CHAPTER 12

True or False 1
True 1. The transfer is either bilateral or unilateral
True 2. Unilateral transfer is subject to transfer tax
True 3. Bilateral transfers are subject to income tax
False 4. Unilateral transfers include sales and barters
False 5. Bilateral transfers include inheritance and donations
False 6. Donations inter-vivos are subject to estate tax
False 7. A donation mortis causa is subject to donor’s tax
True 8. The transferee in a donation is referred to as a donee
True 9. The transferee in a succession is referred to as an heir
True 10. The transferor in a donation inter-vivos is a donor
False 11. The transferee in a donation mortis causa is a decedent
True 12. Complex transfer are subject to both income tax and transfer tax
True 13. What constitutes an “adequate consideration” is a question of fact
True 14. Both the transfer and exchange element of a complex transfer are subject to transfer tax
True 15. Transfer tax supports income taxation
True or False 2
False 1. Transfer tax is intended to recoup future reduction in business tax
True 2. Transfer tax can be viewed as a mode of redistribution of wealth to society
False 3. The dominant view of transfer tax is the ability to pay theory
True 4. Transfer tax is a tax on the privilege to transfer property gratuitously
True 5. Transfer tax are national taxes
False 6. Transfer tax is a form of specific tax
False 7. Transfer tax is an indirect tax
True 8. Transfer tax is a revenue tax
False 9. Transfer taxpayers are classified into two groups: residents and non-residents
True 10. Non—resident aliens are subject to tax only on transfers of Philippine properties
True 11. Citizens are subject to tax on transfer of properties regardless of location
False 12. Aliens are subject to tax only on transfers of properties situated in the Philippines
True 13. Residents are subject to tax on transfers of properties regardless of location
True 14. Non-residents are taxed only on transfers of property located in the Philippines
True 15. The reciprocity rule on intangible personal property applies only to non-resident aliens
True or False 3
False 1. The reciprocity rule may apply to movable personal property located in the Philippines
False 2. The reciprocity rule applies to intangible properties of any alien located in the
Philippines
True 3. Franchises are subject to transfer tax in the place where they are exercised
True 4. The shares and bonds of domestic corporations are presumed situated in the Philippines
for
purposes of transfer taxation
False 5. Shares and bonds of foreign corporations are always presumed situated abroad for
transfer tax
purposes
True 6. For purposes of transfer tax, the interest in a business partnership organized abroad is
presumed
situated abroad
True 7. Cash is considered an intangible property
False 8. Shares of stocks and bonds are tangible personal properties
False 9. Donations inter-vivos are subject to transfer tax at the point of death of the donor
True 10. Donations mortis causa are subject to transfer tax at the death of the decedent
True 11. Donations inter-vivos are inspired by the generosity of the donor
True 12. A donation mortis causa is effected by the death of the decedent
True 13. As a rule, all properties of the donor existing at the point of death constitute his
donation mortis causa
False 14. All forms of gratuitous transmission of property while the donor is living is considered
donation inter-vivos
True 15. Transfer in contemplation of death are donations made inter-vivos but are actually
donation mortis causa
True 16. The transfer of property which conveys title to the property only upon death of the
donor are donations mortis causa
True 17. Estate tax rates are higher than donor’s tax rates
True 18. Incomplete transfers are not subject to tax upon physical transfer of the property
True 19. Incomplete transfers which are pre-terminated by the death of the transferor are subject
to estate tax
True 20. When incomplete transfers are completed during the lifetime of the transferor, the
transfer is subject to donor’s tax

Multiple Choice Theory -1

1. Which is subject to transfer tax –D. Gratuitous and complex transfer (A and C)
2. Which is subject to transfer tax – Donation
3. A property is transferred for less than full consideration when it is sold – below the FV of the
property
4. Gratuity is not characterized by – presence of adequate consideration
5. Transfers for full or adequate consideration is subject to – income tax
6. Transfer for inadequate consideration is subject to - C. Income tax and Transfer tax (A and
B)
7. the transfer for adequate consideration is – exempt from transfer tax
8. the gratuitous component of a transfer for inadequate consideration is – exempt form income
tax
9. who is the taxpayer in donor’s tax – donor
10. Who is the taxpayer in estate taxation – estate
11. Which is not a rationalization of transfer taxation – none 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 – tax recoupment
theory
13. The government enforces the transfer of property by donation and succession. By exercising
these privileges, the transferor must have to be taxed. What theory does the statement describe –
benefit received theory
14. The transfer of wealth should be taxed so that it will benefit the entire society. Which theory
does the statement describe – wealth redistribution 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. – state partnership theory
16. Transfers can be structured in such a way to avoid payment of income tax. Thus, the
gratuitous
component of transfers must be taxed – Tax evasion theory
17. Which is not a characteristic of transfer tax – local tax
18. Transfer taxes are not –transaction and progressive tax
19. Transfer taxes are – revenue taxes
20. Who is subject to transfer tax – transferor
21. Which statement is generally correct? – all Philippine transfers are subject to transfer
taxes
22. Which statement is incorrect? – statement 2

Multiple Choice Theory -2

1. Transfer tax on donation mortis causa applies to – natural person
2. Transfer tax on donation inter-vivos applies to – both natural and juridical person
3. Which is taxable on all transfers regardless of location – resident citizen, resident alien, non-
resident citizen ( all of these)
4. Which is not subject to estate tax – domestic corporation
5. Which is not subject to transfer tax on transfer of properties located abroad – non-resident
alien
6. A non-resident alien is – subject to transfer tax on Philippine properties
7. Which of the following may be exempt on transfers on the basis of reciprocity – non-resident
alien
8. Which properties does the reciprocity exemption cover –intangible properties located in the
Philippines
9. Which of the following is an intangible personal property – all of these
10. Which of these subject is to tax only on transfers of properties situated in the Philippines – a
citizen of the America residing in Korea
11. Which of these is taxable on global transfers of properties – an American residing in the
Ph. & a Filipino residing in Malaysia & a Chinese residing in the Philippines
12. Which is subject to donor’s tax – donation inter-vivos
13. Which is not a characteristic of a donation inter-vivos – inspired by the thought of death of
the transferor
14. Which of these is a donation mortis causa – donation in contemplation of death &
donation to take
effect upon death & revocable donation pre-terminated by death ( all of these)
15. Which of the following donations made during the lifetime of the donor is subject to donor’s
tax – donation inspired by motives associated with life
16. Which of the following is not a motive associated with life – to save on transfer tax
17. Donation made on the decedent’s last will and testaments is – a donation mortis causa
18. Which of the following forms of non-taxable transfers will not be subject to transfer tax –
void transfer quasi-transfer
19. Which of the following forms of non-taxable transfers may be subject to transfer tax in
the future –incomplete transfer
20. Which is incorrect regarding the taxation of incomplete transfers which are eventually
completed – they are subject to either donor’s tax OR estate tax
21. Which is complete transfer – irrevocable transfers
22. A conditional donation may be completed by –fulfilment of the condition specified by the
transferee &waiver of the condition by the transferor
23. Conditional transfers and revocable transfers which are still pending completion at the point
of the transferor’s death are – subject to estate tax
Problems: Part 1
1, Mr. Bonifacio 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 a donation inter-vivos, what is the value to be subjected to donor's
tax?
a. P 450,000 c. P 1,000,000
b. P 500,000 d. P 1,200,000
2. Assuming that the donation is a donation mortis causa, what is the value to be subjected to
estate tax?
a. P 450,000
b. P 500,000
c. P 1,000,000
d P 1,200,000

3. Mang Juan transferred a property with a fair value of 1,000 000. Title to the property was
stipulated to be transferred immediately. Subsequently, Mang Juan died. The property was worth
P800,000 at the date of his death.
Which is correct?
a. The property is subject to donor's tax at P1,000,0000
b. The property is subject to donor's tax at P800,00 .
c. The property is subject to estate tax at P800,000.
d. The property is subject to estate tax at P1,000,000.

4. Assume instead that legal title to the property was reserved by Mang Juan until death, which is
correct?
a. The property is subject to donor's tax at P1,000,000.
b. The property is subject to donor's tax at P800,000.
c. The property is subject to estate tax at P800,000.
d. The property is subject to estate tax at P1,000,000.

5. A resident citizen died leaving the following property at the point of his death:
Fair Value Acquisition Cost
House and lot P 4,000,000 2 000 000
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 6,900,000 (P4M + P800K + P2.1M)
b. P 3,700,000 d. P 7,300,000

6. A donor transferred the following properties on a certain day:

Philippines Abroad
Cash P 400,000 0
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 b. P 1,400,000
c. P 4,000,000 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 b. P 1,400,000
c. P 4,000,000 d. P 4,400,000

8• Assuming the donor is a non-resident citizen, what is the amount of the donation inter-vivos ?
a. P 1,000,000 b. P 1,400,000
c. P 4,000,000 d. P 4,400,000

9• Assuming the donation is a non-resident alien, what is the amount of the inter- vi donor?
a. 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. 1,000,000
b. P 1,400,000
c. 4000 000
d. 4 400 000
 Multiple-Choice — Problems: Part 2
1. Mr. Chucho decedent died leaving the following properties:
Phil Abroad
Investments in stocks 500 000
House and lot 400 000
Residential lot 3000 0000
Assuming Mr. Chucho is a non-resident citizen or a resident alien, what is the amount of
donation mortis causa?
A.P 0
b. P 3,000,000
c. P 3,500,000
d. P 7,500,000

2. Assuming Mr. Chucho is a non-resident alien, what is the amount of the donation mortis
causa?
a. P 0
b. P 3,0 00,000
c. P 3,500,000
d. P 7,500,000

3. Assuming Mr. Chucho is a non-resident alien and the reciprocity rule applies, what is the
amount of the donation mortis causa?
a. 0
b. P 3,000,000
c. P 3,500,000
d. P 7,500,000

4. 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 income tax?
a. P 0
c. P 1,500,000
d. P 2,000,000 (P4.5M – P2.5M)
b. P 1,000,000 .

5. 1n the immediately preceding problem, what is the amount subject to transfer tax?
a. 0
b. 1 000 000 (P5.5M – P4.5M)
c. 1 500 000
d. 2 000 000

6. Avalon sold a car. Data relating to the sale and the car are as follows:
Fair market value P 4,000,000
Selling price 5,000,000
What is the amount subject to income tax and to transfer tax, respectively?
a. 0,0
b. . P1,500,000; 0
c. P1,500,000; P1,000,000
d. P 0; P2,500,000

7. Mr. Peter made a revocable transfer of his stock investments 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 P 1,200,000
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 amount subject to
transfer tax and the type of transfer tax to apply?
a. P 1,200,000; donor's tax
b. P 1,100,000; donor's tax
c. P 1,600,000; donor's tax
d. P 1,600,000; estate tax

8. Assuming Mr. Peter did not revoke the property until the date of his death, what is the amount
subject to transfer tax and the type of transfer tax to apply?
a. P 1,200,000; donor's tax
c. P1,600,000; donor's tax
b. P 1,100,000; estate tax
d. P1,600,000; estate tax

9. 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 2021• Mrs. Blender died on July October 2020 and P
900,000 in March P1,200,000. 15, 2021 when the property was worth 1 200 000.
Assuming that Careen failed to graduate in March 2021, what is tax of donation and the transfer
tax to apply?
a. P 800,000; donors tax
b. P 900,000; donors tax
c. P 1,200,000; estate tax
d. None; none

.10. During his birthday, Mr. Fu Chen donated the following properties:
Cash donation to his wife P 500,000
Oral donation of house and lot 3,000,000
compute the taxable amount of donation inter-vivos.
a, P 0
c. P3.000,000
b. P 500.000
d. P3,500,000
 Multiple-Choice - Problems: Part 3
1. A resident alien conveyed the following properties on the following terms:
Consideration Fair value
Car 0 500 000
Motorcycle 300 000 300 000
Tricycle 20 000 80 000
Compute the total amount subject to transfer tax.
a. P 880,000
b. P 560,000
c. P 500,000
d. P 60,000

2. The following relates to a transfer made by a 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 arnount of
donation and the type of transfer tax to apply?
a. 0; none
c. P 2,500,000; donor's tax
b. P 1,000,000; estate tax
d. P 3,500,000; donor's tax

3. 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
b. P1,000,000; estate tax
c. P2,500,000; donor's tax
d. P3,500,000; estate tax

4. The following relate to the disposition of property made by a 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. P0
b. P 200,000
c. P 800,000
d. P 4,000,000

5. Assuming that the transfer is revocable until the death of the descent seller, what is the amount
subject to estate tax?
a. 0
b. P 200,000
c. P 800,000
d. P4,000,000

6. A donor transferred properties to save on subject to income donation is subject to

a. income tax.
b. donor's tax.
C. estate tax.
d. both income tax and donor's tax.

7. Mr. B made a revocable donation of a property valued at P1,000,000.

Which is a correct statement regarding the taxation of the donation?
a. The donation shall be subject to donor's tax.
b. The donation shall be subject to estate tax.
c. The donation is subject to income tax.
d. The donation shall neither be subject to donor's tax nor estate tax.

8. Kumar made an irrevocable donation of real property during his lifetime in favor of his wife.
Which is true?
a. The donation shall be subject to donor's tax.
b. The donation shall be subject to estate tax.
c. The donation is subject to either donor's tax or estate tax.
d. The donation is void and is not subject to transfer tax.

9. Which of these is not considered within the Philippines?

a. Franchise of a foreign franchisor which is exercised in the Philippines
b. Stocks of a domestic corporation with 60% of business in the Philippines
c. Foreign shares which are traded in the Philippine stock market
d. Stocks of a foreign corporation with 75% of business in the Philippines

10. Mr. Ku Loth, transferred a stock portfolio with a fair value of P2,000,000 P1,990,000.
Ownership shall not transfer until full payment is made by the for transferee within 10 days. On
the 10th day, the buyer paid the price in full when the portfolio was worth P 2,100,000.
Subsequently, the transferor died when the stocks were worth P3 400 00

What is the amount subject to transfer tax and the transfer tax that would to apply?
a. P 0; None This is not a gratuity because P1,990,000 is very close to P2,000,000). This is a
bona fide sale. Ownership transfers upon payment. The transfer no longer owns the stocks by the
time of his death.
b. P 50,000; Donor's tax
c. P 100,000; Donor's tax
d. P 1,400,000; Estate tax

11. Anton donated stock securities to his daughter, Mary, as reward to the latter for services
rendered to Anton. The property was worth P1,100,000 when Anton wrote the deed of donation.
The same had a value of P1,050,000 when the donation was accepted by Mary. What is the
amount of gratuity and the applicable transfer tax?
a. P1,050,000; donor's tax
b. P1,050,000; estate tax
c. P1,100,000; donor's tax
d. P1,100,000; estate tax
12. Mr. Erick received in trust a property worth P1,400,000. Erick was entrusted to be the
fiduciary heir to the property left by his mother, Marciana. While still living, Erick transferred
the same property to his younger brother, Erwin, in accordance with the will of their mother,
Marciana. The property was worth P1,500,000 at the date of transfer.
The property is
a. subject to donor's tax at P1,500,000.
b. subject to estate tax at P1,500,000.
c. subject to donor's tax at P1,400,000.
d. exempt from transfer tax.

13. Raymund was indebted to Zeus with a P 50,000 interest-bearing loan. Raymund rendered
services worth P51,500 to Zeus. Zeus cancelled Raymund's indebtedness when it was worth
P51,500 including interest.
The cancellation of indebtedness is
a. subject to donor's tax.
b. subject to estate tax.
c. exempt from transfer tax.
d. subject to both donor's tax and estate tax.