MULTIPLE CHOICE - ESTATE TAX TEST – THEORY D D C A A 10 C A C C D 11 12 13 14 15 B D C B C 16 17 18 19 20 D C A D D 21 D 26 A 31 B 36 A 22 B 27 A 32 A 37 A 23 C 28 A 33 D 38 D 24 D 29 C 34 C 39 B 25 D 30 B 35 D 40 D 41 A 46 D 51 A 56 A 42 A 47 B 52 C 57 A 43 D 48 D 53 C 58 D 44 C 49 B 54 D 59 D 45 D 50 C 55 C 60 D TEST - MULTIPLE CHOICE (PROBLEMS) Answer: A (See the solution in No 5) Answer: A (see the solution in No 5) Answer: A (see the solution in No 5) Answer: C (see the solution in No 5) Answer: B NRA (no Reciprocity) P 3,000,000 Real property without Tangible personal within Resident or citizen P 3,000,000 2,500,000 700,000 Tangible personal without Intangible personal within Intangible personal without Gross estate 650,000 350,000 225,000 7,425,000 350,000 4,050,000 Real property within Answer: C (see the Solution in No 8) 27 700,000 NRA (with Reciprocity) P 3,000,000 700,00 3,700,00 Answer: D Answer: B Conjugal Family home Exclusive P 2,650,000 Farm in Batangas Farm in Guam Furnitures, Manila 500,000 750,000 125,00 80,00 18,00 500,00 300,00 150,00 110,00 1,250,00 825,000 6,008,000 1,250,00 Bank deposit Cash (12,000 x ½) Car Interest in partnership Proceeds of life insurance Accounts receivable Patent, U.S.A Other personal properties Total s Gross estate 7,258,000 Answer: A Domestic shares P1,000,00 3,000,00 Foreign shares Tangible personal property Total Gross estate Less: Deductions (6,000,000/10,000,000 x 1,200,000) Net estate 10 4,000,00 6,000,0 00 10,000,00 6,000,00 720,0 00 5,280,0 00 Answer: C Shares, domestic Tangible personal property Gross estate Less: Deductions (2,000,000/2,500,000 x P500,000) 28 500,00 1,500,0 00 2,000,0 00 400,0 00 Net estate 1,600,0 00 Tax on P 500,000 1,100,000 x 8% Estate tax P 15,000 88,000 103,000 Shares, domestic corporation 500,00 500,000 1,500,00 2,500,00 Shares, foreign corporation Tangible personal property Total gross estate 11 Answer: C Value at the time of death 1,500,00 1,000,00 500,00 Value of consideration Amount includible in the gross estate 12 Answer: D No amount of money shall be included in the gross estate of the decedent because the transfer is for an adequate and full consideration This is despite the agreement between the seller and the buyer that the transfer shall take effect upon the death of the seller 13 Answer A Actual funeral expenses 140,00 125,0 00 125,0 00 Limit (5% x 2,500,000) Deductible (lower amount) 14 Answer: B Gross estate 2,500,00 Less: Deductions Funeral expenses 125,0 00 1,125,00 1,000,00 Other deductions Standard deduction Net taxable estate 15 2,250,0 00 250,0 00 Answer: D Exclusive real property 750,00 29 Conjugal real property 850,00 450,000 Conjugal personal property Gross estate Less: Deductions Ordinary Unpaid mortgage Funeral expenses Judicial expenses 30,000 85,000 20,000 Special Standard Net estate Less: Share of surviving spouse (1,300,000 – 135,000) x½ Net taxable estate 16 150,000 210,00 1,000,0 00 Standard deduction Net taxable estate Answer: D Expenses incurred during the wake Payable to funeral parlor 5% of gross estate (1,700,000 x 5%) Deductible funeral expense 95,000 20,000 1,360,00 2,640,0 00 115,000 85,000 85,000 Answer: C Loans payable 300,00 60,0 00 200,0 00 1,000,00 1,560,0 00 Bad debts RA 4917 Standard deduction Deductions 19 (1,000,00 0) 915,000 582,50 332,50 4,000,00 Less: Deductions Funeral expenses, actual Other charges 18 ( 135,00 0) Answer: A Gross estate 17 1,300,00 2,050,00 Answer: B Unpaid 2007 real estate taxes Unpaid 2008 real estate taxes Income tax Casualty loss Total deductions P 40,000 40,000 35,000 450,000 565,000 30 20 Answer: B Inherited land (exclusive) Dwelling house, conjugal (850,000/2) Family home 21 P 200,000 425,000 625,000 Answer: B Conjugal Family home Conjugal real estate Conjugal personal property Gross estate Less: Deductions Ordinary Funeral, actual Judicial Unpaid mortgage 950,000 2,000,00 2,950,000 120,000 7,000 35,000 Special Medical expenses Net estate Net conjugal 1,500,0 00 4,450,00 ( 162,00 0) 2,950,00 202,00 2,748,00 Share (2,748,000/2) 1,374,0 00 874,00 Net taxable estate 22 40,00 0) (1,000,00 0) (1,000,00 0) 2,248,0 00 Standard deduction Less: Conjugal deductions Total ( Family home Less: Share of surviving spouse Gross conjugal Exclusive 1,500,00 Answer: B Real properties 3,200,0 00 1,100,00 1,500,00 800,000 50,000 100,00 6,750,00 Family home House and lot, Australia Other personal properties Shares of stocks Claims against insolvent persons Gross estate 31 23 Answer: C Funeral expenses 120,0 00 100,000 30,000 1,000,00 1,250,00 Bad debts Unpaid mortgage Family home Total deductions 24 Answer: D Conjugal Family home Conjugal personal property 2,000,000 800,000 Exclusive real estate Gross estate Less: Deductions Ordinary Unpaid mortgage Funeral expenses Judicial expenses 90,000 124,500 16,000 Special Family home Standard deduction 1,000,000 1,000,000 Net estate Less: Share of surviving spouse Gross conjugal Less: Conjugal deductions Net conjugal Share (2,569,500/2) Answer: A 26 Answer: C 27 Answer: A ( 230,50 0) (2,000,00 0) 1,789,2 50 2,800,000 230,500 2,569,500 1,284,7 50 504,5 00 Net estate subject to tax 25 2,800,0 00 1,219,7 50 4,019,7 50 (see solution in No 26) Conjugal Residential land Commercial land House and lot, Manila House and lot, California 3,000,000 2,000,00 100,00 200,00 140,00 Notes receivable, debtor in U.S.A Notes receivable, debtor in Phils Other personal properties 32 Exclusive 850,00 500,000 Total Gross estate Deductions: Ordinary Funeral expenses Bad debts (200,000 x 40%) Transfer for public purpose Vanishing deduction (Schedule 1) Total 5,440,000 1,350,000 6,790,000 165,000 80,000 _ _ 245,000 200,000 74,757 274,757 Special Family home (1,000,00 0) (1,000,00 0) 4,270,2 43 Standard deductions Net estate Less: Share of surviving spouse Gross conjugal Less: Conjugal deductions 5,440,000 245,00 5,195,00 Net conjugal Share (5,195,000 / 2) (2,597,50 0) 1,672,74 Net taxable estate Schedule 1: Value to take (lower value) Less: Mortgage paid Initial basis Less: Deductions (400/6,790 x P 445,000) Base Rate (more than but not more than years) Vanishing deduction 28 Answer: B 29 Answer: C ( 519,75 7) P 400,000 400,000 26,215 373,785 20 % 74,757 (see solution in No 29) Conjugal 4,000,00 2,500,0 00 House in Cebu House in Japan Domestic shares Appliances, Japan Accounts receivable Claims against insolvent person 85,00 6,585,00 Gross estate Less: Deductions Ordinary Funeral expenses, limit 200,00 33 Exclusive Total 100,00 450,0 00 135,000 _ 685,0 00 7,270,0 00 120,000 65,000 85,000 50,000 Claims against the estate Unpaid mortgage, Japan Bad debts Unpaid mortgage, Cebu ( 520,00 0) Special Family home (1,000,00 0) (1,000,00 0) 4,750,0 00 Standard deductions Net estate Less: Share of surviving spouse Gross conjugal 6,585,0 00 520,0 00 6,065,0 00 Less: Conjugal deductions Net conjugal Share (P 6,065,000 / 2) (3,032,50 0) 1,717,50 Net estate subject to tax 30 Answer: A Lower value Less: Mortgage paid Initial basis Less: Deductions (300/3,000 x 95,000) Base Rate (more than years, not more than years) Vanishing deduction P 350,000 50,0 00 300,0 00 9,50 290,5 00 20 % 58,1 00 Note: Bequests to charitable institutions and medical expenses are not included in the multiplier deductions Only the deductions under ELIT and Transfers for Public Purposes, if any, are part of said deductions 31 Answer: A (see solution in No 34) 32 Answer: D (see solution in No 34) 33 Answer: A (see schedule below) 34 Answer: A Real property Personal properties, Canada 2,960,000.00 1,300,000.0 670,000.0 Real and personal properties 34 2,500,000.0 7,430,000.0 Family home, Canada Gross estate Less: Deductions Funeral expenses P 200,000.00 850,000 00 1,786,056 50 Other deductible expenses Vanishing deduction (Sche 1) Net estate Less: Other deductions Family home Standard deductions P 1,000,000 00 Net estate subject to tax 2,836,056.5 4,593,943.5 1,000,000.0 3,593,943.5 Note: To be deductible, a family home must be situated within the Philippines Schedule 1: Vanishing deduction Lower value Less: Deductions (pro-rated) (2,600/7,430 x 1,050,000) Base Rate (more than year but not more than years) Vanishing deduction 35 Answer: B House (conjugal) Land Family home 36 P 800,000 400,000 1,200,000 Answer: A House (800,000 x ½ ) Land Deductible family home 37 P 400,000 400,000 800,000 Answer: C Lot, Davao City Other tangible properties Gross estate 38 P2,600,000 00 367,429.3 2,232,570.7 80 % 1,786,056.5 P 500,000 500,000 1,000,000 Answer: D Funeral expenses Judicial expenses Claims against the estate 200,000 5,000 25,000 35 Total 230,000 (1,000,000/2,500,000 x 230,000) 39 92,000 Answer: B Lower value Less: Mortgage paid Initial basis Less: Deductions Funeral Judicial Bad debt Unpaid mortgage (60,000 – 20,000) Bequest to Naga City Total (150,000/5,000,000 x P350,000) 170,00 20,000 150,000 180,000 50,000 50,000 40,000 30,000 350,000 10,50 139,500 40% 55,800 Base Rate Vanishing deduction 40 Answer: B Lower value Less: Mortgage paid Initial basis Less: Deductions (pro-rated) (400,000 / 5,000,000 x 350,000) Base Rate Vanishing deduction 41 400,000 400,000 28,000 372,000 20% 74,400 Answer: D Conjugal Family home 1,500,00 2,500,00 300,000 50,00 Other properties Car Claims against insolvent Exclusive Land House 250,000 400,000 Gross estate Less: Deductions Ordinary Conjugal Judicial expenses Bad debts Funeral expenses 180,000 50,000 50,000 Exclusive 36 280,00 4,350,00 650,00 5,000,0 00 Unpaid mortgage (60,000 – 20,000) 40,000 Bequest to Naga City 30,000 Vanishing deduction on land (No 42) 55,800 Vanishing deduction on house (No 43) 74,400 Special Medical expenses Family home (1,500,000/2) Standard deduction 200,20 20,000 750,000 1,000,00 Net estate Less: Share of surviving spouse (4,350,000 – 280,000) x ½ Net taxable estate 42 Answer: B (see Solution in No 44) 43 Answer: B (see Solution in No 44) 44 Answer: D Property, within Property, without (1,770,00 0) 2,749,80 2,035,00 714,80 2,000,000 3,000,00 5,000,00 Total Gross estate Less: Deductions Funeral expenses (2,000,000 x 5%) Unpaid mortgage, within Total (2/5 x P350,000) 2,000,000 100,000 250,000 350,000 140,00 1,860,00 Net taxable estate 45 ( 480,20 0) Answer: A Personal property within Real property within Personal property without Real property without RA 4917 Gross estate Less: Deductions Ordinary Funeral (2,000,000 x 5%) Judicial Claims against the estate RA 4917 700,000 600,000 300,000 300,000 100,000 2,000,000 100,000 120,000 30,000 100,000 Special Standard deduction Medical expenses Net taxable estate ( 350,00 0) (1,000,000) ( 85,000) 565,000 37 46 Answer: D Net estate, Philippines Net estate, United States 3,000,000 1,000,00 4,000,00 Total net estate Tax on P 2,000,000 135,00 220,00 355,00 2,000,000 x 11% Estate tax Less: Tax credit Tax paid, US 80,000 Limit (1/4 x 355,000) 88,750 Allowed (lower) 80,00 275,00 Estate tax due after tax credit 47 Answer: B Net estate, Philippines 600,00 Net estate, Japan 300,00 100,00 Net estate, United States Total Tax on P 500,000 500,000 x 8% Estate tax Less: Tax credit Tax paid, Japan P30,000 (3/10 x 55,000) 16,500 Allowed Tax paid, US 4,000 400,00 1,000,00 15,000 40,00 55,00 16,500 P (1/10 x 55,000) 5,500 Allowed 4,00 20,50 22,00 Total credits, 1st limit 2nd limit (4/10 x 55,000) Credit Allowed (lower) 20,50 34,50 Estate tax due after tax credit 38 48 Answer: C Net taxable estate, Philippines 3,000,00 1,000,000 4,000,000 Net taxable estate, United States Total On P 2,000,000 135,00 220,00 355,00 2,000,000 x 11% Estate tax Less: Tax credit Tax paid in US (squeeze) 80,000 Limit (1/4 x 355,000) 88,750 Credit allowed (lower) 80,00 275,00 Estate tax due after tax credit 49 Answer: A Gross estate, Philippines Less: Deductions, Phils 4,000,000 3,000,00 6,000,00 2,000,00 “A” foreign country Deductions, “A” foreign country Net estate Less: Share of surviving spouse Net taxable estate (5,000,000 x 60%) / Tax on P 2,000,000 50 4,000,00 5,000,00 1,500,00 3,500,00 135,00 165,00 300,000 1,500,000 x 11% Estate tax due Less: Tax credit Tax paid, “A” foreign country Limit (4/5 x 300,000) Estate tax payable 1,000,0 00 124,500 240,000 124,500 175,50 Answer: D Net estate, Philippines 500,00 Net taxable estate, Japan 300,00 ( 50,000 ) Net taxable estate, US 39 Net estate, Hongkong 450,00 Total net estate Tax on P 500,000 700,000 x 8% 700,0 00 1,200,0 00 15,000 56,00 71,00 Estate tax Less: Tax credit Tax paid, Hongkong P 45,000 Limit (450/1,200 x 26,625 71,000) Allowed Tax paid, Japan P 20,000 Limit (300/1,200 x 17,750 71,000) Allowed Total credits, 1st limitation 2nd limitation (700/1,200 x 71,000) Estate tax due 40 26,625 17,750 44,375 41,417 41,417 29,583 ... subject to tax 25 2,800,0 00 1,219,7 50 4,019,7 50 (see solution in No 26) Conjugal Residential land Commercial land House and lot, Manila House and lot, California 3,000,000 2,000,00 100,00 200,00... estate of the decedent because the transfer is for an adequate and full consideration This is despite the agreement between the seller and the buyer that the transfer shall take effect upon the... institutions and medical expenses are not included in the multiplier deductions Only the deductions under ELIT and Transfers for Public Purposes, if any, are part of said deductions 31 Answer: A (see solution