Deductions from the Gross Estate

Question 1

Deductions from gross estate are highly disfavored in law; he who claims deductions must be able to justify his claim or right. T or F?

Answer 1

TRUE

Question 2

Deductions from the gross estate are generally presumed to be conjugal deductions, unless specifically provided otherwise. T or F?

Answer 2

TRUE

Question 3

Obligations contracted by a person during his lifetime are terminated upon his death. T or F?

Answer 3

FALSE.

Question 4

All claims against the insolvent person are deductible from the decedent’s gross estate. T or F?

Answer 4

FALSE.

There are four requisites for deductibility:
(1) The liability represents a personal obligation of the deceased existing at the time of his death
(2) The liability was contracted in good faith and for adequate and full consideration in money or money’s worth
(3) The liability must be a debt or claim which is valid in law and enforceable in court
(4) The debt must not have been condoned by the creditor or the action to collect from the decedent must not have been prescribed

Question 5

In a claim against insolvent person, the insolvency of the debtor must be proven and not merely alleged. T or F?

Answer 5

TRUE.

Question 6

It could be that the amount to be included as part of the gross estate in a claim against insolvent person is less than the full amount owed. T or F?

Answer 6

FALSE

Question 7

So that unpaid mortgage may be deducted from the gross estate, the fair market value of the mortgage property must form part of the gross estate in full. T or F?

Answer 7

TRUE

Question 8

For unpaid taxes to be deductible from gross estate, such must have accrued at the time of or before the decedent’s death.

Answer 8

TRUE

Question 9

Unpaid income taxes incurred before the decedent’s death is deductible from the gross estate. T or F?

Answer 9

TRUE

Question 10

Casualty loss is deductible from gross estate if such loss was incurred during the settlement of the estate. T or F?

Answer 10

TRUE

Question 11

Casualty losses could be claimed as deduction from the gross income and from the gross estate. T or F?

Answer 11

FALSE.

If the loss was already claimed as deduction for purposes of determining the taxable net income of the estate, such loss should no longer be allowed as a deduction in determining the taxable gross estate.

Question 12

In computing for vanishing deduction, the value to be taken is the lesser amount of the value of the property at the date of the previous transfer or the value of the property at the date of death of the decedent. T or F?

Answer 12

TRUE.

Question 13

Vanishing deduction is being allowed to lessen the impact of successive taxation of the same property within a very short period. T or F?

Answer 13

TRUE.

Question 14

The benefit of vanishing deduction may only be applied once. T or F?

Answer 14

TRUE

Question 15

The maximum amount of the deductible family home from the gross estate upon the effectivity of the TRAIN Law is P10,000,000. T or F?

Answer 15

TRUE

Question 16

Which of the following statements is true?

a. Deductions from gross estate are highly disfavored in law; he who claims deductions must be able to justify his claim or right
b. Receipts or invoices or other evidence to show that expense was really incurred, if applicable, must duly support deductions against the gross estate
c. Both “a” and “b”
d. Neither “a” nor “b”

Answer 16

Both “a” and “b”

a. Deductions from gross estate are highly disfavored in law; he who claims deductions must be able to justify his claim or right
b. Receipts or invoices or other evidence to show that expense was really incurred, if applicable, must duly support deductions against the gross estate

Question 17

Which among the following statements is correct?
I. An obligation that had prescribed already during the lifetime of the decedent, or that was unenforceable against him when still alive, will not be a claim against his estate when he shall be dead.
II. If a monetary claim against the decedent did not arise out of a debt instrument, the requirement on a notarized debt instrument does not apply.

Answer 17

Both I and II

I. An obligation that had prescribed already during the lifetime of the decedent, or that was unenforceable against him when still alive, will not be a claim against his estate when he shall be dead.
II. If a monetary claim against the decedent did not arise out of a debt instrument, the requirement on a notarized debt instrument does not apply.

Question 18

The following statements pertain to indebtedness for estate tax purposes. Which is false?
I. When a person leaves property unencumbered by a mortgage or indebtedness, his gross estate must include the fair market value of the property, undiminished by the mortgage or indebtedness
II. Include in the computation for the gross estate only the equity of the decedent on the property
III. If the loan was contracted within three years before the death of the decedent, the administrator or executor must submit a statement showing the disposition of the proceeds of the loan

Answer 18

When a person leaves property unencumbered by a mortgage or indebtedness, his gross estate must include the fair market value of the property, undiminished by the mortgage or indebtedness (FALSE)

Question 19

The following statements regarding “claims against insolvent persons” are correct, except:

a. It is a deduction even if the debtor had some properties
b. It can be a deduction even if secured by a mortgage
c. It should always be included in the gross estate
d. Should be omitted in the computation for the net taxable estate if entirely uncollectible

Answer 19

Should be omitted in the computation for the net taxable estate if entirely uncollectible

Question 20

Which of the following statements is correct?

a. A person is insolvent when his properties are not sufficient to pay his obligation
b. The claims of the creditors will be satisfied out of the available properties of the insolvent debtor
c. For estate tax purposes, there are two kinds of creditors, preferred and ordinary creditors
d. All of the above

Answer 20

All of the above is correct

a. A person is insolvent when his properties are not sufficient to pay his obligation
b. The claims of the creditors will be satisfied out of the available properties of the insolvent debtor
c. For estate tax purposes, there are two kinds of creditors, preferred and ordinary creditors

Question 21

Which of the following is not deductible from the gross estate of a decedent?
I. Income taxes on income received before death
II. Property taxes not accrued before death
III. Estate tax

Answer 21

All of the above is not deductible from the gross estate of the decedent

I. Income taxes on income received before death
II. Property taxes not accrued before death
III. Estate tax

Question 22

Which of the following is deductible from the gross estate?

a. Income tax paid on income received after death
b. Property tax not accrued prior to death
c. Estate tax paid on a foreign country
d. Donor’s tax accrued prior or before death

Answer 22

Donor’s tax accrued prior or before death

Question 23

Which of the following is wrong? Losses deductible from the gross estate

a. Should only be of property included in the Philippine gross estate
b. Should be incurred during the settlement of the estate
c. May be arising from storm
d. Should not be compensated by insurance or other form of indemnity

Answer 23

Should only be of property included in the Philippine gross estate

Question 24

Which is deductible from the gross estate of a resident decedent?

a. Loss of portion of the estate incurred during the settlement period, such as those arising from theft
b. Loss of portion of the estate incurred 200 days before the death of the decedent
c. Loss of the portion of the estate incurred a month before the death of the decedent
d. Losses on the portion of exclusive capital of surviving spouse incurred during settlement of the estate

Answer 24

Loss of portion of the estate incurred during the settlement period, such as those arising from theft

Question 25

It pertains to the amount of all the bequests, legacies, devises or transfers to or for the use of the Government of the Republic of the Philippines, or any political subdivision thereof, for exclusive public purposes

a. Transfer for public use
b. Vanishing deduction
c. Property previously taxed
d. Inheritance

Answer 25

Transfer for public use

Question 26

By “transfer for public use” as deduction from the gross estate is meant dispositions in
I. The last will and testament in favor of the Government of the Philippines or any political subdivision thereof, for exclusive public purposes
II. Transfer to take effect after death in favor of the Government of the Philippines, or any political subdivision thereof, for exclusive public purposes.

Answer 26

Both I and II

I. The last will and testament in favor of the Government of the Philippines or any political subdivision thereof, for exclusive public purposes
II. Transfer to take effect after death in favor of the Government of the Philippines, or any political subdivision thereof, for exclusive public purposes.

Question 27

Which of the following is not a remedy against double taxation

a. Estate tax credit
b. Vanishing deduction
c. Delivery of property from fiduciary heir to fedeicommisary in a fedeicommisary substitution
d. Transfer for public use

Answer 27

Transfer for public use

Question 28

Which is wrong? Deduction for transfer for public use

a. Means legacy in a last will and testament to the government
b. Means device in a last will and testament to the government
c. Includes any kind of transfer to the government for public purpose
d. Will not include legacies to charitable institutions

Answer 28

Includes any kind of transfer to the government for public purpose

Question 29

Vanishing deduction is availed by taxpayer to
I. Reduce his output vat
II. Reduce his gross income
III. Reduce his gross estate

Answer 29

Reduce his gross estate

Question 30

Which of the following statements regarding gross estate is incorrect?

a. Vanishing deduction is being allowed to lessen the impact of successive taxation of the same property within a very short period of time due to the death of the decedent-transferor
b. Even property previously taxed situated outside the Philippines of a non-resident alien decedent, for estate tax purposes, can be allowed vanishing deduction
c. So that unpaid mortgage may be deducted from the gross estate, the fair market value of the mortgaged property must form part of the gross estate in full
d. For unpaid taxes to be deductible from the gross estate, such must have accrued at the time or before the decedent’s death

Answer 30

Even property previously taxed situated outside the Philippines of a non-resident alien decedent, for estate tax purposes, can be allowed vanishing deduction

Question 31

Upon effectivity of the TRAIN Law, which is not true about standard deduction?

a. It need not be substantiated
b. It does not apply to nonresident alien decedent
c. It must be reflected in the estate tax return
d. None of the above

Answer 31

It does not apply to nonresident alien decedent

Question 32

Statement 1: The 5,000,000 standard deduction for estate tax purposes is a short-cut, legal mechanism to further exempt the less privileged estate and heirs from the tax burden
Statement 2: The BIR may examine the bank deposit of a decedent for the purpose of determining his gross estate without violating the Bank Secrecy Law

Which of the following is correct?q

Answer 32

Statements 1 and 2 are correct

Question 33

Only one statement is correct? A deduction for family home

a. Shall be allowed if the family home is in the Philippines
b. Shall be at a maximum of P 10,000,000 based on cost
c. May be allowed for two family homes (one in the city and another in the province), both in the Philippines and with certifications of the barangay captains
d. Shall be deducted at lesser than P10,000,000 if, with vanishing deduction and unpaid mortgage or indebtedness, the value of the family home is already reduced to zero

Answer 33

Shall be allowed if the family home is in the Philippines

Question 34

A resident citizen had family home in the Philippines. He worked abroad and was temporarily absent from his family home when he died. Which of the following statements is correct?

a. The decedent would not be allowed family home deduction because he was abroad when he died
b. The decedent would not be allowed family home deductions because he was a nonresident citizen when he died
c. The decedent would be allowed family home deduction because actual occupancy of the family home was not interrupted or abandoned because of his temporary absence
d. The decedent would be allowed family home because all decedents were allowed family home deduction

Answer 34

The decedent would be allowed family home deduction because actual occupancy of the family home was not interrupted or abandoned because of his temporary absence

Question 35

Which of the following statements regarding amount(s) received or receivable under RA 4917 is not correct?

a. Any amount received by the heirs from the decedent’s employer as a consequence of the death of the decedent-employee in accordance with RA 4917 shall be included in the gross estate of the decedent
b. Any amount received by the heirs from the decedent’s employer as a consequence of the death of the decedent-employee in accordance with RA 4917 shall be deductible from the gross estate of the decedent
c. Both “a” and “b”
d. Neither “a” nor “b”

Answer 35

Neither “a” nor “b” is not correct

a. Any amount received by the heirs from the decedent’s employer as a consequence of the death of the decedent-employee in accordance with RA 4917 shall be included in the gross estate of the decedent
b. Any amount received by the heirs from the decedent’s employer as a consequence of the death of the decedent-employee in accordance with RA 4917 shall be deductible from the gross estate of the decedent

Question 36

One of the following is allowed as a deduction from the gross estate of a non-resident alien under the Tax Code as amended by RA 10963 (TRAIN Law), but is prorated between Philippine gross estate and the total or world gross estate.

a. Losses, indebtedness, claims against the estate and taxes
b. Share of the surviving spouse
c. Vanishing deduction
d. Standard deduction

Answer 36

Losses, indebtedness, claims against the estate and taxes