Chapter 4 | Property Relations Pre-nuptial agreements are no longer new nowadays. This practice, based on history, dates back to the ancient Egyptians and have existed for many centuries in Anglo-American tradition. In previous times, including the Philippines, the parents of the bride and groom negotiated the agreement on the new couple's. behalf. The term is also used interchangeably with premarital agreement or ante-nuptial agreement. Preparing a prenuptial agreement in the Philippines is relatively easy since Philippine laws do not require the agreement between the future spouses to be registered in a government office to be binding between the parties. However, as security for the properties which may be affected by the agreement, and in order to bind third parties, Philippine law requires the recording of the prenuptial agreement in the Local Civil Registry where the marriage is celebrated, and at the Register of Deeds of the province where the affected property is located. 129 The pre-nuptial agreement, which must be in writing, should be executed prior to the celebration of the marriage, and signed by the future spouses. Any modification or amendment thereto may only be allowed before the celebration of the marriage, Scanned with CamScannerPROPERTY RELATIONS ( Family Code (EO 209) D Ne is a special contract of permanent union between a man and a woman in accordance with law. It is not subject to stipulation, except that marriage settlements may fix the property relations during the marriage within the limits provided by law. The system of property relationship is applicable only to married persons. it is used [0 distinguish a conjugal or community property from an exclusive property. Under Art. 74 of the Family Code, the property relationship between husband and wife shall be governed in the following order: 1) By marriage settlements executed before the marriage. 2) By the provisions of law 3) By the local custom. Types of Property Relations or Marriage Settlements (Art. 75 FC) The future spouses may, in the marriage settlements, agree upon the following systems of property relationship: (1) Absolute community of Property (ACoP) (2) Conjugal partnership of gains (CPG) (3) Complete separation of property (4) Any other regime In order that any modification in the marria valid, it must be made before the celebration of ne eeeeeT oe rete) The marriage settlements and any modification thereof shall be in writing, signed by the parties and executed before the celebration of the marriage. They shall not prejudice third persons unless they are registered in the local civil registry where the marriage contract i i proper registries of properties. is recorded as well as in the Law Governing Property Relations Irrespective of the place of the celebré their residence, the provisions of the Family ‘ation of the marriage and Code (E.0. No.209) shall 130 Scanned with CamScannerPra: erly Relat “ONS In the event the couple had not adopted or agreed upon a system before their marriage, the rule is Date of Marriage Property relationship Before August 3, 1988 mma CPG On or After August 3, 1988 —> ACoP Stipulations in the settlements, or contracts in consideration of a future marriage, including donations between the prospective spouses made therein, shall be tendered void if the marriage does not take place. However, stipulations that do not depend upon the celebration of the marriages shall be valid. If decedent was married with surviving spouse, property in the gross estate need to be classified into conjugal or exclusive property to facilitate the computation of the % share of the surviving spouse on the net conjugal property as well as the net taxable estate of a married decedent. Conjugal property is owned by both spouses while Exclusive property is owned either by the husband or by the wife. The exclusive property of the husband is known as “capital” while that of that of the wife is known as “paraphernal” property. ABSOLUTE COMMUNITY OF PROPERTY (ACoP) This is the most common regime in Philippine marital property relations. If the spouses do not have a valid marriage settlement, this system will govern the property relations of the couple and it is more in keeping with Philippine custom and family unity. In general, the provisions on co-ownership shall apply to the absolute community of property between the spouses. In a nutshell, the spouses become co-owners of all property they bring into the marriage and those acquired by each or both of them during marriage, save for the exceptions expressly enumerated by law. The rules on co-ownership applies in all matters not provided in the Family Code. Chapter 3 of the Family Code provides the provisions applicable to Absolute Community of Property. The absolute community of property between spouses shall commence at the precise moment that the marriage is celebrated. Any stipulation, express or implied, for the commencement of the community regime at any other time shall be void (Art. 88). 131 aa Scanned with CamScannerCrypery Relations COMMUNITY PROPERTY under ACoP to belong to the community, In general, property will be presumed to, unless fel be pen to be exclusive property. Article 91 of the Family Code provides: is ie ity property vided or in the marriage settlements, the communi j Ganson of ALL re property owned by the spouses at the time of the celebration of the marie red tf (Art, 91). EXCLUSIVE PROPERTY under ACoP ast. 92): The following shall be excluded from the community property (Art. 92): 1, Art. 92(4) of the Family Code - Property acquired during marriage by gratuitous title by either spouse and the fruits as well as the income thereof, if any, unless the donor, testator, or grantor expressly provided that it be part of community. It shall be noted that under absolute community of property, the classification of “fruits” or income. shall depend on-the classification of the principal or source of the fruits. Therefore, if the income or fruit came from exclusive property, the fruits or. income shall likewise be classified as exclusive property. However, Fruits from “labor” of either spouse shall always form part of community or conjugal property. 2. Art. 92(2) of the Family Code - Property for personal and exclusive use of either spouse. However, jewelry shall form part of the community property. Personal effects or belongings such as clothing, wearing apparel, shoes, and the like for personal and exclusive use of either spouse are considered exclusive property regardless of what was used to acquire the property. In general, property acquired during marriage by purchase with exclusive money or by exchange with exclusive property, shall be considered exclusive property. 3. Art. 92(3) of the Family Code - Property acquired before the marriage by either spouse who has legitimate descend: former marriage, and the fruits a incon fe Rat cane is well as the income, if any of Property acquired during the marriage is presumed to belong to the community, unless it i it i (art. fe ss it is proved that it is one of those excluded therefrom Scanned with CamScannerp fy: Pryperty Relations PARSE ONS Rebar ca mt eae Oriel PROPERTY CLASSIFICATION Acquired BEFORE marriage: 1, ALL properties owned before marriage or brought to the Community marriage. Acquired DURING marriage: 2. Property acquired during marriage (other than Community inheritance or donation); Art. 91 3. Property acquired during marriage through gratuitous Exclusive transfer (inheritance or donation) 4. Property acquired during marriage through gratuitous Community transfer (inheritance or donation) where the donor, testator or grantor provided that they shall form part of the community property (Art. 92(1)] 5. Property acquited using common fund Community 6. Property for personal and exclusive use Exclusive = EXCEPT, JEWELRY =. Community NOTE: The classification of the fruit or income of the property shall follow the classification of the source of the fruit or income. CONJUGAL PARTNERSHIP OF GAINS (CPG) Oftentimes referred to as the CPG, it is one of the property relations between:the spouses, under which the husband and wife place in a common fund the proceeds, products, fruits and income from their * separate properties and those acquired by either or both spouses through their efforts or by chance, and, upon dissolution of the marriage or of the partnership, the net gains or benefits obtained by either or both spouses shall be divided equally between them, unless otherwise agreed in the marriage settlements (Art. 106 Family Code). CPG APPLIES (Art. 105): 1. When the future spouses agree to it in the marriage settlement; or 2. To conjugal partnerships of gains already established between spouses before the effectivity of the Family Code (August 3, 1988), without prejudice to vested rights. Exclusive property under CPG (Art. 109): 1. That which is brought to the marriage as his or her own. 2. That which each acquires during the marriage by gratuitous title. 3. That which is acquired by right of redemption or by exchange with Property belonging to only one of the spouses, 4. That which is purchased with the exclusive money of the wife or of the husband. 133 Scanned with CamScanneree Shhions CONJUGAL PROPERTY - CPG: ired during the marriage, whether the acquisition bah ence contracted or registered in the name of one ars to have been made, d n ar both spouses, is presumed to be conjugal unless the contrary is proved (Art. 116). Article 117 of the Family Code provides that the following are conjugal partnership properties: 4. That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership or for only one of the spouses; 2. That which is obtained by labor, industry, or work or profession of either or both of the spouses; 3. The fruits received or due during the marriage coming from the common property or from the exclusive property of each spouse. Under conjugal partnership of gains, “fruits” regardless of the source (either from exclusive or conjugal property including fruits from labor) are classified as conjugal property; 4. The share in the hidden treasure discovered during marriage which the law awards to the spouses or to either of them as finder or proprietor; 5. Property acquired by occupation such as hunting or fishing by spouses or by either of them; 6. Livestock existing upon the dissolution of the partnership in excess of the: number of each kind brought to the marriage by either spouse; an 7. Those which are acquired b' or betting. However, loss the loser-spouse. y chance, such as winnings from gambling es therefrom shall be borne exclusively by 134 Scanned with CamScanner ar ee Pryperty Relations vt Pea e eu ke reese mr a PROPERTY CLASSIFICATION Acquired BEFORE marriage: 1, ALL properties owned before marriage or brought to the Exclusive marriage. Acquired DURING marriage: 2. Property acquired through onerous title using common Conjugal fun 3. Property through gratuitous transfer (inheritance or Exclusive donation) 4, Property acquired using exclusive fund Exclusive NOTE: Under CPG, the fruit or income of the property shall be classified as conjugal property (Art. 108 FC) ILLUSTRATION 1: A decedent died on February 29, 2020. The following assets were provided for the purpose of determining the decedent's gross estate. If the item is an inclusion in the gross estate of the decedent, classify the same as exclusive by writing “E* or ‘community/conjugal property by writing *G” under the regime of conjugal partnership of gains (CPG) and absolute community property (ACP). If the item is an exclusion from the gross estate, mark the item as “x” ITEM | PROPERTY. CPG ACP 1 ‘Cash owned by the decedent before the marriage 2. Commercial building owned before marriage 3. Income from item no.2 4. | Commercial building inherited during marriage 5, 6. Income from item no.4 Personal property received by the surviving spouse as gift before the marriage % Income from item no.6 8. Property acquired by the decedent with cash owned before the marriage 9. Personal belongings used exclusively by ‘the decedent 40. _ | Property unidentified when and by whom acquired 11. | Income from item no.10 12. | Cash from compensation income of the decedent 43. | Lot acquired before the marriage by the surviving surviving spouse had a previous marriage t spou! and legitimate children in that previous marriage 135 m ; Scanned with CamScannerif EF, WANs Income from the lot (item no, 13) Exclusive property was sold, and was repurchased si njugal property aaentarpoe bl using the salary of the surviving spouse during the marriage, (House was built on the exclusive lot of the decedent) Lot described in item no, ie Livestock brought into mat Livestock in excess of what was brought Into the marriage after the dissolution of the marriage Property acquired by barter using the exclusive of the decedent ANSWERs: ERSHIP i LE 6. X 11.0 16.C 2€ 7.0 12.0 I.E 3c BE 13.E 18.E 4& %E 14.0 19.C 5.C 10.C 15.C 20.E ABSOLUTE COMMUNITY OF PROPERTY 1.6 6.C 11.0 16.C 2c 7.C 12.C 17.E 3. 8.C 13. 18.C 4.E %E 14.E 19.C 5E 10.C 15.C 20.E CONJUGAL DEDUCTIONS, whether under absolute community or Property or conjugal partnership of gains: 1; The support of the spouses, their common Children, and legitimate children of either spouse. All debts and obligations contracted during marriage by the designated administrator — Spouse for the benefit of the conjugal Partnership, or by both spouse, o1 the other, ” a Pp , or by one of them with the consent of 3. Debts and obligations contract led by eith of the other to the extent that t y either spouse without the consent he family may have benefited, 136 Scanned with CamScannerProperty Relations . All taxes, liens, charges, and expenses including major and minor repairs upon conjugal property. . All taxes and expenses for mere preservation, made during the imarriage, upon the separate property of either spouse. Expenses to enable either spouse to commence or complete a _ professional, vocational, or other activity for self-improvement. Debts before marriage of either spouse in so far as they have redounded to the benefit of the family. . The value of what is donated or promised by both spouses in favor of their common legitimate children for the exclusive purpose of commencing or completing a professional or vocational course or activity for self-improvement. Expenses of litigation between spouses, unless the suit is found to b groundless. ‘ * Obligations contracted during marriage are presumed to have benefited the family and therefore conjugal deductions. While obligations contracted by either spouse before marriage are exclusive deductions unless shown that the family gained benefits from the said obligations. «Share of the surviving spouse (% of net conjugal property), family home, medical expenses, and standard deduction are deductions to be made from the net estate (total of net conjugal estate and net exclusive estate) to arrive at the net taxable estate. = Other deductions are either conjugal or exclusive deductions depending on whether chargeable against conjugal Property or exclusive property, or depending on whether the property to which the deduction is related is conjugal or exclusive property. = Wagering loss during marriage shall be borne by the loser. Winnings, however, shall form part of conjugal Property. = Fines and pecuniary damages or indemnities imposed upon either spouse shall be charges against exclusive property. 137 Scanned with CamScannerDr erty Relations PUY Menai kneel oy freee Ce GROSS ESTATE: + Real or immovable 5 6 + Tangible personal property * a = Intangible property* * xx = Certain transfers’ —»—_— «x Total LESS: ORDINARY DEDUCTIONS = Losses/Indebtedness/Taxes (LITe) (xx) (xx) = Transfer for public use . (xx) * Vanishing deduction (ACOP) (x) (x) = Vanishing deduction(CPG)*** : (ox) (mH) = Net Community/Exclusive before x x special deductions e LESS: SPECIAL DEDUCTIONS = Standard deduction (x) = Family home = _ Amount received under RA4917 NET ESTATE before share of the surviving spouse LESS: ‘4 SHARE OF THE SURVIVING SPOUSE on the net conj/eomm. property NET TAXABLE ESTATE x Estate Tax Rate ESTATE TAX DUE NoTE: * “Intangible properties including rights accruing before death, claims against insolvent persons, RA 4917, and receivable as proceeds rom if insurance taken out by the decedent * "Refer to certain transfers made before death but will take effect upon death as well as revocable transfers (Chapter 2). m Wael letren) * "Always an exclusive deduction under CPG, Tra i ‘ reroll Public use shall be classified as exclusive deductions unless expressly provided 138 Scanned with CamScannerProperty Rein ILLUSTRATION 2 (Based on RR 12-2018): A Proper Presentation of FAMILY HOME and STANDARD DEDUCTION under TRAIN Law (Other amounts are assumed for illustration purposes only) CASE A- Decedent is unmarried: Family Home (FH) is more than P10,000,000: Real and personal properties P14,000,000 Family Home 30,000,0000 Gross Estate ‘44,000,000 | Deductions: | Ordinary Deductions Unpaid Real estate tax (2,000,000) Special Deductions , Family Home (10,000,000) Standard Deduction (5,000,000) 17,000,000) | | Net Taxable Estate 27,000,000 | D Atthough the value ofthe Family Home is P30,000,000, the allowable | deduction from the gross estate as provided in the Tax Code (as amended) is | 10,000,000 only. CASE B- Decedent is unmarried: Family Home (FH) is below 210,000,000: Real and personal properties 14,000,000 Family Home 9,000,000 Gross Estate 23,000,000 Deductions: Ordinary Deductions Unpaid Real estate tax (2,000,000) Special Deductions Family Home (9,000,000) Standard Deduction (5,000,000) 16,000,000) Net Taxable Estate 7,000,000 CASE C- Decedent is married. FH is conjugal valued at more than 210,000,000: Exclusive iuaal Total Conjugal properties: re Real and personal properties 14,000,000 Family Home 30,000,000 Exclusive properties 6,000,000 ie Estate 6,000,000 = P44,000,000 50,000,000 Ordinary Deductions: Conjugal Ordinary Deductions (2,000,000) Exclusive Deductions (1,000,000) . (3,000,000) Net estate before Special Deductions 5,000,000 42,000,000 47,000,000 139 Scanned with CamScanner0,000,000) cial Deductions (1,000, a Family Home (P30M/2); Max P10M (5,000,000) Standard Deduction 32,000,000 Nt estate before share of the surviving spouse (21,000,000) Share of the Surviving Spouse (P42M/2) 14,000,000 Net Taxable Estate 7 2 aa eee LD {fdecedentis maried: Special deductions are neither classified as exclusive nor common deductions ow 10,000,000: Decedent is Fis valved bal 00 sal ‘oil Conjugal properties: 14,000,000 Real and personal properties Aeon eae 6,000,000 . toass Se 6,000,000 23,000,000 29,000,000 LESS: ss Ordinary Deductions: Conjugal Ordinary Deductions (2,000,000) Exclusive Deductions. (1,000,000) +,000009 Net estate before Special Deductions. ~ P5,000000 27,000,000 26,000,000 Special Deductions | Family Home (P9M/2) ene | Standard Deduction 5000, Net estate before share of the surviving spouse 16,500,000 | Share of the Surviving Spouse (P21M/2) 0,500,000) Net Taxable Estate CASE E- Decedent is married; FH is exclusive valued at more than P10,000,000: Prypert Relations 6,000,000 Excusve Conjugal Toll =| CConjugl properties: | Real and personal properties 14,000,000 Exclusive properties: | Family Home 30;000,000 | Other excusive properties 6,000,000 | Gross Estate P36,000,000 P14,000,000 50,000,000 | Ordinary Deducons | rug Ordinary Deductions Exclusive Deductions (1,000,000) est) | Net estate before S con oe specie ent Sreil Deducions ~~ P35(00,000 PT3,000;00 —Pa7,000,000 Family Home (Max P10M) | Standard Deduction (10,000,000) | Net Estate — (5,000,000) Share ofthe Surviving Spouse (P 32,000,000 Net Taxable Estate M2) (6,000,000) 26,000,000 _| 140 Scanned with CamScannerLrypetg, Relat MONS COMPLETE SEPARATION OF PROPERTY The spouses shall be governed by complete separation of property if the-future spouses agree in the marriage settlements that their property relations during the marriage shall be governed by the regime of separation of property. To each spouse shall belong all earnings from his or her profession, business or industry and all fruits, natural, industrial, or civil, due or recsived during the marriage from his or her separate property. 5 Both spouses shall bear the family expenses in proportion to their income, or, in case of insufficiency or default thereof, to the current market value of their separate properties. The liability of the spouses to creditors for family expenses shall, however, be solidary. PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE (Title 1V, Chapter 7 of the Family Code) CAPACITATED TO MARRY When a man and a woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage, the following rules shall apply: 14. Wages and salaries shall be owned by them in equal shares. 2. Property acquired by both of them through their work or industry shall be governed by the rules on co-ownership. 3. Neither party can encumber or dispose by act inter-vivos his or share in the property acquired during cohabitation and owned. in common, without the consent of the other, until after the termination of their cohabitation Tn the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. A party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed jointly inthe acquisition thereof i the formar’ efforts consisted in the care and maintenance of the family and of the household, 141 Scanned with CamScannerProperty Relations INCAPACITATED TO MARRY 4. Only the property acquired by both of the throu he ones) a il ey, propel i : - See a aT neporin y+ their respective contributions. (If silent, assume equal shares). ther shall accrue to the 2. The share of any party who is married to ano! e absolute community or conjugal partnership, as the case may be, if existing under the valid marriage. 142 Scanned with CamScannerPopery Relations 3 TSH Maye Mr. Pim Musay, Filipino and married, died in 2021, leaving his estate in favor of his surviving spouse. The following information were made available: Real property in Quezon City, acquired during marriage. Said property is supported by a barangay certification that the spouses resided in this property at the time of Mr. Musay’s death. The fair market value of this property as per latest tax declaration is P15,000,000 while the zonal valuation as of the time death is P 20,000,000. Said real property was held as a mortgage in a loan applied by the spouses. As of the time of death, the outstanding balance of the mortgage payable amounted to P5,000,000. Real property in Batangas, inherited by Mr. Musay during marriage, two and half years ago, from his late father. The fair market value per tax declaration as of his death is 8,000,000 while the zonal valuation is P12,000,000. Said properly was previously taxed ata value of P10,000,00 when Mr. Musay inherited the property from his father. Real property in Cavite, donated to Mrs. Musay, 10 years ago (before marriage) by his parents-in-law . The fair market value as per latest tax declaration as of the time of Mr. Musay's death is P3,000,00 while the zonal valuation is P4,000,000. Other exclusive properties of Mr. Musay P1,000,000; ; Other properties of Mr. and Mrs. Musay- 3,000,000. Funeral expenses incurred by the estate during the wake and burial of Mr. Musay amounted to P1,900,000. REQUIRED: 4. Compute item 34 (Gross Estate) of BIR Form No. 1801 2. Compute Schedule V (Ordinary deductions) of BIR Form No. 0801 3. Compute item 40 (Net Taxable Estate) of BIR Form No. 1801 4. Compute item 20 (Estate Tax Payable) of BIR Form No. 1801 ANSWERS: Item 34 (Gross Estate) of BIR Form No. 1801 = P40,000,000 Schedule V (Ordinary deductions) of BIR Form No. 0801 = P10,250,000 1 2 3. Item 40 (Net Taxable Estate) of BIR Form No. 1801 = P3, .750,000 ‘4. Item 20 (Estate Tax Payable) of BIR Form No. 1801 = P225,000 143 Scanned with CamScannerDyey Relations Solution: Exclusive Common ‘Talal RPC 1P20,000,000 fecate prgeooer?—4o0g000 Other exo! 1,000,000 ‘4900000 Gross estate ET Fewo0000 ~ P27,000,000 40,000,000 INARY DEDUCTIONS: ro Payable| 6,000,000) (8,000,000) Vnishin deduction (6:260,000)". (65,250,000) 7,750,000 P22,000,000 —P289,760,000 NET ESTATE Share of the SS (17,000,000) ‘Standard deduction i (6,000,000) Family Home (P20M/2) (10,000,000 > P3750,000 NET TAXABLE ESTATE (EE) Estate tax rate 6% 0 Estate Tax Payable Value to take/initial basis 10,000,000 ‘= Value in the GE of the decedent - P12M = Value upon inheritance - P10M Proportional deduction: 10/40 x P5,000,000 (1,250,000) Final Basis 8,750,000 x ; 60% Vanishing Deduction P5250,000" 144 Scanned with CamScannerPryperty Relations ems = nae 1801 |__Estate Tax Return Wig | ann pon | emacs a mrnann eeeeeneneene i Teese [12,0 1, 1,0] 2nd mat] No | aMo. ot Sheetis Attached | 4 Es ono 3 Taxpayer Kdentticaton Number (TIN) 4,2)3 o4.2 3,65 0, 0, 0, 0, 0) 6RDO Code if 3,9) [ESTATEOFIM, US) ALY) Pit 80 (MAJHUSiA,¥, (S)T, MUHERRA PUIRA, SUBD). yy 1 BRGY MATIA,LLIN,O, QU,EZ,0N, \C\1,TY, piredied et a MUS AN IPIA, L bit riririiiiit sowaray refit co'sfalztsigtctes! 1 01907 17,8,8,55 6 6 BemiAares Himeamer PSMA QMaity COM yrs siisiisiiii | |Seeeecestas, [ve ae Watyenseme | yy Sekeenesee GY emnmenmmnnges [cha nemo epay pees gates? ENETTAARE ESTATE renewed Wiese Tae ESTATE XDI moun Sis “SA Foug Ese Ts Pa {$5 TaxPaci Fatman Fed san rend Feam BC Tet anv ee ee ta Parte eee Bi Less Pern ota ned x payee ratinert be den bee ia Parte ores anime t (as ree L NL biiid 2:2)5,0,0,0 Sen ods fe pone doy Pale on odo niet beara helo SEI an vt ie csv nS etre se aos rive der er pase tinea tent es vere teva iearte tones igo 27d pate a cae PAMPAM MUSAY OTE Ta Ba Py Pa wae TSHR) 145 Scanned with CamScannerruperty Relations 1 ‘1801 zr Estate Tax Return I RA 9,4 2, 3,5,5; 0, 0, 0, 0, 0M, USiALY, Pil 42 Saray nae om eo 7,000,000, 10,0 10,0; rt 21 91715101 0010) Scanned with CamScanner |CHAPTER EXERCISES PROBLEMS . ‘ P4.1. Classify the following as exclusive or conjugal property under Absolute Community of Property (ACoP) and Conjugal Partnership of Gains (CPG). Write °C" in the space provided if the property is classified as common property and write “E” if the property is classified as exclusive. ; ACoP cPG 1. Properties owned by the spouses before the marriage 2. Rental income on a property acquired before marriage. 3. Property acquired during marriage 4. Income on property described in #3 5. Property acquired by gift before marriage 6. Income on property described in #5 7. Property inherited during marriage 8. Income on property described in #7 9. Property acquired during marriage from common fund 10. Income on property described in #9 11. Car purchased during marriage using funds derived from practice of profession 12. Property owned before marriage for personal and exclusive use of the decedent. 13. Jewelry items during marriage for personal and exclusive use by the decedent 14. Real property acquired during marriage with decedent's own income 15. Car inherited during marriage P4.2. A citizen decedent died in 2021 leaving the following: Land inherited from mother (during marriage) two (2) years P24,000,000 before death; valued at P15M when inherited Personal property owned before marriage 16,000,000 Other personal property acquired during marriage 5,000,000 Deductions claimed: Casualty losses 500,000 Unpaid taxes 400,000 Claims against the estate 600,000 147 Scanned with CamScannerChaper Egerivs — aed ieee Funeral expenses 400,000 Medical expenses 120,000 Judicial expenses Property: DETERMINE THE FOLLOWING under Absolute comment of Property: 1a) Net exclusive property of the dece b) Net community property c) Share of the surviving spouse d) Net Taxable estate DETERMINE THE FOLLOWING under Conjugal Partnership of Gains: e) Net exclusive property of the decedent f) Net community property g) Share of the surviving spouse h) Net Taxable estate P43. A non-resident alien decedent died leaving the following: * Conjugal properties, Philippines, P5,000,000 + Exclusive properties, Philippines, 2,000,000 * Conjugal properties, USA, 10,000,000 + Exclusive properties, USA, 5,000,000 The following deductions were claimed: Actual funeral expenses, P1,250,000 Judicial expenses, 800,000 Claims against the estate, 1,725,000 Transfer for public use, 200,000 Medical expenses, 875,000 Included in the Philippines gross estate (conjugal) were t! ing: = Domestic shares, 500,000 {eeniaal were the following: * Share in a partnership, 1,000,000 * Other tangible personal properties, 3,500,000 The Philippine exclusive properties were all tani The F p r : including a car, which was inherited 3 ¥4 years Bee sreanal properties, death, and had a fair market value of P500,000, Con cececone Determine the following: a) Net exclusive property of the de b) Net community property cesar ©) Net Taxable estate d) Estate tax due 148 Scanned with CamScannerChapter Exercises — Lroperty Relations P4.4. Aresident alien, single died intestate on November 2, 2021. The following data were provided to you: House and lot, USA (family home) 20,000,000 Investment in stock, Philippines 8,000,000 Investment in stock, USA 10,000 000 Investment in bonds, USA (85% of the business of the 7,000,000 USA Corporation is in the Philippines) Cash in bank, Philippines \ 3,000,000 Cash on hand, Philippines 500,000 Accounts receivable from a debtor who resides in USA 2,000.000 (fully uncollectible) Vehicles in the Philippines 8,000,000 Actual funeral expenses 1,500,000 Judicial expenses 3,000,000 Unpaid Philippine income tax for income in 2020 1,200,000 Loss on December 31, 2021 due to theft 800,000 Bequest to Quezon City government for children’s 700,000 playground Receivable under RA 4917 500,000 Medical expenses 5,000,000 DETERMINE THE FOLLOWING: a) Net Taxable estate b) Estate tax due P4.5. Q Pedro Cruz died intestate on September 30, 2020. He was survived by his wife and his two children. He left the following properties: = Land (1,000 sq. m.) inherited from his father 15 months before his death. Fair market value per tax declaration at the time of Pedro's death was P20,000,000 while the zonal value was P30,000 per sq.m.; * House and lot (Family Home) acquired during marriage, FMV, P50,000,000; * Other tangible. personal properties (mode of acquisition unknown), FMV, P22,00,000. The following were considered as deductions from the gross estate: = Actual funeral expenses, P480,000 Judicial expenses, P1,000,000 Other claims against the conjugal properties; P5,000,000 Unpaid taxes; P1,200,000 Claims against insolvent persons, P500,000 Medical expenses, P1,200,000 149 : Scanned with CamScannerCes Euereses or ENT: LNEMEOONS i tax on the land at state of the decedent's father paid the estate ’ feet market value of P25,000,000. During the marriage, Pedro mortgaged the inherited land for 7,000,000 for the benefit of the family. He paid P3,500,000 before he died. Determine the following: a) Vanishing deduction b) Net Taxable estate c) Estate tax due TRUE OR FALSE ; : Write True if the statement is correct, otherwise, write False. "4: Under the regime of absolute community of property, the husband and the wife place in a common fund the proceeds, products, fruits and income from their separate property and those acquired by either or both spouses through their effort or by chance. * The gross estate of a married decedent under the system of conjugal partnership of gains during the marriage is a mixture of his exclusive property and conjugal property. The inclusion of claims against insolvent person in the gross estate. of the decedent spouse as either exclusive or communal property will depend on the nature of the claim-whether it is for an exclusive or for a communal property. Funeral expenses are no longer deductible from the gross estate of a decedent beginning January 1, 2018. . The share of the surviving spouse in the estate shall be deducted equal to % of the gross conjugal property. . Properties acquired by gratuitous title during the marriage are generally classified as conjugal properties under conjugal partnership of gains. Property inherited before the marriage become: i eon ig S Community property In the property relationship of absolute communit , the co-owners of community properties. . Spouses ”. 150 Scanned with CamScannerChapter Eeercises — Dryprty Relations Judicial expenses for the settlement of the estate are no longer deductible upon effectivity of the TRAIN Law. 10. Under the system of absolute community of property, the vanishing deduction is a charge against community property. 1 - Under the system of conjugal partnership of gains, the vanishing deduction is a charge against exclusive property. . Medical expenses incurred is no longer deductible from the estate of a decedent. . Under absolute community of property regime, property acquired during the marriage by gratuitous title by a spouse, and the fruits as well as the income thereof are the property of such spouse. : Under conjugal partnership of gains, property for personal and exclusive use of either spouse is considered as exclusive property, except jewelry. 15. Property acquired before the marriage by either spouse who has. legitimate descendants by a former marriage, and the fruits as well as the income, if any, of such property is classified as exclusive property under Absolute Community of Property. MULTIPLE CHOICE. Principles 1. Under the law, the property relationship between husband and wife shall be governed in what order? |. By marriage settlements executed before the marriage. Il. By the provisions of law Ill. By the local custom. a. 1, Hl, Il c. UU b.1, 1, I d. Ul tt 2. In the absence of a marriage settlement, or when the regime agreed upon is void, the property relations of the spouses who married before August 3, 1988 shall be governed by: a. Absolute community of properties. b. Conjugal partnership of gains c. Absolute separation of properties. d. No property relations. 151 Scanned with CamScanner3. Chepter Euercises - Prypery Relations the regime agreed a marriage settlement, or when thon hoover property relations of the spouses who were married on or after August 3, 1988 would be: a. Absolute community of property b. Conjugal partnership oy een .. Absolute separation of prope! ; : 4 einer ‘absolute community or conjugal partnership of gains Properties owned by the spouses before and brought into the marriage will be classified as: Under absolute community _ Under conjugal partnership a. Community Conjugal b. Exclusive Exclusive c. Community Exclusive d. Exclusive Conjugal . The fruits from exclusive property of each spouse due or received during the marriage are classified as: Under absolute community Under conjugal partnership a. Community Conjugal b. Exclusive Exclusive c Community Exclusive d. Exclusive Conjugal Under the system of absolute community, the following are not exclusive property, except: a. Rental income on a property acquired before marriage. b. Property from which the rental income in “a” was derived c. Receivable arising from lending of funds inherited before marriage d. Property owned before marriage for personal and exclusive use of the decedent when he was still alive Which of the following is exclusive Property under the system of Conjugal partnership of gains? a. Property before marriage b. Inheritance during marriage c. Property acquired during marriage out of e: lusi d. All of the above, 8 _—e Under absolute community of property, which of th ing is a camiminly property? perty, e following is a. Property inherited by the surviving spouse during the Scanned with CamScanner9. Chapter Exercises — Property Relations marriage. b. Property bought during the marriage using the salary of the decedent earned before marriage. + . Personal belongings bought during the marriage for the exclusive use of the decedent. d. None of the above Which is not an exclusive property of a spouse? a, That which is brought to the marriage as his or her own. b. That which each acquired during the marriage by gratuitous title. c. That which is acquired by right of redemption. d, That which is purchased with the spouses’ common fund. 10. Which of the following distinguishes conjugal property from community property? a. Properties inherited during marriage. b. Those acquired through occupation during marriage. c. Fruits of exclusive property. d. Income earned by each spouse during marriage. . The gross estate of a decedent who was married at the time of death will be composed of: a. His capital property, the wife's paraphernal property and the common property b. His capital property and the common property c. Common property d. His capital property . Statement 1: Under the regime of absolute community of property, property acquired during the marriage is presumed to belong to the community, unless it is proved that it is one of those excluded therefrom. Statement 2: Under the system of conjugal partnership of gains upon dissolution of the marriage or of the partnership, the net gains or benefits obtained by either or both spouses shall be divided equally between them. a. Statements 1 and 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true 153 Scanned with CamScannerChepter Eqercises — Property Relations Deductions 43. Statement 1: Under the system of absolute community of property, | vanishing deduction is a charge against community property. Statement 2: Under the system of conjugal partnership of gains, the vanishing deduction is a charge against exclusive property. a. Statements 1 and 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d, Statements 1 and 2 are true 14, Statement 1: Judicial expenses for the settlement of the estate are no longer deductible from the gross estate of a decedent. Statement 2: Medical expenses incurred before death are no longer deductible from the gross estate of a decedent. a. Statements 1 and 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true 15. The following are required to be listed as part of the gross estate, but are exempted from estate tax, except a. Share of the surviving spouse b. Transfer for public use c. Exclusive property of the decedent d. Amount received by heirs under RA 4917 16. All of the following items are allowed as deductions against exclusive portion of the estate, except a. Unpaid taxes b. Claims against insolvent persons c. Vanishing deduction d. Family home 17. uve} following are exclusive property of each spouse. Which one is not? a. That which each acquires during the marriage by lucrative title. b. That which is purchased with the exclusive money of either ‘spouse. c. That which is acquired by exchange with other property belonging to the spouses. d. That which is brought to the marriage as his or her own. 154 ‘ Scanned with CamScannerChapter Evercis ig = Properly Relations 18. Net share of surviving Spouse equals a. Gross conjugal pro jugal property. gal property less charges against conjugal b. Net conjugal property multi i iply by two. c. Net Conjugal property divide by two. d. Net conjugal Property divide by one-half. Use the following data for the n (4) questio Decedent is a citizen of the Philippines and a resident of Quezon City, died leaving the following: Rest house in Batangas inherited from his father during — P2,500,000 marriage Car received as gift from his mother before his marriage 1,000,000 Commercial land received as gift from his mother before 5,000,000 marriage 3 Income from the commercial land 500,000 Commercial building inherited by the surviving spouse 1,500,000 during marriage Income from exclusive property of his spouse, during 200,000 marriage Jewelry owned before the marriage 300,000 Personal exclusive property of the surviving spouse 100,000 Other properties at the time of her death 1,000,000 19. Under the regime of conjugal partnership of gains, how much is the decedent's gross exclusive properties? a. P8,800,000 c. P8,700,000 b. P8,600,000 d. P10,300,000 20. How much is the gross conjugal properties? a. P7,700,000 c. P1,500,000 b. P9,200,000 d. P1,700,000 2 . Under the regime of absolute community of property, how much is the decedent's gross exclusive properties? a. P2,800,000 c. P3,800,000 b. P2,500,000 d, P3,500,000 , 22. Using the same assumption in the preceding number, how much is the gross conjugal properties? a. P7,500,000 c. P7,800,000 b. P6,800,000 d, P6,800,000 155 Scanned with CamScannerChapter Euercises = eg Relations 23, Pedro died on November 1, 2020, leaving the following properties: “> Aparcel of land inherited during marriage from his father who dieg n December 30, 2016 + Fair market value in 2016 — P3,500,000 » Fair market value in 2020 — P5,000,000 = Mortgage assumed and paid by Pedro — P500,000 «Conjugal properties valued at 20,000,000. Deductions claimed against the estate: Casualty loss incurred ten (10) months after death 3,500,000 Unpaid taxes 2,000,000 Other claims against the estate 4,500,000 How much is the share of the surviving spouse? a. P10,000,000 c. P5,250,000 b. P4,500,000 d, P5,000,000 24. A married, nonresident citizen died leaving the following common properties, obligations, and expenses: Real property, Philippines P7,000,000 Real property, USA 5,000,000 Claim against insolvent persons 50,000 Unpaid taxes 50,000 Additional information: = The real property in the Philippines includes the family home valued at P1,500,000. How much is the taxable net estate? a. P225,000 c. P2,025,000 b. P250,000 d. P2,050,000 25. The following data were provided by the administrator of Pedro who died in 2021: Conjugal real properties P7,000,000 Conjugal family home 5,000,000 pacuae Properties 2,500,000 ‘araphernal properties x Deductions claimed: 9,800,000 oi Casualty losses - exclusive 100,000 * Unpaid taxes 50,000 * Other losses 1,000,000 156 Scanned with CamScannerCaster Euereises — ey Relations Additional Information: = 25% of “Other losses” were incurred beyond one year from death of the decedent. * Unpaid taxes pertain to property. taxes (conjugal assets) incurred after death of the decedent The taxable net estate is a. P525,000 c, P6,150,000 b. P875,000 d, P8,300,000 Use the following data for the next three (3) questions: The following data were taken from the records of a citizen decedent: ~ Land inherited from his mother 2 years before death, 24,000,000 during marriage (valued of P15,000,000 when inherited) Other personal property owned before marriage 16,000,000 Other personal property acquired during marriage 5,000,000 Cost and expenses: : Claim against the estate 2,000,000 Medical expenses incurred within one year before 7,000,000 death Losses 1,000,000 26. The amount of exclusive property under absolute community of property should be: - a, P15,400,000 c. P45,000,000 b. P30,800,000 d. P24,000,000 27. The share of the surviving spouse under the absolute community of property should be: a. P15,400,000 c. P45,000,000 b. P30,800,000 d. P9,000,000 28. The share of the surviving ‘Spouse under conjugal partnership of gains should be: a. P1,000,000 c. P9,000,000 b. P2,000,000 d, P18,000,000 The next two (2) que: 1s are based on the following: A married decedent who was under absolute community of properties died on October 15, 2021. His executor provided the following information: Real property inherited during marriage 5,000,000 Real property abroad given as gift by his uncle during 15,000,000 marriage 157 Scanned with CamScannerhyper Exercises — Pryperty Relation ; 5,000,000 Land received as donation during the marriage |) Gl oao'ga House bul on the donated land using comm 1,000,000 Income from the real property received aS QM. 48'a00. 009 Real property received by the surviving spouse os the marri i Real property acquired by the spouses during the 15,000,009 marriage en 10,000,000 Personal properties acquired during the marriage apes Donation mortise causa to the City of Manila The following were considered as deductions from the gross estate: Actual funeral expenses i Wetec Judicial expenses 2000 000 Medical expenses ; 1000, Obligations incurred that benefited the community 2,500,000 properties Claims against an insolvent debtor _ ae 500,000 Unpaid mortgage on inherited “land (originally 600,000 P2,000,000 during inheritance) Loss of vehicle due to theft on December 31, 2021 3,000,000 (part of personal properties acquired during marriage) Unpaid realty tax on real property received as gift 300,000 from his uncle Additional information: - The value of the real property at the time of inheritance was P3,000,000, received 3 years before death. - The value of the real property received as gift (4 % years before death) from his uncle was P10,000,000 at the time of donation. - The donated land (received 6 years before death) and the house built on it were certified by the Barangay Captain as their family home. 29. How much was the vanishing deduction? a. P169,000 c. P1,431,000 b. P858,600 d. P1,976,484 30. How much was the estate tax due? a. P169,000 c. 1,431,000 b. P858,600 d. P1,976,484 158 Scanned with CamScanner