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Solution manual transfer and business taxes by valencia CHAPTER 2 TRANSFER TAXES AND BASIC SUCCESSION

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True 10.False – the legitime is based on value of the estate, not on the form of the estate.. 11.False – they are voluntary heirs.. False – if part of inheritance is through the written

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Problem 2-1

1 True

2 False – first P100,000 of net gift is exempt

3 False – subject to business tax

4 False – gratuitous

5 False – an income earned

6 False – upon right to transfer

7 True

8 False – upon death

9 True

10.False – the legitime is based on value of the estate, not on the form of the estate 11.False – they are voluntary heirs

12.True

13.False – fixed by law

14.False – executor

Problem 2-2

1 False – relatives up to the 5th degree

2 True

3 False – the relative is the legitimate heir

4 False – if part of inheritance is through the written will

5 False – if the transfer is testamentary

6 False – one for the legitimate child and half for the illegitimate child

7 True

8 True

9 False – equal rights

10.True

11.False

12.True

Problem 2-3 Problem 2-4 Problem 2-5

1 A

2 C

3 A

4 A

5 C

6 C

7 C

8 D

9 A

10.D

1 C

2 A

3 A

4 C

5 D

6 B

7 B

8 B

9 D 10.B

1 B

2 C

3 D

4 A

5 B

6 A

7 C

8 A

9 C 10.A

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Problem 2-6

1 C

2 C

House and lot as donation, net of mortgage (P2,000,000 – 1,900,000) P 100,000

Problem 2-7

1 A

2 C

Problem 2-8 C

Net value of property left by the decedent (P5,000,000 –

P1,000,000)

P 4,000,000

Transfers in contemplation of death 2,000,000

Problem 2-9 C

Legitime of children (P5,000,000 x ½) ( 2,500,000)

Portion for the surviving spouse (P5,000,000 x ¼) ( 1,250,000)

Free portion – may be distributed to strangers P1,250,000

Note: The distribution is testamentary because there is a devise or legacy

Problem 2-10 B

Inheritance of the spouse (P5,000,000/5) P1,000,000

Problem 2-11 A

Legitime of children (P3,000,000 x ½) ( 1,500,000)

Portion for the spouse (P1,500,000/4) ( 375,000)

Trang 3

Portion for the illegitimate child (P3,000,000 x 1/3) (1,000,000)

Problem 2-13

Hereditary estate, net of charges (P7,000,000 – P1,000,000) P 6,000,000

Legitime of legitimate children (P6,000,000 x ½) ( 3,000,000)

Portion for the acknowledge natural child (P3,000,000/3) x 50% ( 500,000)

Portion for the surviving spouse (P3,000,000/3) ( 1,000,000)

Free portion – could be disposed of as legacy to the nanny P 1,500,000

Problem 2-14

Inheritance of each child (P5,000,000/5) P 1,000,000

Problem 2-15

Estate tax 100,000 500,000

Problem 2-16

Legitimate child – Mario (P1,200,000 x ½) P 600,000

Illegitimate child – Maria (P600,000 x ½) 300,000

Surviving spouse (P600,000 x ½) 300,000

P1,200,000

Problem 2-17

With respect to legitime: Son Wife Legitimate child (P4,200,000 – P200,000) x 50% P2,000,000

Surviving spouse (P2,000,000 x ½) P1,000,000

Remaining balance (divide based on the intention of

the will)

Legitimate child (P1,000,000 x ½) 500,000

Surviving spouse (P1,000,000 x ½) 500,000

P2,500,000 P1,500,000

Trang 4

Problem 2-18

Gross estate

Less: Deduction

Net estate before share of the surviving spouse

Less: Share of the surviving spouse (P1,000,000 x 50%)

Net estate before estate tax

Less: Estate tax

Net distributable estate

P2,000,000

1,000,000 P1,000,000

500,000

P 500,000 15,000

P 485,000 Dorado

(child) (child)Maya (husband)Jess Total

Distribution of inheritance P161,667 P161,667 P161,667 P485,000

Death of Jess

Exclusive share when Sabel died

Add: Share from distributable share

Distributable estate

P 500,000

161,667

P 661,667 Dorado

(child)

Maya (child)

Free Portion

Total

Distribution of inheritance P165,417 P165,417 P333,883 P 661,667

Problem 2-19

Gross taxable value for:

Problem 2-20

Gross estate

Less: Deductions

Net estate before estate tax

Less: Estate tax

Net distributable estate

P3,000,000

1,000,000 P2,000,000

135,000 P1,865,000

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Tito (legitimate son) (illegi’te son)Vic Total

Distribution of inheritance P1,243,333 P621,667 P1,865,000

Problem 2-21

1 Gross estate (P500,000 + P250,000 + P1,000,000 + 100,000) P1,850,000

2 Inheritance of Tim (P500,000 x ½) P 250,000

Problem 2-22

1 Testamentary

Legitime:

Legitimate son – Peter (P35,000,000 x 50%) x ½ P8,750,000

Legally adopted son – Petros (P35,000,000 x 50%) x ½ 8,750,000

Surviving spouse (P8,750,000 x ½) 4,375,000

Free portion – that may be given to other relatives 8,375,000

P35,000,000

2 Intestate Succession

Legitimate son – Peter (P35,000,000/3.5) 1 P10,000,000

Legally adopted son – Petros (P35,000,000 x 3.5) 1 10,000,000

Surviving spouse (P35,000,000 x 3.5) 1 10,000,000

Illegitimate son – Rocky (P35,000,000 x 3.5) x ½ 1/2 5,000,000

P35,000,000

Problem 2-23

Legitimate child 1

Legitimate child 2

Surviving spouse

Illegitimate child

Total

Amount of

inheritance

P2,857,143 P2,857,143 P2,857,143 P1,428,571 P10,000,000

Note: The last will and testament is void because the presence of legitimate child

eliminates the parents from the inheritance In all cases, the legitime must not be

impaired by the disposition through will

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Problem 2-24

1 Computation of net distributable share

Total gross estate (P10,000,000 + P20,000,000 +

P30,000,000)

Less: Ordinary deductions

Net estate before share of surviving spouse

Less: Share of surviving spouse (P57,500,000 x 50%)

Net estate before estate tax

Less: Estate tax (P28,750,000 x 15%)

Net distributable estate

P60,000,000

2,500,000 P57,500,000

28,750,000 P28,750,000

4,312,500 P24,437,500

2 Computation of the shares of the heirs

Share of legitimate son (P24,437,500 x ½)

Share of surviving spouse (P24,437,500 x ½)

P12,218,750 P12,218,750

Note: His mother and brother, as secondary heirs, are disqualified to share from the

portion of the legitime due to the presence of a legitimate child Hence, the will becomes void

Problem 2-25

1 Computation of net distributable estate:

Gross estate (P4,000,000 + P1,000,000 + P200,000 + P5,000,000 + P3,000,000) P13,200,000

Less: Ordinary deductions:

Funeral expense

Unpaid mortgage

Allowable deduction – Stan’d deduction

Net taxable estate

Less: Estate tax (P11,900,000 x 15%)

Net estate after tax

Add: Standard deduction

Net distributable estate

P 100,000

200,000 P 300,000

1,000,000 1,300,000

P11,900,000

1,785,000 P10,115,000

1,000,000 P11,115,000

2 Distribution of net distributable estate:

Christopher (son)

Cristeta (daughter)

Crisistomo (driver) Total Testate succession

Intestate succession

Mixed succession

P4,000,000

2,957,500 P6,957,500

P1,000,000

2,957,500 P3,957,500

P 200,000

P 200,000

P 5,200,000

5,915,000

P 11,115,000

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