CHAPTER 8-1 PROBLEMS a Tax on P88,620 Exempt b Tax on P200,000 520,125 x 8% Exempt 41,610 c Tax on P2,000,000 d Tax on P10,000,000 2,069,322 x 20% Estate tax 135,000 1,215,000.00 413,864.40 1,628,864.4 Conjugal properties P2,340,00 2,260,00 4,600,00 Exclusive properties Gross estate Less: Ordinary deductions Funeral expenses, actual Judicial expenses Claims against conjugal properties P120,000 45,000 55,000 Standard deductions Net estate Less: Share of surviving spouse Gross conjugal ( 220,000 ) (1,000,00 0) 3,380,000 P 2,340,000 220,000 2,120,000 Less: Conjugal deductions Net conjugal Share (2,120,000 x 1/2) 1,060,00 2,320,00 Net estate subject to tax Miscellaneous personal properties Time deposit (P50,000 x ½) Real estate (P1,000,000 + 500,000) Conjugal P2,000,00 800,000 25,000 Gross estate 2,825,000 Deductions: Ordinary Unpaid mortgage Funeral expenses Judicial expenses Total P 120,000 180,000 60,000 360,000 Family home Special: Family home (maximum) Exclusive 1,500,0 00 1,500,00 Total 4,325,000 ( 360,000 ) (1,000,000 17 Standard deductions Net estate Less: Share of surviving spouse (P2,825,000 – 360,000) x 1/2 Net taxable estate Conjugal Commercial land Family home (P250,000 + 1,300,000) Fishpond Motor vehicle Time deposit, PNB Other personal properties Total 1,550,000 280,000 160,000 90,000 800,000 2,880,000 Exclusive 1,400,0 00 1,400,00 Deductions: Ordinary Unpaid mortgage, commercial land 200,000 Claim against the estate(200,000 x 18% x 27,000 9/12) Unpaid mortgage, family home 220,000 Funeral expenses 55,000 Judicial expenses 15,000 Total 517,000 Family home (1,550,000 x ½) Net estate Less: Share of surviving spouse (2,880,000 – 517,000) x 1/2 Net taxable estate Conjugal Family home 4,280,000 (1,000,000 ) ( 775,000 ) 1,988,000 1,181,500 806,500 P 2,900,000 1,500,000 4,400,000 Personal property (1,600,000 – 100,000) Gross estate Less: Deductions Ordinary Funeral expenses Claims against the estate Losses 100,000 75,000 25,000 Special Standard deduction Family home (2,900,000 x ½), limit 1,000,000 1,000,000 18 Total ( 517,000 ) Special Standard deductions ) (1,000,000 ) 1,965,000 1,232,500 732,500 ( 200,00 0) (2,000,000 ) Net estate Less: Share of surviving spouse (4,400,000 – 200,000) x 1/2 Net taxable estate 2,200,000 2,100,000 100,000 Family home House and lot – Bangkok Domestic shares DBP Bonds Appliances, Kampuchea Receivable from an insolvent debtor, Manila Receivable from an insolvent debtor, Kampuchea Gross conjugal / Gross estate Deductions: Ordinary Funeral expenses (42,500 + 20,000) Claims against the estate Unpaid mortgage, Manila Unpaid mortgage, Bangkok Bad debts, Manila Bad debts, Kampuchea 1,340,000 2,200,500 130,000 30,000 168,000 25,000 35,000 3,928,500 Special Family home (1,340,000 x ½) Standard deduction 62,500 50,000 75,000 50,000 25,000 35,000 670,000 1,000,000 Net estate Less: Share of surviving spouse (3,928,500 – 297,500) x 1/2 Net taxable estate ( 297,50 0) (1,670,000 ) 1,961,00 1,815,500 145,500 7–2 PROBLEMS Family home P1,800,00 40,00 1,840,000 1,500,000 3,340,00 Shares of stock (2,000 x P20) Total conjugal Add: Exclusive property – ricemill Gross estate Deductions Ordinary Claims against the estate 32,00 40,500 Funeral expenses, actual Special deductions Family home (1,800,000 x 1/2) Standard deduction 900,000 1,000,00 Net estate Less: Share of surviving spouse (1,840,000 - 72,500) x 19 ( 72,50 0) (1,900,000 ) 1,367,50 ( 883,75 1/2 Net estate subject to tax 0) 483,750 Conjugal properties: Cash Prize in a raffle Conjugal 500,000 50,00 150,00 1,900,00 800,00 1,500,00 30,00 4,930,00 Proceeds of insurance House and lot, family home Other personal properties Other real properties Claims against insolvent persons Gross estate Less: Deductions Ordinary Funeral expenses Judicial expenses 195,000 15,00 30,00 350,00 35,00 Bad debts Unpaid mortgage, Laguna Unpaid taxes Special Family home (1,900,000/2) Total 4,930,00 ( 625,000 ) ( 950,00 0) (1,000,00 0) 2,355,555 Standard deduction Net estate Less: Share of surviving spouse Gross conjugal Less: Conjugal deductions 4,930,000 625,00 4,305,00 Net Exclusive Share (4,305,000 x 1/2) Net estate subject to tax 2,152,500 203,055 Family home House in Manila 1,500,000 2,200,00 537,50 80,00 4,317,500 Shares of stock (110+105)/2 x 5,000 Amount received from employer Gross estate Less: Deductions Ordinary 20 Funeral expenses Judicial expenses Legacy to Red Cross Claims against the estate Received from employer (RA 4917) 135,000 25,000 15,000 50,000 80,000 Special Family home, limit Standard deduction 1,000,000 1,000,000 Net taxable estate Tax on P2,000,000 12,500 x 11% Estate tax ( 305,000 ) (2,000,000 ) 2,012,500 135,000 1,375 136,375 Cash House and lot 135,000 950,00 450,00 465,000 2,000,00 Medical equipments Land in Camarines Sur Gross estate Less: Deductions Ordinary Funeral expenses Cremation Cost of coffin Expenses of the wake Burial plot and tombstone Total Limit (2,000,000 x 5%) 150,000 20,000 60,000 22,000 252,000 100,00 5,00 80,0 00 70,00 204,16 Judicial expenses Loans from GSIS Unpaid mortgage (100,000 – 30,000) Vanishing deduction (Schedule 1) Special Standard deduction ( 459,165 ) (1,000,00 0) ( 15,00 0) 525,83 Medical expenses Net estate subject to tax Tax on P500,000 P15,000.0 2,066 80 17,066 80 25,835 x 8% Estate tax 21 Schedule 1: Vanishing Deduction Lower value P420,00 30,00 390,00 Less: Mortgage paid Initial basis Less: Deductions (pro-rated) Funeral expenses 100,000 Judicial expenses 5,000 Loans from GSIS 80,000 Unpaid mortgage 70,000 Total 255,000 (390/2,000) x 255,000 49,72 340,27 60% 204,16 Base Rate Vanishing deduction Conjugal 4,600,0 00 400,00 Family home Personal properties Land Building Car 5,000,00 800,000 500,000 900,00 2,200,00 200,000 200,000 150,000 _ 550,000 997,500 997,500 Gross estate Less: Deductions Ordinary Funeral expenses (maximum) Judicial expenses Unpaid mortgage, family home Vanishing deduction Total Exclusive Special Family home, maximum Standard deduction Net estate Less: Share of surviving spouse (5,000,000 – 550,000) x ½ Net estate subject to tax 22 Total 7,200,000 ( 1,547,500 ) ( 1,000,000 ) ( 1,000,000 ) 3,652,500 2,225,000 1,427.500 Schedule 1: Computation of Vanishing Deduction / Property previously taxed Lower value: Land Commercial building Car Total Less: Mortgage paid Initial basis Less: Deductions (pro-rated) (1,800,000/7,200,000) x P 550,000 Base Rate (more than years, not more than years) Vanishing deduction a b c d e P 600,000 500,000 900,000 2,000,000 200,000 1,800,000 137,500 1,662,500 60% 997,500 Deductible Not deductible Not deductible Not deductible Deductible Exclusiv Community Total e 2,500,00 1,750,000 2,000,00 1,400,000 4,500,00 3,150,000 7,650,000 Personal properties Family home Real properties Gross estate Ordinary deductions: Funeral expenses, limit Judicial expenses Unpaid taxes Losses Special deductions: Family home 200,000 30,000 12,500 350,000 ( 592,500) Standard deduction Medical expenses, limit Net estate Less: Share of surviving spouse (3,150,000 – 592,500) (1,000,000 ) (1,000,000 ) ( 500,000 ) 4,557,50 1,278,750 /2 Net taxable estate 3,278,75 Computation of net distributable estate: Exclusive Community 2,500,000 1,750,000 Personal properties 23 Total Family home Real properties Gross estate 2,000,000 4,500,000 1,400,000 3,150,000 7,650,00 Ordinary deductions: Funeral expenses Judicial expenses (30,000 + 20,000) Unpaid taxes Medical expenses Losses (350,000 + 130,000) 220,000 50,000 12,500 550,000 480,000 Net estate Less: Share of surviving spouse (3,150,000–1,312,500)/ Net distributable estate (1,312,50 0) 6,337,50 918,750 5,418,750 Communit Exclusive Total y 3,000,000 2,000,00 5,000,00 0 Gross estate Less: Deductions Ordinary Unpaid mortgage (50,000 – 20,000) Amount claimed as deduction Vanishing deduction 30,000 170,000 384,000 ( 584,000 ) (1,000,00 0) 3,416,00 Special (Standard deduction) Net estate Less: Share of surviving spouse Gross conjugal 3,000,00 584,00 2,416,00 Less: Conjugal expenses Net conjugal Share (2,416,000 /2) 1,208,00 2,208,00 Net taxable estate Computation of vanishing deduction: Value to take Less: Mortgage paid (20,000 + 20,000) Initial basis Less: Deductions (pro-rated) Amount claimed Unpaid mortgage (50,000 – 20,000) Total 24 540,000 40,000 500,000 170,000 30,000 200,000 (500,000 / 5,000,000) x 200,000 Base Rate (more than year, not more than years) Vanishing deduction 20,000 480,000 80% 384,000 a Decedent was a resident / citizen Gross estate, Philippines 2,000,00 300,00 5,000,00 1,500,00 Less: Expenses Gross estate, United States Less: Expenses 1,700,0 00 3,500,0 00 5,200,0 00 Total Tax on P 5,000,000 200,000 x 15% Estate tax due Less: Tax credit Tax paid, US Limit (35/52 x 495,000) Estate tax due after tax credit 465,000 30,000 495,000 280,000 333,173 280,000 215,000 b Decedent was a nonresident alien A nonresident alien is not entitled to a tax credit of estate tax paid or payable in a foreign country because such properties are not also taxable in the Philippines 10 Net taxable estate, Philippines Gross estate, “A” foreign country Deductions, “A” foreign country Gross estate, “B” foreign country Deductions, “B” foreign country Gross estate “C” foreign country Deductions “C” foreign country 900,000 800,00 200,00 600,00 0 500,00 (600,00 (100,00 0) 0) 800,00 200,00 600,00 0 Total Tax on P2,000,000 Less: Tax credit Tax paid “A” foreign country Limit (6/20 x 135,000) Tax paid “B” foreign country 1,100,0 00 2,000,0 00 135,000 60,000 40,500 100,00 25 40,500 Limit (6/20 x 135,000) 60,000 Total credits, 1st limitation 2nd limitation (11/20 x 135,000) Estate tax payable 60,00 100,50 74,25 74,250 60,750 26 ... Less: Share of surviving spouse (2 ,88 0,000 – 517,000) x 1/2 Net taxable estate Conjugal Family home 4, 280 ,000 (1,000,000 ) ( 775,000 ) 1, 988 ,000 1, 181 ,500 80 6,500 P 2,900,000 1,500,000 4,400,000... 1,550,000 280 ,000 160,000 90,000 80 0,000 2 ,88 0,000 Exclusive 1,400,0 00 1,400,00 Deductions: Ordinary Unpaid mortgage, commercial land 200,000 Claim against the estate(200,000 x 18% x 27,000... (Schedule 1) Special Standard deduction ( 459,165 ) (1,000,00 0) ( 15,00 0) 525 ,83 Medical expenses Net estate subject to tax Tax on P500,000 P15,000.0 2,066 80 17,066 80 25 ,83 5 x 8% Estate tax 21