TAX 2 2015 Edition- ANSWER KEY (Chapters 1-3_ Chapter 5.docx

TRANSFER & BUSINESS TAXATION, 2015 Edition By:

TABAG & GARCIA

CHAPTER 1 – SUCCESSION & TRANSFER TAXES TRUE OR FALSE 1. TRUE 6. TRUE 11. FALSE 16. 2. TRUE 7. FALSE 12. TRUE 17. 3. FALSE* 8. FALSE 13. TRUE 18. 4. FALSE 9. TRUE 14. TRUE 19. 5. FALSE 10. FALSE 15. FALSE 20. *The taxpayer for estate tax purposes is the estate as a juridical person. MULTIPLE CHOICE 1. D 12. C 23. D 34. 2. A 13. C 24. B 35. 3. D 14. B 25. D 36. 4. C 15. D 26. D 37. 5. C 16. C 27. B 38. 6. A 17. B 28. D 39. 7. B 18. D 29. A 40. 8. A 19. C 30. D 41. 9. B 20. B 31. B 42. 10. A 21. B 32. A 43. 11. D 22. B 33. D 44. **Inheritance and repudiation takes effect upon death of the decedent

TRUE FALSE TRUE TRUE TRUE D B B D B D D B D B B

45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55.

B C D D A B A D** D D B

CHAPTER 2 – GROSS ESTATE PROBLEM SOLVING (P2.1) (1) P19,300,000

(2) P19,300,000

(3) P11,800,000

(4) P14,300,000

(P2.2) Total Gross Estate

P78,000,000

(P2.3) Total Gross Estate P4,075,000 ***Mean value shall be used only if the quotation price at the date of death is not determinable (RR 2-2003)

(P2.4)

(1)P230,0000; (2)P1,100,000; (3)P0; (4)P5,000,000; (5)P1M + [1M x (1M x 10% x 1.5)] = P1,150,000

MODIFIED IDENTIFICATION EXERCISE A 1. Included 6. Excluded 2. Included 7. Excluded * 3. Excluded 8. Included ** 4. Included 9. Excluded 5. Excluded 10. Included*** *Designated by the prior decedent **Exclusions from the gross estate. Nonetheless, the tax code requires these items to be included first in the gross estate before deducting the same from the gross estate. *** Bequests to charitable institutions are considered exclusions from the gross estate only if the problem clearly states that not more than 30% were used for administrative purposes. However, even if not more than 30% of the bequests were used for administrative purposes, the tax code still require these items to be included first in the gross estate before deducting the same for estate tax purposes. EXERCISE B

EXERCISE C 1. 2.

P0; valid sale P0; valid sale

1. 2.

P10M P20M

3. 4. 5.

P0; valid sale P4,000,000 P6,000,000

3. 4. 5.

TRUE OR FALSE 1. TRUE 2. TRUE 3. TRUE 4. FALSE 5. TRUE

6. 7. 8. 9. 10.

FALSE FALSE FALSE TRUE TRUE

11. 12. 13. 14. 15.

FALSE TRUE TRUE FALSE FALSE

16. 17. 18. 19. 20.

TRUE TRUE FALSE TRUE FALSE

MULTIPLE CHOICE 1. A 2. B 3. D 4. B 5. C 6. C 7. A 8. B 9. A 10. A 11. A 12. B 13. D 14. A 15. C

16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

D C B D A D A B A C C C D B D

31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45.

C B A B B D C B C C C B C B C

46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60.

D C C D D D C C C B D C C A A

P5M P10M P0

61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75.

A A C D B A C C D D D A D D B

CHAPTER 3 – DEDUCTIONS FROM THE GROSS ESTATE PROBLEM SOLVING

(P3.1)

(P3.2)

(Funeral Expenses) Case A: P150,000 Case B: P200,000 Case C: P150,000 Case D: P150,000

P0 Mourning clothing (donated by the decedent’s employer) Expenses paid by relatives Telecommunication charges paid by the friends Cost of burial plot, coffin, interment fees and other funeral charges paid by an insurance company DEDUCTIBLE FUNERAL EXPENSE

P-nil-

(P3.3) P183,500 computed as follows: NOTE: Hospital bills for two months of confinement before decedent’s death should be charged to “medical expenses”

(P3.4) (Claim Against Insolvent Persons) Case A: P100,000 Case B: P333,333 computed as follows: Case C: P0. Debtor is not insolvent CaseD: P250,000

(P3.5) P133,333 computed as follows: (P3.6) P2,097,000 computed as follows: (P3.7) Question 1: P217,500 Question 2: P217,500

Same answer with question #1. Whether or not the estate was settled judicially is irrelevant in the determination of allowable deduction for judicial expenses.

(P3.8) (P3.9) (P3.10) (P3.11)

P265,000 computed as follows: P2,500,000 computed as follows: P262,500 computed as follows: STANDARD DEDUCTION Case A: P1,000,000 Case B: P1,000,000 Case C: P1,000,000 Case D: P0 Case E: P0

(P3.12) MEDICAL EXPENSES Case A: Case B: Case C: Case D: Case E:

P500,000 P500,000 P150,000 P500,000 P0

(P3.13) FAMILY HOME Case A: Case B: Case C: Case D: Case E: Case F:

P1,000,000 P500,000 P0 P500,000 P600,000 P750,000; [ (1M/2) + (500,000/2)]

(P3.14) P1,550,000 computed as follows: (P3.15) Question 1: P2,430,000 (Decedent: Resident Citizen) Question 2: P2,430,000 (Decedent: Resident Alien) (same computation with Q#1).

(P3.16) Question 1: P2,757,500 computed as follows: Question 2: P2,672,330 computed as follows:

(P3.17) Question 1: P426,000 computed as follows: TRUE OR FALSE 1. TRUE 2. TRUE 3. TRUE 4. TRUE 5. TRUE 6. FALSE

7. 8. 9. 10. 11. 12.

TRUE TRUE TRUE FALSE FALSE FALSE

13. 14. 15. 16. 17. 18.

FALSE FALSE TRUE FALSE TRUE TRUE

19. 20. 21. 22. 23. 24.

TRUE TRUE TRUE FALSE TRUE TRUE

25. 26. 27. 28. 29. 30.

TRUE TRUE FALSE TRUE FALSE TRUE

MULTIPLE CHOICE 1. C 2. D 3. D 4. C 5. B 6. B 7. D 8. C

11. 12. 13. 14. 15. 16. 17. 18.

C B A A A D D C

21. 22. 23. 24. 25. 26. 27. 28.

A A B B B C A C

31. 32. 33. 34. 35. 36. 37. 38.

C A C B B D A D

41. 42. 43. 44. 45. 46. 47. 48.

C A A C D A A A

9. 10.

A B

19. 20.

D P650,000

29. 30.

D C

39. 40.

D D

49. 50.

B D

CHAPTER 4 – PROPERTY RELATIONS ERRATUM: PAGE 127, ILLUSTRATION #2, CASE B: The P300,000 jewelry shall be classified as conjugal property. Net Taxable estate shall be P625,000

CHAPTER 5 – ESTATE TAX CREDIT AND ESTATE TAX DISTRIBUTABLE PROBLEM SOLVING P5.1 (1)P200,000

(2)P0; not allowed

P5.2 Estate tax payable after tax credit ALLOWED TAX CREDIT

P67,500 P67,500

P5.3 (a) Net Taxable estate = P3,570,000; (b)Estate tax due after tax credit = P142,770 (c ) Net Distributable Estate = P4,427,230

P5.4 NET TAXABLE ESTATE ESTATE TAX PAYABLE NET DISTRIBUTABLE ESTATE

ULTIPLE CHOICE 1. B 2. C 3. D 4. C 5. C 6. C 7. C

8. 9. 10. 11. 12. 13. 14.

A D A D D A D

P1,325,000 P81,000 P2,994,000

15. 16. 17. 18. 19. 20. 21.

A C C A D A C

22. 23. 24. 25. 26. 27. 28.

C A C D C A B

29. 30. 31. 32.

C D A B