CPAR Business & Transfer Taxes Testbank

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Basic Terminologies

1. An act whereby a person is permitted with the formalities prescribed by law, to

control to a certain degree the disposition of his estate, to take effect after his
death.
A. will C. legitime
B. Succession D. device
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2. The person whose property is transmitted through succession, whether or not
he left a will.
A. successor C. legatee
B. heir D. decedent
3. The person called to the succession, either by the provision of a will or by
operation of law.
A. Heir C. devisee
B. legatee D. decedent
4. Succession which results from the designation of an heir, made in a will
Email executed in the form prescribe by law.
A. Testamentary C. intestate succession
B. mixed succession D. legal succession
5. Transmission of properties where there is no will, or if there is a will, the same
is void or nobody succeeds in the will.
A. testamentary succession C. legal succession
B. mixed succession D. escheat
6. Transmission of properties which is effected partly by will and partly by
operation of law.

$ A. testamentary succession
B. mixed succession
C. legal succession
D. intestate succession %
7. An heir to a particular personal property given by virtue of will.
A. Legacy C. devisee
B. successor D. legatee
8. An heir to particular real property given by virtue of will.
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A. devise C. successor
B. devisee D. legatee
9. Part of the testator’s property which he cannot dispose of because the law has
reserved it for certain heirs who are called compulsory heirs.
A. legitimate C. free portion
B. legitime D. estate
10. A will which is entirely written, dated and signed by the testator.
A. hieloglyphics C. holocaust
B. holographic D. own will

Problem 1

Liwayway died leaving the fo;;owing properties:

a. House and lot in the Philippines (mortgaged for P300,000) 1,250,000

b. Condominium unit in Hongkong 1,000,000
c. Car in Philippines 70,000
d. Car in Hongkong 60,000
e. Franchise exercised in the Philippines 300,000
f. Franchise exercised in New York, USA 25,000
g. Domestic shares, certificate kept in New York, USA 55,000
 h. Foreign shares, 90% of business in the Philippines 60,000
i. Foreign shares, 30% of business in the Philippines, with business
situs in the Philippines. 15,000
j. Foreign shares, 60% of business in the Philippines 75,000

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1. The gross estate if the decedent was a resident citizen, resident alien or a non-
resident citizen-
A. 2,910,000 C. 1,620,000
B. 1,770,000 D. 1,750,000
2. The gross estate if the decedent was a non-resident alien (no reciprocity)-
A. 2,910,000 C. 1,825,000
B. 1,750,000 D. 1,320,000
3. The gross estate if the decedent was a non-resident alien (with reciprocity)-
A. 2,910,000 C. 1,825,000
B. 1,750,000 D. 1,320,000

Problem 2

Juan, married to Juana, died. The following properties were left upon his death:
a. Durian plantation in Davao, brought into marriage by H. - 3,000,000
b. Income of plantation in Davao earned during marriage - 250,000
c. Shares of stocks with Aga corp. earned by Juana during
marriage - 420,000
d. Dividends from Aga Corp. earned during marriage - 52,000
e. Bus in Cebu, inherited by Juan during the marriage - 760,000

f. Riceland
g. Income ofinpassenger bus earned
Legazpi, inherited by during
Juana the marriage
before marriage -- 460,000
23,000
h. Income of Riceland in Legazpi earned during the marriage - 50,000
i. Underwear(panties, brassiere) of Juana brought into Juana - 85,000
j. Cash, unidentified when and by whom acquired - 55,000
k. Jewelries inherited by Juana during marriage from her mother - 320,000
4. The exclusive properties of Juan under conjugal partnership of gains--
A. 5,475,000 C.3,760,000
B. 3,815,000 D. 4,610,000
5. The gross estate of Juan if the spouse were under conjugal partnership of
gains--
A. 5,475,000 C. 4,560,000
B. 4,610,000 D. 3,975,000
6. The community property of the spouses under absolute community of property
regime--
A. 4,287,000 C. 4,560,000
B. 5,475,000 D. 3,975,000
7. The gross estate of Juan if the spouses were under the absolute community of
property regime--
A.5,070,000 C. 4,287,000
B. 5,475,000 D. 4,610,000

Problem 3

Market value – date of

 Transfer Death Consideration

1. Revocable transfer:
a. Coconut plantation P1,500,000 P1,800,000 P1,000,000
b. Mitsubishi pajero 1,200,000 1,000,000 750,000
c. Shares of stock 300,000 220,000 250,000
d. Delivery truck 400,000 450,000 420,000
2. Townhouse, in contemplation of
death 2,000,000 2,300,000 1,500,00

8. The amount includible in the gross estate is--

A. 1,080,000 C. 1,050,000
B.1,850,000 D. 1,500,000

Problem 4

Actual Gross estate Deductible

a. P 60,000 P1,500,000 60,000
b. 175,000 5,000,000 175,000
c. 55,000 1,150,000 55,000
d. 225,000 4,750,000 200,000

Problem 5

Al, decedent, had the following data at the time of his death on July 20, 2013:
Prior decent – father Present decedent

Car P250,000 P 200,000

Land 500,000 900,000

The land had an unpaid mortgage of P300,000 at the time it was inherited from his
father on January 5, 2010. Al was able to pay P200,000 before his death. The gross
estate of Al was P4,000,000 while the expenses amount to P900,000 broken down as
follows:

Actual funeral expenses P 175,000

Claims against the estate 3 0,000
Claims against insolvent persons 20,000
Transfer to City of Manila for public purpose 50,000
Medical expenses 545,000
RA 4917 80,000
Included in the gross estate is his family home. It was purchased on Feb. 2012 at
P1.8M. At the time of his death, it had a value of P2,000,000

9.The amount of vanishing deduction is—

A. 77,500 C. 173,125

B. 90,625 D. 181,250
Problem 6

Indicate whether the following items of deduction from gross estate are
deductible or not.

Items of Deduction Resident or Citizen NRA Remarks

Decedent Decedent
ELIT ! !

Transfer for public use ! !

Vanishing deduction ! !

RA 4917 !

Share of surviving ! !

spouse
Medical expenses !

Standard deduction !
Family Home !
Problem 7

Country A: Net estate of P100,000 and estate tax paid of P3,500; Country B: Net estate
of P200,000 and estate tax paid of P5,000; Philippines: Net estate of P200,000. The
decedent was a citizen and resident of the Philippines.

9. The estate tax credit for foreign estate tax paid is:

A. P9,000 C. P8,000

B. P8,500 D. P7,000
10. The estate tax still due after credit for foreign estate taxes paid is:

A. P6,000 C. P7,000

B. P6,500 D. P15,000

Problem 8

Papa Tai died on January 3, 2013. The estate tax due and payable of P25,000 was
paid on January 3, 2015.

11. The estate tax due, including increments ,if any

A. 38,750 C. 34,375

B. 36,250 D. 33,750

12. Assuming the tax was paid on January 3, 2016 and the failure to pay tax due on
time was due to willful neglect, the tax due is

A. 50,000 C. 37,500

B. 45,000 D. 33,750

MULTIPLE CHOICE QUESTIONS

1. Which of the following statements is correct?

A. The gross estate of a resident citizen decedent would not include all
properties, whether real or personal and whether within or without.

B. The
Philippines gross estate
includes of an American
all properties decedent who
in the Philippines was a resident of the
only.

C. The gross estate of a Filipino decedent who was residing in Australia would
include all properties regardless of location.

D. The personal property of a non-resident alien is not included in the gross

estate in the Philippines if they are intangible.

2. In computing the gross estate of a decedent:

A. If he was a non-resident, but citizen of the Philippines, tangible and

intangible properties, regardless of location, shall be included

B. If he was a resident who was not a citizen of the Philippines, tangible and
intangible properties, regardless of location, shall be included

C. If he was a non-resident who was not a citizen of the Philippines, tangible

and intangible personal properties, located in the Philippines, shall be included.

D. All above statements are correct.

3. A citizen of the Philippines, single, died a resident of Canada, leaving the following
properties:

Real property in Canada, inherited from father one and one-half P2,000,000
years ago
Personal property in the Philippines inherited from father 1,600,000
Family home in Canada 1,400,000
The gross estate subject to Philippine estate tax is:

A. P3,400,000 C. P1,600,000

B. P5,000,000 D. P3,000,000
4. Which of the following is not included in the gross estate?
 A. Revocable transfer where the consideration was not sufficient

B. Revocable transfer where the power of revocation was not exercised

C. Transfer under a general power of appointment where the consideration was

not sufficient

D. Transfer under a special power of appointment

5. A revocable transfer with a consideration received:

Consideration received P200,000

Fair market value of property at the time of transfer 300,000
Fair market value of property at the time of death 250,000
Value to include in the gross estate is:

A. 300,000 C. 100,000

B. 250,000 D. 50,000

6. Which of the following is not included in the gross estate?

A. Transfer in contemplation of death where the consideration is not sufficient

B. Revocable transfer where the power of revocation was not exercised

C. Proceeds of life insurance where the beneficiary designated is the executor
and the designation is irrevocable

D. Proceeds of life insurance where the irrevocably designated beneficiary is the

mother

7. A citizen of Japan, residing in Hongkong, with properties in Hongkong and the

Philippines, had the following data on properties and rights at the time of his death
and their values.

Real estate, Hongkong P1,000,000

Real estate, Philippines 2,000,000
Shares of stock of a domestic corporation 200,000
Shares of stock of a Japanese corporation 300,000

Shares of stock of a Canadian corporation, doing business in the 100,000

Philippines only
Philippine peso deposit in Metrobank 500,000
Receivable under a life insurance with an insurance company 250,000
doing business in Hongkong
The gross estate that should be reported in the Philippines is:

A. P4,350,000 C. P 2,800,000

B. P3,700,000 D. P4,000,000

8. Which statement is wrong? The gross estate shall be valued:

A. At its fair market value at the time of death

B. At its fair market value at the return is due
C. In real property, the zonal value, which may be higher than the assessed
value
D. In the case of common shares of stock, at book value

9. Personal property with a cost of P400,000 and a fair market value at the time of
death P900,000, but subject to a mortgage of P250,000

a. Shall be in the taxable net estate at P500,000

b. Shall be in the gross estate at the decedent’s equity of P650,000

c. Shall be in the gross estate at P400,000

d. Shall be in the gross estate at P900,000

10. 1st statement: 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.

2nd statement: 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

11. Which of the following is correct? Under the system of conjugal partnership of
gains and absolute community of property:

a. Property acquired during the marriage by inheritance or gift is exclusive

property under both systems

b. Property owned before the marriage is exclusive property under both systems
 b. Property owned before the marriage is exclusive property under both systems

c. Income of property under (a) is exclusive property under both systems

d. Property under (a) may be conjugal or community when expressly declared

by the benefactor as conjugal or community

12. One of the following statements is wrong:

a. Amounts receivable under RA 4917, and during the marriage, are conjugal
properties

b. Income out of the labor of the husband is conjugal property

c. Income out of exclusive property of the wife is conjugal property

d. Property inherited when the fair market value was P600,000, sold for cash
during the marriage when the value was P1,000,000 resulted in gain of P400,000. The
gain is conjugal property

13. A citizen and resident of the Philippines died on October 5, 2010. He was a
married and the property relationship during the marriage was absolute community of
property. He left behind properties with market values as follows:

Agricultural land P 100,000

House andaslotfamily
ago, used acquired
homeby(with
inheritance before
a FMV of the marriage
P420,000and 4-1/2 yrs.
a mortgage of 500,000
P120,000 when acquired: P20,000 was paid by the decedent before he
died)
Jewelry of wife, acquired during the marriage with her income 50,000
Clothes acquired during the marriage , with income during the
marriage:
For use of the decedent 60,000
For us of the wife 70,000
Cash on hand and in banks:
Income from unidentified sources 300,000
From a sale at a loss of exclusive property 1,500,000
Received as gift six yrs. ago and before the marriage (current account) 40,000
Other properties:
Owned before the marriage 90,000
Acquired during the marriage 20,000
The gross estate is:

a. P1,560,000 c. P2,660,000

b. P1,100,000 d. P3,660,000

14. Which of the following statements is wrong? For, a decedent who was married at
the time of death, there may be deductible funeral expenses:

a. Whether paid or unpaid

b. By funeral expenses incurred before internment

c. Reduces the distributable estate by the allowable 5% of the gross estate

d. At not more than P200,000

15. Which of the following deductible for the purposes of computing the net
distributable estate?

a. Vanishing deduction c. unpaid medical expenses

b. standard deduction d. RA 4917

16. Which of the following statements is wrong? Deduction for funeral expenses shall
be allowed:

a. Shall in no case exceed 5% of the gross estate

b. Shall in no case exceed P200,000

c. Only if paid out of the estate

d. For a non-resident alien, only that which was actually incurred in the
Philippines
ITEMS 17 THROUGH 19 ARE BASED ON THE FOLLOWING INFORMATION:

A resident citizen died with properties constituting his gross estate of P5,000,000.
Actual funeral expenses amounted to P220,000 and other expenses and claims which
are deductions from the gross estate amounted to P1,200,000.

17. The allowable deduction for funeral expenses is:

a. 220,000 c. 200,000

b. 250,000 d. None given

18. The taxable net estate is:

a. P3,600,000 c. P 3,700,000

b. P2,600,000 d. P3,580,000

19. The distributable estate was diminished by:

a. P 1,420,000 c. P 1,200,000

b. P 1,400,000 d. Some other amount

ITEMS 20 and 21 ARE BASED ON THE FOLLOWING INFORMATION:

Properties in the Philippines – P500,000; Properties outside the Philippines –

P300,000; Actual funeral expenses in the Philippines – P20,000; Actual funeral
expenses outside the Philippines – P10,000.

20. If the decedent was a citizen or resident of the Philippines, the deductible funeral
expenses is:

a. P30,000 c. P18,750

b. P40,000 d. P25,000

21. If the decedent was a non-resident, not citizen of the Philippines, the deductible
funeral expenses is:

a. P15,625 c. P18,750

b. P40,000 d. P25,000

22. Statement 1: Losses can be deducted only if incurred during the settlement of the
estate.

Statement 1: Losses can be deducted only if the property lost is included in the gross
estate.
a. both statement are true.

b. both statement are false.

c. the first statement is true, but the second statement is false.

d. the first statement is false, but the second statement is true.

23. Which statement is wrong? Losses are deductible from the gross estate:

a. if arising from earthquake.

b. if not compensated by insurance or other form of indemnity.

c. if the loss arises from sale of capital assets.

d. must be incurred during the settlement of the estate.

24. A resident Filipino, died on May 5, 2012 and his estate incurred losses as follow:

1st loss: From fire on July 2, 2012 of improvement on his property not compensated by
insurance.
nd
2 loss: From flood on July 2, 2011 of household furniture also not compensated by
insurance.

a. 1st loss is not deductible and 2 nd loss is deductible.

b. both losses are not deductible.

c. both losses are deductible from gross estate.

st nd
d. 1 loss is deductible and 2 loss is not.
25. Which statement is correct? Real property with a cost of P300,000 and a fair
market value at the time of death of P1,000,000, but subject to mortgage of P200,000.

a. Shall be in the taxable net estate at P800, 000.

b. Shall be in the gross estate at the decedent’s equity of P800, 000.

c. Shall be in the gross estate at P300, 000.

 c. Shall be in the gross estate at P300, 000.
d. Shall be in the gross estate at the decedent’s equity of P100, 000.

26. Kenkoy inherited property on November 1, 2012, with a fair market value and a
mortgage at that time of P200,000 and P100,000, respectively. He married on January
10, 2013, under the property relationship of conjugal partnership of gains. On March
5, 2014, he borrowed P200,000 from a bank and mortgaged the same property.
Kenkoy died without paying any of the mortgage indebtedness. Disregarding accrued
interest on the mortgage indebtedness, deduction against exclusive property is:

a. P200,000 c. P300,000

b.P100,000 d. None of these

27. A resident decedent was married under the conjugal partnership of gains. An
obligation of P100,000, incurred during the marriage and secured by a mortgage of

exclusive property is:

a. A deduction from the gross estate at P100,000 against conjugal property.

b. A deduction from the gross estate at P100,000 against exclusive property.

c. A deduction of P50,00 from the gross estate against conjugal property.

d. A deduction of P100,00 from the gross estate against exclusive property, but

with a receivable of P50,000 from the surviving spouse.

28. Which statement is correct? Claims against the estate, as deduction from the gross
estate:

a. Represents obligations enforceable during the lifetime of the decedent.

b. Should always be evidenced by a notarized document.

c. is sufficient for deductibility if a avlid obligation under the law on obligations.

d. If unpaid mortgage of a non-resident, not citizen of the Philippines, the

property should be included in the Philippine gross estate.

29. Which of the following is deductible from the gross estate?

a. Income tax paid on income received after death.

b. Unpaid property taxes accrued in the year of death.

c. Donor’s tax accrued after to death.

d. Estate tax paid to a foreign country.

30. Which is wrong? Deduction for transfers for public purpose:

a. Means legacy in a last will and testament to the government.

b. Means device in a last will and testament to the government.

c. Includes properties transferred inter vivos.

d. will not include legacies to charitable institutions.

31. In determining the taxable net estate of a decedent, which of the following rules is
correct?
a. Real estate abroad is not included in the gross estate of a decedent who was
a resident alien.

b. Vanishing deduction must be subject to limitations.

c. Shares of stocks being intangible property shall be included in the decedent’s

gross estate wherever situated.

d. Funeral expenses are deductible to the extent of 5% of the total gross estate
but not exceeding P100,000.

32. Which of the following statement is correct? Property subject to vanishing

deduction should be:

a. If the decedent was a not citizen nor resident of the Philippines, the property

should not be located in the Philippines.

b. If the decedent was a citizen or resident of the Philippines, the property may
not be located in the Philippines.

c. If the decedent was a citizen but a resident of the Philippines, the property
need not be located in the Philippines.

d. If the decedent was a citizen and resident of the Philippines, the property
should be located in the Philippines.
33. A resident decedent, during his lifetime, was under the conjugal partnership of
gains. Among his allowable deductions from the gross estate is vanishing deduction
and the following:

Funeral expenses P 80,000

 Judicial expenses 100,000
Claims against conjugal properties 120,000
Mortgage on exclusive property 40,000
Casualty losses 5,000
Bequest to the Philippines Government 60,000
Family Home 600,000
Amount received under R.A 4917 60,000
In the formula for vanishing deduction where:

Initial basic of property x Deduction

Gross estate

The multiplier “deduction” is:

a. P400,000 c. P40,000

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b. P405,000 d. P1,005,000

34. A citizen of the Philippines and resident of Baguio City, died testate on May 10,
2013. Among his gross estate are properties inherited from his deceased father who
died on April 4, 2010. What percentage of deduction will be used in computing the
amount of vanishing deduction?

a. 80% of the value taken as basis for vanishing deduction.

b. 100% of the value taken as basis for vanishing deduction.

c. 60% of the value taken as basis for vanishing deduction.

d. 40% of the value taken as basis for vanishing deduction.

35. Statement 1: For a vanishing deduction, there should always be two deaths within
five years from receipt of property.

Statement 2: For a vanishing deduction, there should always be two transfer of

property within five years whether the first transfer be gratuitous or onerous.

a. Both statements are true.

b. Both statements are false.

c. The first statement is true, but the second statement is false.

d. The first statement is false, but second statement is true.

36. A citizen and resident of the Philippines, married, died, leaving the following
properties:

Real and personal properties acquired during the marriage P3,000,000

Land and building inherited from the father 11/2 years ago (with
a fair market value at that time of P1,500,000), and used at the
time of his death as home for his family. 2,000,000
Car, purchased with cash received as gift from the mother
during the year 500,000
Cash (including P500,000 received by inheritance from the 1,500,000
father )
Claims against conjugal properties 600,00
Unpaid mortgage on the land and building inherited (from an

Theoriginal of P600,000
vanishing deductionwhen
is: inherited) 100,000
 a. P1, 530,000 c. P450, 000

b. P1, 080,000 d. P1, 130,000

37. Which statement is wrong? For a non-resident, not citizen of the Philippines:

a. There are no special deductions from the gross estate

b. There can be no deduction for funeral expenses entirely incurred outside the
Philippines.

c. There can be a vanishing deduction.

d. There can be a deduction for transfer for public use.

38. Only once statement is correct. Deduction for family home:

a. Shall be allowed if the family home is in the Philippines.

b. Shall be at a maximum of P1,000,000, based on cost.

c. May be allowed for family homes (one in the City and another in the
Province), both in the Philippines and with certificates of the Barangay Captains.

d. Shall be deducted at lesser than P1,000,000 if, with vanishing deduction and
unpaid mortgage or indebtedness, the value of the family home is already reduced to
zero.

39. Which statement is true?

a. A single person who is not a head of family may not have a deduction for
family home.

b. There can be a deduction for two family homes if their aggregate value does
not exceed P1,000,000.

c. Deduction may be claimed for a family home of a non-resident of the

Philippines located outside the Philippines.

d. A family home is always conjugal/community property.

40. A resident decedent was married at the time of death and under the system of
conjugal partnership of gains. Among the properties in the gross estate were:

Land, inherited before the marriage, fair market value P100,000

Family home built by the spouses on the inherited land 800,000

Deduction for family home is:

a. P900,000 c. P400,000

b. P500,000 d. P450,000

41. One of the statement is wrong. Identify. Medical expenses deductible from the
gross estate:

a. Only if the decedent was a citizen or resident of the Philippines at the time of
death.

b. Is actual medical expenses or P500,000, whichever is lower.

c. Need not be on the illness resulting in death.

d. Must not be paid before death.

42. The following expenses, except one, should be paid or take place within a certain
period in order to be deductible from the gross estate of a citizen or resident decedent.
Which is the exception?

a. Vanishing deduction c. Medical expenses

b. Judicial expenses d. Claims against the estate

Items 42 through 46 are based on the following information:

A citizen and resident of the Philippines, died on October 10, 2010, leaving the
following properties, rights, obligations and charges:

Conjugal properties (including a family home of P3,000,000

and amount receivable under RA 4917 of P200,000) P6,000,000
Exclusive properties (including cash of P500,000 inherited 4 1/2
years ago) 4,000,000
Medical
Funeral expenses
expenses unpaid, January 2012 600,000
350,000
Judicial expenses 500,000
Other obligations 100,000
43. The deductible funeral expenses is:

a. P350,000 c. P500,000

b. P100,000 d. P200,000

44. The vanishing deduction is:

a. P460,000 c. P92,000

B.P184,000 d. P138,000

45. The deduction for family home is:

a. P3,000,000 c. P1,000,000

b. P1,500,000 d. P500,000

46. The deductible medical expenses is:

a. P600,000 c. P500,000

b. P300,000 d. 250,000

47. The taxable net estate is:

a. P4,808,000 c. P3,808,000

b. P4,908,000 d. P3,908,000

48. Estate tax credit for foreign estate tax paid is available to the estate of:
a. Resident or citizen of the Philippines

b. Non-resident alien

c. All kinds of decedents

d. None of these

49.

Philippines Foreign

Gross estate P6,000,000 P4,000,000

Claims against the estate 1,000,000 1,000,000

How much was the Philippine estate tax due if the decedent was a non-resident, not
citizen of the Philippines, and there was a foreign estate tax payment of P400,000?

a. P0 c.P571,875

b. P515,000 d. P443,000

50. The estate tax return should be accompanied by a certificate of an independent

CPA if the gross estate is:

a. P2,000,000 c. Over P2,000,000

b. P2,000,000 or over d. P50,000 or over

51. Which of the following statements is false? When an estate tax return had been
filed and the estate tax had been paid but subsequently, because of errors in the
return, a deficiency estate tax has to be paid:

a. The
estate had Bureau
been of Internal Revenue can ask payment from the heirs to whom the
distributed.

b. The Bureau of Internal Revenue cannot ask the executor or administrator to

pay because he would have been discharged from liability for the estate tax to the
heirs once the estate tax had been paid.

c. The
pay, even Bureau
if the heirs of Internal
have Revenue
dissipated can still ask ifthe
the inheritance, executor
the oror
executor administrator to
administrator
did not ask for a written discharge from liability from the Bureau of Internal Revenue .

d. The Bureau of Internal Reveneu shall have a lien on the properties of the
estate once a demand for payment had been made.

52. When a donation which paid a donor’s tax was actually a donation mortis causa,
as ascertained by the Bureau of Internal Revenue, which of the following is true?

a. The donation shall be required to pay the estate tax on its proper valuation at
the time of death, and there can be a refund for the wrong payment of the donor’s tax.
the time of death, and there can be a refund for the wrong payment of the donor’s tax.

b. The donation shall be required to pay the estate tax so that the estate tax
computed shall be reduced by the donor’s tax already paid.

c. The donation shall not pay any transfer tax anymore.

d. The donation has to pay the estate tax in addition to the donor’s tax
previously paid.

53. Taxpayer died February 2, 2013. No judicial proceedings were instituted for the
settlement of his estate. Return was filed and tax of P20,000 was paid November 2,
2013. The estate tax due, including increments, as of November 2, 2013 is:

a. P26,000 c.P31,000

b. P26,250 d. P31,500

------------------------end-------------------------

TAX. M- 1402 Donor’s Tax

Problem 1

Ara gave the following properties to various donees on December 25, 2012:

House and lot in London P3,500,000

Apartment house in Naga City 8,000,000

Car in Iriga City 520,000

Car in London 900,000

Savings deposit with BPI 50,000

Time deposit in a New York Bank 120,000

Accounts receivable, debtor residing in the Philippines 140,000

Accounts receivable, debtor residing in Hongkong 35,000

Franchise exercised in New York 225,000

Franchise exercised in Philippines 120,000

Investment in Good Time Co., partnership established in Hongkong 160,000

Investment in Lovers Company, partnership established in the Phil’s. 125,000

1. The gross gift if Ara is a resident or citizen

a. P13,895,000 c. P8,520,000
b. P8,955,000 d. none

2. The gross gift if Ara is a resident and citizen of united states (without reciprocity).

a.13,895,000 c. 8,520,000

b. 8,955,000 d. None
 3. The gross gift if Ara is a resident and citizen of the donor as diminution on the
property donated.

a.13,895,000 c. 8,520,000

b. 8,955,000 d. None

Problem 2

Anacleto gave the following donations to:

02-14-12 —Azucena, legitimate daughter on account of marriage last December 31,

2010—P190 ,000.

06-01-12 —Brusco, brother on account of marriage scheduled December 31, 2011 —

P160,000.
10-13-12 —Carizosa, legitimate daughter, on account of marriage on November 12,
2011—P180,000

05-15-13—Dalmacio, father, on account of marriage, land with a fair market value of

P1,000,000 but mortgage for P100,000 which was assumed by the donee.

4. The gift tax payable on February 14, 2012

a. 190,000 c. 2,000

b. 1,800 d. 200,000

5. The gift tax payable on June 1, 2012

a. 6,200 c. 1,200

b. 8,000 d. 350,000

6. The gift tax payable on October 13, 2012

a. 15,200 c. 7,800

b. 15,800 d. 7,200

7. The gift tax payable on May 15, 2013

a. 900,000 c. 44,000

b. 1,000,000 d.38,000

Problem 3

Mr. and Mrs. Alavado gave the following donations:

May 3, 2013 -Conjugal property valued at P300,000 donated to Barumbado,

legitimate son who got married January 1, 2013.

July 14, 2013 -Capital property donated to Carlota, legitimate daughter who got
married June 1, 2013. Value –P500,000.

Search-Conjugal property (
Dec. 30, 2013
value of P800,000
donated to Carlota. The dowry has fair market

8. The gift tax due of Mrs. Alavado on May 3, 2013

a. 1,000 c. 800

b. 5,600 d. 6,000

Download &
9. The gift tax due of Mr. Alavado on July 14, 2013.

a. 21,800 c. 12,600

b. 21,000 d. 6,400

10. The gift tax due of Mrs. Alavado on December 30, 2013

a. 15,000 c. 8,200

b. 9,000 d. 15,800

Problem 4

Anaconda, resident, gave the following donations:

Donee January 22, 2013
 Barbado Legitimate son, on account of graduation – P140,000.

Naga City A parcel of land to be used for public purposed – P200,000.

Coronado Legitimate child on account of its forthcoming marriage on February 14,
2013 – P6,000.

Dimalupig Legitimate daughter, on account of marriage on February 4, 2012. -

P7,000.

March 25, 2013

Barbado On account of marriage on April 10, 2013 – P150,000.

Coronado Additional donation on account of marriage Feb. 14, 2013 – P69,000.

Dimalupig Additional donation on account of marriage Feb. 4, 2012 – P200,000.

Devt. Academy of the Phil’s For education and training purposes, P50,000.

* + , -
11. The donor’s tax due on January 22, 2013.
Home Books Audiobooks
a. 800
Documents
c. 140,000

b. 660 d. 6,600

12. The donor’s tax due on March 25, 2013.

a.16,700 c. 9,200

EXCLUSIVE OFFER
b. 15,900 d. 15,720

Problem 5 )
Try Scribd for FreeMr. and Mrs. Albano gave the following donations:

CompletelyAlbano.
ad-free.
July 1, 2013 Community property was donated to Balaoing, sister of Mr.
The fair market value is P650,000.
Sept. 25, 2013 Cash of P300,000 to Cuarto, son of Mrs. From her teen-age
boyfriend .

Nov.10, 2013 Cash of P250,000 was donated to Balaoing.

Read Free for 30 Days

13. The donor’s tax due on Mr. and Mrs. Albano on July 1, 2013 –

a. 7,000;7,000 c.97,500;7,000
b. 7,000;97,500 d. 97,500;97,500

14. The donors tax due on Mr. Albano on September 25, 2013 –

a. 1,000 c. 45,000

b. 90,000 d. 6,000

15. The donor’s tax due on Mr. and Mrs. Albano on November 10 2013, 2013 –

a. 5,000; 37,500 c.37,500;37,500

b. 10,000; 5,000 d. 500,500

Problem 6

Arandasi sold the following assets:

Date of Sale Buyer Market Value Selling Price Cost /Book

value

Jewelry June 11 Niece P 130,000 P 15,000 P 100,000

Res. House June 22 Girlfriend 1,000,000 600,000 750,000

Apt. House Sept. 25 Legally adopted child 900,000 600,000 750,000

Apt. House Sept. 25 Legally adopted child 900,000 600,000 750,000

Del. Truck Oct. 10 Controlled corp. 450,000 400,000 350,000

16. The gift tax, if any, in each of the independent transactions above.

(a) (b) (c) (d)

Jewelry P 300 P 300 P 600 P 600

Residential house 120,000 None 120,000 75,000

Apt. house 6,000 6,000 1,000 1,000

Delivery truck None 15,000 15,000 None

Problem 7

17. Which of the following examples is taxable?

a. A, American citizen donated a parcel of land located in the united State to S,

a resident alien.

b. On June 1, 2013, T made a gift of P200,000 to his daughter on account of

her marriage celebrated on May 1, 2012.
c. U, a minimum wage earner, gives his son a gift worth P2,000 as a birthday
gift.

d. V and W are the only heirs of X. V renounces his share of inheritance in favor
of W

Problem 8

18. 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

Problem 9

19. One of the following statement is false:

a. Contracts of donation between husband and wife are void in most cases.

b. The donation by the public works contractor to a Mayor, in view of her public
office is void in all cases.

c. Donations between persons guilty of adultery or concubinage are void.

d. Donation to a conceived or unborn children is valid.

Problem 10

20. A, a citizen and resident of the Philippines, made donations on January 10, 2013,
as follows: Donation to B, a legitimate son, on account of marriage, to be celebrated on
February 14, 2013, property in the United States (on which a U.S. donor’s tax of
P1,200 was paid), with a fair market value of Donation to B, cash in the Philippines of
Donor’s tax credit for donor’s tax paid to the U.S.:

a.P1,200 c. P600

b. P1,000 d. P2,000

Problem 11

21. One of the following statements is correct. The donor’s tax return:

a. Must be filed within thirty days after the end of the calendar year.

b. Must be filed within thirty days from the date of donation.

c. Must be accompanied by a certificate of an independent Certified public

Accountant if the gross gift is P50,000 or more.

d. In the case of husband and wife making donations, one donor’s tax return
shall be filed and signed by either the husband or the wife.

22. One of the following statements is not true. Which is it? If on any one date there
 22. One of the following statements is not true. Which is it? If on any one date there

is
to aa donation
donee whobyisone donor to a donee who is not a stranger together with a donation
a stranger:

a. There will be two separate donor’s tax return because the donor’s tax on the
donation to a non-stranger is at graduated rates while the donor’s tax on the donation
to a stranger is at the flat rate of 30%.

b. There will be one donor’s tax return only, where the donor’s tax at graduated
rates on the donation to a non-stranger will be shown together with the donor’s tax at
the flat rate of 30% on the donation to a stranger, the total being the donor’s tax to
pay.

c. If there were previous donations to strangers during the year, the prior net
gifts to strangers need not be added anymore in the computation of aggregate net gifts,
donor’s tax on aggregate net gifts and donor’s tax due on the donations to strangers.

d. A donation on account of marriage, before the marriage, by a parent to a son

and daughter-in-law shall be considered as donations to a non-stranger and stranger.
23. On March 6, 2013, a Filipino citizen donated house and lot with fair market value
of P200,000 to his child on account of marriage on January 1,2013. Gift tax return
was filed and tax paid on July 5, 2013. The donor’s tax due, including increments, as
of July 5, 2013 is:

a. 2,400 c. 2,600
b. 2,340 d. 1,800

Multiple Choice Questions

1. Which of the following statement is wrong? A distinction between a donation inter

vivos and a donation mortis causa is:
a. The first take effect during the lifetime of the grantor while the second takes
effect after the death of the grantor.

b. The first is subject to the donor’s tax while the second is subject to the estate
tax.

c. The first always requires a public document while the second may not require
a public document.

d. The first is valued at fair market value at the time the property is given while
the second is valued at fair market value at the time of the death of the grantor.

2. The following are the requisites of a donation for purposes of the donor’s tax, except
one:

a. capacity of the donor c. delivery of the subject matter of gift

b. capacity of the donee d. donative intent

3. 1st statement: A sold his car ( cost, P300,000 ) to B for P500,000. The car has a fair
market value of P900,000 at the time of sale. The difference of P400,000 in selling
price and fair market value constitutes a gift subject to donor’s tax.

2nd statement: C purchased a lot and cottage in Alaminos City (home of 100 islands) in
2009 for P1,000,000. It was used as summer vacation house by his family. In 2010, C
decided to sell the lot and cottage to D for P2,000,000 although its present market
value is P2,500,000. The P500,000 difference in selling price and market value is a gift
but not subject to donor’s tax.

a. both statements are true

b. both statements are false

c. The first statement is true and the second statement is false.

d. The first statement is false and the second statement is true.

4. 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.

5. The reciprocity clause in the donr’s tax law applies to a:

a. Non-resident citizen c. Resident citizen
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b. Resdient alien d. Non-resident alien

6. In the previous question, the reciprocity clause applies to:

a. Real property c. Intangible personal property

b. Tangible personal property d. All of these

7. If he is a resident alien his gross gift is:

a. P2,100,000 c. P2,950,000

b. P1,950,000 d. P3,000,000

8. If he is a non-resident Japanese, and there is reciprocity law, his gross gift is:

a. P850,000 c. P1,050,000
b. P650,000 d. P700,000

9. Which of the following statements is correct? A donation inter vivos by husband and
wife, jointly during the marriage

a. Is a donation of conjugal property that will require one computation of the

donor’s tax, if the spouses are under the system of conjugal partnership of gains.

b. Is a donation of community property that will require one computation of the

donor’s tax, if the spouses are under the system of absolute community of property.

c. Is a donation of exclusive property by the either spouse that will require one
computation of the donor’s tax, if the spouses are under the system of conjugal
partnership of gains.

d. Is a donation of each spouse to the extent of one-half that will require

separate computation for two donor’s taxes, under whichever property relationship
exists between the spouses.

10. Situation 1: M, in trading business, had a receivable of P150,000 from N. Without

exerting utmost effort to collect, M canceled the indebtedness of N.

Situation 2: O sold to P personal property worth P200,000 for a consideration of

P50,000, to take effect immediately upon receipt of the consideration.

a. Situation 1 involves a donation of P150,000 and should be covered by a

donor’s tax return within thirty days from the date of cancellation of the indebtedness.

b. Situation 1 is bad debt expenses of the business and should not be treated
as involving a taxable donation.

c. Situation 2 shall be considered a bad bargain and not involving a taxable

donation.
d. Situation 2 involves a donation of P200,000 and should be covered by a
donor’s tax return within thirty days from the date of the sale.

11. Q sold his land (capital asset) on September 5, 2012 to his best friend for
P300,000 when the market value was P500,000 He gave a commission of P20,000 to
the broker and spent for documentary stamp taxes and transfer fees the amount of
P4,000. The internal revenue tax payable is:

a. Final capital gain tax of P30,000

b. Final capital gain tax of P18,000

c. Donor’s tax of P60,000

d. None, as it is exempt from any internal revenue taxes

12. Statement 1: In showing gross gifts in the donor’s tax return, buildings should be
valued at the current fair market value as shown in the assessment rolls, or the fair
market value as determined by the Commissioner of Internal Revenue, whichever is
higher.

Statement 2:In showing gross gifts in the donor’s tax return, personal property
should be valued at current fair market value or at cost, whichever is lower.
a. Both statements are correct

b. Both statements are false

c. The first statement is correct and the second statement is wrong.

d. The first statement is wrong and the second statement is correct.

13. A donation on account of marriage will gave a donor a deduction from the gross
gifts made if:

a. The donee is a legitimate child c. The donee is not a stranger

b. The donee is anybody d. None of these.

14. Which of the following statements wrong? A deduction for a donation on account
of marriage:
a. Shall be allowed to a resident citizen when the property donated is located
outside the Philippines.

b. Shall be allowed to a resident citizen when the property donated is located

within the Philippines.

c. Shall be allowed to a resident alien when the property donated is located

outside the Philippines.
d. Shall be allowed to a resident alien when the property donated is located
within the Philippines.

15. All of the following statements are wrong, except one. If the donor is a nonresident,
not citizen of the Philippines:

a. Property situated abroad but donated to a citizen of the Philippines will pay
the donor’s tax.

b. Property situated in the Philippines but donated to a donee aboard will not
pay the donor’s tax.

c. Property outside the Philippines donated on account of marriage to a resident

of the Philippines has a deduction of P10,000.

d. Property in the Philippines with a value of P150,000 donated to a citizen of

the Philippines will pay a donor’s tax.

16. Husband and wife made out of conjugal cash of P1,000,000, a donation on
account of marriage, to a legitimate child. Which of the following statements is not
correct on deduction for donation on account of marriage?

a. P10,000 to each spouse, on separate computation for donor’s tax.

b. P5,000 to each spouse, on separate computation for donor’s tax.

c. P10,000 on a separate computation for donor’s tax of the husband.

d. P10,000 on a separate computation for donor’s tax of the wife.

17. On a contribution to the Roman Catholic Church by an individual, which of the

following correctly state/s true rule/s in computing the donor’s tax.

a. There is no deduction from the gross gift.

 a. There is no deduction from the gross gift.

b. It is not considered a gift on which there will be a donor’s tax.

c. It is considered a gross gift and a deduction from the gross gift.

d. It pays the donor’s tax at the time of the contribution at the graduated rates
of donor’s tax.

18. Since a donation to a charitable institution has a deduction without any ceiling.

Statement 1: The net gift will be zero, so that in computing the donor’s tax, the
donation may be omitted in gross gift if it is likewise omitted in deductions.

Statement 2: The gross gifts should be reported and the deduction shall be
claimed.

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.

19. Which of the following donations is not entitled to deduction?

a. Donation to charitable institution

b. Donation to scientific organization

c. Donation to social welfare

d. Donation to a political party

20. R donated a total amount of P500,000, ½ to the Quezon City Hall and ½ to a
charitable institution, TAHANANG WALANG HAGDANAN. Upon inquiry, it was verified
that the charitable institution’s total receipts from donation amounted to P10M and its
total administrative expenses reached P4.0M. R can claim a total
deduction/exemption of:

a. P250,000 c. P200,000

b. P500,000 d. None
21. All of the following except one are exempt from gift tax under special laws:

a. Donation to Integrated Bar of the Philippines

b. Donation to Development Academy of the Philippines

c. Donation to Philippine Institute of Certified Public Accountants

d. Donation to International Rice Research Institute

22. First distinction: The rates for donor’s tax are lower than those for estate tax, in all
cases.

Second distinction: In donor’s tax, the exemption is P200,000 while in estate tax it is
P100,000.

a. Both distinction are correct c. First is correct, second is wrong

b. Both distinction are wrong d. First is wrong, second is correct

23. Which statement is wrong? The donor’s tax:

a. Is computed on the basis of the net gifts of a calendar year.

b. Is computed and paid within 30 days from the date of donation.

c. Is computed separately for each spouse in case of a joint donation.

d. Become proportionately bigger on later donations.

24. Statement 1: All gifts made on the same date pay one donor’s tax only.

Statement 2: A donation to a legitimate child on account of marriage, when the

property donated was already delivered, will not pay the donor’s tax if the donee’s
marriage did not actually take place.

a. Both statements are true.

b. Both statements are false.

c. The first statement is true and the second statement is false.

d. The first statement is false and the second statement is true.

25. In computing the donor’s tax on a subsequent donation, the donor must also
consider:

a. All prior net gifts during his lifetime.

b. All prior net gifts during the calendar year.

 c. The present and the immediately preceding donation.
d. Only the present donation.

26. Donations on one date by H, a father, of property and cash, as follows: To I, a

legitimate daughter, on account of marriage, land with a fair market value of P500,000
but subject to mortgage of P100,000 which is assumed by I. to J, a legitimate son, on
account of marriage, cash of P200,000. The net gifts made are:

a. P680,000 c. P590,000
b. P580,000 d. P700,000

27. Who of the following is a stranger under the donor’s tax law?

a. A child of a brother c. A granduncle

b. A grandchild d. A second cousin

28. For donor’s tax purposes, one of the following is not stranger.

a. son by a natural adoption c. grandson

b. step-son d. son-in-law

29. One of the following is n`ot a relative by consanguinity n the collateral line within
the fourth degree of relationship.

a. daughter of the donor’s nephew c. niece of the donor

b. First cousin of the donor d. second cousin of the donor

30. Statement 1: A donation to a corporation is a donation to a stranger.

Statement 2: a donation by one spouse to the legitimate child by a former marriage of

the other spouse is a donation to a stranger.

a. both statements are true

b. both statements are false

c. The first statement is true and the second statement is false.

d. The first statement is false and the second statement is true.

31. Which of the following statement is wrong? A donation by husband and wife out of
conjugal or community property to a brother of the wife.

a. Is one-half a donation to a non-stranger by the wife.

b. Is one-half a donation to a stranger by the husband.

c. Is a donation on which the husband must pay a donor’s tax of 30% on his
net gift.

d. Is a donation on which the husband must pay the graduated donor’s tax on
his net gift.

32. When the donee or beneficiary is a stranger, the tax payable by the donor shall be.

a. 30% of the gross profits.

b. 30% of the net profits.

c. Based on the graduated rates with the first P100,000 net gift exempt.

d. Based on the graduated rates with the first P100,000 net gift exempt or 30%
of the net gifts whichever is higher.

33. N made a donation to O and P, son and daughter-in-law, on account of marriage,

of real property with fair market value of P 1,500,000, but subject to a mortgage of
P300,000 which was assumed by the donees.

The total donor’s tax is:

a. 77,750 c. 185,950

b. 84,950 d. 199,400

Questions 34 through 37 are based on the following data:

Mr. and Mrs. K, made the following donations.

1/25/2013 -To L, their legitimate son, on account of marriage last 1/20/2012, car
worth P400,000, with P200,000 mortgage, ½ was assumed by the one.
5/31/2013 -to M, brother of Mr. K, his capital property worth P200,000 on
account of marriage 6 months ago of M with a condition that the one
will pay the donor’s tax thereon.
7/15/2013 -To N, daughter of Mrs. K by former marriage, on account of her
marriage 12 months ago, Mrs. K’s paraphernal property worth
P100,000.
8/20/2013 -To N on account of the same marriage, conjugal car of the couple
worth P400,000, with P200,000 unpaid mortgage, ½ assumed by N.
 worth P400,000, with P200,000 unpaid mortgage, ½ assumed by N.
And P500,000 worth of land to their four sons on account of their
graduation, 20% of which was owned by their Kumpadre who agreed
to donate his share thru a public document.

34. The gift tax due of Mr. K as of May 31, 2013 is:

a. 8,000 c. 7,200

b. 7,000 d. 6,600

35. The gift tax due of Mrs. K as of July 15, 2013 is:

a. 3,600 c. 2,800

b. 2,600 d. 4,000

36. The gift taxes due of Mr. & Mrs. K on Aug. 20, 2013 are

a. P69,000 & P18,800, respectively

b. P17,000 & P18,800, respectively

c. P54,000 & P15,800, respectively

d. P54,000 & P18,800, respectively

37. The gift tax due of their Kumpadre is:

a. P30,000 c. P45,000
b. P10,000 d. none

Items 38 through 41 are based on the following information:

Q a citizen of the Philippines made the following donations in 2013:

01/10/2013 : To R, a legitimate daughter, on account of marriage cash of

P200,000.
05/10/2013 : To S, a legitimate son, on account of mortgage, property with a fair
market value of P200,000 and a mortgage thereon, which was
assumed by S, of P40,000.
10/10/2013 : To T, a friend, an ordinary donation of P10,000.
12/10/2013 : To U, a niece, a donation on account of marriage of P 15,000.

38. The donor’s tax on the donation of January 10, 2013:

a. P150 c. P 900

b. P600 d. P1,800

39. The donor’s tax on the donation of May 10,2013:

a. P5,750 c. P4,500

b. P24,000 d. P5,800
40. The donor’s tax on the donation of October 10,2013:

a. P1,000 c. P6,250

b. P3,000 d. P6,150

41. The donor’s tax on the donation of December 10,2013:

a. P1,350 c. P6,500

b. P2,450 d. P600

42. Statement 1. Tax credit for donor’s tax paid to foreign country is allowed only if the
donor is a citizen or resident of the Philippines:

Statement 2. There can be a donor’s tax paid to a foreign country even if the citizen

or resident donor had no donation of property in the Philippines.

a. Both statements are true.

b. Both statements are false.

c. The first statement is true and the second statement is false.

 d. The first statement is false and the second statement is true.

43. Donations to a legitimate child of:

Property in the Philippines P110,000

Property outside the Philippines, on account of marriage 200,000
Donor’s tax paid to foreign country 4,500
Donor’s tax due after tax credit for foreign donor’s tax paid:

a. P2,200.00 c. P4,625.50

b. 2,750.00 d. P3,208.33

Questions 44 and 45 are based on the following data:

Mr. O, made the following donations for the year 2013:

April 15 - To P, legally adopted child on account of marriage last week, car

worth P710,000 in the Philippines.
- To Q, his daughter, car in USA worth P300,000. They paid $180
donor’s tax in US. ($1-P56)
July 20 - To R niece in manila, P200,000 worth of personal property.
- To S, legitimate daughter on account marriage in Cebu, last July 18,
2012, car worth P400,000 but mortgage for P200,000, ½ of which
was assumed by the donee.

44. The gift tax due after tax credit on April 15, 2013 is:

a. P30,800 c. P44,000

b. P35,000 d. P33,920

45. The gift tax due on July 20,2013 is:

a. P 40,000 c. P84,000

b. P36,400 d. P38,920

46. L, a citizen and resident of the Philippines, made the following donations on
January 14, 2013: To M, a legitimate child, on account of marriage on the same day,
property in Japan, which paid the Japanese government a donor’s tax of P52,000 and
with a fair market value of P610,000

To N, a friend, ordinary donation of property in the Philippines, subject to a mortgage

of P60,000 which was assumed by N. Fair market value of the property, 160,000

The tax credit for foreign donor’s tax paid is:

a. P34,628.06 c. P42,857.14

b. P52,000.00 d. P31,520.43

47. Mr. O made the following gifts to his relatives:

Phil. USA UK Italy

Gross gift P750,000 P500,000 P250,000 P500,000

Deductions 250,000 200,000 150,000 150,000

Tax paid 25,000 12,000 10,000

The gift tax due after credit is:

a. P35,600 c. P33,520

b. 25,600 d. P39,000

48. Mr. P is a citizen and resident of the Philippines. On July 8, 2013, he made
donations to Q, a friend, of properties in Country Y and Country Z. Donor’s taxes were
paid to country to Country Y and a fair market value of P300,000 while the property in
Country Z had a fair market value of P200,000. The donor’s tax still due after credit
for foreign donor’s taxes paid is:

a. P0 c. P145,000

b. P15,000 d. P10,000
49. On one date, a resident alien donor made donations of property in the Philippines
to a non-stranger and of property outside the Philippines to a stranger. In taking a
credit for the foreign donor’s tax paid, the credit shall be against the Philippine donor’s
tax on the:

a. Donation to the non-stranger.

b. Donation to the stranger.

c. Donation to the non-stranger plus that to the stranger.

d. None of these.

50. One of the following statements is correct. Which is it? In the preparation of the
50. One of the following statements is correct. Which is it? In the preparation of the
donor’s tax return.

a. Dowries are shown as deductions from the gross gifts.

b. Dowries are not shown anymore as gross gifts and as deductions.

c. Spouses making donations of conjugal or community property prepare one

donor’s tax return.

d. Donor’s tax on donations to strangers and to non-strangers are computed

and shown in separate return.

51. One of the statements that follow is correct. Which is it? A deed of donation was
executed by G, resident of Dagupan City, in favor of H, a resident of Baguio City. H
executed a deed of acceptance in Baguio City. The donor’s tax return must be filed
with the Bureau of Internal Revenue Office:

a. At the resident of the donor.

b. At the resident of the donee.

c. At the resident of the donor or the 19one, whichever the donor chooses.

d. None of the above.

52. Statement 1. A donation on which the donor’s tax was not paid is not a valid
donation.

Statement 2. Title to the donated real property cannot be transferred to the donee
in the Register of Deeds unless the donor’ s tax on the donation had been paid.

a. Both statements are true.

b. Both statements are false.

c. The first statement is true and the second statement is false.

d. The first statement is false and the second statement is true.

53. One of the following statements is wrong:

a. The Commissioner is not allowed to grant extension of time within which the
donor’s tax returns may be filed, and such extension shall not exceed thirty days.

b. The return may be filed in one municipality and the tax paid in another
municipality.
c. When donor’s tax is assessed by reason of negligence, intentional disregard of
rules and regulations, or fraud on the part of the taxpayer, no extension of time for
payment of the tax may be granted by the Commissioner of Internal Revenue.

d. A gross gift of P50,000 for the whole year to non-strangers need not be
covered by a donor’s tax return.

54. Statement 1: When a donor’s tax return was filed and it was found by the Bureau
of Internal Revenue to have errors which gave rise to a deficiency donor’s tax, the
donor may be required to pay the deficiency although he does not possess or own the
property anymore.

Statement 2: The Government is not bound by any agreement between the donor
and the done that the latter shall pay tax on the donation.

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.

TAX.M-1403 VALUE ADDED TAX

Problem 1

Topline Company sold to Bestbooks Enterprises goods worth P 10 000, exclusive of tax. Record
the accounting entries in the sales book and in the purchase book if:

1. The buyer and the seller are subject to VAT.

2. Seller is VAT registered, while buyer is not.

3. Seller is no VAT registered, while buyer is VAT registered.

Answer:

Sales book Purchase book

1. Cash/ accounts receivable P 11 200 Purchases P 10 000
Sales 10 000 Input tax 1 200
Output Tax 1 200 Cash 11 200
2. Cash/ accounts receivable P 11 200 Purchases P 11,200
Sales 10 000 Cash 11 200
Output Tax 1 200
3. Cash/ accounts receivable P 10 000 Purchases P 10 000
Sales 10 000 Cash 10 000

Problem 2

All amounts given are total invoice costs/prices:

A, non-VAT taxpayer, sells to B, VAT taxpayer P 67 200

B, VAT taxpayer, sells to C, VAT taxpayer 100 800

C, VAT taxpayer, sells to D, VAT taxpayer, an exporter 168 000

D, VAT taxpayer, exports 300 000

1. The value-added tax of B:

A. Payable of P 3 600 C. Payable of P 10 080
B. Payable of P 10 800 D. Payable of P 12 096
2. The value-added tax of C:
A. Payable of P 7 200 C. Payable of P 8 064
B. Payable of P 6 720 D. Refundable of P 10 900
3. The value-added tax of D:
A. Payable of P 18 000 C. Payable of P 36 000
B. Refundable of P 18 000 D. Refundable of P 36 000

Problem 3

H and W, husband and wife had the following gross sales (net of tax) during the year:

W- restaurant owner P 800 000

H-
a. Professional CPA P 350 000
b. Medium sized store:
Sale of office/school supplies P 1 120 000
Sale of books P 275 000

4. Which of the following statements is true?

A. For purposes of the threshold of P 1 919 500, the gross receipts of the husband and
wife shall be combined.
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B. The gross receipts shall be subject to VAT even if she does not register voluntarily
under the VAT system.
C. For purposes of the threshold of P 1 919 500, the sale of office supplies and the
practice of profession are considered as separate taxpayers.
D. For purposes of the threshold of P 1 919 500, the aggregation rule for each taxpayer
shall apply. Thus, the gross receipts from the medium sized store shall be added to the
receipts from the practice of profession.

Problem 4

5. Winery is a manufacturer of wine. During a particular calendar quarter, it had the

following transactions (net of VAT):
Jan. 4, 2013 : Consigned wine to a retailer in Makati City amounting to P 200 000.
Feb. 14, 2013 : Exported P 1 000 000 worth of wine to Spain.
Feb. 27, 2013 : President of Winery celebrated his birthday, consuming P 50 000

worth of wine
Mar. 20, 2013 given to him by
: Declared the company
property as of
dividend a birthday
one casegift.
of wine for every 10 shares,
amounting to P 150 000.

The output tax for the calendar quarter ended March 31, 2013 is:
A. P 48 000 C. P 140 000
B. P 168 000 D. P 40 000

Problem 5
Farmland Merchandising became subject to VAT effective January 1, 2013:
The following are its records:

Gross sales- January 1 to Dec. 31, 2012 P 2 900 000

January 2013 data:
January 1 inventory:
Purchased from VAT registered persons 48 000
Purchased from non-VAT registered persons 332 000
Actual VAT paid 5 140
Sales (total invoice amount) 224 000
Purchases (exclusive of VAT) 60 000

6. The VAT payable on January 2013 is -

A. P 11 660 C. P 16 400
B. P 9 200 D. None

Problem 6

Azucarera de Papa is a processor of refined sugar. It purchases sugarcane from farmers for
processing into intermediate stages until it becomes refined sugar. In a month, it had the
following sales and purchases, no tax included:

Sales P 880 000

Purchases of sugarcane 220 000
Purchases of containers and paper labels 100 000

7. The value-added tax payable is:

A. P 67 200 C. P 84 800
B. P 89 200 D. P 69 200

Problem 7

8. In a month, total invoice prices/costs:

 Domestic sales P 672 000
Export sales 1 500 000
Purchases from VAT-registered persons of:
Goods exported 560 000
Goods sold in the Philippines 224 000
Operating expenses 112 000

The input taxes attributable to export sales which may be refunded or credited against
other internal revenue taxes, including any value-added tax on domestic sales, is:

A. P 60 000 C. P 84 000
B. P 24 000 D. P 96 000

Problem 8

9. Bogart is an operator of parking lots. What business tax is due on his income from the
business?
A. Broker’s tax C. Caterer’s tax
B. Common carrier’s tax D. Value-added tax

Problem 9

Sale of services by a VAT-registered contractor:

Collections on total invoice price for contracts completed
(including P 448 000 for materials) P 1 120 000
Receivables on billings (VAT included) 336 000
Advances on contracts (VAT not included) 200 000
Retentions on contracts made by clients out of contract price already earned 90 000

Purchases of:
Materials (VAT included) 224 000
Services of sub-contractor (VAT not included) 448 000
Services of persons subject to percentage taxes 56 000
Salaries of employees 60 000

10. Output taxes are:

A. P 158 400 C. P 132 000
B. P 144 000 D. P 154 000
11. The input taxes are:
A. P 67 200 C. P 77 760
B. P 72 000 D. P 80 640
12. The value-added tax payable is:
A. P 64 800 C. P 86 400
B. P 86 400 D. P 66 240

Problem 10

13. Lesion is a lessor of real property and personal property (cars). The tax that he pays is:
A. Excise tax C. Transaction tax
B. Value-added tax D. None of these
Problem 11

14. Which of the following shall be subject to 0% VAT?

A. Sale of electricity by generation companies.
B. Sale of electricity by transmission companies.
C. Sale of electricity by distribution companies.
D. Sale of power or fuel generated through renewable sources of energy.

Problem 12

Japayuki Corp. imported an article from Japan. The invoice value of the following article was
P 1 000 000 Yen (1 Yen= P0.50). the following were incurred in connection with the
importation:
Insurance P 15 000
Freight 10 000
Postage 5 000
Wharfage dues 7 000
Arrastre charges 8 000
Brokerage fee 25 000
Facilitation fee 3 000

The imported article was subject to P 50 000 customs duty and P 30 000 excise tax. Japayuki
The imported article was subject to P 50 000 customs duty and P 30 000 excise tax. Japayuki
Corp. spent P 5 000 for trucking from the customs warehouse in Quezon City.

15. The VAT on importation is:

A. P 65 800 C. P 65 000
B. P 78 000 D. P 50 000
16. Assuming that the imported article was sold for P 950 000, VAT exclusive, the VAT
payable is:
A. P 36 000 C. P 30 000
B. P 29 200 D. P 114 000

Problem 13

M. Porter is VAT-registered. Importations were for:

Any value-added tax not included. Sale Own use
Invoice cost (Exchange rate is $1: P56) $ 80 000 $ 4 000
Expenses based on cost:
Freight and insurance 4% 4%
Other expenses up to the point of removal from customs house 6% 6%
Transfer expenses from customs house to warehouse in Mania ½% ½%

Selling price of goods imported for sale within the same taxable period of importation, value-
added tax included, was P 6 720 000.

17. The value-added tax payable on the importations of M. Porter is:

A. P 492 800 C. P 517 440
B. P 491 300 D. P 620 928
18. The value added tax payable on the sale is:
A. P 99 072 C. P 107 200
B. P 128 640 D. P 720 000
19. Which of the following sales of real properties shall not be exempt from VAT?
A. Sale of real properties not primarily for sale to customers or held for lease in the
ordinary course of trade or business.
B. Sale of real properties utilized for low-cost and socialized housing.
C. Sale of real properties utilized for commercial purposes.

D. Sale of residential lot valued at P1 919 500 and below, or house and lot and other
residential dwellings valued at P 3 199 500, and below.

Problem 14

20. INDICATE if the following receipts from lease of residential units are subject to VAT or
not:
Case Monthly Rental Aggregate Annual Rental Taxable/ Not

taxable
1 P 7 000 P 2 600 000 Not taxable
2 12 800 1 400 000 Not taxable
3 9 500 1 450 000 Not taxable
4 13 000 1 919 500 Not taxable
5 13 000 2 600 000 Taxable

Problem 15

Miss Divina Valencia, a bold actress, had the following data for the quarter ending June 30, 2013
(amounts are exclusive of tax):

Receipts from talent fees P 1 000 000

Gross receipts from taxicabs (4 units) 500 000
Purchases of wardrobes used in films 200 000
Purchases of spare parts of taxicabs 100 000
Public relation services for image build-up as an actress 85 000
Insurance premiums for taxicabs 61 000
Rent of office space used both for her occupation
and taxicabs business, subject to VAT 400 000

21. The VAT payable by Miss Valencia is-

A. P 37 800 C. P 53 800
B. P (41 520) D. P 18 480

Problem 16

Sosyal is a Vat-registered taxpayer. The following data from the books of accounts were
transactions for each of the months of January, February and March (first quarter) of 2012:

January February March

Credits to sales account P 440 000 P 550 000 P 770 000
Debits to purchases account on
local purchases of goods from:
VAT-registered persons 110 000 660 000 330 000
Non-VAT registered persons 20 000 30 000 15 000
Importation of goods, landed cost 50 000
 22. The value-added tax payable at the end of January is:
A. P 33 000 C. P 30 000
B. P 39 600 D. P 52 800
23. The value-added tax payable (refundable) at the end of February is:
A. P (19 200) C. Due of 0
B. P 19 800 D. P 66 000
24. The output taxes on the return for the period ending March is:
A. P 160 000 C. P 211 200
B. P 176 000 D. P 92 400
25. The value-added tax payable at the end of March 2012 is:
A. P 13 800 C. P 13 200
B. P 33 600 D. P 39 600

Problem 17

26. The following first quarter data pertain to a value-added taxpayer whose purchases were
all from value-added taxpayers:
Output taxes, January P 132 000
Input taxes, January 240 000
Output taxes, February 348 000
Input taxes, February 144 000

Sales, total invoice price, March 3 360

Purchases, total invoice cost, March 1 456
The value-added tax payable for March is:

A. P 190 400 C. P 204 000

B. P 192 000 D. P 260 400

Problem 18

A VAT registered business has the following transactions:

Sales of good to private entities, net of 12%
Purchases of goods sold to private entities, gross
Sales to a GOCC, net of 12% VAT
Purchases of goods sold to GOCC, net of 12%
27. How much is the withholding VAT?
A. P 120 000 C. P 50 000
B. P 70 000 D. none of the above
28. What is the treatment of the excess actual input VAT
A. Input tax credit C. income
B. Expense or cost D. none of the above
29. How much is the VAT payable?
A. P 244 000 C. P 120 000
 B. P 204 000 D. none of the above

Problem 19

Felicisima had the following data during the month of February:

Case
Sales, net of VAT 1 900
Purchases
A. ofExcise
goodstax
for sale, exclusiveC.
of Percentage
VAT 1 260
tax
Purchases
B. ofValue-added
machines (VAT
tax not included)
D. None of these1 440
Machine life is a VAT-registered dealer of liquors. On
4. Cantor 6 his
years
A. Excise tax C. Percentage tax
30. B.
TheValue-added
VAT payabletaxin Case A: D. None of these
5. Statement
A. P 76 8001: A person subject to
C. excise tax is also subject
P 74 400
Statement
B. P 78 9202: A person subject to
D.percentage
P 154 080 tax is also
31. A.
TheBoth
VATstatements
payable inare correct
Case B:
B.
A. Statement
P 36 0001 is correct whileC. statement 2 is wrong
P 142 200
B.
C. P
Both141 000
statements are wrong D. P 300 000
32. D.
TheStatement
VAT payable 1 is wrong
in Casewhile statement
A if the 2 ismachine
life of the correct
6. Which
A. P statement
73 920 is correct? TheC.value-added
P 73 200 tax on
A.
B. Should
P 154 800 be paid by the tax-exempt
D. P 74importer,
400 if he
non-tax-exempt purchaser.
B. Should be paid by the non-tax-exempt purchaser
MULTIPLE CHOICE
sells it. QUESTIONS

1. The
C. Isfollowing
a liabilityare major
either of internal revenueimporter
the tax-exempt businessortaxes
D. Shall not
A. Income tax pay the value-added
C. Value-addedthe
tax because taxtransacti
B. importation.
Excise tax D. Percentage tax
7.
2. The value-added
Alamid imported tax of Gencor
cigarettes fromCo., before
Taiwan forany taxAtcredits
sale.
A. P 210 960
Philippines. He is subject to value-addedC. P 173
tax. He is300
B.
A. P 175 800
Excise tax D. Ptax
C. Percentage 207 960
8. The businesstax
B. Income tax of Falcon Co.,D.before
Noneany tax credits,
of these
A. Value-added tax of P 3 960 C. Value-added
3. Burgos
B. is manufacturer of fermented liquors. In making
and Percentage
transactionstaxareofpassed
P 990 D. Percentage
on to the buyers. For purposes
9. Which
of thesestatement is wrong?
taxes listed Transactions
below that considered
he pays forms part of
and, therefore, subject to the business taxes include:
A. Regular conduct or pursuit of a commercial or an
organization.
B. Regular conduct or pursuit of a commercial or an
 B. Regular conduct or pursuit of a commercial or an
non-profit private organization.
C. Isolated services in the Philippines by non-resident
D. Isolated sale of goods or services for a gross selling

10. First statement: Sales of drugs and medicines of pharmacy

outpatients are subject to VAT.
Second statement: Pharmacy items used in the performanc
hospital units such as in the operating and delivery rooms
considered part of medical services rendered by the
A. Both statements are correct
B. Both statements are incorrect
C. Only the first statement is correct
D. Only the second statement is correct
11. To be exempt from value-added tax, the lease of residentia
I. Monthly rental per unit of P 12 500 or less.

II. Gross annual rentals exceeding P 1 919 500.

A. Both I and II are necessary
B. Both I and II are not necessary
C. Only I is necessary
D. Only II is necessary
12. Gross selling price includes all of the following, except
A. Total amount which the purchaser pays to the seller.
B. Total amount which the purchaser is obligated to
C. Excise tax.
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