PROBLEM 3-1.

TRUE OR FALSE
Write TRUE if the statement is correct or FALSE if incorrect.

1. The paraphernal is part of the gross estate of the decedent wife.

2. The gross estate of a nonresident citizen decedent includes all properties and interest situated in the
Philippines.
3. The citizenship and residency of the decedent determines the situs of properties subject to estate
tax.
4. Cash and cash equivalents are classified as tangible personal properties for estate tax purposes.
5. Properties belonging to aliens are subject to Philippine estate tax only if located in the Philippines.
6. The fair value of the property at time of death is considered in determining the value of the gross
estate.
7. In valuing shares of stocks not listed in the stock exchange, common shares and preferred stock are
valued at their book values.
8. Accrued interest, rents and dividends declared to stockholders of record on or before the date of
decedent’s death are to be included in his estate although they are not collected until after his
death.
9. The interest revenue to be included as part of the gross estate must exist at the time of the
decedent’s death.
10. A gift intended to take effect at death, or after death, or under which the donor reserved the income
or the right to designate the persons who should enjoy the income shall be subject to donor’s tax
and not estate tax.
11. Where the insured transfers a life insurance policy in contemplation of death, the amount to be
included in gross estate is the face value of the policy, not the cash surrender value.
12. Proceeds of life insurance received by irrevocable beneficiary are subject to estate tax.

PROBLEM 3-2. TRUE OR FALSE

Write TRUE if the statement is correct or FALSE if incorrect.

1. Shares of stocks acquired by a nonresident alien from a domestic corporation are taxable in the
Philippines.
2. The amount received under RA 4917 is not taxable in its entire amount; hence, it shall not be
included as part of the gross estate.
3. If there is reciprocity, all properties within of a nonresident alien are not subject to Philippine estate
tax.
4. The real property left by the decedent should be valued at the higher fair market value as provided
by provincial or city assessor by the BIR Commissioner.
5. Intangible properties located in the Philippines by a resident alien decedent may be subject to
reciprocity if his country exempts a Filipino citizen from estate tax.
6. The book value of unlisted common share does not include appraisal surplus and value assigned to
preferred shares.
7. Under the conjugal partnership of gains, the properties belonging to each spouse before marriage
shall be treated as exclusive properties but the income derived therefrom during marriage shall be
conjugal properties.
8. Under the absolute community of property ownership, jewelries are classified as part of the
community property, in general.
9. Under absolute community property relationship, the fruit of an exclusive property is classified as a
community property.
10. When the designation of the beneficiary is not stated or is not clear, the Insurance Code assumed
revocable agreement.
11. A man and a woman who live as husband and wife without marriage shall divide equally the
properties they acquired during their live-in period.
12. Property that is subject to a general power of appointment is to be included as part of the gross
estate.

PROBLEM 3-3. MULTIPLE CHOICE (THEORY)

Encircle the letter that contains the best answer.

1. Which of the following is to be classified as intangible for estate tax?

a. Cash
b. Goodwill
c. Franchise
d. All of the above

2. This item is not included as part of the gross estate of the decedent
a. Claims against insolvent person
b. His fully depreciated building
c. Proceed of life insurance with irrevocable beneficiary
d. Properties already given in contemplation of death

3. One of the following is not included in the gross estate

a. Property left by the decedent
b. Accrued interest after death
c. Transmissible rights and obligations existing at the time of death
d. Accrued dividends on or before death

4. Which of the following item is considered situated outside the Philippines

a. Franchise in the name of the decedent which is exercised in the Philippines
b. Share of stock holdings of decedent in a foreign corporation whose business is 90% done in the
Philippines
c. Bond certificate issued by a domestic corporation owned by a nonresident decedent
d. Foreign currency deposited in bank outside the Philippines

5. The value included in determining the book value of unlisted common share is
a. Retained earnings
b. Appraisal surplus
c. Liquidating value of preferred shares
d. Unrealized gain or loss

6. Which of the following is not included in the gross estate

a. Transfer under mortis causa
b. Transfer for insufficient consideration
c. Transfer for an adequate and full consideration in money’s worth
 d. Transfer in contemplation of death

7. Which of the following is considered as “constructive receipt”?

a. Retirement benefits
b. Fees paid to a public official
c. Deposits for rentals to answer for damages, restricted as to their use
d. Interest coupons that have natured and are payable but have not been cashed

8. Mr. Melvin Carcha makes a transfer of property in trust, income payable to himself for 10 years,
thereafter to Miss Cherryl Calub or his estate. Mr. Carcha dies after 2 years.
a. Only transfer No. 1 is to be included in the gross estate
b. Only transfer No. 2 is to be included in the gross estate
c. Both transfers are to be included in the gross estate
d. Both transfers are not to be included in the gross estate

9. When a married person dies, the property relationship between the husband and the wife was that
of conjugal partnership of gains, the gross estate of the decedent would include:
a. His exclusive property and all conjugal property
b. All properties of the husband and wife
c. His exclusive property, capital property of the surviving spouse and all conjugal properties
d. His exclusive property and one- half of the conjugal property

10. This is not deemed as part of the gross estate of the deceased or decedent for estate tax purposes.
a. Transfer in contemplation of death
b. Property previously taxed
c. Capital of the surviving spouse
d. An exemption of P200,000 which is included in the computation of graduated estate rates

11. Which of the following proceeds of life insurance is to be included in the taxable gross estate?
a. Insurance proceeds from SSS and GSIS
b. Amount receivable by any beneficiary whose designation in the policy is irrevocable
c. Proceeds of group insurance taken out by a company for its employees
d. Amount receivable by any beneficiary designated in the insurance policy

12. Which of the following exempt transactions will still require inclusion of the property in the gross
estate?
a. Legacies to social welfare, charitable and cultural institutions, which the administrative expenses
exceed 30% of the legacy
b. Amount received as war damages
c. Transfer from the first heir to the second heir designated by the decedent
d. Merger of usufruct in the owner of the naked title

PROBLEM 3-4. MULTIPLE CHOICE (THEORY)

Encircle the letter that contains the best answer.

1. The value of the common stock not listed in the stock exchange included in the gross estate at the
time of death would be
 a. Mean value
b. Book value
c. Par value
d. Market value

2. Which of the following whose estate from within only should be included in the gross estate?
a. Resident alien
b. Nonresident citizen
c. Nonresident alien
d. Resident citizen

3. The legal right to use and enjoy the benefits and profits of something belonging to another is called:
a. Usufruct
b. Owner of the naked title
c. Fideicommissary
d. Fiduciary

4. Which of the following is included in the gross estate for estate tax compensation?
a. Donation mortis causa
b. Donation inter vivos
c. Transfer with full or adequate consideration
d. Irrevocable transfer done during the lifetime of the donor

5. A revocable transfer does not include

a. Conditional transfer
b. Transfer which the decedent’s power is exercised only if there is consent of all interested parties
in the property
c. Transfer with right to designate the person to enjoy the income of property
d. Donation mortis causa

6. Which of the following is not included in the gross estate for computation of Philippine estate tax?
a. Conjugal property of decedent and his spouse
b. Exclusive property of decedent
c. Exclusive property of spouse of decedent
d. Uncollected accrued interest on time deposit of decedent

7. Which of the following proceeds of the insurance of the decedent is included in the gross estate?
a. The estate as irrevocable beneficiary
b. The spouse as the irrevocable beneficiary
c. The parent as the irrevocable beneficiary
d. Irrevocable beneficiary other than the estate or executor

8. Which of the following is not included in the gross estate of a Filipino or resident alien decedent?
a. Dividend income declared but not yet actually received at date of death
b. Share in partnership’s profit earned immediately after date of death
c. Rent income accrued before death but collected after death
d. Interest income accrued at the time of death
9. Which of the following is considered as transfer under general power of appointment?
a. Power to use property though a will exercisable in favor of the estate
b. Power to appropriate property expressly not exercisable by decedent’s creditors
c. Power to use property for the comfort of person/ persons other than the decedent or his estate
d. Power to appropriate income in favor of the decedent pertinent to his health

10. Which of the following proceeds of life insurance of the decedent is not included in the gross estate?
a. The estate as beneficiary
b. The executor as beneficiary
c. The estate as the irrevocable beneficiary
d. The spouse as the irrevocable beneficiary

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

a. Bad debts claimed as deductions from the gross estate
b. Pension pay under RA 4917 received by the heir upon death of decedent
c. Merger or usufruct in the owner of naked property
d. Capital of the decedent

12. Which of the following transfers is subject to estate tax?

a. Devises to charitable institution for administrative purposes
b. Transmission from the first heir in favor of another heir, in accordance with the desire of the
predecessor
c. Transmission of the inheritance by the fiduciary heir to the fideicommissary
d. The merger of usufruct in the owner of the naked title

PROBLEM 3-5. SHORT PROBLEMS

Instruction: The problem below are independent from each other unless state otherwise. Compute the
respective amount.

1. What is the amount of reportable gross estate if a resident Filipino died with P2,500,000 worth of
property (net of P500,000 claims against insolvent person) but his liability amounts to P5,000,000?

2. What is the amount of gross estate reportable in the Philippines if a resident alien died in the
Philippines with P5,000,000 property within and P20,000,000 worth of property located in China?

3. A, a Filipino citizen, has 20% investment in U Corporation whose shares of stock is not traded in the
stock market. How much is his reportable gross estate if U Corporation has total assets of
P10,000,000 and total liabilities of P8,000,000 at the time of A’s death?

4. D, a nonresident Filipino citizen, was insured in the Philippines with proceeds of life insurance
amounting to P5,000,000. If the proceeds of life insurance is to be received by his irrevocable
Filipina fiancé, how much is the reportable gross estate?

5. If M, a resident alien, died leaving a family home in USA with market value of P10,000,000 and
employment death benefits of P1,000,000 in the Philippines, how much is the reportable Philippine
gross estate?
6. T, a resident alien, died leaving P10,000,000 investment in bonds in the Philippines. If his country
allows estate tax exemptions to Filipino citizens, how much is the amount to be excluded from T’s
Philippine gross estate?

7. Based on No. 6, if T is a nonresident alien, how much is the amount of gross estate to be reported
for Philippine estate tax purposes?

8. What is the amount to be included in the gross estate if a resident decedent died due to a bus
accident and the bus company paid P900,000 as compensatory damages at the time of burial plus
P100,000 payment for medical and funeral expenses.

9. X, a nonresident alien, died leaving P5,000,000 worth of property in the Philippines. Sixty percent
(60%) of which was donated to the University of Santo Tomas exclusively for educational purposes
and the remaining forty percent (40%) to the Philippine Government. How much is the amount
excluded from the gross estate?

PROBLEM 3-6. AMOUNT OF GROSS ESTATE

How much is the reportable amount of personal property owned by a resident Filipino citizen if the
property was acquired for P1,000,000 but at the time of his death it has a book value of P800,000 and a
market value of P750,000 respectively?
a. P200,000 b. P750,000 c. P800,000 d. P1,000,000

PROBLEM 3-7. COMPOSITION OF GROSS ESTATE

Cada Ver, an American residing in the Philippines, died leaving the following properties:

Business, Daily City, USA P30,000,000

Cars, Philippines 1,000,000
Condominium, Quezon City, Philippines 3,000,000
Mansion, Boracay, Philippines 20,000,000
Shares of stock, Hongkong 4,000,000
Receivable, including P500,000 claims against insolvent 2,000,000

The gross estate of Carla Ver is

a. P34,000,000 b. P40,000,000 c. P60,000,000 d. P60,500,000

PROBLEM 3-8. COMPOSITION OF GROSS ESTATE

What would be the amount included in the gross estate of a resident alien decedent for the following
properties of his country reciprocity tax exemption

Cost Fair Value

Real property- Philippines P800,000 P1,600,000
Personal properties- foreign country 700,000 600,000
Intangible properties- Philippines 300,000 800,000

a. P3,100,000 b. P3,000,000 c. P2,500,000 d. P2,400,000

PROBLEM 3-9. DETERMINATION OF GROSS ESTATE
What would be the gross estate of an alien who died as resident of his country, leaving the properties to
his Filipina wife?

Real estate located in the decedent’s country with a fair market value of P1,000,000. Investment in
shares of stock of a resident foreign corporation with 85% business in the Philippines has a fair market
value at P500,000.
a. P500,000 b. P1,000,000 c. P1,500,000 d. None

PROBLEM 3-10. REPORTABLE GROSS ESTATE

The following are the lists of properties pertaining to the computation of the estate of Zuma Langit:

Real properties in the Philippines (fair market value) P1,000,000

Car in the Philippines 800,000
Collectibles in Philippines (20% uncollectible) 500,000
Franchise- taiwan 200,000

1. If Zuma Langit is a Filipino citizen, the reportable gross estate in the Philippines is:
a. P2,500,000 b. P2,300,000 c. P1,800,000 d. P1,500,000

2. Based on the above data, assume that the decedent is a nonresident alien with estate tax
reciprocity. The reportable gross estate in the Philippines would be:
a. P2,000,000 b. P2,200,000 c. P1,800,000 d. P1,500,000

PROBLEM 3-11. VALUATION OF REAL PROPERTY

Jingle Goy died in 2000 leaving a will which directed all real estates, owned by him, not to be disposed or
sold for a period of 13 years after his death, and ordered that the property will be given to Lito Mendoza
after 15 years.

The estate left by Goy in 2000 had a fair market value of P500,000. In 2013, the fair market value of the
said estate increased to P4,500,000 and the BIR Commissioner assessed value thereon is P4,000,000 in
2013. What would be the correct amount of the gross estate?
a. P500,000 b. P4,000,000 c. P4,500,000 d. P5,000,000

PROBLEM 3-12. VALUATION OF SHARES OF STOCK

Part of the gross estate of a citizen is an investment of P1,000 shares of domestic corporation. It has a
par value of P100 per share. It was selling in the stock exchange at P120 to P150 at date of death of
decedent. The amount to be included in the gross estate would be
a. P100,000 b. P120,000 c. P135,000 d. P150,000

PROBLEM 3-13. DECEDENT’S INTERESTS

What would be the amount to be included in the gross estate of Kuhako, a resident decedent with a
40% equity investment in SMC. Total book value of SMC before its current income is P100,000,000.

Assume that prior to death of Kuhako, the net income of SMC was P20,000,000 and P10,000,000
dividend declared but received after the death of Kuhako.
a. P20,000,000 b. P40,000,000 c. P44,000,000 d. P48,000,000

PROBLEM 3-14. DECEDENT’S INTERESTS

The following are the properties of a Filipino decedent, Don Sungki, who died on November 1, 200A:

Business establishments (cost as of June 1, 200A) P10,000,000

(The business has P200,000 average monthly net income)
Time deposit for 10 years 30,000,000
(The time deposit was made January 200A at 12% interest per annum)
5% equity in Jollibee Corporation 5,000,000
(Jollibee declared 10% dividend on Nov. 2, 200A, but payment was made
only on April 1, 200B)
Car and mansion donated mortis causa to his son 20,000,000

The amount of reportable gross estate of Don Sungki would be

a. P69,500,000 b. P69,000,000 c. P65,000,000 d. P60,000,000

PROBLEM 3-15. ADDITION TO GROSS ESTATE

Iwan, a Filipino decedent, left the following at the time of his death on June 1, 200A:

 Commercial building amounting to P10,000,000 with monthly rent income of P200,000.

 200,000 common shares in Jollibee corporation acquired at par value for a total amount of
P20,000,000. Jollibee declared 10% cost dividend prior to Ivan’s death but payment of which was
made after death. The common share was selling at P120 initial price and P130 closing price during
the time of death.

How much is the amount reportable in the gross estate?

a. P38,000,000 b. P36,000,000 c. P35,000,000 d. P30,000,000

PROBLEM 3-16. ADDITIONS TO GROSS ESTATE

Mr. Tuso presents the following properties and expenses to the BIR in relation to the death of his wife:

Revocable transfer to the Ramon Magsaysay Foundation P1,000,000

Proceeds of life insurance from SSS 5,000,000
Family home 1,000,000
Nontaxable benefits received under RA 4917 500,000
Transfers in contemplation of death 2,000,000
Donation to the government 1,000,000
The total reportable gross estate would be
a. P5,000,000 b. P5,500,000 c. P10,500,000 d. P11,000,000

PROBLEM 3-17. PROCEEDS OF LIFE INSURANCE

The surviving spouse of a passenger who died in a bus collision received a total amount of P1,000,000 of
which P200,000 comes from the bus company and P800,000 of which P200,000 comes from the bus
company and P800,000 from the proceeds of life insurance assigned to an irrevocable beneficiary. An
out-of-settlement court payment for damages was received amounting to P200,000 from the bus
company. How much is the amount to be declared in the estate tax return?
a. P1,000,000 b. P800,000 c. P200,000 d. Zero

PROBLEM 3-18. PROCEEDS OF LIFE INSURANCE

Six months before his death, Mr. H paid a P100,000 life insurance policy out of his exclusive savings
accumulated prior to his marriage to his wife. He named his wife as his revocable beneficiary. Upon the
death, his wife received P500,000 as insurance proceeds.

Would the insurance proceeds be reported as part of Mr. H’s gross estate? If so, how much would be
reported?
Reportable? Amount to be reported
a. Yes P500,000
b. Yes P400,000
c. No P100,000
d. No P-0-

PROBLEM 3-19. SALE FOR INADEQUATE CONSIDERATION

What would be the amount included in the gross estate of a resident citizen who sold all his real
property classified as capital asset to his only son two months prior his death if these were the
following?

Selling price paid by the son P 100,000

Fair market value at date of sale 2,500,000
Fair market value at date of death 3,000,000

a. P3,000,000 b. P2,900,000 c. P2,500,000 d. P-0-

PROBLEM 3-20. SALE FOR INADEQUATE CONSIDERATION

Mr. Singsong, a Filipino decedent, owns a vintage car valued at P2,000,000 at the time of his death. The
said property was sold during his lifetime to Mr. Valhalla for P1,300,000 when its auction value was
P1,700,000. It was agreed by both parties that the transfer of ownership will take place after Mr.
Singsong’s death. For purposes of Philippine estate tax, the amount to be included in the gross estate
would be
a. P2,000,000 b. P1,700,000 c. P700,000 d. P400,000

PROBLEM 3-21. CLAIMS AGAINST INSOLVENT PERSONS

What would be the amount to be included in the gross estate of a decedent whose collectible from a
debtor as P160,000 and the same debtor was subsequently declared by the court as insolvent for having
total liabilities of P400,000 and total properties of P50,000?
a. P20,000 b. P140,000 c. P160,000 d. P350,000

PROBLEM 3-22. TRANSFERS OF PROPERTIES

Cancer, a resident decedent, made the following transfers of properties before his death:

Family home to Cell, his daughter (Cancer used the house until his death) P4,000,000
Commercial building to Cyst, his son (Cancer received the rental income) 6,000,000
Rice farm to Pus, his brother (The transfer is effected by absolute sale for a 2,000,000
Consideration of P200,000)
Shares of stock to Aids, his wife (Evidenced by oral donation) 3,000,000

How much is the amount of properties reportable for estate tax purposes?
a. P15,000,000 b. P13,000,000 c. P10,000,000 d. P4,000,000

PROBLEM 3-23. DONATIONS TO GOVERNMENT

A, a nonresident Filipino, died leaving a P10,000,000 gross estate in the USA. He donated 30% to the US
government and the 70% remaining to the Philippine government. If A has no property left in the
Philippines, how much is the gross estate reportable in the Philippines?
a. P-0- b. P3,000,000 c. P7,000,000 d. P10,000,000

PROBLEM 3-24. EXEMPTION FROM ESTATE TAX

Apo Lacay, a Filipino citizen, died leaving the following assets:

Condominium in Makati as a fiduciary heir P5,000,000

Cash as bequest to University of Philippines directly and exclusively for 2,000,000
educational purposes
Death benefits received under RA 4917 800,000
Claims against insolvent persons 200,000
Total P8,000,000

How much is the amount to be excluded from reportable gross estate?

a. P8,000,000 b. P7,000,000 c. P6,000,000 d. P4,000,000

PROBLEM 3-25. PRINCIPLE OF RECIPROCITY

Mr. Sumir Ku, a Japanese residing in the Philippines, died leaving following assets in the Philippines:

Time deposit in the Philippines P1,000,000

Shares of stocks 2,000,000
Franchise exercised in the Philippines 3,000,000
Vacation house in the Philippines 4,000,000
If the country of Mr. Ku exempts a Filipino citizen from estate tax, how much of his assets would be
exempted from estate tax as a result of reciprocity agreement?
a. P – 0 – b. P4,000,000 c. P5,000,000 d. P8,000,000

PROBLEM 3-26. PRINCIPLE OF RECIPROCITY

Mr. Flat Top, a nonresident alien, died leaving the following assets in the Philippines:

Time deposit in the Philippines P1,000,000

Shares of stocks 2,000,000
Franchise exercised in the Philippines 3,000,000
Vacation house in the Philippines 4,000,000

If the country of Mr. Flat exempts a Filipino citizen from estate tax, how much is the amount of gross
estate included for Philippine estate tax purposes?
a. P – 0 – b. P4,000,000 c. P5,000,000 d. P8,000,000

PROBLEM 3-27. PROPERTY RELATIONS

What would be the amount included in the gross estate of a Filipino decedent who was married in 1997
and died in 2013 under the following circumstances?

The only property of husband and wife at date of death is a real property brought in by the surviving
spouse into their marriage, which was acquired through gratuitous title in 1986. It was valued at
P1,000,000 at date of acquisition and at P2,000,000 at date of death.
a. P –0 – b. P1,000,000 c. P1,500,000 d. P2,000,000

PROBLEM 3-28. PROPERTY RELATIONS

Prior to the death of Mr. Exit, a Filipino decedent, he brought into marriage a business worth P3,000,000
but at the time of his death the business has market value of P12,000,000 plus an accumulated
P4,000,000 earnings during the marriage period.

1. How much is the exclusive gross estate of Mr. Exit if he was married on August 2, 1988?
a. P –0 – b. P4,000,000 c. P12,000,000 d. P16,000,000

2. How much is the exclusive gross estate of Mr. X if he was married on August 3, 1988?
a. P –0 – b. P3,000,000 c. P12,000,000 d. P16,000,000

PROBLEM 3-29. PROPERTY RELATIONS

Mr. Bungo died leaving the following assets:

Boarding house inherited from his parents during marriage P4,000,000

Accumulated income from the boarding house 3,000,000
Farm land – brought into marriage by his wife 6,000,000
Personal properties acquired during marriage 5,000,000
 1. Under the conjugal partnership of gains, how much is the amount of the gross estate of Mr.
Bungo?
Conjugal Exclusive Total
a. P 8,000,000 P 4,000,000 P 12,000,000
b. P 7,000,000 P 6,000,000 P 13,000,000
c. P 5,000,000 P 2,000,000 P 8,000,000
d. P 12,000,000 P — 0 — P 12,000,000

2. Under the absolute community of property relation, how much is the maount of the gross
estate of Mr. Bungo?
Conjugal Exclusive Total
a. P 8,000,000 P 4,000,000 P 12,000,000
b. P 7,000,000 P 6,000,000 P 13,000,000
c. P 11,000,000 P 7,000,000 P 18,000,000
d. P 12,000,000 P 6,000,000 P 18,000,000

PROBLEM 3-30. INCLUSION OR EXCLUSION FROM GROSS ESTATE

Indicate whether the transaction is to be included or excluded from the gross estate. Justify your
answer.

Case 1: Bul Lagta gave a car to Salamat until the latter passes the CPA exam.

Case 2: Tea Tirik donated a house and lot to Laway. The former reserved the right to use the property
until he dies.

Case 3: Uto Otto donated a dormitory building to Nah Otto. Uto reserved the right to the rental earnings
for 3 years. Uto died 6 years later.

Case 4: Abu Rido donated a rice farm to Mapa Yapa. The latter obtains the rights to the fruits after 6
years. The former died on the third year after donation.

Case 5: Embu Tido sold a truck to Meca Niko for P20,000. The truck was purchased by Tido 5 years ago
for P300,000. The estimated useful life of the truck is 6 years. The market price of the same
truck is P80,000.

Case 6: Nana sold a vintage car to his friend for P100,000. To dispose his remaining property before his
death due to cancer. The car has a market price of P1,000,000. With an acquisition cost of
P200,000.

Case 7: Pidol sold his real property to Zsa Nanga for P1,000,000 before his death. The property was
previously acquired for P10,000,000 but with fair market value of P15,000,000 at the time of his
death.

Case 8: H died in 2000 leaving a family home to S, his son, through a will. The will stipulates that he is
giving power to S to appoint D, his daughter, to succeed over the property in the event that S
dies.

Case 9: Based on Case No. 8, assume that S died in 2013, and D succeeded over the family home.
Case 10: Lagot died in 2000 leaving behind a condominium to his friend, Hinga, through a will. In the
will, he gave Hinga the power to appoint anybody to succeed over the property.

Case 11: Sigu Rado took a life insurance polivy for his own life naming his mother, Siga Rado, as the
irrevocable beneficiary.

Case 12: Based on Case No. 11, assume that his mother is his executor.

PROBLEM 3-31. AMOUNT OF GROSS ESTATE

The following is a list of properties and expenses pertaining to the computation of estate tax of Yuma
Yao, a nonresident Filipino, who died on June 1, 200A:

Real properties in the Philippines at fair value P2,000,000

Car in the Philippines, fair market value 800,000
Accounts receivable 500,000
12% Time deposit (Jan 1, 200A) – single interest, ignore tax 300,000
Funeral expenses 100,000
Judicial expenses 50,000
Claims against insolvent person 35,000

Required: Compute the amount of gross estate.

PROBLEM 3-32. GROSS ESTATE

Mr. Jose Velarde, a Canadian residing in Laos, died in 200A. He left the following properties with their
corresponding fair market values at the date of his death:

Rest house in China P 20,000,000

A mansion in Boracay, USA 130,000,000
Shares of stock in a Taiwan Corporation 50,000,000
Shares of stock in a Japanese Corporation with office at Ortigas, 85% of the
120,000,000
business located in the Philippines 500,000,000
Time deposit in Equitable-PCI Bank, Philippines 1,000,000
Lease contract over his Hawaiian property leased to a Filipino citizen. 4,000,000
Investments in bonds in Jollibee Corporation

Required: How much is the Jose Velarde’s gross estate for Philippine estate tax purposes?

PROBLEM 3-33. VALUATION OF REAL AND PERSONAL PROPERTIES

Mr. Limot Hinga, a Filipino, died leaving the following properties in Manila:

Fair market values by

Baguio City BIR
a. Real properties: Assessors Commissioner
House and lot P 4,000,000 P6,000,000
Investment in property 2,000,000 1,000,000
Totals P 6,000,000 P 7,000,000
 b. Personal properties: Book values Market values
Car P 500,000 P 600,000
Furniture 500,000 300,000
Totals P1,000,000 P 900,000

Required: Compute the gross estate of Mr. Limot Hinga.

PROBLEM 3-34. VALUATION OF SHARES OF STOCK

Mr. Natay, a nonresident Filipino, died leaving 10,000 common shares investment acquired at P110,000
from Jollibee Corporation. At the time of death, the stockholders’ equity of Jollibee Corporation shows
the following information:

Capital stock:
Common, 100,000 shares, par P50 P5,000,000
Preferred, 60,000 shares at P100 6,000,000
Reserves:
Revaluation surplus 200,000
Additional paid-in-capital – common shares 300,000
Additional paid-in-capital – preferred shares 500,000
Retained earnings 3,000,000
Total stockholders’ equity P 15,000,000

The liquidating value of preferred shares is P110 per share.

Required: Determine the reportable value of investment in common stock as part of the gross estate if
the securities are:
1. Listed in the local stock exchange assuming that each common share has an initial sale price of
P100 and closing price of P90 at the time of death.
2. Not listed in the local stock exchange.

PROBLEM 3-35. DECENDENT’S INTEREST

The following data are available to determine the gross estate of May Bankay who died on November 1,
200A:
Estate Tax Paid
Date of Death (March 1, 200B)
Real estate properties P3,000,000 P3,500,000
Time deposit starting March 1, 200A at 12% simple interest
(ignore tax) 2,000,000 2,000,000
Tangible personal properties 1,000,000 800,000
Other intangible properties 500,000 600,000

Required: Compute the gross estate of May Bangkay.

Problem 3-36 ADDITIONS TO THE GROSS ESTATE

Mr. Himlay, a Filipino, died due to cancer leaving the following assets:
Family home P2,000,000
Time deposit in BPI 1,000,000
Proceeds of life insurance received by his wife 500,000
Claims against insolvent person 200,000

Additional information:
(1) The time deposit in BPI is subject to a 6% annual interest. It has been deposited 9 months prior
to his death (ignore tax).
(2) The insolvent person has total assets of P400,000 and total liabilities of P800,000.
(3) A week prior to his death, he gave a car worth P1,500,000 to his son.

Required:
1. How much is the additions to the reportable gross estate?
2. How much is the total gross estate?

PROBLEM 3-37. PROPERTY RELATIONS

The following data pertains to the death of a resident alien:

Property acquired by decedent prior to marriage P600,000

Property acquired by surviving spouse prior to marriage 700,000
Property inherited by decedent during marriage 800,000
Property inherited by the surviving spouse during marriage 900,000
Property acquired through labor during marriage 1,000,000
Income derived from property inherited by the surviving spouse during
marriage including income tax of P50,000 450,000
Time deposit (excluding interest before death, P90,000 and interest after
death, P60,000, ignore tax) 850,000

Required: Determine the total gross estate under the following property relationships:
1. Conjugal partnership of gains regime.
2. Absolute community of property regime.

PROBLEM 3-38. COMPREHENSIVE PROBLEM

Puma Paalam died leaving the following properties:

Within Outside
Condominium P5,000,000
Commercial building P10,000,000
Shares of stock – nonresident foreign corp. 3,000,000
Business transferred to his son, the decedent enjoys the
income until his death 8,000,000
Investments in lands:
Acquisition cost 4,000,000 2,500,000
Fair market value at time of death 5,000,000 2,000,000
Proceeds of life insurance, his wife is the irrevocable
beneficiary 3,000,000
Proceeds of life insurance, the estate is the irrevocable
 beneficiary 2,000,000
Proceeds of property insurance 3,000,000 7,000,000
Cash in bank 2,500,000 4,000,000
Franchises 1,500,000 2,000,000

Required: Compute the reportable gross estate in the Philippines if the decedent is a:
1. Filipino citizen or resident alien.
2. Nonresident alien without reciprocity.
3. Nonresident alien with reciprocity.