Quiz3 Chpater3

Name ___________________________________ Date _______________________
Business Taxation
Quiz No. 3 (Chapter 3)
TRUE OR FALSE (1 point)

__________ 1. Family home is allowed as special deduction for nonresident alien.
__________ 2. Vanishing deduction is allowed as special deduction for nonresident alien
__________ 3. Judicial expenses are not allowed as deduction from gross estate stating January 01,
2018.
__________ 4. The mortgaged property, to the extent of the decedent’s interest therein, should
always form part of the gross estate.
__________ 5. An insolvent person is a person whose properties are not sufficient to satisfy his debts.
__________ 6. In order for a transfer for public use to be allowed as a deduction from the gross estate
of the decedent, the same amount shall not be included in the computation of the
decedent’s gross estate.
__________ 7. The law allows a standard deduction with qualification and requisites.
__________ 8. For purposes of availing of a family home deduction to the extent allowable, a person
may constitute only one family home.
__________ 9. Unpaid income taxes incurred before the decedent’s death is deductible from the
gross estate.
__________ 10. All claims against the insolvent person are deductible from the decedent’s gross
estate.
THEORIES (1 point)
_____ 1. The following are requisites for deductibility of casualty loss, except
a. Not compensated by insurance
b. Not claimed as a deduction in an income tax return of the estate subject to income tax
c. Incurred before the settlement period of the estate
d. None of the above
_____ 2. The following are requisites for deductibility of claims against the estate, except
a. The debt must have been condoned by the creditor
b. The action to collect from the estate must not have been prescribed
c. Represents personal obligation of the deceased existing at the time of his death
d. Valid in law and enforceable in court
_____ 3. The following are requisites for deductibility of vanishing deductions, except
a. The present decedent died within five years from the date of death of the prior decedent
b. Must be located in the Philippines
c. No such deduction on the property, or the property given in exchange therefore, was
allowed in determining the value of the net estate of the prior decedent
d. The estate tax on the prior succession must not be paid
_____ 4. The following are requisites for deductibility of family home, except
a. The decedent was married or if single, was a head of the family
b. The family home as well as the land on which it stands must be owned by the surviving
spouse
c. The family home must be actual residential home of the decedent and his family at the
time of his death
d. The amount of deduction should not exceed P10,000,000
_____ 5. Which of the following is not a remedy against double taxation?
a. Estate tax credit
b. Vanishing deduction
c. Transfer for public use
d. Delivery of property from fiduciary heir to fideicommissary in a fideicommissary
substitution
PROBLEMS (2 points)
_____ 1. A nonresident alien decedent left the following assets:
Shares of stock, domestic corporation P10,000,000
Shares of stock, foreign corporation 30,000,000
Tangible personal property, Philippines 60,000,000
Losses, unpaid indebtedness and taxes 12,000,000
The country where the decedent is a citizen and resident does not impose transfer tax on
transmission of intangibles of Filipinos not residing therein. The taxable net estate in the
Philippines is
a. 52,300,000 b. 47,800,000 c. 42,800,000 d. 38,000,000
_____ 2. A nonresident alien died on March 10, 2021 leaving the following properties and
deductions:
Shares of stock, domestic corporation P5,000,000
Shares of stock, foreign corporation 5,000,000
Tangible personal property 15,000,000
Deductible losses, indebtedness and tax 5,000,000
Assuming there is no reciprocity, the estate tax due is

a. 930,000 b. 660,000 c. 15,000,000 d. 16,000,000
_____ 3. On September 13, 2024, Romeo died leaving an apartment building which has a fair value of
P10,000,000 which he inherited from his mother. The property was valued at P9,000,000 at
the time of inheritance dated July 28, 2021. The building has a previous mortgage of
P1,500,000 of which P500,000 was paid by Romeo prior to his death. How much will be the
vanishing deduction?
a. 3,050,000 b. 3,000,000 c. 3,060,000 d. 3,230,000
_____ 4. Romeo transferred a 4,000 square meter lot purposely to be converted as a recreational park
to be administered by the city government of General Santos City. The lot was acquired by
the decedent 10 years ago for P100,000. Its fair market value at the time of Romeo's death
was P6,000,000. The deduction from the gross estate relative to this transfer is
a. 100,000 b. 6,000,000 c. 6,100,000 d. 0
Use illustration 1 to answer numbers 5 to 8
Illustration 1
Among the properties included in the gross estate of the decedent at the time of death is a three-story
commercial building with a fair market value of P15,000,000. During the settlement of the estate and
before the last day of paying the estate tax, the said property is destroyed by fire. The fair market
value at the time of the incident was P18,000,000.
_____ 5. The amount that should be included as part of the gross estate is
a. 0 b. 18,000,000 c. 15,000,000 d. 3,000,000
_____ 6. The amount of deductible loss will be

a. 0 b. 18,000,000 c. 15,000,000 d. 3,000,000
_____ 7. Assume that the property was insured for P14,000,000 and the amount recovered from the
insurance company was P12,000,000. The amount of deductible loss is
a. 3,000,000 b. 1,000,000 c. 4,000,000 d. 6,000,000
_____ 8. Assume that 60% of the property is destroyed by fire and the property is insured for
P5,000,000. The deductible loss will be
a. 6,000,0000 b. 7,200,000 c. 1,000,000 d. 2,200,000
_____ 9. The gross estate of Romeo includes P6,000,000 receivables which is duly notarized from a
debtor (Juliet) whose record shows:
Assets 4,000,000
Liabilities 10,000,000
Juliet’s liabilities composed of the following:

 Due to the BIR for unpaid taxes 1,000,000
 Due to Romeo 6,000,000
 Due to other creditors 3,000,000
Determine the amount of allowable deduction from Romeo’s gross estate in relation to the
receivable from Juliet
a. 2,000,000 b. 0 c. 1,000,000 d. 3,000,000
_____ 10. The heirs of a resident citizen decedent with a total gross estate of P15,000,000 provided the
following data:
Receivable from Jude, a debtor P500,000
Amount collectible from Jude 350,000
Unpaid taxes on the estate before death 150,000
Unpaid taxes on the estate after death 50,000
Unpaid mortgage on the estate 200,000
Funeral expenses 82,000
Unpaid loans arising from debt instruments (notarized) 125,000
Unpaid loans arising from debt instruments (not notarized) 75,000
Casualty loss 65,000
Determine the total amount of allowable deduction from gross estate of the decedent
including applicable special deduction
a. 5,000,000 b. 5,640,000 c. 5,690,000 d. 5,890,000

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Name _____________ Date _

TRUE OR FALSE (1 point)

Assuming there is no reciprocity, the estate tax due is

_____ 6. The amount of deductible loss will be

Juliet’s liabilities composed of the following:

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