Booklet 1 Introduction To Transfer Tax - Estate Tax

CRC-ACE The Professional CPA Review School
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TAXATION
BOOKLET 1
MAY 2023 BATCH
TOPICS:
TAX 0501 – TRANSFER TAXES: PART 1

I. Introduction to Transfer Taxes
II. Estate Tax
a. Composition of Gross Estate
b. Allowable Deductions
c. Net Taxable Estate for Resident Decedent &
Estate Tax Due
PROF. ROEL E. HERMOSILLA, CPA
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CRC-ACE The CPA Professional Review School
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TRANSFER TAXES: PART 1
I. INTRODUCTION TO TRANSFER TAXES
Succession - It is a mode of transmission of the ownership, rights, interests

and obligations over property by reason of death of the owner in favor of
certain persons designated by the owner himself or by operation of law.
Elements of succession
1. Decedent. The person who dies and whose properties, rights and
obligations are transmitted. If he left a will, he is called the testator.
2. Successors. The persons to whom the properties, rights and
obligations of the decedent will pass. They are the heirs or
beneficiaries.
3. Estate. The properties, rights and obligations which are the subject
matter of the succession. It is sometimes called the inheritance.
Kinds of succession
1. Testate or voluntary. A succession carried out according to the wishes
of the testator expressed in a will executed in the form prescribed by
law.
2. Intestate, involuntary, or legal. A succession with an invalid will or
without a will, thus giving rise to a succession by operation of law.
II. ESTATE TAX
Estate tax- It is a tax on the privilege of the decedent to transmit his estate
at death to his lawful heirs or beneficiaries.
A. Composition of Gross Estate

1. In the case of a citizen or resident alien decedent:
a. Real property within and without the Phil.
b. Tangible personal property within and without the Phil.
c. Intangible personal property within and without the Phil.
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2. In the case of a non-resident alien decedent:
a. Real property within the Phil.
b. Tangible personal property within the Phil.
c. Intangible personal property within the Phil., unless there is
RECIPROCITY in which case it is not taxable.
Rule of reciprocity - this rule applies to transmission of intangibles of non-

resident alien decedent. There is reciprocity if the foreign country of which
the decedent was a citizen and resident at the time of his death:
1. Did not impose a transfer tax; or
2. Allowed similar exemption from transfer tax in respect of intangible
personal property owned by citizens of the Phil. not residing in that
foreign country.
When there is reciprocity, the transmission of intangibles located in the Phil.

of a non-resident alien decedent is not subject to tax. When there is no
reciprocity, the transmission of intangibles located in the Phil. of a non-
resident alien decedent is subject to tax.
Properties considered as located in the Phil.

1. Franchise which must be exercised in the Phil.
2. Shares, obligations, or bonds issued by any corporation or Sociedad
Anonima organized or constituted in the Phil. in accordance with its laws.
3. Shares, obligations, or bonds issued by any foreign corporation eighty-
five percent (85%) of the business of which is located in the Phil.
4. Shares, obligations, or bonds issued by any foreign corporation if such
shares, obligations, or bonds have acquired business situs in the Phil.
5. Shares or rights in any partnership, business or industry established in
the Phil.
6. Any personal property, whether tangible or intangible, located in the
Phil.
Taxable Transfers (with insufficient consideration or without

consideration)
1. Transfers in contemplation of death.
2. Revocable transfers.
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3. Properties passing under a general power of appointment.
Exempt Transfers
1. The merger of usufruct in the owner of the naked title.
2. The transmission or delivery of the inheritance or legacy by the fiduciary
heir or legatee to the fideicommissary.
3. The transmission from the first heir, legatee, or donee in favor of another
beneficiary, in accordance with the desire of the predecessor.
4. All bequests, devises, legacies or transfers to social welfare, cultural and
charitable institutions, no part of net income of which inures to the
benefit of any individual: Provided, however, that not more than 30%
of the said bequests, devises, legacies or transfers shall be used by such
institutions for administration purposes.
Properties EXCLUDED from Gross Estate of Citizen or Resident Alien

Decedent
1. Proceeds of irrevocable life insurance policy payable to beneficiary other
than the estate, executor or administrator.
2. Proceeds of GSIS policy.
3. Separate property of the surviving spouse.
4. Benefits received from GSIS.
5. Benefits received from SSS.
Valuation of the estate

1. Usufruct. To determine the value of the right of usufruct, use or
habitation, as well as that of annuity, there shall be taken into account
the probable life of the beneficiary in accordance with the latest Basic
Standard Mortality Table.
2. Properties. The estate shall be appraised at its fair market value as of

the time of death. However, the appraised value of real property as of
the time of death shall be whichever is higher of:
a. The fair market value as determined by the Commissioner, or

b. The fair market value as shown in the schedule of values fixed by the
Provincial or City Assessors.
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Fair market value - the price at which property would change hands
between a willing seller and a willing buyer, neither of whom is under
compulsion to sell or to buy.
Exclusive and common properties of spouses

Absolute Community of Property
EXCLUSIVE PROPERTY
1. Property acquired before the marriage by either spouse who has
legitimate descendants by a former marriage, and the fruits of
such property.
2. Property acquired during the marriage by gratuitous title by
either spouse and the fruits thereof (unless it is expressly
provided by the donor or testator that they shall form part of
the community property).
3. Property for personal and exclusive use of either spouse, except
jewelry.
COMMUNITY (COMMON) PROPERTY
All other properties owned by the spouses:
1. At the time of marriage; or
2. Acquired thereafter.
Conjugal Partnership of Gains

EXCLUSIVE PROPERTY
1. That which one already owns before his or her marriage, except
the fruits of such property.
2. That which one acquired after the marriage by gratuitous title
(e.g., donation, inheritance) or by exchange with an exclusive
property, except the fruits of such property.
CONJUGAL (COMMON) PROPERTY
All other properties are presumed conjugal, e.g.:
1. Salary received; and
2. Fruits from exclusive property.
B. Deductions from Gross Estate
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1. Losses, indebtedness and taxes (please refer to B.1.)

a. If decedent was a citizen or resident alien, deduct all LIT.
b. If decedent was a non-resident alien, prorate LIT as follows:
Phil. gross estate
World gross estate x Total LIT = Deductible LIT
2. Transfers for PUBLIC PURPOSE. These are bequests, legacies, devises

or transfers for the use of the government of the Phil. or any political
subdivision thereof, exclusively for public purpose.
3. Deduction for property previously taxed (VANISHING DEDUCTION).
4. The family home not exceeding P10,000,000. (To be adjusted every 3
years)
5. Standard deduction for citizen or resident alien decedent of P5,000,000;
and for non-resident alien decedent of P500,000.
6. Retirement benefits received by employees of private firms from private
pension plan approved by the BIR under R.A. 4917.
7. Net share of the surviving spouse in the conjugal partnership property
or community property as diminished by the expenses properly
chargeable to such property shall be deducted from the estate.
B.1. Losses, indebtedness, and taxes deductible from gross estate

(LIT)
1. Losses due to fire, storm, shipwreck, or other casualty.
2. Losses due to theft, robbery or embezzlement.
3. Claims of the decedent against insolvent persons, where the value
of the decedent’s interest therein is included in the gross estate.
4. Claims against the estate, provided that the debt instrument was
notarized at the time the indebtedness was incurred; and, if the loan
was contracted within three years before the death of the decedent,
a statement showing the disposition of the proceeds of the loan (or
how the proceeds of the loan was used) must accompany the estate
tax return.
5. Unpaid mortgage, where the value of the decedent’s interest,
undiminished by the mortgage, is included in the gross estate.
6. Income tax on income prior to death of the decedent.
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7. Property taxes which have accrued prior to death of decedent.
REQUISITES for deduction of losses in Nos. 1 and 2 above:

a. The loss is not compensated by insurance or otherwise.
b. The loss is not claimed as a deduction in the estate income tax return.
c. The loss must occur not later than the last day for payment of the estate
tax. (The last day for payment of the estate tax is 1 year from the
decedent’s death).
B.2. PROPERTY PREVIOUSLY TAXED (VANISHING DEDUCTION)

1. Purpose - to minimize the effects of a double tax on the same property
within a short period of time.
2. Conditions for allowance:

a. There is a property forming a part of the gross estate of the present
decedent situated in the Philippines;
b. The present decedent acquired the property by inheritance or
donation within 5 years prior to his death;
c. The property subject to vanishing deduction can be identified as the
one received from the prior decedent, or from the donor, or can be
identified as having been acquired in exchange for the property so
received;
d. The property acquired formed part of the gross estate of the prior
decedent, or of the taxable gift of the donor;
e. The estate tax on the prior transfer or the gift tax on the gift must
have been paid; and
f. The estate of the prior decedent has not previously availed of the
vanishing deduction.
3. Percentage of vanishing deduction - the rate depends on the interval

between the death of present decedent and death of prior decedent (if
the property was acquired by inheritance) or death of present decedent
and date of gift (if the property was acquired by donation), as follows:
More than Not more than Percentage
xxx 1 year 100%
1 year 2 years 80%
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2 years 3 years 60%
3 years 4 years 40%
4 years 5 years 20%
5 years xxx xxx
4. Procedures in computing vanishing deduction

a. Determine the initial value by comparing the FMV of the property
used in computing the first transfer tax paid with the FMV of the
property in the present decedent. The lower of the two is the initial
value.
b. From the initial value taken, deduct any mortgage or lien on the
property previously taxed which was paid by the present decedent
prior to his death, where such mortgage or lien was a deduction from
the gross estate of the prior decedent or gross gift of the donor. This
is the initial basis.
c. The initial value taken, as reduced by Step (b), shall be further
reduced by prorated deductions for, losses, indebtedness, taxes (LIT)
and transfers for public purpose (PP) only, allocable to the property
previously taxed as follows:
Initial Basis
Gross estate x Deductions = Portion Deductible
This is the final basis.

d. Determine the time interval between the death of present decedent
and death of prior decedent (if the property was acquired by
inheritance) or death of present decedent and date of gift (if the
property was acquired by donation) to find the applicable percentage
of vanishing deduction.
e. Multiply the final basis by the percentage of vanishing deduction to
arrive at the VANISHING DEDUCTION.
B.3. FAMILY HOME
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1. Defined - The family home is the dwelling house where a person and
his family reside, and the land on which it is situated.
2. Value included in the gross estate. The current fair market value or
zonal value of the family home, whichever is higher, shall be included
in the gross estate of decedent.
3. Valuation date. The family home shall be valued as of the date of
death.
4. Conditions for allowance of deduction:
a. The total value of the family home must be included in the gross
estate of the decedent.
b. The decedent is married or head of the family.
c. The family home must be the actual residence of decedent and
his family at the time of death, as certified by the barangay
chairman of the locality where the family home is situated.
(Note: However, the TRAIN LAW removed the
requirement of the certification from the barangay, even
if RR No. 12-18 still provides the requirements)
d. Deduction cannot exceed the fair market value or zonal value of
the family home as included in the gross estate but not exceeding
P10,000,000 (P1,000,000 prior to TRAIN LAW)
5. Illustrative presentation of family home and standard deduction as
deductions from the gross estate and, where applicable, share of
surviving spouse.
a. Decedent was an unmarried head of a family
1. Real and personal properties P 7,300,000

Family home 12,000,000
Gross estate 19,300,000
Ordinary deductions:
LIT P 1,300,000
Special deductions:
Standard deduction 5,000,000
Total deductions (16,300,000)
Taxable net estate P 3,000,000
Note: Although the family home is valued at P12 million, the maximum
allowable deduction for the family home is P10 million only.
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2. Real and personal properties P 8,300,000
Gross estate 16,300,000
LIT 1,300,000
Special deductions:
Standard deduction 5,000,000
Total deductions (14,300,000)
Note: Deduction for family home is allowed for P8,000,000 only which is the
declared value of the family home.
b. Decedent was a married man with surviving spouse
1. The family home was his separate property:

Separate Common Total
Real properties P5,000,000
Family home P12,000,000
Other separate 5,000,000 _________
properties
Gross estate 17,000,000 5,000,000
LIT deductions __________
(1,500,000)
Net estate after OD _17,000,000 3,500,000 20,500,000
Special deductions:
Family home (10,000,000)
Standard deduction (5,000,000)
Net estate 5,500,000
Less ½ share of
surviving spouse:
Common property P 5,000,000
Common deductions (1,500,000)
Net common estate P3,500,000
SSS (P3,500,000/2) (1,750,000)
2. Family home was a common property:

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Family home P12,000,000
Other real properties 1,000,000
Separate properties P10,500,000 __________
Gross estate 10,500,000 13,000,000
LIT _________ (7,500,000)
Net estate after OD 10,500,000 5,500,000 16,000,000
Special deductions:
Family home (6,000,000)

Less ½ share of
surviving spouse:
Common property P13,000,000
Net common estate P 5,500,000
SSS (P5,500,000/2) (2,750,000)
3. Family home was common property, but lot on which it stands

was separate property:
Other real properties P 1,000,000
Separate properties:
Other real properties P 6,500,000
Family lot 8,500,000 _________
Gross estate 15,000,000 6,000,000
LIT _________ (3,500,000)
Net estate after OD 15,000,000 2,500,000 17,500,000
Special deductions:
Family home:
Separate lot P8,500,000
Common home 2,500,000
(P5,000,000/2) 11,000,000 (10,000,000)

Less ½ share of
surviving spouse:
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Common property P6,000,000
Net common estate P2,500,000
SSS (P2,500,000/2) (1,250,000)
Taxable net estate P1,250,000
C. Estate Tax Rate
NIRC (BEFORE 2018)

OVER BUT NOT OVER TAX SHALL BE PLUS
- Php200, 000 EXEMPT -
Php200, 000 500, 000 Php0 5% of the excess over Php200, 000
500, 000 2, 000, 000 15, 000 8% of the excess over Php500, 000
2, 000, 000 5, 000, 000 135, 000 11% of the excess over Php2, 000, 000
5, 000, 000 10, 000, 000 465, 000 15% of the excess over Php5, 000, 000
10, 000, 000 - 1, 215, 000 20% of the excess over Php10, 000, 000
TRAIN (ON OR AFTER JAN. 1 2018)
6% OF TAXABLE NET ESTATE
COMPLIANCE REQUIREMENTS:
Notice of Death
NIRC TRAIN
✔ Requirement: ✔ Repealed
1. Gross Estate exceeds Php20, 000; or
2. The transfer is subject to Estate Tax
CPA Certification
✔ required if the Gross Estate exceeds:
NIRC (Before 2018) TRAIN (On or After 1/1/2018)

✔ Php2, 000, 000 ✔ Php5, 000, 000
CLASSROOM DISCUSSION
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Multiple Choice Questions:
1. Estate tax is
a. A property tax because it is imposed on the property transmitted by
the decedent to his heirs.
b. An indirect tax because the burden of paying the tax is shifted on
the executor or any of the heirs of the decedent.
c. An excise tax because the object of which is the shifting of economic
benefits and enjoyment of property from the dead to the living.
d. A poll tax because it is also imposed on residents of the Philippines
whether Filipino citizens or not.
2. A successor to an estate, whether in a last will and testament or not:

a. Heir b. Legatee c. Devisee d. None of these
3. A succession to properties mentioned in the last will and testament,

where the values of the properties shall have increased from the time
the last will and testament was executed is:
a. Testamentary succession
b. Mixed succession
c. Intestate succession
d. Escheated to the state on the increased value
4. First Statement: Succession is the mode of acquisition whereby the

property rights and obligation of a person is deemed transmitted to his
heirs, successors or beneficiaries, upon his death, either by his will or by
operation of law.
Second Statement: Succession takes effect upon acceptance by the
heirs of the properties left behind by the decedent.
a. True, True
b. True, False
c. False, False
d. False, True
5. The estate should be valued at the time ____________.
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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
6. Mr. Ibarra died leaving a farm land. In his will, he transferred the
ownership to Fidel, but subject to the condition that Clara will have the
right to use the land for a period of ten years. In the seventh year,
Clara died, surrendering his right over the land to Fidel. What is the
tax implication of the transfer from Clara to Fidel? *
a. The transfer is both an inclusion from the gross estate
b. The transfer is subject to estate tax
c. The above is a tax-exempt transfer
d. The transfer is subject to donor’s tax
7. In computing the gross estate of a decedent:

a. If he was a non-resident, but citizen of the Philippines, tangible
and intangible properties, regardless of location, shall be included.
b. If he was a resident who was not a citizen of the Philippines,
tangible and intangible properties, regardless of location, shall be
included.
c. If he was a non-resident who was not a citizen of the Philippines,
tangible and intangible personal properties, located in the
Philippines, shall be included.
d. All the above statements are correct.
8. Uzumaki Naruto, a citizen of Japan, residing in Okinawa, with

properties in the Japan and the Philippines, had the following data on
properties and rights at the time of his death and their values.
Real estate, Japan P1,000,000
Real estate, Philippines 2,000,000
Shares of stock of a domestic corporation 200,000
Shares of stock of a Japanese corporation 300,000
Shares of stock of an Indonesian
corporation, doing business in the Philippines 100,000
only
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Philippine Peso deposit in BDO – E.
500,000
Rodriguez in Quezon City
Receivable under a life insurance with an
insurance company doing business in Japan 250,000
The gross estate that should be reported in the Philippines is:
a. P4,350,000 b. P3,700,000 c. P4,000,000 d. P2,800,000
9. Which of the following is not true? A transfer in contemplation of death

for less than full and adequate consideration in money may result in:
a. Value included in the gross estate.
b. Value included in the net estate.
c. Nothing included in the gross estate.
d. Value to consider as taxable income.
10. Which of the following is not included in the gross estate?

a. Revocable transfer where the consideration was not sufficient.
b. Revocable transfer where the power of revocation was not exercised.
c. Transfer under a general power of appointment where the
consideration was not sufficient.
d. Transfer under a limited power of appointment.
11. A revocable transfer with a consideration received:

Consideration received P200,000
Fair market value of property at the time of transfer 300,000
Fair market value of property at the time of death 250,000
Value to include in the gross estate is:
a. P300,000 b. P250,000 c. P100,000 d. P50,000
12. A revocable transfer with the following circumstances:

Fair market value at the time of transfer P300,000
Fair market value at the time of death P180,000
Consideration received when transferred P200,000
a. Shall be included in the gross estate at P180,000.
b. Shall be included in the gross estate at P200,000.
c. Shall be included in the gross estate at P100,000.
d. Shall not be included in the gross estate.
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13. The following are transactions and acquisitions exempt from transfer tax,
except:
a. Transmission from the first heir or donee in favor of another
beneficiary in accordance with the desire of the predecessor.
b. Transmission or delivery of the inheritance or legacy by the fiduciary
heir or legatee to the fideicommissary.
c. The merger of usufruct in the owner of the naked title.
d. All bequests, devises, legacies or transfers to social welfare, cultural
and charitable institutions.
14. Which of the following is not included in the gross estate?

a. Revocable transfer where the consideration is not sufficient.
b. Revocable transfer where the power of revocation was not exercised.
c. Proceeds of life insurance where the beneficiary designated is the
estate and the designation is irrevocable.
d. Proceeds of life insurance where the beneficiary designated is the
mother and the designation is irrevocable.
15. Proceeds of life insurance includible in the taxable gross estate:

a. Insurance proceeds from SSS or GSIS.
b. Amount payable to any beneficiary, irrevocable, designated in the
insurance policy by the insured.
c. Amount payable to any beneficiary designated in the insurance policy
by the insured.
d. Proceeds of group insurance taken out by a company for its
employees.
16. Real property with a cost of P300,000 and a fair market value at the time
of death of P1,000,000, but subject to a mortgage of P200,000.
a. Shall be in the taxable net estate at P100,000.
b. Shall be in the gross estate at the decedent’s equity of P800,000.
c. Shall be in the gross estate at P300,000.
d. Shall be in the gross estate at P1,000,000.
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17. First statement: For marriages on or after August 3, 1988, the property
relationship between husband and wife, in the absence of a written
agreement between them, is the system of absolute community of
property.
Second statement: There may be a property relationship of conjugal
partnership of gains even if marriage was on or after August 3, 1988.
a. Only the first statement is true c. Both statements are true
b. Only the second statement is true d. Both statements are false
18. Which statement is correct? Under the system of conjugal partnership

of gains and absolute community of property:
a. Property acquired during the marriage by inheritance or gift is
exclusive property under both systems.
b. Property owned before the marriage is exclusive property under
both systems.
c. Income of property under (a) is exclusive property under both
systems.
d. Property under (a) may be conjugal or community when expressly
declared by the benefactor as conjugal or community.
19. One of the following statements is wrong:

a. Amounts receivable under Republic Act 4917, and during the
marriage, are conjugal properties.
b. Income out of the labor of the husband is conjugal property.
c. Income out of the exclusive property of the wife is conjugal
property.
d. Property inherited when the fair market value was P600,000, sold
for cash during the marriage when the value was P1,000,000
resulted in a gain of P400,000. The gain is conjugal property.
20. A resident Filipino, died on November 5, 2022 and his estate

incurred losses as follows:
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1st loss: From fire on February 2, 2022 of improvement on his
property not compensated by insurance.
2nd loss: From flood on February 25, 2023 of household furniture
also not compensated by insurance.
a. 1st loss is not deductible and 2nd loss is deductible.
b. Both losses are deductible from gross estate.
c. Both losses are not deductible.
d. 1st loss is deductible and 2nd loss is not.
21. Which of the following statements is wrong? A claim against an insolvent

person, with no properties whatsoever:
a. Is included in the gross estate.
b. Is not included in the taxable net estate.
c. If arising out of a debt instrument of the insolvent, the debt
instrument must be notarized.
d. Needs no preliminary filing of a case against the insolvent person.
22. Which of the following is/are included in the gross income of a taxable
estate or trust?
I. Income received from a property after the administration or
settlement of an estate
II. Income of a property under a revocable trust, in which no
income was distributed to the beneficiary
III. Income of a property under an irrevocable trust, in which in
the discretion of the fiduciary, may be distributed to the
beneficiaries or accumulated
a. III only
b. I and II
c. I, II and III
d. II & III
23. One of the following statements is wrong. Claims against insolvent

persons:
a. Should always be included in the gross estate.
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b. If entirely uncollectible, may be omitted in the computation of the
taxable net estate.
c. Is a deduction even if the debtor had some properties.
d. Can be a deduction even if secured by a mortgage.
24. Aubrey died with a receivable from Douglas. Douglas has properties
worth P220,000 and obligations of P320,000. Included in the obligations
are P20,000 owed to the Government of the Republic of the Philippines
for unpaid taxes and P60,000 owed to Aubrey. The estate of Aubrey has
a deduction for claim against insolvent person of:
a. P60,000 b. P41,250 c. P20,000 d. P0
25. The following are the requisites in order that claims against the
decedent’s estate may be deductible, except:
a. They must be existing against the estate.
b. They must have been prescribed.
c. They must be reasonably certain as to amounts.
d. They must be enforced by the claimants.
26. Which statement is correct? Real property with a cost of P300,000 and
a fair market value at the time of death of P1,000,000, but subject to a
mortgage of P200,000.
a. Shall be in the taxable net estate at P800,000.
b. Shall be in the gross estate at the decedent’s equity of P800,000.
c. Shall be in the gross estate at P300,000.
d. Shall be in the gross estate at the decedent’s equity of P100,000.
27. Lito, married to Maria, died leaving the following:

Car acquired before marriage by Lito P3,000,000
Car acquired before marriage by Maria 4,500,000
House and lot acquired during marriage 15,000,000
Jewelries of Maria (received as gift during the marriage) 1,000,000
Personal properties inherited by Lito during marriage 2,500,000
Land inherited by Maria during marriage 10,000,000
Rental income on land inherited by Maria (25% of which
was earned after Peter’s death) 2,000,000
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Benefits from SSS 3,500,000
Proceeds of group insurance taken by Lito’s employer 1,750,000
Allowable deduction from gross estate of a decedent who died on or
after January 1, 2018: *
a. Losses arising from calamities after settlement of the estate
b. Medical expenses
c. Optional standard deductions
d. None of the above
28. Ricardo was married at the time of death and was survived by his wife
and their two legitimate children when he was still alive. He died on
November 1, 2022, leaving the following:
Real and personal properties in the Philippines P 11,000,000
Proceeds of life insurance:
Receivable by the estate as revocable beneficiary 5,000,000
Receivable by the spouse as irrevocable beneficiary 3,900,000
Medical expenses within one year prior to death:
Paid by the time of death 500,000
Unpaid as at the time of death 400,000
Funeral expenses:
Unpaid at the time of death 300,000
Other obligations of the decedent 1,500,000
The net taxable estate is: *
a. P 1,250,000
b. P 1,900,000
c. P 2,250,000
d. P 3,700,000
29. Which statement is correct? Claims against the estate, as deduction from
the gross estate:
a. Represents obligations enforceable during the lifetime of the
decedent.
b. Should always be evidenced by a notarized document.
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c. Is sufficient for deductibility if a valid obligation under the law on
obligations.
d. If unpaid mortgage of a non-resident, not citizen of the Philippines,
the property should be included in the Philippine gross estate.
30. Which of the following is not a deduction from the gross estate under the
National Internal Revenue Code?
a. Taxes c. Legacy to the government
b. Losses d. Legacy to a charitable institution.
31. Which is wrong? Deduction for transfers for public purpose:

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.
32. In determining the taxable net estate of a decedent, which of the

following rules is correct?
a. Real estate abroad is not included in the gross estate of a decedent
who was a resident alien.
b. Vanishing deduction must be subject to limitations.
c. Shares of stocks being intangible property shall be included in the
decedent’s gross estate wherever situated.
d. Funeral expenses are deductible to the extent of 5% of the total
gross estate but not exceeding P200,000.
33. The following are requisites for vanishing deduction to be allowable,

except one:
a. The estate tax of the prior succession must have been paid.
b. The present decedent died within five (5) years from date of death
of the prior decedent.
c. The property with respect to which deduction is sought for can be
identified as the one inherited by the present decedent.
d. The property must have formed part of the gross estate situated in
the Philippines of the prior decedent.
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34. Which of the following statements is wrong? Property subject to vanishing
deduction should be:
a. If the decedent was a citizen or resident of the Philippines, the
property should be located in the Philippines.
b. If the decedent was not a citizen nor resident of the Philippines, the
property should be located in the Philippines.
c. If the decedent was not a citizen but a resident of the Philippines,
the property should be located in the Philippines.
d. If the decedent was a citizen and resident of the Philippines, the
property may be located anywhere.
35. One of the following statements is wrong. Vanishing deduction shall be

allowed to the estate of a resident citizen:
a. As long as the property is included in the gross estate.
b. If no vanishing deduction was allowed to the estate of the prior
decedent.
c. Even if the grantor of the property is still alive.
d. Even on substitute property.
36. A resident decedent, during his lifetime, was under the conjugal
partnership of gains. Among his allowable deductions from the gross
estate is vanishing deduction and the following:
Funeral expenses P 80,000
Judicial expenses 100,000
Claims against conjugal properties 120,000
Mortgage on exclusive property 40,000
Bequest to charitable institution 5,000
Bequest to the Philippine Government 60,000
Medical expenses 300,000
Amount received under R.A. 4917 60,000
In the formula for vanishing deduction, the multiplier “deductions” is:
a. P220,000 b. P280,000 c. P400,000 d. P765,000
37. Statement 1: For a vanishing deduction, there should always be two

deaths within five years from receipt of property.
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Statement 2: For two acquisitions by gratuitous title at different dates,
but both within five years to present death, there may be one
consolidated computation for the vanishing deduction.
a. Both statements are true.
b. Both statements are false.
c. The first statement is true, but the second statement is false.
d. The first statement is false, but the second statement is true.
38. Charlie, head of the family, died intestate on August 20, 2023
leaving the following properties:
Land and house (family home) P8,000,000

Agricultural land inherited from his father who died 2 ½
800,000
years before his death
Other tangible personal properties 200,000
Bank deposit, PNB-Manila representing amount received
500,000
by heirs under R.A. No. 4917
Obligation of and charges against certain properties follow:

Medical expenses of last illness (unpaid as of the time
of death, supported by bills and statements from P600,000
hospital)
Actual funeral expenses (30% paid for from the
500,000
estate, 70% paid for by relatives)
Judicial expenses incurred within six (6) months after
100,000
death
Claims against the estate other than unpaid
270,000
mortgage
Unpaid mortgage on inherited agricultural land 30,000
Claims against insolvent persons 100,000
The value of the agricultural land at the time of inheritance was P500,000. It
had an unpaid mortgage of P80,000. How much was the vanishing deduction?
*
a. 265,178
b. 259,811
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c. 159,107
d. 318,214
39. Only one statement is correct. Deduction for family home of resident
citizen or resident alien decedent:
a. Shall be allowed if the family home is in the Philippines.
b. Shall be at a maximum of P10,000,000, based on cost.
c. May be allowed for two family homes (one in the city and another in
the province), both in the Philippines and with certification each of the
Barangay Chairman.
d. Shall be deducted at lesser than P10,000,000 if, with vanishing
deduction and unpaid mortgage or indebtedness, the value of the
family home is already reduced to zero.
Situational Problems
Situation 1
Carding, a decedent died single (but head of family), leaving a family home
which consists of a piece of land that he inherited 3-1/2 years ago (with a
value at that time of P6,000,000) with a fair market value of P8,000,000 at
the time of his death, and a house thereon which he built at a cost of
P6,500,000, and a fair market value at the time of his death of P4,500,000.
Other properties in his gross estate have a fair market value of P5,500,000.
Unpaid obligations at the time of his death amounted to P3,000,000.
1. The vanishing deduction is:
a. P2,000,000 b. P5,000,000 c. P4,000,000 d. P2,250,000
2. The total deduction for family home is:

a. P4,500,000 b. P5,500,000 c. P10,000,000 d. P12,500,000
Situation 2
Chichi, a resident citizen died with properties constituting her gross estate of
P8,000,000. Actual funeral expenses amounted to P220,000 and claims
against the estate amounted to P1,200,000.
1. The allowable deduction for funeral expenses is:
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a. P220,000 b. P250,000 c. P200,000 d. None
2. The taxable net estate is:

a. P1,580,000 b. P1,800,000 c. P6,580,000 d. P6,800,000
3. The distributable estate was diminished by:

a. P1,420,000 b. P1,400,000 c. P1,528,000 d. 6,420,000
Situation 3
A citizen of the Philippines and a resident of the Australia, under the system
of conjugal partnership of gains died in the Australia, and was shipped to
and buried in the Philippines. He had the following data:
Real property in the Philippines (inherited 3 ½ years
ago, with a fair market value of P9,000,000 when P 11,000,000
inherited)
Real property in the Australia, used as family home 13,000,000
Tangible personal properties in the Philippines 200,000
Tangible personal properties in the Australia 700,000
Funeral expense in the Australia 110,000
Funeral expenses in the Philippines 100,000
Unpaid obligations 600,000
Claim against an insolvent person in the Philippines 100,000
Estate tax paid to the Australia 120,000
1. The gross estate is:
a. P3,520,800 b. P23,000,000 c. P24,900,000 d. P25,000,000

a. P2,565,000 b. P2,650,800 c. P9,150,800 d. P7,650,800
Situation 4
Kim, a citizen and resident of the Philippines, died on October 12, 2022,
leaving the following properties, rights, obligations and charges:
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Conjugal properties (including a family home of P22,000,000
and amount receivable under Republic Act 4917 of P26,000,000
P200,000)
Exclusive properties (including cash of P500,000 inherited 4
½ years ago) 4,000,000
Medical expenses unpaid, January 2022 600,000
Funeral expenses 350,000
Other obligations 300,000
1. The deduction for family home is:
a. P1,000,000 b. P5,000,000 c. P10,000,000 d. P 11,000,000
2. The vanishing deduction is:
a. P99,000 b. P100,000 c. P495,000 d. P500,000

a. P651,000 b. P751,000 c. P1,651,000 d. P1,751,000
Situation 5
Arturo Lamay, married, died on June 30, 2022. He left the following properties
in favor of his heirs:
Personal properties P8,000,000
Additional information:
➢ The estate incurred the following expenses:
o Funeral expense – P250,000
o Legal expense – P300,000
o Unpaid taxes as of the date of death – P200,000.
➢ Real properties are inclusive of conjugal family home with fair market
value as of date of death amounting to P1,500,000.
➢ Personal properties are inclusive of separation pay received from
decedent’s employer due to his death amounting to P2,000,000.
➢ As of the date of death, the spouses have an unpaid mortgage amounting
to P2,500,000.
➢ All properties are acquired during marriage and are quoted at fair market
value at the time of death.
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1. Compute the Share of the Surviving Spouse (any benefits received under
RA 4917 to be classified as ordinary deductions).
a. P7,650,000
b. P6,375,000
c. P6,650,000
d. P5,900,000
2. Compute the Estate Tax Due.

a. P21,000
b. P54,000
c. P66,000
d. None
QUIZZER 1 – INTRODUCTION TO TRANSFER TAXES & ESTATE TAX
1. The property, rights and obligations of a person which are not

extinguished by his death and those which have been accrued thereto
since the opening of succession:
a. Assets
b. Capital
c. Estate
d. Income
2. What is the term applied to the person whose property is transmitted by

succession through a will?
a. Testator
b. Estate
c. Don
d. Trustor
3. Statement 1. Succession takes place upon the determination of the

respective shares of the heirs in the estate of the decedent.
Statement 2. Taxation of the estate shall be governed by the statue in
force at the time of distribution of the estate to the heirs.
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Statement 3. Property brought to the marriage by either spouse shall
belong to both spouses.
a. Statements 1 and 2 are false; Statement 3 is true.
b. All the Statements are true.
c. Statements 2 and 3 are false, Statement 1 is true.
d. All the Statements are false.
4. For income tax purposes, any person or corporation that holds in trust an
estate of another person is a ______________.
a. Fiduciary
b. Beneficiary
c. Transferor
d. grantor
5. The person to whom a gift of real property is given by virtue of a will is a

__________.
a. legatee
b. trustee
c. devisee
d. fiduciary
6. A distinction between a donation inter vivos and a donation mortis causa

is:
I. The first takes effect during the lifetime of the grantor while
the second takes effect upon death of the grantor
II. The first is subject to the donor’s tax while the second is
subject to the estate tax
III. The first is valued at fair market value at the time the property
is given while the second is valued at fair market value at the
time of the death of the grantor
a. Statements I and III are correct.
b. Statements I, II and III are correct.
c. Statements I and II are correct.
d. Statements II and III are correct.
7. Estate tax accrues from:

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a. The moment the notice of death is filed
b. The moment the estate tax return is filed
c. The moment of death of the decedent
d. The moment the properties are delivered to the heirs
8. The taxpayer in estate tax is:

a. The decedent
b. The estate as a juridical entity
c. The heirs or succession
d. The administrator or executor
9. Who has the personal liability to pay estate tax?

a. The decedent
b. The administrator or executor
c. The estate as a juridical entity
d. The heirs or successors
10. Part of the estate left by A are preference shares of MERALCO. The
shares are listed and traded in the Philippine Stock Exchange.
Which of the following rules of valuation is correct?
a. The preference shares will be valued based on their book value.
b. The preference shares will be valued based on their par value.
c. The preference shares will be valued based on their fair market value
as determined by the Commissioner of Internal Revenue
d. The preference shares will be valued using the arithmetic mean
between the highest and lowest quotation at the date nearest the
date of death, if none is available on the date of death itself.
11. Which of the following cases is/are CORRECT?

I. Mike died leaving his wife and two of his sons as his only
surviving heirs. Mike’s wife renounces her share on Mike’s
estate in favor of her eldest son, her favorite son. The
renunciation of inheritance of Mike’s wife is not subject to
donor’s tax since it has already been subjected to estate tax.
II. Jun-Jun died leaving his wife and four of his children as his only
surviving heirs. Jun-Jun’s wife renounces her share on Jun-
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Jun’s estate in favor of their four children. The renunciation of
inheritance of Jun-Jun’s wife is not subject to donor’s tax since
it involves general renunciation of rights to inherit.
III. Inuyasha entrusted a piece of land to his brother, Sesshomaru,
for the benefit of his minor daughter, Towa. The trust
agreement provides that the piece of land will be transferred
to Towa when he reaches the age of 18. Two donor’s tax
returns shall be filed and paid on the transfers made from
Inuyasha to Sesshomaru and Sesshomaru to Towa, since there
are two transfers involved in this case.
a. Case I only
b. Cases I and II
c. Case II and III
d. Case II only
12. Which of the following statements is/are correct with regard to the
imposition of the final withholding tax on the withdrawal from the bank
deposit account/s of a deceased depositor without required Electronic
Certificate Authorizing Registration?
Statement I. The executor, administrator or any of the legal heir/s of
a decedent, may be allowed to withdraw from the bank deposit account/s
of the decedent, within one year from the death of the deceased
depositor, provided the withdrawals shall be subject to final withholding
tax.
Statement II. If the account is in the name of two or more depositors,
the final withholding tax shall only be imposed on the share of the
deceased in the joint account.
Statement III. The executor, administrator or any of the legal heir/s of
a decedent may file for a tax refund on the withholding tax deducted from
the bank account withdrawals, when the withholding tax exceeds the
estate tax due of the decedent’s estate.
a. I and III
b. II and III
c. I and II
d. I only
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13. Which of the following allowable deductions from gross estate is NOT
directly reducing the inheritance of the heirs?
I. Transfer for public use
II. Casualty losses
III. Vanishing deduction
a. III only
b. I, II and III
c. I and III
d. II and III
14. Who has the subsidiary liability for the payment of the estate tax?
a. Heir or beneficiary
b. Executor
c. Administrator
d. Local government
15. What are the tax implications of each case?

Statement I. Y transfers shares of stock to Z on the condition that Y
shall receive or enjoy the dividends during Y’s lifetime.
Statement II. A makes a transfer of property in trust, income payable
to himself for six (6) years, thereafter to B or his estate. A dies before
the six (6) years lapsed.
a. The first transfer is subject to estate tax while the second is
subject to donor’s tax.
b. The first transfer is subject to donor’s tax while the second is
subject to estate tax.
c. Both transfers are subject to estate tax.
d. Both transfers are subject to donor’s tax.
QUIZZER 2 – COMPOSITION OF ESTATE TAX
1. Which of the following statements is wrong?

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a. The gross estate of a non-resident citizen would include all
properties regardless of location.
b. The gross estate of a non-resident, not citizen of the Philippines,
would include intangible properties in the Philippines.
c. The gross estate of a resident, not citizen of the Philippines, would
include all properties regardless of location.
d. The gross estate of a non-resident citizen of the Philippines would
include only properties in the Philippines.
5. Liwayway, a citizen of the Philippines, single, died a resident of the South

Korea, leaving the following properties:
Real property in the South Korea, inherited from
P2,000,000
mother one and one-half years ago
Personal property in the Philippines inherited from
1,600,000
mother
Family home in the South Korea 1,400,000
The gross estate subject to Philippine estate tax is:
a. P3,400,000
b. P5,000,000
c. P1,600,000
d. P3,000,000
6. Which statement is wrong? The gross estate shall be valued:

a. At its fair market value at the time of death.
b. At its fair market value at the time the return is due.
c. In real property, the zonal value, which may be higher than the fair
market value.
d. In the case of shares of stock, at book value.
7. The personal properties of a non-resident, not citizen of the Philippines,

would not be included in the gross estate if:
a. The intangible personal property is in the Philippines
b. The intangible personal property is in the Philippines and the
reciprocity clause of the estate tax law applies
c. The tangible personal property is in the Philippines
d. The personal property is shares of stock of a domestic corporation
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80% of whose business is in the Philippines.
8. All of the following are considered intangible in the Philippines,

except:
a. Franchise which must be exercised in the Philippines
b. Shares, obligations or bonds issued by any corporation or Sociedad
anonima organized or constituted in the Philippines in accordance
with its laws
c. Shares, obligations of bonds issued by any foreign corporation if
such shares, obligations or bonds have acquired a business situs in
the Philippines
d. Shares, obligations or bonds by any foreign corporation 75% of the
business of which is located in the Philippines
9. In a transfer in contemplation of death, revocable transfer and transfer

under a general power of appointment, there are rules to observe to
determine the amount to be included in the gross estate. Which of the
following is NOT a rule to observe?
Statement I. If there was no consideration received on the transfer
as in donation inter-vivos, the value to include in the gross estate shall
be the fair market value of the property at the time of transfer.
Statement II. If the transfer was in the nature of a bona fide sale for
an adequate and full consideration in money or money’s worth, no value
shall be included in the gross estate.
Statement III. If the consideration received on the transfer is less than
adequate and full, the value to include in the gross estate shall be the
excess of the fair market value of the property at the time the decedent’s
death over the consideration received.
a. I only
b. II only
c. III only
d. I and III
10. Which of the following proceeds from life insurance is NOT subject to
estate tax?
a. Beneficiary of the life insurance is the administrator with
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irrevocable designation
b. Beneficiary of the life insurance is the administrator with revocable
designation
c. Beneficiary of the life insurance is the son with revocable
designation
d. Beneficiary of the life insurance is the son with irrevocable
designation
11. For estate tax purposes, one of the following is NOT an intangible
personal property. Which is it?
a. Accounts receivable
b. Investment in stock
c. Bank deposit
d. Livestock
12. During their last anniversary, the Angel bought an expensive coat for her
husband, Tony using her salary earned during the marriage. Shortly
thereafter, the Tony died. For Philippine estate tax purposes, the
expensive coat shall be classified as (assume the system of absolute
community of property) _________.
a. common property
b. exclusive property of the Angel – surviving spouse
c. exclusion from the gross estate
d. exclusive property of the Tony – decedent
13. Mr. Hilario Lipunan, Filipino citizen, died in the United States of America
in 2020. He left the following properties:
a) House and lot, Texas, USA
b) Shares of stock in Jollibee, domestic corporation
c) Car, registered in the name of Kiko, his 21-year old son
d) Bank deposit, First Bank Texas, USA
e) Tax-free long term Philippine Government bonds
f) Bank deposit, BDO-Quezon City
Which of the properties shall be included in the Philippine gross estate?
a. Properties a, b, c and d
b. Properties b, c, e and f
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c. Properties a, b, d, e and f
d. All properties enumerated
14. Jacko, resident citizen and single, died on June 30, 2020. He left the
following properties in favor of his heirs:
Real properties – P30,000,000
Personal properties – P14,000,000
Included in the real properties is a family home valued at P7,000,000. As
of the time of his death, there is an unpaid mortgage attached to one of
the real properties amounting to P2,000,000. During the settlement of
the estate, it incurred the following expenses:
o Judicial expenses – P500,000
How much is the gross estate of Jacko?
a. P30,000,000
b. P44,000,000
c. P37,000,000
d. P51,000,000
15. Mr. Xian Ganza, resident citizen and married, died on September 30,
2022. He left the following properties in favor of his surviving spouse and
children:
Exclusive Conjugal
Family Home Php2,000,000 Php7,000,000
Real and personal properties Php5,000,000 14,000,000
Ordinary conjugal deduction amounted to P2,000,000. How much is
the Conjugal Estate of Mr. Ganza?
a. P21,000,000
b. P7,000,000
c. P28,000,000
d. P26,000,000
16. Roberto, married to Joana, died leaving thefollowing:

Car acquired before marriage by Roberto P3,000,000
Car acquired before marriage by Joana 4,500,000
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Jewelries of Joana (received as gift during the marriage) 1,000,000
Personal properties inherited by Roberto during marriage 2,500,000
Land inherited by Joana during marriage 10,000,000
Rental income on land inherited by Joana (25% of whichwas
earned after Roberto’s death) 2,000,000
Proceeds of group insurance taken by Roberto’s employer 1,750,000
How much is the correct gross estate if the property relationship

is conjugalpartnership of gains?
a. 19,500,000
b. 22,000,000
c. 26,000,000
d. 36,000,000
17. Roberto, married to Joana, died leaving the following:

Car acquired before marriage by Roberto P3,000,000
Car acquired before marriage by Joana 4,500,000
Jewelries of Joana (received as gift during the marriage) 1,000,000
Personal properties inherited by Roberto during marriage 2,500,000
Land inherited by Joana during marriage 10,000,000
Rental income on land inherited by Joana (25% of whichwas
earned after Roberto’s death) 2,000,000
Proceeds of group insurance taken by Roberto’s employer 1,750,000
How much is the correct gross estate if the property relationship
is absolute community of property?
a. 19,500,000
b. 25,000,000
c. 26,500,000
d. 36,000,000
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18. On the belief that Luigi is about to die, he sold to his daughter a parcel
of land, valued at P3,000,000 for the same amount. One (1) year later,
Luigi died of a car accident. At that time, the property had already a
value of P3,500,000. For Philippine estate tax purposes, the amount
includible in the gross estate is
a. Zero
b. P500,000
c. P3,000,000
d. P3,500,000
QUIZZER 3 – ALLOWABLE DEDUCTIONS AGAINST THE GROSS

ESTATE
1. Yoongi, head of the family, died intestate on August 20, 2021 leaving the
following properties:
Land and house (family home) P8,000,000
Agricultural land inherited from his father who died 2 ½
800,000
years before his death
Other tangible personal properties 200,000
Bank deposit, PNB-Manila representing amount received by
500,000
heirs under R.A. No. 4917
Obligation of and charges against certain properties follow:

Medical expenses of last illness (unpaid as of the time of
P600,000
death, supported by bills and statements from hospital)
Actual funeral expenses (30% paid for from the estate, 70%
500,000
paid for by relatives)
Judicial expenses incurred within six (6) months after death 100,000
Claims against the estate other than unpaid mortgage 270,000
Unpaid mortgage on inherited agricultural land 30,000
Claims against insolvent persons 100,000
The value of the agricultural land at the time of inheritance was P500,000. It
had an unpaid mortgage of P80,000. How much was the vanishing deduction?
a. 265,178
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b. 259,811
c. 159,107
d. 318,214
2. Jimmy died leaving gross estate of P3,500,000. The actual funeral

expense on his burial is P300,000. Of the said amount, P100,000 is
unpaid, how much is the deductible claims against the estate?
a. P100,000
b. P75,000
c. P50,000
d. Zero
3. Which of the following may reduce the taxable estate but not the
inheritance?
a. Claim against the estate
b. Losses
c. Judicial expense
d. Family home
4. The amount of funeral expense, that may be deducted from the gross
estate is _________.
a. 5% of the gross estate or P200,000 whichever is lower.
b. Actual funeral expense or P200,000 whichever is lower.
c. 5% of the gross estate or the actual funeral expenses whichever is
lower.
d. 5% of the gross estate or the actual funeral expenses or P200,000,
whichever is the lowest.
e. No funeral expense may be deducted
5. The estate of citizen or resident decedent may claim a standard deduction

of __________.
a. P5,000,000
b. P200,000
c. P2,000,000
d. P500,000
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6. Losses arising from fires, storms, shipwreck, or other casualties, or from
robbery, theft or embezzlement may be deductible. Which of the following
is not a prerequisite for its deductibility?
a. Incurred prior to the death of the decedent.
b. Such losses are not compensated for by insurance or otherwise.
c. At the time of the filing of the return such losses have not been claimed
as a deduction for income tax purposes in an income tax return.
d. Such losses were incurred not later than the last day for the payment
of the estate tax.
7. Blue died on November 20, 2021. Some of the properties he left are the
following:
Market Value
Mode of Date of Date Death of
Assets Acquisition Acquisition Acquired Ash
Land Donation 07/03/2013 P500,000 P350,000
Car Purchase 10/02/2016 800,000 980,000
Other information:
• The gross estate of the decedent amounts to P3,000,000.
• The land was mortgaged for P50,000 which was deducted in prior
estate and Blue paid the same before he died.
• The allowable deductions total P125,000, which includes medical
expenses of P30,000. It excludes bequest to a charitable institution
in the amount of P50,000.
The vanishing deduction is:
a. P58,100
b. P57,500
c. P67,783
d. P67,083
8. The following selected data were taken from the Estate of Crisostomo:
Claim against an insolvent person (fully uncollectible) P500,000
Claim against a person who absconded (fully uncollectible) 300,000
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Claim against an insolvent person (20% collectible) 100,000
How much should be deducted from the gross estate?
a. P880,000
b. P580,000
c. 100,000
d. P80,000
9. Vanishing deduction is availed of by a taxpayer to:

a. Reduce his gross income.
b. Reduce his output value-added tax liability.
c. Correct his accounting records to reflect the actual deductions
made.
d. Reduce the decedent’s gross estate.
10. Which statement is true?

a. A single person who is not a head of family may not have a deduction
for family home.
b. There can be a deduction for two family homes if their aggregate value
does not exceed P10,000,000.
c. Deduction may be claimed for a family home of a non-resident citizen
of the Philippines located outside the Philippines.
d. A family home is always conjugal/community property.
11. Which of the following is allowed as a deduction from the gross estate of
a non-resident alien decedent?
a. Vanishing deduction & Standard deduction
b. Vanishing Deduction
c. Medical expenses
d. Family home
12. Budying, resident citizen and single, died on June 30, 2020. He left the
following properties in favor of his heirs: Real properties – P30,000,000
and Personal properties – P14,000,000. Included in the real properties is
a family home valued at P7,000,000. As of the time of his death, there
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is an unpaid mortgage attached to one of the real properties amounting
to P2,000,000. During the settlement of the estate, it incurred the
following expenses: Funeral expense – P150,000 and judicial expenses –
P500,000. How much is the total allowable deductions against Budying’s
gross estate?
a. P9,000,000
b. P14,000,000
c. P7,000,000
d. P14,650,000
13. Chris Juico, resident citizen and married, died on September 30, 2022.
He left the following properties in favor of his surviving spouse and
children:
Exclusive Conjugal

the allowable deductions against Chris Juico’s estate under the
Conjugal/Community Property Relations?
a. P10,500,000
b. P12,500,000
c. P14,000,000
d. P16,000,000
children:
Exclusive Conjugal

the allowable deductions against Chris Juico’s estate under the
Absolute Community of Property?
a. P2,000,000
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b. P9,000,000
c. P5,500,000
d. P10,500,000
15. One of the following is incorrect with regard to property subject to

vanishing deduction. If the decedent was _________.
a. a resident of the Philippines, the property should be located in the
Philippines
b. not a resident of the Philippines, the property should be located in
the Philippines
c. a resident alien, the property should be located in the Philippines
d. a resident citizen, the property may be located anywhere
QUIZZER 4 – NET TAXABLE ESTATE FOR RESIDENT DECEDENT &

ESTATE TAX DUE
1. Mr. Hipolito, resident citizen and married, died on July 15, 2020 and left
the following properties in favor of his surviving spouse and children:
Exclusive Conjugal
Family Home Php30,000,000
During the settlement of the estate, the estate paid P2,000,000 for judicial
expenses. How much is the estate tax due of Mr. Hipolito’s estate?
a. P840,000
b. P720,000
c. P900,000
d. P660,000
2. Mrs. Kagome, resident citizen and married, died on February 14, 2020.
She left the following properties in favor of her surviving spouse and
children:
Exclusive Conjugal
Family Home Php9,000,000
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As of the date of death, there is an unpaid mortgage attached to the
family home amounting to P2,000,000. How much is the estate tax due
of Mrs. Kagome’s estate?
a. P300,000
b. P360,000
c. P240,000
d. P1,020,000
3. Jill, a resident citizen, single, died leaving the following properties with
their fair market value, charges and deductions
Property inherited 5 ½ years ago with a fair market

P 2,800,000
value of P1,000,000 when inherited
Property acquired thru own labor 7,200,000
Actual funeral expenses 240,000
Claims against the estate:
Evidenced by a notarial loan agreement 400,000
Evidenced by a promissory note (not notarized) 200,000
In relation with above data, ignoring estate tax, the net distributable
estate is:
a. P8,000,000
b. P10,000,000
c. P9,000,000
d. P8,960,000
4. Jill, a resident citizen, single, died leaving the following properties with
their fair market value, charges and deductions
Property inherited 5 ½ years ago with a fair market
P 2,800,000
value of P1,000,000 when inherited
Property acquired thru own labor 7,200,000
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Actual funeral expenses 240,000
Claims against the estate:
Evidenced by a notarial loan agreement 400,000
Evidenced by a promissory note (not notarized) 200,000
The net taxable estate is:
a. P4,200,000
b. P3,540,000
c. P3,560,000
d. P4,600,000
5. Budying, resident citizen and single, died on June 30, 2020. He left the
following properties in favor of his heirs: Real properties – P30,000,000
and Personal properties – P14,000,000. Included in the real properties is
a family home valued at P7,000,000. As of the time of his death, there
is an unpaid mortgage attached to one of the real properties amounting
to P2,000,000. During the settlement of the estate, it incurred the
following expenses: Funeral expense – P150,000 and judicial expenses –
P500,000. How much is the estate tax due of Budying’s estate?
a. P1,761,000
b. P1,800,000
c. P1,770,000
d. P1,620,000
children:
Exclusive Conjugal
Ordinary conjugal deduction amounted to P2,000,000. How much is the
estate tax due of Chris Juico?
a. P360,000
b. P150,000
c. P90,000
d. P420,000
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7. Mr. Kilua, married, died on June 30, 2020. He left the following properties
Personal properties 8,000,000
to P2,500,000.
What is the tax implication of the separation pay received by the
decedent’s employer?
a. It is exempted from income and estate tax
b. It is subject to income tax but exempted from estate tax
c. It is subject to estate tax but exempted from income tax
d. It is subject to income and estate tax
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to P2,500,000.
Compute the Share of the Surviving Spouse (any benefits received under
RA 4917 to be classified as ordinary deductions).
a. P7,650,000
b. P6,375,000
c. P5,900,000
d. P6,650,000
to P2,500,000.
Compute the Estate Tax Due.
a. P21,000
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b. P54,000
c. P66,000
d. None
10. Pipo was married at the time of death and was survived by his wife, Susan
and their five legitimate children when he was still alive. Pipo died on
November1, 2021, leaving the following:
Funeral expenses:
The estate tax due is:
a. P225,000
b. P135,000
c. P114,000
d. P75,000
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Funeral expenses:
The net distributable estate to the compulsory heirs is:

a. P13,665,000
b. P13,686,000
c. P13,725,000
d. P13,575,000
Funeral expenses:
The net taxable estate is:
a. P1,250,000
b. P1,900,000
c. P2,250,000
d. P3,700,000
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13. Teh Gok, a widower with 2 sons, died on March 31, 2021. As of the
date of death, he left the following properties in favor of his heirs (at book
value):
• Cash in bank, family bank account P3,000,000

• Cash in bank, business bank account (rentals) 2,000,000
• Real property 1, family home 15,000,000
• Real property 2, commercial lot and building 30,000,000
• Uncollected rentals from commercial building 300,000
➢ As of the date of death, the zonal value of the family home and the
commercial lot and building, amounted to P12,000,000 and P20,000,000,
respectively.
➢ As per latest tax declaration, the fair market value of the family home and
the commercial lot and building amounted to P8,000,000 and
P25,000,000, respectively.
➢ Under the lease agreement, the commercial building is rented out for
P300,000 a month and the lease-term will be terminated at the end of
November 2021. The lease agreement was not renewed after the end of
the lease-term. The personal income tax of Teh Gok is being reported
using the accrual basis of accounting. All rentals are collected at the end
of the lease term.
➢ From the date of death until December 31, 2020, the business bank
account accumulated an additional net deposit of P2,000,000 (net of
business expenses and distribution to beneficiaries amounting to P200,000
and P500,000, respectively.
Compute the Estate Tax due

a. P1,638,000
b. P1,758,000
c. P1,938,000
d. P1,620,000
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14. Cong, a citizen of the Philippines and a resident of the San Francisco,
California, under the system of conjugal partnership of gains died in
the San Francisco, California, and was shipped to and buried in the
Philippines. He had the following data:
Real property in the Philippines (inherited 3 ½ years ago,
with a fair market value of P9,000,000 when inherited) P11,000,000
Tangible personal properties in the San Francisco, California 700,000
Funeral expense in the San Francisco, California 110,000
Estate tax paid to the San Francisco, California 120,000
The gross estate is:
a. P3,520,800
b. P23,000,000
c. P24,900,000
d. P25,000,000
15. Cong, a citizen of the Philippines and a resident of the San Francisco,
California, under the system of conjugal partnership of gains died in
the San Francisco, California, and was shipped to and buried in the
Philippines. He had the following data:
Real property in the Philippines (inherited 3 ½ years ago,
P11,000,000
with a fair market value of P9,000,000 when inherited)
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Tangible personal properties in the San Francisco, California 700,000
Funeral expense in the San Francisco, California 110,000
Estate tax paid to the San Francisco, California 120,000
The taxable net estate is:

a. P2,565,000
b. P2,650,800
c. P9,150,800
d. P7,650,800
/reh/cde/z
Page 51 of 51

Booklet 1 Introduction To Transfer Tax - Estate Tax

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Booklet 1 Introduction To Transfer Tax - Estate Tax

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CRC-ACE The Professional CPA Review School

TAX 0501 – TRANSFER TAXES: PART 1

PROF. ROEL E. HERMOSILLA, CPA

TRANSFER TAXES: PART 1

I. INTRODUCTION TO TRANSFER TAXES

Succession - It is a mode of transmission of the ownership, rights, interests

II. ESTATE TAX

A. Composition of Gross Estate

Rule of reciprocity - this rule applies to transmission of intangibles of non-

When there is reciprocity, the transmission of intangibles located in the Phil.

Properties considered as located in the Phil.

Taxable Transfers (with insufficient consideration or without

Properties EXCLUDED from Gross Estate of Citizen or Resident Alien

Valuation of the estate

2. Properties. The estate shall be appraised at its fair market value as of

a. The fair market value as determined by the Commissioner, or

Exclusive and common properties of spouses

Conjugal Partnership of Gains

B. Deductions from Gross Estate

1. Losses, indebtedness and taxes (please refer to B.1.)

2. Transfers for PUBLIC PURPOSE. These are bequests, legacies, devises

B.1. Losses, indebtedness, and taxes deductible from gross estate

REQUISITES for deduction of losses in Nos. 1 and 2 above:

B.2. PROPERTY PREVIOUSLY TAXED (VANISHING DEDUCTION)

2. Conditions for allowance:

3. Percentage of vanishing deduction - the rate depends on the interval

4. Procedures in computing vanishing deduction

This is the final basis.

B.3. FAMILY HOME

a. Decedent was an unmarried head of a family

1. Real and personal properties P 7,300,000

b. Decedent was a married man with surviving spouse

1. The family home was his separate property:

2. Family home was a common property:

Net estate 5,000,000

3. Family home was common property, but lot on which it stands

Net estate 2,500,000

C. Estate Tax Rate

NIRC (BEFORE 2018)

NIRC (Before 2018) TRAIN (On or After 1/1/2018)

Multiple Choice Questions:

2. A successor to an estate, whether in a last will and testament or not:

3. A succession to properties mentioned in the last will and testament,

4. First Statement: Succession is the mode of acquisition whereby the

5. The estate should be valued at the time ____________.

7. In computing the gross estate of a decedent:

8. Uzumaki Naruto, a citizen of Japan, residing in Okinawa, with

9. Which of the following is not true? A transfer in contemplation of death

10. Which of the following is not included in the gross estate?

11. A revocable transfer with a consideration received:

12. A revocable transfer with the following circumstances:

14. Which of the following is not included in the gross estate?

15. Proceeds of life insurance includible in the taxable gross estate:

18. Which statement is correct? Under the system of conjugal partnership

19. One of the following statements is wrong:

20. A resident Filipino, died on November 5, 2022 and his estate

21. Which of the following statements is wrong? A claim against an insolvent

23. One of the following statements is wrong. Claims against insolvent

27. Lito, married to Maria, died leaving the following: