8. A.) No the Philippine Tax will not apply in the eventual transfer of shares of stock to V.

Wembanyama’s eldest son.

The National Internal Revenue Code, as amended by the TRAIN Law, provides that a non-resident alien is
only taxable to his properties located in the Philippines. In the present case, as the half of his
stockholdings is not located here in the Philippines, the Philippine tax will not apply when V.
Wembanyama eventually transfers his shares of stock.

Again, the Philippine tax will not apply in the eventual transfer of shares of stock to V. Wembanyama’s
eldest son as V. Wembanyama is a non-resident alien.

B.) No, my answer would be the same.

My answer would be the same had V. Wembanyama executed a deed of donation instead of a last will
and testament. The National Internal Revenue Code, as amended by the TRAIN Law, provides that a
donation of a property made by a non-resident alien whether tangible or intangible, not located in the
Philippines, is not subject to donor’s tax. In the present case, had V. Wembanyama executed a deed of
donation instead of a last will and testament, Philippine tax would still not apply as he is not a resident
alien and the property to be donated, based on the facts given, was not a resident corporation.

Again, even though V. Wembanyama executed a deed of donation instead of a last will and testament,
Philippine tax will still not apply as he is a non-resident alien and the property to be donated is not
located here in the Philippines.

10. A.) The shares of Mr. Barbera’s wife in the inheritance is includible in the gross estate but not the
shares in the conjugal property.

The National Internal Revenue Code, as amended by the TRAIN Law, states that the shares of a surviving
spouse in the inheritance is included in the gross state, while the share in the conjugal property is not
includible in the same. In the present case, only the shares of Mr. Barbera’s wife in the inheritance is
included in the gross estate, but not her share in the conjugal property.

Again, only the shares of Mr. Barbera’s wife in the inheritance and not the share in the conjugal
property is includible in his gross estate.

B.) The BIR was partly correct.

The National Internal Revenue Code, as amended by the TRAIN Law, provides that a general
renunciation in the inheritance is not subject to donor’s tax, while a renunciation of the surviving spouse
of his or her share in conjugal property is subject to donor’s tax regardless if the renunciation is a
general or special renunciation. In the present case, the BIR was wrong when it assessed Mrs. Barbera a
donor’s tax with respect to her renunciation in the inheritance as there is no clear showing based from
the given facts that her renunciation in the inheritance was in favor of a specific child. With respect to
her renunciation of her share in the conjugal property, the BIR is correct when they assessed a taxable
gift based on the same, as the renunciation, whether general or special, is subject to donor’s tax.

Again, the BIR erred when it assessed a donor’s tax on the renunciation of Mrs. Barbera in her
inheritance, but it is correct when it assessed a donor’s tax on her renunciation in her share in the
conjugal property.

16. A.) No, the claim of deduction is not justified.

The National Internal Revenue Code, as amended by TRAIN Law, provides that in order for a vanishing
deduction to be legally justified, it must be shown that the property was acquired through succession,
and was later on passed also through succession, or the subject property was acquired through
succession and was later on passed through donation. In the present case, Ramon acquired the subject
parcel of land through purchase, and not through succession. As such, the claim is not legally justified.

Again, as the subject parcel of land was not acquired through succession, the claim of deduction is not
legally justified.

B.) Vanishing deduction is available if the decedent is a non-resident alien.

The National Internal Revenue Code, as amended by the TRAIN Law, provides that a decedent, even
though a non-resident alien, may avail of the vanishing deduction. It is one of the few deductions a non-
resident alien decedent may avail of.

Again, vanishing deduction is available even if the decedent is non-resident alien.

19. A.) Yes, the sale is subject to VAT.

The National Internal Revenue Code, as amended by the TRAIN Law, provides that a sale made in the
ordinary course of trade or business is subject to VAT. In the present case, since Juliana is an owner of a
drug store in Sampaloc Manila, her sale of various needed medicines for recuperation to Marites is a
sale made in the ordinary course of trade or business. As such, the sale is subject to VAT.

Again, as the sale is made in the ordinary course of trade or business, the sale is subject to VAT.

B.) No, Juliana is not liable for donor’s tax on the difference of the market price of the medicines over
the selling price she offered to Marites.

The National Internal Revenue Code, as amended by the TRAIN Law, provides that a bona fide sale, or
sale made in arm’s length is not subject to donor’s tax. In the present case, as the sale between Juliana
and Marites is a bona fide sale, the difference between the market price of the medicines over the
selling price offered to Marites is not subject to donor’s tax.

Again, since the sale made by Juliana to Marites is a bona fide sale, the difference between the market
price of the medicines over the selling price she offered to Marites is not subject to donor’s tax.

27. A.) Yes, an estate tax return should be filed.

The National Internal Revenue Code, as amended by the TRAIN Law, provides that an estate tax return
should be filed regardless of the amount of the estate. In the present case, even if the market value of
the stocks held by Jason at the time of his death dipped to P25,000.00 and save for the few personal
effects, an estate tax return should still be filed. With regard to how much should be paid, no estate tax
should be paid as there is an allowable threshold amount for standard deduction of P5,000,000.00. As
the estate of Jason does not exceed P5,000.000.00, no tax would be due to Jason’s estate.

Again, an estate tax return should still be filed regardless of the amount of the estate.

B.) No, Jason would not be held liable for donor’s tax.

Jason would not be held liable for donor’s tax as the sale was not for an insufficient amount or
consideration. The National Internal Revenue Code, as amended by the TRAIN Law, provides that a sale
for an inadequate amount or consideration is subject to donor’s tax if the selling price is lower than the
market value. In the present case, since the current market value is P25,000.00, even though Jason
purchased it at P50,000.00, Jason would not be liable for donor’s tax as there is no difference between
the selling price and the current market value.

Again, supposing that Jason sold the shares before he died at a current market value of P25,000.00, he
would not be held liable for donor’s tax.

30. I will tell Engr. Eugene that taxes are due upon transfer of his properties to his son, and I would
advice him to do gift splitting upon donation in order to completely avoid such tax liability.

The National Internal Revenue Code, as amended by the TRAIN Law, provides that a donation not
exceeding P250,000.00 every year is exempt from donor’s tax. As such, I will advise Engr. Eugene that he
may donate only P250,000.00 every year to avoid tax liabilities, until he completely transfers his
properties to his only son and surviving heir.

Again, I will advise Engr. Eugene to donate P250,000.00 only every year to not exceed the exempt
threshold amount until he completely transfers all his properties to his only son and surviving heir to
avoid any tax liability.

36. A.) Don Pedro has no gross estate left.

The National Internal Revenue Code, as amended by the TRAIN Law, provides for an allowable deduction
such as family home with a threshold amount of P10,000,00.00, and a standard deduction with a
threshold amount of P5,000,000.00, among others. In the present case, the house and lot in Makati as a
family home valued at P10 Million, is an allowable deduction. Moreoever, the car worth P1 Million
registered in the name of Don Pedro’s youngest son, jewelries valued at P1 Million which where
inherited from Don Pedro’s parents, and the business interest in a grocery store in Las Vegas Nevada
valued at P1 Million are also covered by the standard deduction of P5,000,000.00. Hence, Don Pedro will
have no gross estate left to be taxable.

Again, as the threshold amount of allowable deductions for family home and standard deduction are not
exceeded, there will be no gross estate left which is taxable for Don Pedro.

B.) My answer would depend if Don Pedro, as a Mexican, will die here in the Philippines as a resident
alien or a non-resident alien.
The National Internal Revenue Code, as amended by the TRAIN Law, provides that only a resident
citizen, a non-resident citizen, and a resident alien, may avail of the allowable deductions provided
under the law. As such, if Don Pedro, as a Mexican, is a resident alien, he can constitute his family home
as an allowable deduction together with his properties as standard deduction, except the business
interest in a grocery store in Las Vegas Nevada valued at P1 Million which is subject to the rule on
reciprocity. Meanwhile, if Don Pedro was a Mexican and not a resident alien, he cannot claim his family
home as an allowable deduction and the allowable threshold amount of standard deduction for a non-
resident alien is only P500,000.00. The inclusion of the business interest in a grocery store in Las Vegas
Nevada, valued at P1 Million to the gross estate is also subject to reciprocity rule. As such, his gross
estate would be P12, 500,00.00, or P11,500,00.00, depending on the application of the reciprocity rule.

Again, the gross estate of Don Pedro is either P12,500,000.00 or P11,500,00.00 depending the
application of the reciprocity rule.