,000

3,000,000

1,800,000

1,800,000

Property acquired thru the labor of: Mr. O

2,000,000

2,000,000

Mrs. O

1,500,000

1,500,000

Mr. & Mrs. O (family home

2,400,000

2,400,000

Other personal property

1,600,000

1,600,000

Gross estate

7,500,000

12,300,000

Unpaid mortgage

4,800,000 (500,000)

(500,000)

(180,000) Claims against the estate Accrued taxes

(180,000) (170,000)

(170,000)

(80,000)

(80,000)

VD

(665,561)

(665,561) 3,454,439

7,250,000

10,704,439

FH (2.4m/2)

(1,200,000)

Std deductions

(5,000,000)

Share of SS (7.25m/2 )

(3,625,000)

Net taxable estate

879,439

Initial value Less: paid mortgage Initial basis

1,800,000

1.8/12.3 x 930,000

(136,098) 1,663,902 40%

1,800,000

VD

665,561

Item 33-35 Mr. Manalo died. An inventory and analysis of the properties held by his family are presented below: Mr. Manalo Mrs. Manalo Properties acquired before marriage: Properties for exclusive personal use 20,000 30,000 Other properties acquired 280,000 470,000 Total 300,000 500,000 Properties acquired during marriage: Properties for exclusive personal use Properties from own industry Donated properties received Inherited properties Fruit of donated/inherited property Total

30,000 290,000

40,000 500,000 300,000

400,000 80,000 800,000

60,000 900,000

Assuming the absolute community of property is the property regime. 33. Determine the separate property of Mr. Manalo. 530,000 34. Determine the gross estate of Mr. Manalo. 2,070,000 35. Determine the common property of the spouses. 1,540,000 Separate Properties for exclusive personal use Other properties acquired

Common

20,000

Total 20,000

750,000

750,000

Properties for exclusive personal use

30,000

Properties from own industry Inherited properties Fruit of donated/inherited property Gross estate

30,000 790,000

790,000

400,000

400,000

80,000

80,000

530,000

1,540,000

2,070,000

TAX 2: SEATWORK Test I. Multiple Choice-Theories. Choose the correct answer from the given choices. 1. The estate should be valued at the time a. The heirs are ascertained b. The estate tax is paid c. The estate is ready for distribution to the heirs d. Of death of the decedent 2. This is not part of the conjugal property a. Those acquired by onerous title during the marriage at the expense of the common fund b. Those acquired by industry or work of either of them c. The fruits, rents or interest received or due during the marriage coming from the conjugal property or from the exclusive properties of the spouses d. Those acquired during the marriage by gratuitous title 3. Gross estate includes all his property, real and personal, tangible or intangible, wherever situated, except a. Resident citizen b. Non-resident citizen c. Resident alien d. Non-resident alien 4. Unless stipulated, the property relations should be governed by absolute community of property for marriage on or after August 3, 1988. Under the regime of absolute community of property, property for personal and exclusive use of either spouse, except jewelry, shall belong to both spouses. a. True, true b. True, false c. False, true d. False, false 5. The gift is perfected from the moment the donor effects the delivery either actually or constructively of the property donated. Donor’s tax is a property tax imposed on the property transferred by way of gift inter-vivos. a. True, true b. True, false c. False, true d. Fa...