Gross Estate

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS)  11

SUGGESTED ANSWERS

Chapter 3: GROSS ESTATE

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CHAPTER 3

GROSS ESTATE

Problem 3-1

1. True
2. False – include all properties within and outside the Philippines.
3. True
4. False – intangible personal properties

1. False – properties of nonresident aliens. The properties within and outside the Philippines of a resident alien is subject to Philippine estate tax.

1. True

1. False – common stock only; preferred stock is measured at its par value.
2. True
3. True
4. False – This is a donation mortis causa which is subject to estate tax.
5. True

1. False – only proceeds of life insurance with revocable beneficiary is included for estate tax purposes.

Problem 3-2

1. True

1. False – amount receivable under R.A. 4917 shall be included as part of the gross estate subject to deduction of its entire amount reported.

1. False – only intangible properties are exempted from estate tax.
2. True
3. False – the reciprocity exemption is granted only to nonresident alien.

1. True
2. True

1. True
2. False – exclusive property.
3. True
4. True
5. True

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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS)  12

SUGGESTED ANSWERS

Chapter 3: GROSS ESTATE

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Problem 3-5

1. The reportable gross estate is P3,000,000 or (P2,500,000 + P500,000)

1. P25,000,000. The properties left by a resident alien which are located within and outside the Philippines are required to be reported for Philippine estate tax purposes.

1. A has 20% in the book value of U Corporation. The book value of U Corp. is P2,000,000. Therefore, the reportable gross estate of A would be P400,000 or (P2,000,000 x 20%).

1. Zero. The beneficiary is irrevocable. Therefore, the P5,000,000 proceeds of life insurance should be excluded from the gross estate.

1. Since M is a resident alien, all of his properties within and outside the Philippines should be reported as part of the gross estate for Philippine estate tax purposes. The reportable gross estate should be P11,000,000.

1. Zero. No amount is allowed as exemption because the rule of reciprocity is applied only on the intangibles of nonresident alien.

1. P10,000,000. Since Mr. T is a nonresident alien in this case, the gross estate is zero because the rule of reciprocity can now be applied.

1. None. The rule is to report the market value of the property at the time of the decedent’s death. The compensatory damages of P900,000 are excluded since the accrued is made to the decedent’s heirs after death. Payments for medical and funeral expenses are nontaxable because they are considered contributions from symphatizers.

1. Excluded from the gross estate is P3,000,000 or (P5,000,000 x 60%). As a rule, property donated by the decedent to a nonprofit and nonstock educational institution is excluded from the gross estate. Donations to the Philippine government is included as part of the gross estate, but deductible in its full amount.

Problem 3 – 6        B

At market value of P750,000. The law provides that the valuation should be at the market value of the property at the time of the owner’s death. The book value is irrelevant because the properties left by the decedent are considered under liquidating concern.