Deductions from the Gross Estate

PROBLEMS

P3.1

Assume the decedent died prior to 2018. Determine the allowable deductions for funeral
expenses from the following independent problems:

Case A Case B Case C Case D

Total expenses ₱450,000 ₱450,000 ₱550,000 ₱400,000
Paid by - - 80,000 150,000
friends/relatives
Gross Estate 3,500,000 4,000,000 3,200,000 3,000,000
Allowable funeral expense?

P3.2

Francisco died in 2017 leaving gross estate of ₱4,100,000. The actual funeral expense on his
burian is ₱400,000. Of the said amount, ₱180,000 is unpaid.

Question #1: How much is the funeral expense that can be claimed in computing taxable net
estate?

Question #2 : How much is the deductible claims against the estate?

P3.3

The following were incurred in connection with the wake and burial of a resident citizen
decedent who died on December 2017:

Mourning clothing ( donated by the decedent’s employer) for the:

 Surviving spouse ₱4,000

 Dependent children 16,000
 Married children 12,000
 Grandchildren 6,800

Expenses of the wake paid by relatives 68,900

Telecommunication charges paid by the friends 4,240
Cost of burial plot, coffin, interment fees and other funeral charges paid 389,580
by an insurance company under the decedent’s insurance coverage taken
before his death.

REQUIRED: Assume the gross estate of the decedent was ₱5,000,000, determine the amount of
allowable deduction for funeral expenses.
P3.4

Mr. Yukiko San, a resident of Makati City and a citizen of Japan, was given by his doctor two
months to live due to a terminal illness. The remaining two months of his life were spent in a
hospital bed with his loved ones. The following expenses were incurred before and after the
death in 2017.

 Hospital bills for two months of confinement before ₱830,000

decedent’s death
 Embalming charges 16,300
 Burial apparel of the decedent 2,900
 Cost of coffin 79,500
 Mourning apparel of the surviving spouse during the 3,000
burial
 Mourning apparel of the six children ( 1 minor, 2 legal age 15,000
but unmarried, 3 married). ₱2,500 each.
 Snacks and drinks during the wake 13,000
 Honoraria of the priest for daily masses before burial 3,500
 Telecommunication charges to inform relatives in Japan 12,500
 Charges for death notice published in newspaper 1,200
 Cost of video footage of the burial and interment 10,500
 Funeral car service during interment 4,500
 Honorarium of priest who celebrated the mass during 1,800
interment
 Cost of tombstone 32,500
 Snacks and drinks for prayer vigils after interment 4,850
 Cost of thank you cards 1,500

REQUIRED: Assume the gross estate of the decedent was ₱10, 250,000, determine the amount
of allowable deduction for funeral expenses.

P3.5

The following expenditures were incurred in connection with the settlement of the estate of a
decedent who died on October 2017.

 Expenditures incurred for the collection of assets ₱120,000

and payments of debt
 Attorney’s fees for services to individual legatees 13,500
 Accountant’s fee 27,500
 Executor’s commission 16,200
 Appraiser’s fees 3,000
  Court fees 18,000
 Cost of preserving and distributing the estate 16,250
 Cost of storing the property of the estate 13,000
 Brokerage fees 11,800

REQUIRED: Determine the allowable “judicial expenses” assuming:

1. The estate is under judicial settlement

2. The estate is under extra-judicial settlement.

P3.6

Juan, a bachelor and resident Filipino citizen, died on November 2, 2018. The following fees
were paid to the following in connection with the settlement of his estate.

 To the executor, for time and effort in executing the will ₱32,000
 To a lawyer, for legal advice in carrying out the will 92,000
 To an appraiser, for establishing property values 74,500
 To an accountant, for estate tax return preparation 35,000

The administrator also incurred the following:

 Court fees 20,000

 Cost of preserving the estate 17,000
 Cost of storing the property of the estate 13,000
 Brokerage fees for selling property of estate 10,500

In addition to the information provided above, the administrator paid a premium of ₱3,800 on his
bond, being exclusively for his accountant.

REQUIRED: Determine the allowable “judicial expense”.

P3.7

Various type of losses incurred by a decedent/estate as follows:

 Loss due to typhoon, a day before the decedent’s death, ₱1,800,000.

 Loss due to a shipwreck, two months after the decedent’s death, ₱350,000.
 Swindling loss incurred 2 months before death, 950,000
 Gambling losses before death, ₱3,500,000

REQUIRED: Determine the deductible “losses” from the gross estate of the decedent. Assume
further that the decedent’s gross estate amounted to ₱28,500,000 as of the date of his death.
P3.8

The heirs of a resident citizen decedent with a total gross estate of ₱8,000,000 provided the
following data:

 Receivable from Anton, a debtor ₱350,000

 Amount collectible from Anton 320,000
 Unpaid taxes on the estate before death 250,000
 Unpaid taxes on the estate after death 180,000
 Unpaid mortgage on the estate 150,000
 Unpaid funeral expenses 40,000
 Unpaid medical expenses 78,200
 Judicial expenses 80,000
 Unpaid loans arising from debt instruments (notarized) 120,000
 Unpaid loans arising from debt instruments ( not notarized) 73,000
 Casualty loss 75,000

REQUIRED: Determine the total amount of allowable deduction from gross estate of the
decedent.

P3.9

Case A Case B Case C Case D

Receivable from ₱650,000 ₱650,000 ₱650,000 ₱650,000
debtor
Amount 450,000
collectible
Debtor’s total 550,000 1,500,000 1,500,000
asset
Debtor’s total 1,350,000 780,000 780,000
liabilities
Unpaid taxes 540,000

Allowable deductions -
Claims Against insolvent person _________________________________________________

P3.10

The following data were taken from the estate of Pedro Juan:

 Claims against Francis ( insolvent ), ₱250,000, fully uncollectible.

 Claims against Vico ( insolvent ), ₱150,000, 50% uncollectible.
 Claims against a person who absconded, ₱350,000.
REQUIRED: Based on the data provided. Determine the allowable deduction from Pedro Juan’s
gross estate.

P3.11

The gross estate of Vico Soto includes ₱280,000 receivable which is duly notarized from debtor
(Vicky) whose records show:

Assets ₱500,000

Liabilities ₱805,000

Vicky’s Liabilities composed of the following:

 Due to the BIR for unpaid taxes, ₱210,000

 Due to Malia, ₱120,000
 Due to other creditors, ₱475,000

REQUIRED: Determine the amount of allowable deduction from Vico’s gross estate in relation
to its receivable from Vicky.

P3.12

Philip, a Filipino residing in Negros died on December 9, 2016, leaving a gross estate of
₱6,300,000 including a parcel of land valued at ₱1,200,000, which he inherited from his father
who died on November 2, 2013; that the land was previously taxed with a fair value of ₱983,700
for estate tax purposes in the estate of his father; that the land was subjected to a mortgage of
₱511,200 at the time it was inherited by the present decedent, which amount was deducted from
the net estate of the father; that the present decedent paid ₱200,000 of the mortgage indebtedness
and that the total deductions claimed expenses, losses, etc including the unpaid mortgage of
₱311, 200 was ₱600,000

REQUIRED: Determine the correct amount of vanishing deduction, if any.

P3.13

Determine the allowable standard deduction from the following independent cases:

PARTICULARS

A Decedent is single and a resident citizen of the Philippines

B Decedent is a head of family and a resident citizen of the Philippines

C Decedent is a resident alien

D Decedent is non-resident alien; reciprocity clause under the tax code is applicable
E Decedent is non-resident alien; reciprocity clause under the tax code is not applicable

P3.14

Determine the deductible medical expenses of a decedent who died in 2017 from the following
cases:

CASE PARTICULARS AMOUNT

A Expenses incurred within 1 ₱850,000
year before the decedent’s
death; ½ of the expenses were
not yet paid.
B Expenses incurred within 1 480,000
year before the decedent’s
death; ½ of the expenses were
paid three months after death
C Expenses incurred within 1 350,000
year before the decedent’s
death; ½ of the expenses were
gratuitously paid by the
decedent’s relatives.
D Expenses incurred within 1 650,000
year before the decedent’s
death; the illness was not the
cause of the decedent’s death.
E Expenses incurred more than I 5,200,000
year before the decedent’s
death.

P3.15

Determine the deductible family home in 2018 from the following independent cases:

CASE PARTICULARS FAMILY HOME

A Decedent is single ₱10,000,000
B Decedent is head of the family 6,500,000
C Decedent is married. The 9,000,000
family home is the exclusive
property of the surviving
spouse.
D Decedent is married. The 9,500,000
family home is the exclusive
property of the decedent.
E Decedent is married. The 13,000,000
family home is classified as
conjugal property.
 F Decedent is married. 50% of 10,000,000
the family home is classified
as conjugal property; the
remainder is the exclusive
property of the decedent.

P3.16

The administrator of a decedent’s estate provided the following data:

Property:

Domestic shares of 3,300 shares inherited 6 years ago ₱1,320,000

House and lot, family home, located in Europe, inherited 2,300,000
2 years ago at a value of ₱1,700,000
Jewelry items, in the Philippines at the time of death 380,000
Jewelry items kept in a vault abroad 200,000
Bank Deposit in the PH branch of a U.S bank 600,000
Interest from bank deposit after decedent’s death 35,000

Expenses and other charges:

Funeral expenses, abroad 87,000

Funeral expenses, Philippines 220,000
Judicial expenses, abroad 90,000
Judicial expense, Philippines 93,000
Claims against the estate with the notarized debt 150,000
instrumented issued in the Philippines
Donation to the PH government as provided in his will 300,000

REQUIRED: Determine the net taxable estate assuming:

CASE A- Decedent died prior to the effectivity of TRAIN LAW

1. The decedent was a Filipino citizen but a resident of South Korea

2. The decedent was not a Filipino citizen but a resident of Cebu City

CASE B- Decedent died after the effectivity of TRAIN LAW

1. The decedent was a Filipino citizen but a resident of South Korea

2. The decedent was not a Filipino citizen but a resident of Cebu City
P3.17

A resident decedent, head of family, died leaving the following properties and obligations:

Cash in bank, 50%, donated mortis causa to National Gov’t ₱450,000

House and lot in Makati, F. Home 1,500,000
Personal properties 1,300,000
Farm lot 850,000
Claim against an insolvent debtor 240,000
Transfer in contemplation of death (gratuitous) 1,400,000
Transfer passing under special power of appointment 80,000

Deductions claimed:

Funeral expenses 675,000

Judicial expenses 62,800
Donation mortis causa to Quezon City gov’t 175,000
Unpaid mortgage on the farm lot 90,000
Medical expenses (included in the funeral expense 250,000
incurred within 1 year period with receipts)

The farm lot was inherited 5 ½ years ago by the decedent before his death with a value then of
₱700,000 and a mortgage indebtedness of ₱260,000.

REQUIRED: Determine the net taxable estate assuming:

CASE A- Decedent died prior to effectivity of TRAIN LAW

1. The taxable net estate

2. The taxable net estate assuming the farm lot was inherited 5 years ago.

CASE B- Decedent died after the effectivity of TRAIN LAW

1. The taxable net estate

2. The taxable net estate assuming the farm lot was inherited 5 years ago.

P3.18

Marco died leaving a gross estate of ₱8,000,000 including a land inherited from his uncle 3 ½
years before his death and a car donated to him 7 years before his death. The following data
pertain to the two properties:
 Unpaid Mortgage FMV upon receipt FMV upon death
Land ₱120,000 2,200,000 1,850,000
Car 75,000 340,000 400,000

The decedent was able to pay ½ of the unpaid mortgage on the land before his death.

Other deductions claimed are as follows:

Expenses, losses, indebtedness, tax ₱1.600,000

(excluding the unpaid mortgage above but
including actual funeral expenses of ₱320,000
and medical expenses of ₱640,000)

Standard Deductions 1,500,000

Transfer to the Gov’t. include above 350,000
Death Benefits from Employes 265,000
Family home (included above) 2,250,000

REQUIRED: Determine the net following:

CASE A- Decedent died prior to effectivity of TRAIN LAW

1. Vanishing deductions

2. The net taxable estate

CASE B- Decedent died after the effectivity of TRAIN LAW

1. Vanishing deductions

2. The net taxable estate

P3.19

Joey (single), a Filipino citizen dies in Tokyo, Japan while undergoing medical treatment on
November 7, 2015, leaving the following properties and charges:

 Cash in bank, ₱1.350,000

 Residential house and lot in Marikina City (family home) 200 sq. m. ₱13,500 per sq. m.
₱1,500,000 cost, ₱2,800,000 zonal value
 Agriculture land in New Zeland valued at ₱1,700,000. The property was received as a
gift from a friend on September 1, 2013. Its value at the time was ₱1,100,000 net of
 ₱490,000 mortgage assumed by Joey. ¼ of which remained unpaid as of the date of
death.
 Real properties devised to Quezon City government for public use valued at ₱1.230,000
 Common stocks of DDS Corporation (5,300 shares), a domestic corporation-listed in the
PH Stock Exchange (highest-₱120; lowest ₱85)
 Common stocks of MADI Comporation (18,000 shares), a domestic corporation- not
listed in the stock exchange. Cost- ₱60 per share; book value-₱45 per share. Only 60% of
its business is located in the Philippines.
 Preferred Stocks of Granny Inc. (2,800 shares), a domestic corporation- not listed in the
stock exchange. Cost- ₱80 per share; book value- ₱65 per share; par value ₱50 per share
 Shares of stock in a foreign corporation valued at ₱240,500. Eighty- five percent of its
business is located in the Philippines.
 Car (cost-₱1,000,000; book value -₱680,000; market value -₱700,000)

Obligations of and charges against certain properties claimed by Joey’s heirs:

Mortgages/Indebtedness:

 ₱120,000 mortgage on the residential house and lot which remained unpaid as of the date
of death.
 ₱180,000 Bank loan evidenced by a notarial agreement.

Funeral expenses (except for obituary notices in the Philippines, all other expenses were incurred
in Japan.):

 Burial lot donated by the decedent’s siblings ₱90,000

 Coffin bought by decedent’s friends 130,000
 Snacks given during wake 28,000
 Fees paid for the obituary notices- Japan 4,500
 Fess paid for the obituary notices- Philippines 14,800
 Fees for funeral services 135,000
 Fees for prayers and mass 32,000
 Expenses for food and drinks consumed after burial 14,000

Other expenses/Charges:

 Receivables from Miriam (insolvent), ₱143,000. The debtor is a friend from Japan.
 Medical expenses incurred in Japan reaches ₱620,000; ½ was incurred within the
settlement period of 6 months, balance is beyond the settlement period but within 12
months before death.
 Judicial expenses amounted to ₱66,000
 Benefits under RA4917, ₱300,000
 REQUIRED: Determine the following:

1. The total gross estate

2. The deductible funeral expense is

3. The total deductible claim against the estate is

4. The deductible vanishing deduction is

5. The deductible medical expenses is

6. The deductible family home is

7. The taxable net estate is

8. The estate tax is

MULTIPLE CHOICE

1. Which of the following statements is true?

a. Deductions from gross estate are highly disfavored in law; he who claims deductions
must be able to justify his claim or right.
b. Receipts or invoices or other evidence to show that the expense was really incurred must
duly support the funeral expense.
c. Both a and b
d. Neither a nor b

2. Which is false?
a. The estate tax is computed based on the net estate or taxable estate.
b. The net estate is determined by subtracting from the gross estate the deductions
authorized by law.
c. Both a and b
d. Neither a nor b
3. Which of the following statements regarding funeral expense (assuming decedent died before
2018) is correct?

a. Mourning apparel of all minor children of the decedent regardless of civil status can be
deducted from the gross estate.
b. Expenses of the prayer vigils succeeding the burial are deductible from the gross estate
c. Cost of burial plot, tombstone, monument or mausoleum can be claimed as deduction
from the gross estate including their upkeep
d. If the decedents relative are abroad, telecommunication expenses incurred to inform them
may be claimed as deduction from the gross estate.
4. The following statements are correct, except (assuming the decedent died before 2018):

a. Expenses of the decedents wake include food and drinks.

b. The cut-off point for funeral expenses is interment.
c. Expenses related to the death which accrues after interment are considered funeral
expenses.
d. All of the above.
5. The gross estate of the decedent who died in February 2018 has a fair market value of
P20,000,000. Deductions, excluding funeral expenses of P1,250,000 amounted to P7,500,000.
Deductible funeral expenses is?

a. P0 c. P1,000,000
b. P750,000 d.P125,000
6. The following were incurred in connection with the wake and burial of a decedent who died in
2016:

Mourning clothing of the decedent’s surviving spouse 1,500

Mourning clothing of the decedent’s surviving children 3,200
Mourning clothing of the grandchildren 10,000
Mourning clothing of the decedent’s married children 15,000
Expenses of the wake during the burial 40,000
Publication charges for death notices 5,000
Telecommunication expenses telling the relatives of the deceased 3,000
Cost of burial plot 20,000
Interment fees and charges 12,000
Expenses for the performance of the rites and ceremonies 5,000
Expenses for the prayers after the interment 3,000

The value of the gross estate was 2,000,000. The deductions should be:
c. P200,000 c. P92,700
d. P89,700 d. P100,000
7. Which of the following is not deductible as judicial expense?

a. Executor’s commission
b. Accountant’s fee
c. Docket fees for the settlement of the estate
d. Attorney’s fees paid by the heir in protecting their personal interest
8. Which of the following statements is correct?

a. There can be a deduction on gross estate for expenses on extrajudicial settlement of the
estate.
 b. Notarial fees of the lawyer who prepared and notarized the deed of extrajudicial partition
of the estate is an example of extrajudicial settlement expenses
c. Both a and b
d. Neither a nor b
9. Which of the following statements is true?

a. Brokerage fees in selling property of the estate are part of the deductible judicial
expenses.
b. Estate tax is deductible from the gross estate.
c. Both a and b
d. Neither a nor b
10. The following statements pertain to funeral and judicial expenses. Which is false?

I. Expenses on the death anniversary of the deceased are not deductible expenses on the
gross estate
II. Expenses incurred by an heir from appearance at the trial to oppose the probate of a
will of the decedent are deductible from the gross estate
a. I only c. both I and II
b. II only d. neither I nor II

11. Expenses not essential in the proper settlement of the estate but incurred for the individual
benefit of the heirs, legatees, or devisees are not allowed as “judicial expense”. Which of the
following is not allowed as deduction from the gross estate under this category?

a. Attorney’s fees paid by the heirs to their respective lawyers arising conflicting claims are
not deductible as judicial expenses. These expenses should be separately borne by them.
b. Premiums paid by judicial administrator on his bond are not6 deductible because the
ability of the appointee to give bond is in the nature of a qualification.
c. Compensation of trustees such expenses being for the account and benefit not of the
estate but of the beneficiaries.
d. All of the above
12. Which f the following incurred expenses shall not be deducted under the category of judicial
expenses?

a. Expenses for the inventory-taking of the assets comprising the gross estate
b. Expenses for the administration and payment of debts of the estate
c. Expenses for the distribution of the estate among the heirs
d. Expenses as of the last illness of the decedent
13. Which among the following statements is correct?
 I. An obligation that had prescribed already during the lifetime of the decedent, or that was
unenforceable against him when still alive, will not be claim against his estate when he
shall be dead.
II. If a monetary claim against the decedent did not arise out of a debt instrument, the
requirement on a notarized debt instrument, the requirement on a notarized debt
instrument does not apply.
a. I only c. both I and II
b. II only d. neither I nor II
14. The following statements pertain to indebtedness for estate tax purposes. Which is false?

I. When a person leaves property encumbered by a mortgage or indebtedness, his gross

estate must include the fair market value of the property, undiminished by the mortgage
or indebtedness
II. Include in the computation for the gross estate only the equity of the decedent of the
property.
III. The loan is merely an accommodation loan, when the proceeds of the loan went to
another person, the value if the unpaid loan must not be included in the receivable of the
estate.
a. I only c. I and II only
b. II only d. II andIII only

15. Which among the following is false?

The following statements pertain to indebtedness for estate tax purposes. Which is false?

I. If a claim against the estate arise from a debt instrument, the debt instrument must be
notarized regardless of the source
II. If a monetary claim against a decedent did not arise out of a debt instrument does not
apply
III. If the loan was contracted within three years before the death of the decedent, the
administrator or the executor must submit a statement showing the disposition of the
proceeds of the loan.

c. I only c. III only

d. II only d. II andIII only
16. Awa Nhen died on January2018 leaving among others the following charges and obligations:

Real property tax of the year for the year 2017 100,000
Notarized interest bearing promissory note 100,000
Accrued interest on the promissory note at the time of death 20,000
 Interest to accrue on the promissory note at the date of death to the date of maturity 10,000
Income tax due for 2017 200,000
How much were allowable deductions from the gross estate?
a. P420,000 c. P510,000
b. P430,000 d. P520,000
17. Claims against the estate of the decedent who died on February 2018:
Notes payable for money borrowed, not notarized P500,000
Accounts payable for supplies used in business 200,000
Unpaid medical expenses, incurred 2 years prior to death 150,000
Unpaid medical expenses, within 4 months prior to death 100,000
Debts from gambling losses 120,000
How much were allowable deductions from the gross estate?
a. P200,000 c. P470,000
b. P350,000 d. P850,000
18. The following statements regarding, ”claims against insolvent persons” are correct, except
a. It is a deduction even if the debtor had some properties
b. It can be a deduction even if secured by a mortgage
c. It should always be included in the gross estate
d. Should be omitted I the computation for the next taxable estate if entirely uncollectible

19. Which the following statements is correct?

a. A person is insolvent when his properties are not sufficient to pay his obligation
b. The claims of the creditors will be satisfied out of the available properties of the
insolvent debtor
c. For estate tax purposes, there are two kinds of creditors, preferred and ordinary creditors
d. All of the above

20. Which of the following is not deductible from the gross estate of a decedent?
I. Income taxes on received after death
II. Property taxes not accrued by death
III. Estate tax

a. I and II only c. all of the above

b. II and III only d. none of the above
21. Which of the following taxes is deductible from the gross estate?

a. Income tax paid on income received after death

b. Property tax not accrued prior to death
c. Estate tax paid on a foreign country
d. Donors tax accrued prior of death
22. On June 2018, John passed away. The following unpaid taxes relate to his property, income
on his property, and estate. Estate tax was filed early on December 2018

2017 income tax from practice of profession P300,000

Income tax- practice of profession for January to June 2018 100,000
Income tax of the estate, July to December 2018 200,000
Real property taxes for2017 150,000
Business taxes for 2017 100,000
The total taxes that may be deducted from the gross estate
a. P550,000 c. P850,000
b. P750,000 d. P650,000
23. Which of the following is wrong? Losses deductible from the gross estate

a. Should only be of property should be included in the Philippine gross estate

b. Should be incurred during settlement of the estate
c. May be arising from storm
d. Should not be compensated by insurance or other form of indemnity
24. It pertains to the amount of all the bequests, legacies, devices or transfers to the use of the
government of the republic of the Philippines, or any political subdivision thereof, for
exclusively public purposes

a. Transfer for public use

b. Vanishing deduction
c. Property previously taxed
d. Inheritance
25. Peter died leaving a car he acquired by purchase from John 4 years ago.

a. 0%
b. 40%
c. 60%
d. 80%
26. Upon affectivity of the TRAIN Law, which is not true about standard deduction?

a. It need not be substantiated

b. It does not apply to nonresident alien decedent
c. It need not be reflected in the estate tax return
d. None of the above
27. One of the following statements is wrong. Prior to 2018, medical expenses deductible from
the gross estate:

a. Its allowed if the decedent was a citizen and a resident of the Philippines
 b. The deductible amount is the actual medical expenses or P500,000 whichever is lower
c. Need not to be on the illness resulting to death
d. Must be paid before death
28. Statement 1: the maximum amount of deductible family home from the gross estate is
P10,000,000

Statement 2: if the family home is exclusive property of the surviving spouse and has a current
fair market value of P10,000,000 such amount is not subject to estate tax

a. Statements 1 and 2 are correct

b. Only statement 2 is correct
c. Only statement 1is correct
d. Statements 1 and 2areincorrect
29. Which of the following items is not considered as a special deduction in computing the
taxable net estate of the decedent?

a. Vanishing deduction
b. Medical expense
c. Standard deduction
d. Family home
30. One of the following is allowed as a deduction from the gross estate of a nonresident alien
under the Tax Code as amended by RA 10963, but is prorated between Philippines gross estate
and the total or world gross estate

a. Losses, indebtedness, claims against the estate and taxes

b. Share of surviving spouse
c. Vanishing deduction
d. Standard deduction

31. Which is deductible from the gross estate of resident decedent?

a. Loss of portion of the estate incurred during settlement period such as those arising
from theft.

b. Loss of portion of the estate incurred 200 days before the death of the decedent.

c. Loss of portion of the estate incurred a month before the death of the decedent.

d. Losses on the portion of exclusive capital of surviving spouse incurred during

settlement of the estate.

Use the following information for the next four questions:

Among the properties included in the gross estate of the decedent at the time of death is a three-
story commercial building with a fair market value of ₱12,000,000. During the settlement of the
estate and before the last day of paying the estate tax, the said property is destroyed by fire. The
fair market value at the time of the incident was ₱13,000,000

32. The amount that should be included as part of the gross estate is

a. ₱0 c. ₱12,500,000
b. ₱13,000,000 d. ₱13,000,000
33. The amount of deductible loss will be

a. ₱0 c. ₱12,500,000
b. ₱13,000,000 d. ₱13,000,000
34. Assume that the property was insured for ₱10,000,000 and the amount recovered from the
insurance company was ₱9,000,000. The amount of deductible loss will be

a. ₱1,000,000 c. ₱9,000,000
b. ₱3,000,000 d. ₱12,000,000
35. Assume that 70% of the property is destroyed by fire and the property is not insured. The
deductible loss will be

a. ₱0 c. ₱8,400,000
b. ₱3,600,000 d. ₱12,000,000
36. It pertains to the amount of all the bequests, legacies, devises or transfers to or for the use of
the Government of the Republic of the Philippines, or any political subdivision thereof, for
exclusively public purposes.

a. Transfer for public use

b. Vanishing deduction
c. Property previously taxed
d. Inheritance

37. Which is wrong? Deduction for transfer for public use:

a. Means legacy in a last will and testament to the government

b. Means device in a last will and testament to the government
c. Includes any kind of transfer to the government for public purpose
d. Will not include legacies to charitable institutions
38. Yumao Na Shia transferred a 3,000 square meter lot purposely to be converted as a zoo to be
administered by the city government of Cebu City. The lot was acquired by the decedent 10
years ago for ₱50,000. Its fair market value at the time of Yumao’s death was 5,000,000. The
deduction from the gross estate relative to this transfer is

a. ₱50,000 c. ₱5,000,000
b. ₱2,500,000 d. ₱0
39. Vanishing deduction is availed by taxpayer to

a. Reduce his output vat

b. Reduce his gross income
c. Reduce his gross estate

a. I only c. III only

b. II only d. II and III only
40. Which of the following statements regarding gross estate is incorrect?

a. Vanishing deduction is being allowed to lessen the impact of successive taxation of the
same property within a very short period due to death of the decedent-transferor
b. Even property previously taxed situated outside the Philippines of a non-resident alien
estate, for estate tax purposes, can be allowed vanishing deduction
c. So the unpaid mortgage may be deducted from the gross estate, the fair market value of
the mortgaged property must form part of the gross estate in full.
d. For unpaid taxes to be deductible from the gross estate, such must have accrued at the
time or before the decedent’s death.
41. Which of the following properties of Namayapa Shia who died December 1. 2018 is subject
to vanishing deduction?

Property 1: Rest house in Tagaytay purchased in 2016

Property 2: Commercial lot and building inherited from her mother in 2015 where the estate
tax thereon had not been paid.

Property 3: Donation from a friend in 2017

Property 4: Property won in a lottery 6 months before death

Property 1 Property 2 Property 3 Property 4

a. No No Yes Yes
b. No No Yes No
c. Yes Yes No Yes
d. Yes Yes No No
42. Ded Nha, a citizen of the Philippines and a resident of Bacolod City, died testate on May 10,
2018. Among his gross estate are properties inherited from his deceased father who died on April
4, 2015. What percentage of deduction will be used in computing the amount of vanishing
deduction?

a. 80% of the value taken as basis of vanishing deduction

b. 100% of the value taken as basis of vanishing deduction
c. 60% of the value taken as basis of vanishing deduction
d. 40% of the value taken as basis of vanishing deduction
43.On September 4. 2018, Marky died leaving an apartment building which has a fair value of
₱1,000,000 which he inherited from his mother. The property was valued at 900,000 at the time
of inheritance dated July 28, 2015. The building has a previous mortgage of 150,000 of which
50,000 was paid by Macky prior to his death. In computing for the vanishing deduction, what
percentage will be used and how much will be the vanishing deduction?

a. 40%; ₱306,000
b. 60%; ₱300,000
c. 40%; ₱323,000
d. 20%; ₱305,000
44. Statement 1: the ₱5,000,000 standard deduction for estate tax purposes is a short-cut, legal
mechanism to further exempt the less privileged estate and heirs from the tax burden.

Statement 2: The BIR may examine the bank deposit of a decedent for the purpose of
determining his gross estate without violating the Bank Secrecy Law.

a. Statements 1 & 2 are false

b. Statements 1 is true but 2 is false
c. Statements 1 is false but 2 is true
d. Statements 1 & 2 are true
45. Prior to 2018, which of the following medical expenses will be allowed in full amount as
deduction from the gross estate?

a. ₱750,000 medical expenses incurred during the last 6 months prior to death
b. ₱400,000 medical expenses incurred 13 months prior to death and paid a month before
death
c. ₱250,000 hospitalization expenses incurred and paid during the last one month prior to
death.
d. All of the above
46. Statement 1: the maximum amount of deductible family home from the gross estate is
₱10,000,000

Statement 2: if the family home is exclusive property of the surviving spouse and has a current
market value of ₱10,000,000, such amount is not subject to estate tax.
 a. Statements 1 and 2 are correct
b. Only statement 2 is correct
c. Only statement 2 is incorrect
d. Statements 1 and 2 are incorrect
47. Only one statement is correct? A deduction from family home

a. Shall be allowed if the family home is in the Philippines

b. Shall be at a maximum of ₱10,000,000, based on cost
c. May be allowed for two family homes ( one in the city and another in the province), both
on the Philippines and with certifications of the barangay captains.
d. Shall be deducted at lesser than ₱10,000,000 if, with vanishing deduction and unpaid
mortgage or indebtedness, the value of the family home is already reduced to zero.
48. A resident citizen had family home in the Philippines. He worked abroad and was
temporarily absent from his family home when he died. Which of the following statements is
correct?

a. The decedent would not be allowed family home deduction because he was abroad when
he died.
b. The decedent would not be allowed family home deduction because he was nonresident
citizen when he died
c. The decedent would be allowed family home deduction because actual occupancy of the
family home was not interrupted or abandoned because of his temporary absence.
d. The decedent would be allowed family home deduction because all decedents were
allowed family home deduction.
49. Which of the following statements regarding amount(s) received or receivable under RA4917
is not correct?

a. Any amount received by the heirs from the decedent’s employer as a consequence of the
death of the decedent-employee in accordance with RA 4917 shall be included in the
gross estate of the decedent.
b. Any amount received by the heirs from the decedent’s employer as a consequence of the
death of the decedent-employee in accordance with RA 4917 shall be deductible in the
gross estate of the decedent.
c. Both a and b
d. Neither a nor b
50. Which of the following is not directly reducing inheritance?

a. Standard deduction
b. Claim against insolvent person
c. Unpaid mortgage
d. Funeral expense
51. A decedent has one year left to complete 30 years of continuous service with his employer
when he died. His only heir received ₱1,500,000 as benefit under RA4917. What should be the
amount to be included in the gross estate?

a. ₱1,500,000
b. ₱500,000
c. ₱1,000,000
d. ₱0
52. Based on the preceding problem, what amount should be included as part of the deductions
from gross estate?

a. ₱1,500,000
b. ₱500,000
c. ₱1,000,000
d. ₱0
53. Which of the following may reduce the taxable estate but not the inheritance?

a. Funeral expense
b. Losses
c. Judicial expense
d. Family home
54. A nonresident alien decedent left the following assets:

Domestic shares ₱1,000,000

Foreign shares 3,000,000

Tangible personal property, Philippines 6,000,000

Losses, unpaid indebtedness and taxes 1,200,000

The country where the decedent is a citizen and resident does not impose transfer tax on
transmission of intangibles of Filipinos not residing therein. The taxable net estate in the
Philippines is.

a. ₱3,800,000
b. ₱4,280,000
c. ₱4,800,000
d. ₱5,280,000