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Garcia/Co/Wong
TAX 1-Estate Tax
Answers

Exercise (NRA DECEDENT)

a. George James a non-resident Chinese citizen died testate and left the following properties:
Car, Philippines ( received as donation 2 years before death, FMV, date of donation was P1,500,000) P1,000,000
Car, Shanghai, China 900,000
Bonds, Philippines 1,000,000
Shares of stock, Shanghai, China 600,000
House and lot, China (Mortgaged for P200,000) 1,800,000
Cash deposit, BDO-Sampaloc, Manila 1,200,000
Other tangible personal properties, Manila 500,000
Franchise exercised in the Philippines 2,500,000
Shares of stock issued by a foreign corporation 1,500,000

His cousin, Lebron, was assigned as the executor of the last will and testament of George and initially presented you the list of deductions as
follows:
Actual funeral expenses (defrayed by relatives) P100,000
Judicial expenses (Extra judicial settlement) 300,000
Loss of certain tangible personal properties 250,000
Claims against the estate 100,000
Unpaid taxes, accrued after death 150,000
Claims against insolvent person 100,000
Transfer for public use 100,000
Medical expenses 600,000

How much was the total deductions from Philippine gross estate, allowable deductions and taxable net estate in the Philippines?
.

OLD LAW Answer

Gross Estate P6,300,000.00
Less: Ordinary Deductions 1,358,022.31
Estate After Deduction P4,941,997.69
Less: Special Deductions -
Net estate P4,941,997.69
Less: Share of Surviving Spouse -
Taxable Net Estate P4,941,997.69
Estate Tax Due P 458,619.75
Less: Estate Tax Credit -
Estate Tax Payable P 458,619.75

Properties Within Without World/Total

Car, Philippines P1,000,000 P1,000,000
Car, Shanghai, China 900,000 900,000
Bonds, Philippines P1,000,000 P1,000,000
Shares of stock, Shanghai, China 600,000 600,000
House and lot, China (Mortgaged for P200,000) 1,800,000 1,800,000
Cash deposit, BDO-Sampaloc, Manila 1,200,000 1,200,000
Other tangible personal properties, Manila 500,000 500,000
Franchise exercised in the Philippines 2,500,000 2,500,000
Shares of stock issued by a foreign corporation - 1,500,000 1,500,000
Claims against insolvent person 100,000
Total Gross Estate P6,300,000 P4,800,000 P11,100,000

Funeral expenses (5%x11,100,000) or (Zero) -

Judicial expenses P300,000
Loss of certain tangible personal properties 250,000
Claims against the estate 100,000
Claims against insolvent person 100,000
Unpaid mortgage 200,000
Total ELITE/Prorated ELITE (P6,300,000/P11,100,000 x P950,000) P950,000 P539,189.19
Transfer for public use 100,000.00
Vanishing deductions*** 718,833.12
Total deductions allowed for NRA P1,358,022.31

*** Vanishing Deductions

Value to take*** P1,000,000
Less Mortgaged paid by the current decedent -
 LEARNING ADVANCEMENT LEAD
Initial basis P 1,000,000.00
Less: Proportional Deductions (1,000,000/6,300,000) x(P639,189.19) 101,458.60
Final Basis P 898,541.32
Multiply by Rate of Vanishing Deduction 80 %
Vanishing Deduction P 718,833.12

TRAIN LAW Answer

Gross Estate* P6,300,000.00
Less: Ordinary Deductions P1,209,373.66
Estate After Deduction P5,090,626.34
Less: Special Deductions (Standard Deduction of P500,000 to NRA) *500,000.00
Net estate P4,590,626.34
Less: Share of Surviving Spouse -
Taxable Net Estate P4,590,626.34
Estate Tax Due( 6%) P 275,437.58
Less: Estate Tax Credit -
Estate Tax Payable P275,437.58

*Gross Estate
Properties Within Without World/Total
Car, Philippines P1,000,000 P1,000,000
Car, Shanghai, China 900,000 900,000
Bonds, Philippines P1,000,000 P1,000,000
Shares of stock, Shanghai, China 600,000 600,000
House and lot, China (Mortgaged for P200,000) 1,800,000 1,800,000
Cash deposit, BDO-Sampaloc, Manila 1,200,000 1,200,000
Other tangible personal properties, Manila 500,000 500,000
Franchise exercised in the Philippines 2,500,000 2,500,000
Shares of stock issued by a foreign corporation - 1,500,000 1,500,000
Claims against insolvent person 100,000
Total Gross Estate P6,300,000 P4,800,000 P11,100,000

** Ordinary Deductions
Funeral expenses (Not anymore deductible)
Judicial expenses (Not anymore deductible)
Loss of certain tangible personal properties 250,000
Claims against the estate 100,000
Claims against insolvent person 100,000
Unpaid mortgage 200,000
Total ELITE/Prorated ELITE (P6,300,000/P11,100,000 x P650,000) P650,000 P368,918.92
Transfer for public use 100,000.00
Vanishing deductions*** P740,454.74
Total ordinary deductions allowed for NRA P1,209,373.66
Standard Deduction 500,000.00
Total Allowed Deductions P1.709,373.66

*** Vanishing Deductions

Value to take*** P1,000,000
Less Mortgaged paid by the current decedent -
Initial basis P1,000,000
Less: Proportional Deductions (1,000,000/6,300,000) x(P468,918.92) 74,431.57
Final Basis P925,568.43
Multiply by Rate of Vanishing Deduction 80 %
Vanishing Deduction P740,454.74

TAX 1-ESTATE TAX-Answers Page 2 of 2