Chapter 3 - Gross Estate

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BUSINESS AND TRANSFER TAXATION 3rdEdition (BY: VALENCIA & ROXAS)SUGGESTED ANSWERS

Chapter 3: GROSS ESTATE

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CHAPTER 3

GROSS ESTATEProblem 3-1

1. Falseshould be including revocable transfers and transfers for insufficient consideration.2. Falsedepending on the citizenship and residency of the decedent.3. True4. Falsecommon stock only; preferred stock is measured at its par value.5. Falseresident alien = properties within and without6. True7. True8. Falsedonation mortis causa is subject to estate tax.9. True10. Falseonly revocable transfer is taxable.Problem 3-21. Falsethe relationship must be one degree of generation.2. TrueIf he is a nonresident alien.3. Falsethe other way around4. True5. Falseit will depend on how the jewelry was acquired.6. True7. Falserevocable designation.8. True9. Falseexclusively to wife10. Falsesurviving spouse capital is not included.

Problem 3-3 Problem 3-4

1. C 6. A 1. D 6. A

2. A 7. D 2. C 7. C3. C 8. A 3. C 8. C4. D 9. C 4. A 9. None is to be included in the gross estate5. B 10. C & D 5. D 10. C

Problem 3 5 A

House and lot, Daly City P10,000,000Mansion, Boracay, Philippines 50,000,000Cars, Philippines 2,000,000Shares of stock, Hongkong 5,000,000Accounts receivable 3,000,000Gross estate of Molina P70,000,000

Problem 3-6 C

Real property in the Philippines P1,000,000Personal properties in foreign country 300,000Amount to be included in the gross estate P1,300,000

Problem 3-7 D

Since the alien is nonresident all of his properties outside the Philippines are reportable forPhilippine estate tax purposes.


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Problem 3-8

1. AReal propertiesPhilippines P1,000,000CarPhilippines 500,000CollectiblesTaiwan 500,000Taxable gross estate P2,000,000

2. DReal propertiesPhilippines P1,000,000CarPhilippines 500,000Taxable gross estate P1,500,000

Problem 3-9 A

The gross estate shall be valued at its fair market value at the time of death.

Problem 3-10 C

Amount to be included in the gross estate [(P120+P150)/2] x 1,000 P135,000

Problem 3-11 A

The decedent person has no property because the property left was acquired by the survivingspouse through gratuitous transfer before marriage.

Problem 3-12 A

Equity in SMC book value (P1,250,000,000 x 40%) P500,000,000Investment income (P100,000,000 x 40%) 40,000,000Amount to be included in the gross estate P540,000,000

Problem 3-13 B

Proceeds to revocable life insurance P 800,000

Problem 3-14 D

The proceeds of life insurance is not reportable because the beneficiary is irrevocable.

Problem 3-15 C

Fair market valuedate of death P3,000,000Less: Selling price paid by the son 100,000Amount included in the gross estate P2,900,000

Problem 3-16 C

Fair market valuedate of death P2,000,000Less: Selling price received by Singsong 1,300,000Amount included in the gross estate P 700,000

Problem 3-17 C

The entire amount of receivable, irrespective whether collectible or not, shall be included as part

of the gross estate.


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Problem 3-18 A

Revocable donation to the Ramon Magsaysay Foundation P1,000,000Family home 1,000,000

Benefits under R.A. 4917 500,000Transfers in contemplation of death 2,000,000Donation to the government 1,000,000Total reportable gross estate P5,500,000

Problem 3-19 B

Condominium in Makati as a fiduciary heir P5,000,000Cash as bequest to the University of the Philippines 2,000,000Amount to be excluded from reportable gross estate P7,000,000

Problem 3-20 A

Only nonresident alien shall be subject to reciprocity.

Problem 3-21

1. Conjugal partnership of gains = AConjugal properties:

Accum. income from boarding house P3,000,000Personal properties acquired during marriage 5,000,000 P 8,000,000

Exclusive propertyboarding house inherited from his parents before marriage 4,000,000Total gross estate P12,000,000

2. Absolute community of property = DAbsolute communal properties:

Accum. income from boarding house P 3,000,000Personal properties acquired during marriage 5,000,000Boarding house inherited from his parents before marriage 4,000,000

Total gross estate P12,000,000

Problem 3-22

1. Resident citizen

Real estatePhilippines P 5,000,000Real propertiesTaiwan 10,000,000Personal propertiesPhilippines 500,000Gross estate P15,500,000

2. Resident alienReal estatePhilippines P 5,000,000Real propertiesTaiwan 10,000,000Personal propertiesPhilippines 500,000Gross estate P15,500,000

3. Nonresident alienReal estatePhilippines P 5,000,000Personal propertiesPhilippines 500,000Gross estate P 5,500,000

Problem 3-23Real properties in the PhilippinesCar in the PhilippinesCollectiblesTime depositAccrued interest on time deposit (P300,000 x 12% x 5/12)Gross estate

P2,000,000800,000500,000300,00015,000

P3,615,000


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Problem 3-24

Shares of stockJapanese Corporation85% of business in the PhilippinesTime deposit in Equitable-PCI Bank

Investments in bonds in Jollibee CorporationGross estate

P120,000,000500,000,000

4,000,000P624,000,000

Problem 3-25

House and lot P6,000,000Investment in property 2,000,000Car 600,000Furniture 300,000Gross estate P8,900,000

Problem 3-26

1. Listed in the local exchangeCommon (P190/2) x 10,000 shares P 950,000

2. Not listed in the local exchangeTotal stockholders equity P15,000,000Less: Liquidating value of preferred stock

(P110 x 60,000 shares) 6,600,000Revaluation surplus 200,000

Total book value to common shares P 8,200,000Divided by outstanding common shares 100,000Book value per share P 82Multiplied by number of Mr. Tulogs

investment in common shares 10,000Value of securities as part of gross estate P 820,000

Problem 3-27

Real estate properties P 3,000,000Time depositprincipal amount 2,000,000

Accrued interest on time deposit (P2,000,000 x 12% x 8/12) 160,000Tangible personal properties 1,000,000Other intangible properties 500,000Gross estate P 6,660,000

Problem 3-28

Proceeds of life insurancerevocableDonation to take effect upon her deathDiamond necklaceGross estate

P1,000,000500,000500,000

P2,000,000

Problem 3-29

1. Accrued interest (P1,000,000 x 6% x 9/12) P 45,000Transfers in contemplation of death 1,500,000

Additions to the reportable gross estate P1,545,000

2. Family home P2,000,000Time deposit 1,000,000Proceeds of life insurance received by his wife 500,000Claims against insolvent person 200,000Additions to the reportable gross estate (see 1) 1,545,000Total gross estate P5,245,000


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Problem 3-30Conjugal

PartnershipAbsolute

Community

Properties:Acquired by decedent prior to marriageAcquired by surviving spouse prior to marriageInherited by decedent during the marriageAcquired during the marriageIncome derived from property inherited by surviving

spouse during the marriageTime depositAccrued interest

Total gross estate of the decedent

P600,000

800,0001,000,000

450,000850,00090,000

P3,790,000

P600,000700,000800,000

1,000,000

850,00090,000

P4,040,000

Documents

Chapter 3 - Gross Estate