TRANSFER TAXATION- ESTATE TAXES

February 6, 2020

Part I- Theory (1 pt.)

1. The following transfers are taxable, except?
a. Transfer passing under special power of appointment
b. Transfers with a right to revoke but not exercised by the decedent to the time of his death
c. Transfer in contemplation of death
d. Properties passing under general power of appointment
2. The following transfers are exempt and hence excluded from gross estate, except?
a. Merger of the usufruct in the owner of the naked title
b. All bequest, devise, legacies and transfers to social welfare, cultural and charitable institution no part of the income of
which inures to the benefit any person and not more than 30% of such bequest, devise or legacies or transfers are used
for administration purposes
c. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicomissary
d. The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance with the desire of the
predecessor
3. I. In taxable transfers, the value to include in gross estate is the fair value of the property at the time of death, any
consideration given by the counterparty is treated as an obligation deductible to gross estate
II. In taxable transfers, if the fair value at the time of death is lesser than the consideration given, no value is included in
gross estate
III. In taxable transfers, if at the date of transfer the fair value is higher than the consideration received, the fair value at
the time of death is included in gross estate regardless of whether at the time of death the value of the property is lower
than the consideration given
Which is correct?
a. I only b. I and II only c. II and III only d. II only
4. The reciprocity on exemption of intangible properties located in the Philippines of non-resident aliens may apply on the
following conditions, except when the foreign country where the non-resident alien is a citizen
a. do not have an estate tax law.
b. has estate tax only to residents or citizens therein.
c. has estate tax only to properties of a citizen thereon regardless of nature.
d. has no income tax imposed on income earned by the estate but imposes transfer taxes.
5. The gross estate of this decedent shall be comprised of properties situated in the Philippines only:
a. Filipino residing in the Philippines; c. Filipino residing in the US;
b. American residing in the Philippines; d. American residing in the US.
6. One of the following is not included in the gross estate of a citizen decedent:
a. Land situated outside the Philippines; c. Investment in stock in a Japanese corporation;
b. Car situated within the Philippines; d. Benefits received from group insurance.
7. For estate tax purposes, the rule of reciprocity applies:
I. When the decedent is a non-resident alien;
II. With respect to intangible personal properties situated in the Philippines;
a. Only I is correct; c. Both I and II are correct;
b. Only II is correct; d. Neither I nor II are correct.
8. One of the following is not an intangible personal property situated in the Philippines:
a. Shares, obligations or bonds issued by any corporation or sociedad anonima organized or constituted in the Philippines
in accordance with its laws;
b. Shares, obligations or bonds issued by any foreign corporation 85% of the business of which is located in the Philippines;
c. Shares, obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired
business situs in the Philippines;
d. Shares, obligations or bonds issued by a non-resident foreign corporation.
9. For estate tax purposes, one of the following is not an intangible personal property.
a. Accounts receivable; c. Bank deposit;
b. Investment in stock; d. Livestock.
10. John Johnson, an American domiciled in South Africa, died in 2005. He left the following property:
 Rest house in Hawaii;
 A Villa in Switzerland;
 Shares of stock in LA Corporation, USA;
 Shares of stock in San Miguel Corporation, Philippines;
 Shares of stock in Union Corp, a foreign corporation where 85% of its business is in the Philippines;
 Time deposit, Philippine National Bank, Manila;
 Lease contract over his Manhattan, New York, USA apartment leased to the Philippine Consulate.
 John Johnson’s Philippine gross estate shall consist of:
a. All property enumerated above; c. Only property a. b. and d.;
b. Only property d. e. and f.; d. None of the property enumerated above.
11. Using the same data in the preceding question, assuming there is reciprocity, John Johnson’s Philippine gross estate
shall consist of:
a. All properties enumerated above c. Only property f
b. Only properties d, e and f d. None of the properties enumerated above
12. Mr. Juan Cruz, Filipino citizen, died in the United States of America in 2005. He left the following properties:
 House and lot, California, USA
 Shares of stock in PLDT, domestic corporation
 Bank deposit, First Bank of California, USA
 Bank deposit, BPI-Manila
 Tax-free long term Philippine government bonds
 Car, registered in the name of his 21-year old son
The Philippine gross estate shall consist of:
a. All properties enumerated above c. All properties enumerated above except e and f
 b. All properties enumerated above except f d. Only properties a and d
13. Case I – X transfer shares of stock of Y on the condition that X shall receive or enjoy the dividends during X’s lifetime,
thereafter to Y or his estate.
Case II – B makes a transfer of property in trust, income payable to himself for six (6) years, thereafter to C or his estate. B
dies before the six (6) years lapsed.
a. Both transfers are with retention and reservation of certain rights, hence taxable
b. Both transfers are exempt from estate tax
c. The first transfer is taxable, the second is exempt
d. The first transfer is exempt, the second is taxable
14. One of the following is not included in the gross estate of a decedent
a. Cash dividend that accrued before death
b. Shares of stock transferred in contemplation of death
c. Land held in trust but in the decedent’s possession before death
d. Rent income on property that accrued before death
15. One of the following is not a motive which precludes a transfer from category of one made in contemplation of death.
a. To reward services rendered c. To settle family litigated and unlitigated disputes
b. To save on donor’s and estate tax d. To relieve the donor from burden of management
16. Which of the following proceeds shall be included in the taxable gross estate?
a. Insurance proceeds from SSS and GSIS
b. Amount receivable by any beneficiary, irrevocably designated in the policy by the insured
c. Amount receivable by any beneficiary designated in the insurance policy
d. Proceeds of group insurance taken out by a company for its employees
17. The widow and children of a passenger who died in an airplane crash were paid P3,500,000 by the airline. This figure
was released after negotiation between the heirs of the deceased and the insurer of the airline, the latter having
received indubitable evidence that the deceased had a net income of P350,000 at the time of his death and that 10
productive years would have insured financial stability for his family. Should the heirs declare this amount in the estate
tax return?
a. No, the heirs should not declare the P3,500,000 in the estate tax return because the amount is not part of the
decedent’s properties at the time of death.
b. No. the heirs should not declare the P3,500,000 in the estate tax return because it was a result of a negotiation between
the heir and the airline company.
c. Yes. The heirs should declare the P3,500,000 in the estate tax return because the designation of the beneficiary is not
known, hence, negotiable.
d. Yes. The heirs should declare the P3,500,000 in the estate tax return because the amount would have earned by the
decedent if he did not die.
18. The following are transactions and acquisitions exempt from transfer taxes, except
a. Transmission from the first heir or donee in favor of another beneficiary in accordance with the desire of the predecessor
b. Transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicommissary
c. The merger of the usufruct in the owner of the naked title
d. All bequests, devises, legacies or transfers to social welfare, cultural and charitable institutions
19. Which of the following exempt transactions will still require the inclusion of the property in the gross estate?
a. Merger of the usufruct in the owner of the naked title
b. Bequest, devises, legacies or transfers to social welfare, cultural and charitable institutions the administration expenses
of which do not exceed 30% of such bequest, devises, legacies or transfers
c. Transfer from the first heir to a second heir designated by the decedent
d. Death benefits received from SSS and GSIS
20. Case I – Y devised in his will a piece of land; naked title to B and usufruct to C for as long as C lives, thereafter to B. The
transmission from Y to B and C is subject to estate tax but the merger of the usufruct and the naked title in B upon the
death of C is exempt.
Case II – Z devised in his will real property to his brother D who is entrusted with the obligations to preserve and to
transmit the property to E, a son of D, when he becomes of age. The transmission from D to his son E is subject to tax.
a. Both statement as to the taxability and non-taxability of the transmissions are correct
b. Both statement as to the taxability and non-taxability of the transmissions are incorrect
c. Only the first statement as to the taxability and non-taxability of the transmissions is correct
d. Only the second statement as to the taxability and non-taxability of the transmission is correct
21. Statement 1: For marriages on or after August 3, 1988, the property relationship between husband and wife, in the
absence of a written agreement between them, is the system of absolute community of property.
Statement 2: There may be a property relationship of conjugal partnership of gains even if marriage was on or after
August 3, 1988.
a. Only the first statement is true
b. Only the second statement is true
c. Both statements are true
d. Both statements are false
22. Statement 1: As a rule , donations to candidates in local and/or national elections are not subject to donor’s tax.
Statement 2: Donation to a political party is not subject to donor’s tax if it is reported by the donor to the Comelec and
by the candidate in his Statement of Expenditures.
a. True; True c. False; False
b. True; False d. False; True
23. Statement 1: The gross gifts of a donor who is a non-resident alien will include all properties regardless of location.
Statement 2: The gross gifts of a donor who is a non-resident alien of the Philippines, will include only property located in
the Philippines.
a. both statements are correct
b. both statements are wrong
c. The first statement is correct and the second statement is wrong.
d. The first statement is wrong and the second statement is correct.
24. Don Fortunato, a widower, died in May 2020. In his will, he left his estate of P100 million to four children. He named his
compadre, Don Epitacio, to be the administrator of the estate. When the BIR sent a demand letter to Don Epitacio for
the payment of the estate tax, he refused to pay claiming that he did not benefit from the estate, he not being an heir.
 Forthwith, he resigned as administrator. As a result of the resignation, who may be held liable for the payment of the
estate tax?
a. Don Epitacio since the tax became due prior to his resignation.
b. The eldest child who would be reimbursed by the others.
c. All the four children, the tax to be divided equally among them.
d. The person designated by the will as the one liable.
25. Mr. William died on June 30, 2019, leaving among others the following charges and obligations: Real property tax for the
calendar year 2019 – P20,000; On an interest-bearing promissory note (notarized): face value of the note – P10,000;
accrued interest on the note at the time of death – P600; and interest to accrue on the note from the date of death to
the date of maturity – P400. The deduction from the gross estate is:
a. 30,600 b. 21,000 c. 20,600 d. 31,000
26. Mr. Simon, a citizen and resident of Puerto Rico, dies during the year. Puerto Rico does not impose transfer taxes on properties
of decedent not residing therein. He left the following properties among others:
Shares of stock, San Miguel Corporation,
Manila House and lot, Puerto Rico
Leasehold on a condominium unit, Philippines
Contract for public works, Philippines
What properties are to be included in his Philippine gross estate. What answer will you give him?
a. Include all properties except shares of stock and house and lot
b. Include all properties except house and lot in Puerto Rico
c. Include contract for public works only
d. Include all the properties
27. Which of the following is not true regarding a claim against insolvent person?
a. The decedent’s claim which cannot be collected is deductible according to the ratio of the debtor’s assets to
liabilities.
b. The decedent’s claim must be included in full in the gross estate.
c. The decedent’s claim is deductible in full because the debtor’s liabilities exceed his remaining assets.
d. Claim against insolvent person is a claim against a person whose assets are not sufficient to pay his liabilities.
28. Which of the following cancellation or forgiveness of debt shall be included in the gross estate of the creditor?
a. Forgiveness or cancellation of debt where the debtor did not render service in a favor of the creditor to take effect
while the creditor is alive.
b. Forgiveness or cancellation of debt where the debtor rendered service in favor of the creditor.
c. Forgiveness or cancelation of debt where the debtor did not render service in favor of the creditor to take after the
creditor dies.
d. Forgiveness or cancellation of debt by a creditor-corporation in favor of a debtor-stockholder.
29. Mr. Jose donated completely a parcel of land to his son a few months Mr. Jose was accidentally hit over by a speeding
car and died. The particular parcel of land is includible in the gross estate of Mr. Jose which is subject to the estate tax
because
a. It is revocable transfer
b. It is a transfer for insufficient consideration
c. It is not to be included in the gross estate of Mr. Jose
d. It is part of the transfers in contemplation of death
30. Gardo, a citizen of the Philippines and resident of Baguio City died intestate on July 4, 2017. Among his gross estate is a
property inherited from his deceased father who died on June 10, 2014. What percentage of deduction will be used in
computing the amount of vanishing deduction?
a. 80% b. 60% c. 40% d. 20%

Part II- Problems (2 pts)

31. You are given the following information about the estate of a resident citizen decedent:
Columbia Net estate of P100,000 and estate tax paid of P1,500
Indonesia Net estate of P200,000 and estate tax paid of P1,800
Philippines Net estate of P1,500,000
The allowable amount of tax credit for estate tax paid in foreign countries amount to:
a. 3,000 b. 2,800 c. 3,300 d. 5,500
32. Genie and Gem got married before the effectivity of the New Family Code, devoid of any pre-nuptial agreement. A year
later, Gem received a donation consisting of a 400 square meter lot with modest bungalow house erected. The couple
leased the house to a tenant and saved the entire rental thereon. The said rental receipts were then sued to construct
their own residence on the vacant one-half portion of the same lot. Gem died, and the following information was
available at the time of her death.

FMV of 400 square-meter lot P800,000

FMV of rented bungalow house 200,000
FMV of family house 500,000
The gross estate of Gem amounts to:
a. P1,250,000 b. 1,000,000 c. 1,500,000 d. 800,000
33. Mr. A died on March 1, 2018. The following data were available in connection with the property:
Assessed value, 6 months before death 2,500,000
FV at the time of filing estate tax on Feb. 29, 2019 3,000,000
Zonal value, March 1, 2018 2,000,000
What would be the value of the land in the gross estate?
a. 2,000,000 b. 2,500,000 c. 3,000,000 d. 5,000,000
34. Mr. A also left 10,000 UM shares. The shares were traded in the PSE. At the time of death, the following data were
available:
Fair market value 400/ share
 Average between the highest and lowest quotation 500/ share
Book value 350/ share
What is the value to be included in the gross estate?
a. 3,500,000 b. 4,000,000 c. 5,000,000 d. 6,000,000
35. Mr. Fatay died leaving the following properties:
House and Lot in Davao, acquired before marriage 6,000,000
Income from property in Davao 600,000
Apartment in Cebu, brought to marriage by wife 3,600,000
Income from such apartment 360,000
Townhouse in Cagayan, acquired during marriage 10,500,000
Income from such townhouse 1,050,000
Car, donated to wife during marriage( the will provided
that it shall be common to both spouses) 1,300,000
Jewelry, acquired during marriage for exclusive use of wife 200,000
How much is the conjugal properties under CPG?
a. 12,510,000 b. 18,510,000 c. 22,310,000 d. 23,610,000
36. How much is the gross estate under CPG?
a. 12,510,000 b. 18,510,000 c. 22,310,000 d. 23,610,000
37. How much is the community properties under ACP?
a. 12,510,000 b. 18,510,000 c. 22,310,000 d. 23,610,000
38. How much is the gross estate under ACP?
a. 12,510,000 b. 18,510,000 c. 22,310,000 d. 23,610,000
39. The estate of F, resident citizen decedent, married, who died on April 1, 2018, are as follows:
House and lot (Family Home) 14,000,000
The lot was acquired at a cost of 3M before marriage while the house was constructed on March 1, 2018,
during marriage, at a cost of 10M from partnership funds. The lot had a FV of 4M after construction of the
house
Other properties acquired during marriage 6,000,000
Jewelry, inherited on Feb 14, 2017, during marriage, then with
FV of 1.3M 2,500,000
Property in US received as gift during marriage from a friend on
Jan. 12, 2017 (applicable donor’s tax not paid by donor) 1,300,000
Accrued rental income from above property to date 1,200,000
Funeral expenses 420,000
Judicial expenses 800,000
Casualty-losses- Dec. 10, 2018 600,000
Claims against the estate 1,600,000
Medical expenses, within 1 year prior to death, (50% unreceipted) 4,000,000

How much is the net taxable estate under CPG?

a. 3,926,000 b. 6,426,000 c. 3,426,000 d. 1,348,000
40. How much is the net taxable estate under CPG?
a. 4,836,000 b. (2,174,000) d. 1,174,000 d. 2,174,000