ILLUSTRATIVE PROBLEM: X, a citizen of the Philippines and a resident of Manila, died testate (with a will) on May 10, 2000 leaving the following properties: Gross Estate:

(1) Properties inherited from his deceased father who died on April 4, 1998. These properties, the estate tax on which was paid by X, are itemized as follows:

Item Value is estate of prior decedent

(father) Value is estate of present decedent (X)

1 P600, 000 P500, 000 2 P1, 000,000 P1, 250,000 3 P1, 500,000 (with mortgage) P1, 750,000 Item No. 3 above was subject to a mortgage of P1, 250,000 at the time it was inherited by X, which amount was deducted from the gross estate in determining the net estate and computing the estate tax due from the estate of the father. X paid P500, 000 of this mortgage indebtedness before the death of his father.

(2) Properties acquired by X and his wife through their labor P4, 000,000 (3) Property received by X on June 8, 1996 as a gift from his P2, 000,000

Uncle who died on March 10, 2000 TOTAL: P6, 000, 000 ---------------------------

Deductions X bequeathed to the government for exclusively public purposes the sum of P100, 000. Claimed as deductions, among others, are: (1) Funeral expenses……………………………………. P180, 000 (2) Medical expenses…………………………………… P300, 000 (3) Judicial expenses……………………………………. P350, 000 (4) Claims against the estate incurred during the marriage…………………………….. P500, 000 TOTAL: P1, 330, 000 -----------------

 REQUIRED:

(1) Compute the amount allowable as vanishing deduction on the properties inherited. (2) Calculate in good form the estate tax due. (3) Accomplish an estate return using this problem.