Reviewer Computations:

Estate Tax
Mr. Sunny Antonio, Filipino, resident of San Jose, Antique, head of family Antonio, died on February 28, 2020 due to
severe pneumonia, leaving the following properties and obligations:

Cash in Bank, Metrobank 10,000,000

Cash in Bank, BPI (20% donated to the Local Government Unit of San Jose, Antique) 5,000,000
Jewelries 2,000,000
Car 1,500,000
Residential House and Lot in San Jose 5,000,000
Rest house in Mararison Island 3,000,000
Claims against the estate 500,000
Claims against an insolvent debtor 500,000
Transfer in contemplation of death 1,000,000
Transfers passing under special power of appointment 800,000
Funeral expenses 500,000
Judicial expenses 200,000
Medical Expenses 1,500,000
Unpaid mortgage on the rest house in Mararison Island 200,000
Losses occuring 3 months after death due to fire 500,000
Donation mortis causa to LGU San Jose, Antique 1,000,000
Amounts Received under R.A. 4917 200,000

The rest house was inherited 3 1/2 years by the decedent before his death with a value of P1,500,000 and a mortgage
indebtedness of P700,000. Compute the estate tax due.

SOLUTION:

Gross Estate 28,200,000

12,761,7
Less: Deductions 02
Net Taxable Estate 18,938,298
x Rate 0.06
Estate tax due 926,298

*First, we need to determine the important info about the decedent. The decedent is Mr. Sunny Antonio. He is a Filipino
and resident of San Jose, Antique. Therefore, he is a RESIDENT CITIZEN. It means, we will tax him his estate from
Philippines and outside Philippines.
*Next, we need to know if his civil status because it will affect the computation. Because if he is married, we need to
determine the property relationship between Mr. Sunny and his wife. But in the problem, it stated that Mr. Sunny is the
“head” of the family. No indication if he is married. But we can still determine his real status base on the problem, if the
conjugal properties are specified in the problem.
*If we read the problem, there’s no conjugal properties given. So we will assume that all properties are exclusive
properties of Mr. Antonio.
*Mr. Antonio died on February 28, 2020. The date of the death is very important to determine if we will use the estate
tax table or we will use the 6%. Since, he died on 2020, we will follow the estate rules amended by the TRAIN law. We
will use the 6%. Plus, we will ignore the funeral, judicial and medical expenses as repealed by the TRAIN law.
*Then we will now compute the gross estate.
 10,000,00
Cash in Bank, Metrobank 0
Cash in Bank, BPI (20% donated to the Local Government Unit of San Jose, 5,000,00
Antique 0
2,000,00
Jewelries 0
1,500,00
Car 0
5,000,00
Residential House and Lot in San Jose (Family Home) 0
3,000,00
Rest house in Mararison Island 0
500,00
Claims against an insolvent debtor 0
1,000,00
Transfer in contemplation of death 0
Amounts Received under R.A. 4917 200,000
28,200,00
Total Gross Estate 0
*The Transfers passing under special power of attorney are not part of the gross estate. The properties only passed
under the General Power of Appointment (GPA) is included in the gross estate because GPA were transferred
gratuitously during lifetime, but in substance, it was transferred upon death.
*Transfer in contemplation of death is part of the gross estate because it may be transferred during the lifetime of the
decedent but in substance, it is transferred upon death.
*The donation mortis causa means that it is a donation after death to LGU San Jose. It is part of the Cash in Bank 20%
donation to San Jose.
*Those included in the gross estate are Real and Personal Properties of the Mr. Antonio.

*Next, we will compute the deductions.

Claims against the estate 500,000

Claims against an insolvent debtor 500,000
Transfers for Public Use- 20% donation to LGU San Jose 1,000,000
Property Previously Taxed 361,702
Unpaid mortgage on the rest house in Mararison Island 200,000
Amounts Received under R.A. 4917 200,000
Family Home - Residential House in San Jose 5,000,000
Standard Deduction 5,000,000
Total Deductions 12,761,702

*there are two kinds of allowable deductions for estate tax: Ordinary Deduction and Special Deduction.
*Ordinary deduction is composed of ELIT (Expenses, Losses, Indebtedness, Taxes, etc), Transfer for Public Use, Property
Previously Taxed/Vanishing Deduction
*ELIT is composed of Funeral expense, Judicial expenses, Casualty losses, Claims against the estate, claims against
insolvent persons, unpaid mortgage and unpaid taxes
*Special Deductions is composed of Standard deduction, family home, medical expenses, benefits under RA 4917

*The total amount of claims against the estate is allowed to be deducted in the gross estate because it is part of the ELIT
*Claims against the insolvent debtor should be part of the gross estate and part of the allowable deduction.
*Transfers for Public Use are transfers given to the government of the Philippines. The 20% of the P5,000,000 was
donated to the Local Government of San Jose. Therefore, 5,000,000 x 0.20 = 1,000,000. The P1,000,000 is a TPU.
*Vanishing deduction computation:
 Value to take 1,500,000
Less: Mortgage paid ( 500,000)
Initial Basis 1,000,000
Less: Proportionate Deduction 95,745
Final Basis 904,255
X Rate _________0.4
Vanishing Deduction 361,702

*a property can claim vanishing deduction if it was inherited. Then, look at the date when it was acquired and when the
decedent died. If from date acquired to date of death is more than 5 years, then you cannot claim for vanishing
deduction. But if the date acquired to date of death is not more than 5 years, you can claim for vanishing deduction. In
the problem, the date acquired to date of death is 3 ½ years. Therefore, it can qualify for vanishing deduction.
*next, check if the property is located in the Philippines. Although if the property’s date was within the required time
from date acquired to death, but the property is located abroad, it cannot avail the vanishing deduction. In the problem,
it was inherited, period is 3 ½ years, and located at Mararison Island here in the Philippines. Therefore, it can qualify to
claim vanishing deduction.

How to compute for vanishing deduction:

*Value to take RULE: Amount as of date acquired vs. Amount as of date of death of the decedent whichever is lower. In
the problem:
Date acquired Death of Sunny
1,500,000 3,000,000
The lower amount is P1,500,000. Therefore, the value to be taken is P1,500,000
*For the mortgage paid: Given in the problem is the total amount of mortgage which is 700,000 and total unpaid
mortgage P200,000. To compute:
Total Mortgage 700,000
Less: Unpaid Mortgage ( 200,000 )
Paid Mortgage 500,000

*Proportionate Deduction:
Initial Basis 1,000,000
Divided by Total Gross Estate 28,200,000
Total 0.035460993
X ELIT&TPU 2,700,000
Proportionate Deduction 95,745

*ELIT + TPU computation

Losses occuring 3 months after death due to fire 500,000
Claims against an insolvent debtor 500,000
Claims against the estate 500,000
Unpaid mortgage on the rest house in Mararison Island 200,000
Transfers for Public Use- 20% donation to LGU San Jose 1,000,000
Total 2,700,000

*we use 0.40 because the period is 3 ½ years which is under the bracket of more than 3 years but not more than 4 years
More than Not more than Percentages
1 year 100%
1 year 2 years 80%
2 years 3 years 60%
3 years 4 years 40%
4 years 5 years 20%
5 years x 0%
*The rule for family home is Actual Amount vs. 10 million (maximum deduction) whichever is lower.
Actual Amount = 5,000,000
Maximum = 10,000,000

Therefore, we will use P5,000,000 because it is lower than P10,000,000.

*The standard deduction under train law is P5,000,000.

DONOR’S TAX

Pedro, married to Petra, gave gifts to the following persons on June 1, 2020, his 50 th birthday:
Value Property Donee
250,000 Second hand car Kaskasero, secretary
2,500,000 Beach house Ana, his concubine for 2 years
100,000 Cash Ramon Magsaysay Foundation
3,000,000 Jewelries Maria, his new girlfriend
250,000 Cash Juan, trusted driver, written in the will
500,000 Cash Provincial Government Office

Compute the donor’s tax.

SOLUTION:

Second hand car Kaskasero, secretary 250,000

Beach house Ana, his concubine for 2 years 2,500,000
Jewelries Maria, his new girlfriend 3,000,000
Total   5,750,000
Less: Exempt gifts 250,000
Taxable gift 5,500,000
x Rate 0.06
330,0
Donor's Tax Due
00

*The cash given to Ramon Magsaysay Foundation is not taxable because under the special laws, any donation given to
RMF is exempt.
*The cash given to Juan is a transfer in contemplation of death. It will only be taxable upon death of Pedro as part of the
Estate Tax.
*The cash given to the provincial government office is not taxable because it is a government entity.

DOCUMENTARY STAMP TAX

A sale of real property in Iloilo City was sold on January 15, 2020 for P5,000,000 with a market value in the tax
declaration of P5,500,000 and zonal value of P4,500,000. Compute the documentary stamp tax.

SOLUTION:
The problem is a real property. The rule is:
*The Consideration is P5,000,000, Market Value is P5,500,000, and the Zonal Value is P4,500,000. The highest is the
market value per tax declaration. So we will use the Market Value, P5,500,000.

Market Value 5,500,000

Divided by taxable unit 1,000
Total 5,500
x Tax per unit 15
Documentary Stamp Tax 82,500

*the taxable unit is 1,000 (given in the box) and the tax per unit is P15 (given in the box)

LOCAL TAXES

A tax declaration contains the following data for a land:

Actual use of property: Residential
Market Value: P500,000

Compute the Basic Real Property Tax if the property is located in a municipality and if it is located in the city.

SOLUTION:
Location: Municipality (meaning, outside Metro Manila or outside in any city)

Fair Market Value 500,000

x Assessment Level (residential) 0.20
Assessed Value 100,000
x rate of tax 0.01
Basic Real property tax 1,000

*The assessment level is derived from:

*The actual use of the property is RESIDENTIAL. It is a land. Therefore, it’s assessment level is 20%.
*The tax rate is 1% because it is located in a municipality which is part of a province.
Provinces Not exceeding 1% of the assessed value of the real property
Cities or Municipalities in Not exceeding 2% of the assessed value of the real property
Metro Manila
Location: City

Fair Market Value 500,000

x Assessment Level (residential) 0.20
Assessed Value 100,000
x rate of tax 0.02
Basic Real property tax 2,000

*The actual use of the property is RESIDENTIAL. It is a land. Therefore, it’s assessment level is 20%.
*The tax rate is 2% because it is located in a city.
Provinces Not exceeding 1% of the assessed value of the real property
Cities or Municipalities in Not exceeding 2% of the assessed value of the real property
Metro Manila