Module Guide for TAX 2 Business & Transfer Taxation

Module 1
ACTIVITY 2
100 points

Test I – Shade the answer sheet column A if the statement is correct otherwise shade
column B if it is incorrect. 1pt. each (total 20points)

1. The reciprocity rule may apply to movable personal property located in the Philippines.
2. The reciprocity rules apply to intangible properties of any alien located in the Philippines
3. Franchise are subjected to transfer tax in the place where they are exercised.
4. The share and bonds of domestic corporations are presumed situated in the Philippines for purposes of transfer
taxation
5. Shares and bonds of foreign corporations are always presumed situated abroad for transfer tax purposes
6. For purposes of transfer tax, the interest in a business partnership organized abroad is presumed situated abroad
7. Cash is considered an intangible property
8. Shared stocks and bonds are tangible personal properties
9. Donation inter-vivos are subject to transfer tax at the death of the donor
10. Donations mortis causa are subje4cted to transfer tax at the death of the decedent
11. Donation inter-vivos are inspired by the generosity of the donor
12. A donation mortis causa is affected by the death of the decedent
13. As a rule, all properties of the donor existing at the point of death constitute his donation mortis causa.
14. All forms of gratuitous transmission of property while the donor is living is actually donation mortis causa.
15. Transfer in contemplation of death are donation made inter-vivos but are actually donation mortis causa.
16. The transfer of property6 which conveys title to the property only upon death of the donor are donation mortis
causa.
17. Estate tax rate are higher than donor’s tax rates/
18. Incomplete transfer is not subject to tax upon physical transfer of the property.
19. Incomplete transfer which pre-terminated by the death of the transferor are subject to estate tax.
20. When incomplete transfer is completed during the lifetime of the transferor the transfer is subject to donor tax

Test I – Shade the answer sheet column A if the statement is correct otherwise shade column B if it is
incorrect. 1pt. each (total 20points)

# A B # A B
1 11
2 12
3 13
4 14
5 15
6 16
7 17
8 18
9 19
10 20

Test II- Multiple choice: Shade the letter referred to in a given statement below .1point
each (Total 30 points)
1. Which is subject to transfer tax?
a. Gratuitous transfer c. complex transfer
b. Onerous transfer d. A and C
2. Which to subject to transfer tax?
a. Sale c. Donation
b. Barrier d. Loan
3. A property is transferred for less than full consideration when it is sold
a. Above the fair value of the property
b. Below the fair value of the property
c. At the fair value of the property
d. At any proice3 which is deemed unacceptable to the seller.
4. Gratuity is not characterized by
a. Absence of consideration
b. Presence of adequate consideration
c. Presence of inadequate consideration
d. A and C
5. The transfer for full or adequate consideration is to
a. Income tax c. both a and b
b. Transfer tax d. Neither A nor B
6. Transfer for inadequate consideration is to
a. Income tax c. Both A and B
b. Transfer tax d. Neither A nor B
7. The transfer for adequate consideration is n
a. Exempt form transfer tax
b. Exempt from income tax
c. Subject to transfer tax
d. B and C
8. The gratuitous component of a transfer for inadequate consideration is
a. Subject to income tax
b. Exempt form income tax
c. Exempt from transfer tax
d. A and B
9. Who is the taxpayer in donor tax?
a. Donor c. Donne
b. Trustee d. beneficiary
10. Who is the taxpayer is estate taxation?
a. Decedent c. Administration
b. Estate d. Executor
11. Which is not a rationalization of transfer taxation?
a. Tax evasion c. State partnership
b. Tax recoupment d. All of the above

12. Transfer tax is imposed to partially recover future reduction in income tax which will arise from the split
of income producing property to few or several taxpayers.
 What theory statement does the statement describe?
a. Tax evasion theory c. Benefit received Theory
b. Tax recoupment d. Wealth redistribution theory
13. The government enforces the transfer of property by donation and succession. By exercising theses
privileges, the transferor must have to be taxed. What theory does the statement describe?
a. Tax evasion theory c. Benefit received theory
b. Tax recoupment theory d. ability to pay theory
14. The transfer of wealth should be taxed so that it will benefit the entire society. Which theory does the
statement describe?
a. State partnership theory c. Benefit received theory
b. Ability to pay theory d. Tax recoupment theory
15. Wealth accumulation could not be possible without the government’s indirect participation. The transfer
of wealth should be subject to tax because it is just fair for the government to take its just share on the
wealth. The statement Describes?
a. State partnership theory c. wealth redistribution theory
b. Ability to pay theory d. Tax minimization theory
16. Transfer can be structed in such a way to avoid payment of income tax. Thus, the gratuitous component
of transfer must be taxed. The statement described?
a. Tax evasion theory c. Benefits received theory
b. Tax recoupment theory d. ability to pay theory
17. Which is not a characteristic of transfer tax?
a. Privilege tax c. Local tax
b. National tax d. Direct tax
18. Transfer taxes are not
a. Fiscal taxes c. Ad valorem taxes
b. Indirect taxes d. Transaction taxes
19. Transfer taxes are
a. Regressive taxes c. Specific taxes
b. Indirect taxes d. Revenue Taxes
20. Who is subject to transfer tax?
a. Transferor c. Both transferor and transferee
b. Transferee d. None of these
21. Transfer tax on donation mortis causa applies to a
a. Natural person c. Both A and B
b. Juridical person d. Neither A nor B
22. Transfer tax on donation inter-vivos applies to a
a. Natural person c. Both A and B
b. Juridical person d. Neither A nor B
23. Which is taxable on all transfers regardless of location?
a. Resident citizen c. Non-resident citizen
b. Resident alien d. all of these
24. Which is not subject to estate tax?
a. Resident citizen c. Domestic corporation
b. Non-Resident alien d. Non-resident citizen

25. Which is not subject to transfer tax on transfer of properties located abroad? NON-RESIDENT ALIEN
a. Resident citizen c. Non-resident citizen
b. Resident alien d. Non-resident citizen
 26. A non-resident alien is
a. Exempt from transfer taxes.
b. Subject to transfer tax on Philippines properties
c. Subject to transfer on global properties
d. Subject to transfer tax only on transfer of tangible properties
27. Which of the following may be exempt on transfer on the basis of reciprocity?
a. Resident alien c. Non-resident alien
b. Non-resident citizen d. B and C
28. Which properties does the reciprocity exemption cover?
a. Intangible personal property located abroad
b. Intangible personal property located in the Philippines
c. Tangible and intangible properties located abroad
d. Tangible and intangible properties located in the Philippines
29. Which of the following is an intangible personal property?
a. Franchise c. Bonds
b. Stocks d. All of these
30. Which of these is subject to tax only on transfers of properties situated in the Philippines?
a. A citizen of Japan residing in the Philippines.
b. A citizen of Philippines residing in Hong Kong
c. A citizen of America residing in Korea
d. A citizen of the Philippines residing in the Philippines.

ANSWER SHEET
Test II- Multiple choice: Shade the letter referred to in a given statement below .1point each (Total 30
points)

# A B C D # A B C D # A B C D
1 11 21
2 12 22
3 13 23
4 14 24
5 15 25
6 16 26
7 17 27
8 18 28
9 19 29
10 20 30

Problem Solving; Compute the amount in a given problems. Shade the in the answer sheet
that correspond to your computed amount. 2points each (total 50points)
1. Mr.Bonifcio purchased a piece of land in 2011 for P500,000 when it was worth P450,000. He
transferred the property when it was worth P1,000,000. Subsequently, Mr. Bonifacio died when the
property was worth P1,200,000
Assuming that the donation is donation inter-vivos, what is the value to be subjected to donor tax?
a. P450,000 c. P1,000,000
b. P500,000 d. P1,200,000
2. Assuming that the donation is a donation mortis causa, what is the value to be subjected to estate tax?
a. P450,000 c. P1,000,000
b. P500,000 d. P1,200,000
3. Man Juan transferred a property with a fair value of P1,000,000. Title to the property was stipulated to
be transferred immediately. Subsequently, Mang Juan died. The propery was worth P800,000 at the date
of his death
Which is correct?
a. The property is subjected to donor’s tax at P1,000,000
b. The property is subjected to donor’s tax at P800,000
c. The property is subjected to estate tax at P800,000
d. The property is subjected to estate tax at P1,000,000
4. Assume instead that the title to the property was reserved by Mang Juan until death, which is correct?
a. The property is subjected to donor’s tax at P1,000,000
b. The property is subjected to donor’s tax at P800,000
c. The property is subjected to estate tax at P800,000
d. The property is subjected to estate tax at P1,000,00
5. A resident citizen died leaving the following property at the point of his death:

Fair Value Acquisition Cost

House and Lot P4,000,000 P2,000,000
Car 800,000 1,200,000
Agricultural Land 2,100,000 500,000

Compute the amount of the donation mortis causa.

a. P 0 c. P 4,000,000
b. P 3,700,000 d. P 7,300,000
6. A donor transferred the following properties on a certain day:

Philippines Abroad
Cash P400,000 P0
Land 1,000,000
Car 3,000,000
Assuming the donor is a resident citizen, what is the amount of the donation inter-vivos?
a. P 1,000,000 c. P 4,000,000
b. P 1,400,000 d. P 4,400,000
7. Assuming the donor is a resident alien, what is the amount of the donation inter-vivos?
a. P 1,000,000 c. P 4,000,000
b. P 1,400,000 d. P 4,400,000

8. Assuming the donor is a non- resident citizen, what is the amount of the donation intervivos?
a. P 1,000,000 c. P 4,000,000
b. P 1,400,000 d. P 4,400,000
9. Assuming the donor is a non-resident alien, what is the amount of the donation intervivos?
a. P 1,000,000 c. P 4,000,000
b. P 1,400,000 d. P 4,400,000
10. Assuming the donor is a non-resident alien with a reciprocity exemption, what is the amount of the
donation inter-vivos?
a. P 1,000,000 c. P 4,000,000
b. P 1,400,000 d. P 4,400,000
11. Mr. CHucho decedent died leaving the following properties:

Philippines Abroad
Investment in stocks P500,000 -
House and Lot - 4,000,000
Residential Lot 3,000,000 -
12. Assuming Mr. Chucho is a non-resident alien, what is the amount of donation mortis causa?
a. P 0 c. P 3,500,000
b. P 3,000,000 d. P 7,500,000
13. Assuming Mr. Chucho is a non-resident citizen or resident alien and reciprocity rule applies, what is the
amount of donation mortis causa?
a. P 0 c. P 3,500,000
b. P 3,000,000 d. P 7,500,000
14. A seller of goods made the following sales:
Fair market value P 5,500,000
Selling price 4,500,000
Cost 2,500,000

What is the amount subject to the income tax?

a. P 0 c. P 1,500,000
b. P 1,00,000 d. P 2,000,000
15. In the immediately preceding problem, what is the amount subject to transfer tax?
a. P 0 c. P 1,500,000
b. P 1,00,000 d. P 2,000,000
16. Avalon sold car, Data relating to the sale and the car are as follows:
Fair market value P 4,000,000
Selling price 5,000,000
Cost 2,500,000

What is the amount subject to income tax and to transfer tax respectively?
a. P 0; P 0 c. P 1,500,000; P 1,000,000
b. P 1,500,000; P 0 d. P 0; P 2,500,000

17. Mr. Peter made a revocable transfer of his stock investment on July 4, 2020 in favor of his brother,
Merto. Peter died on December 15 2020.
The stocks had the following fair values:
 July 4, 2020 P1,200,000
August 20,2020 1,100,000
December 15,2020 1,600,000

Assuming Peter waived the right to revoke on August 20, 2020, what is the amounts subject to transfer
tax and the type of transfer tax to apply?
a. P 1,200,000; donor’s tax
b. P 1,1000,00; donor’s tax
c. P 1,600,000; donor’s tax
d. P 1,600,000; estate tax
18. Assuming Mr. Peter did not revoke the property until the date of his death, what is the amounts subject
to transfer tax and type of transfer tax to apply?
a. P 1,200,000; donor’s tax
b. P 1,1000,00; donor’s tax
c. P 1,600,000; donor’s tax
d. P 1,600,000; estate tax
19. In October 2020, Mrs. Blender transferred a property to her younger sister, Careen, subject to the
condition that careen must graduate in March 2021.
The property was worth P 800,000 in October 2020 and P 900,000 in March 2021. Mrs. blender died on
July 15,2021 when the property was worth P 1,200,000.

Assuming that Careen failed to graduate in March 2021, what is the amount of donation and the transfer
tax to apply?
a. P 800,000; donor’s tax
b. P 900,000; donor’s tax
c. P 1,200,000; donor’s tax
d. None; None
20. During his birthday, Mr. Fu Chen donated the following properties:
Cash donation to his wife P 500,000
Oral donation of hose and lot 3,00,0000

Compute the taxable amount of donation inter-vivos?

a. P 0 c. P 3,000,000
b. P 500,000 d. P 3,500,000
21. A resident alien conveyed the following properties on the following terms:
Consideration Fair Value
Car P0 P500,000
Motorcycl 300,000 300,000
e
Laptop 20,000 80,000

Compute the total amount subject to transfer made by seller:

a. P 880,000 c. P 500,000
b. P 560,000 d. P 60,000

22. The following relates to a transfer made by seller

Selling price P 1,500,000
 Fair value of property at date of sale 4,000,000
Fair value at death of the seller 5,000,000

Assuming that title to the property is transferred on the date of sale, what is the amount of donation and
the type of transfer tax to apply?
a. P 0; None c. P 2,500,000; donors’ tax
b. P 1,00,000; estate tax d. P3,500,000; donors’ tax
23. Assuming that title to the property was agreed upon to take effect on the date of death, what is the
amount of donation and the type of transfer tax to apply?
a. P 0; none c. P 2,500,000; donor’s tax
b. P 1,000,000; estate tax d. 3,500,000; donor’s tax
24. The following relate to the disposition of property made by seller:
Selling price P 4,200,000
Fair value of property on date of sale 4,000,000
Fair value at death of the seller 5,000,000

What is the amount subject to donor’s tax?

a. P 0 c. P 800, 000
b. P 200,000 d. P 4,000,000
25. Assuming that the transfer s revocable until the death of the decedent-seller, what is the amount subject
to estate tax?
a. P 0 c. P 800, 000
b. P 200,000 d. P 4,000,000

ANSWER SHEET
Problem Solving; Compute the amount in given problems. Shade the in the answer sheet
that correspond to your computed amount. 2points each (total 50points)

# A B C D # A B C D # A B C D
1 11 21
2 12 22
3 13 23
4 14 24
5 15 25
6 16 26
7 17 27
8 18 28
9 19 29
10 20 30