X vanishing deduction 80 vanishing deduction p1120000

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x Vanishing Deduction %80%Vanishing DeductionP1,120,000Since the problem is silent as to the type of the marriage settlement but one of the requirements is to compute for “community property”, ACP should be used. The term “community” property is applicable to ACP. P4.3(a)P1,624,773 (b)P4,132,955 (c)P3,691,250 (d)P321,038ExclusiveCommonTotalExclusive propertiesP2,000,000Conjugal properties*P5,000,000P7,000,000ELIT**(867,045)Vanishing Deductions ***(175,227)Transfer for Public Use ****(200,000)Net EstateP1,624,773P4,132,955P5,757,728Share of the Surviving Spouse (4,132,955/2)(2,066,478)Net Taxable EstateP3,691,2501stP2,000,000P135,000In excess of P2,000,000 @ 11%186,038ESTATE TAX DUEP321,038*The problem is silent as to reciprocity, hence, the gross estate should include tangible and intangible properties within the Philippines.**ELIT:Funeral expensesP200,000Judicial expenses800,000Claim against the estate1,725,000TOTAL ELITP2,725,000X 7,000/22,000ALLOWABLE ELITP867,045**VANISHING DEDUCTIONS:Value to takeP500,0 001stDeduction: Mortgage paid-Initial basisP500,0002ndDeduction: Proportionate deduction(500/7,000) x 867,045(61,932)Final BasisP438,068x Vanishing rate40%Vanishing DeductionP175,227****Since the properties were already classified as exclusive and common, it should be assumed that the exclusive properties were already inclusive of transfer for public use.P4.4(Decedent: Resident Citizen)a)Vanishing deduction = P1,676,200b)Net exclusive property of the decedent = P7,200,000c)Net community property = P19,300,000d)Net Taxable estate = P14,850,000e)Estate tax due = P2,185,00012| T r a n s f e r & B u s i n e s s T a x a t i o n ( 2 0 1 5 E d i t i o n ) b y T a b a g a n d G a r c i a
ExclusiveConjugalTotalExclusive propertiesP10,000,000Ordinary Deductions:Conjugal properties20,000,000P30,000,000Funeral expenses(200,000)(200,000)Judicial expenses(300,000)(300,000)Claims against conjugal properties(200,000)(200,000)Claims against exclusive properties*(400,000)(400,000)Legacy-local government (Tr. for Public Use) **(723,800)-(723,800)VANISHING DEDUCTION***(1,676,200)(1,676,200)Net exclusive/conjugalP7,200,000P19,300,000P26,500,000Special Deductions:Standard deduction(1,000,000)Medical expenses(500,000)Amount received under RA4917(1,500,000)Share of the surviving spouse (P19.3M/2)(9,650,000)NET TAXABLE ESTATEP14,850,000ESTATE TAX DUE (Refer to the Tax Table)P2,185,000*From the information provided in the problem, the amount of P400,000 as “claim against exclusive property” shouldpertain to the unpaid mortgage on the land inherited. Therefore, the present decedent paid P100,000 on the originalamount of the mortgage (P500,000). This should be taken into consideration in computing the vanishing deduction.** LEGACY AGAINST EXCLUSIVE PROPERTIESLegacy means bequest or inheritance of personal properties. The deductible legacy/devised (bequests) under the taxcode are:Transfer for “public use” (Rule: Include both in the “Gross Estate” as well as in the “Deductions from theGross Estate) ; andBequests to charitable institutions wherein not more than 30% of the bequest was used for administrativepurposes (Rule: Same as transfer for public use)TRANSFER FOR PUBLIC USEValue to takeP3,000,000Mortgage Paid (refer to explanation above)(100,000)Initial basisP2,900,0002nd Deduction: 2,900/30,000 x P1.1M(106,333)13| T r a n s f e r & B u s i n e s s T a x a t i o n ( 2 0 1 5 E d i t i o n ) b y T a b a g a n d G a r c i a
Final BasisP2,793,667x rate60%Vanishing Deduction***P1,676,200P4.5

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