BASIC PRINCIPLES

1. In our jurisdiction, which of the following statements may be erroneous?

a. Taxes are pecuniary in nature.
b. Taxes are enforced charges and contributions.
c. Taxes are imposed on persons and property within the territorial jurisdiction of a
State.
d. Taxes are levied by the executive branch of the government.

2. Well-known authors describe that the exercise of taxation has three aspects, which of
the following is not:
a. Research
b. Levy
c. Assessment
d. Collection

3. In case of inconsistency between a law and a revenue regulation, which will prevail?
a. Law
b. Revenue Regulation
c. Either “a” or “b” whichever is favorable to the taxpayer
d. Either “a” or “b” whichever is favorable to the government

4. Which of the following statements is incorrect pertaining to tax exemption of properties

for religious, charitable and educational purposes?
a. Exemptions of religious, charitable and educational institutions applies to real
property tax and income tax only.
b. In case of property tax exemption, the test is usage, not ownership.
c. The word “exclusive” means primarily rather than solely.
d. What is exempted is not the institution itself but the lands, buildings and
improvements actually, directly and exclusively used for religious, charitable and
educational purposes.

5. Bank A is subject to the gross receipts tax on its interest income on loan transactions to
customers and at the same time such income is subject to income tax. Which statement
below INCORRECTLY describes the transaction?
a. There is double taxation because two taxes – income tax and gross receipts tax
are imposed on the interest income described above, and double taxation is
prohibited under the 1987 Constitution.
b. There is no double taxation because the first tax is income tax, while the second
is a business tax.
c. Income tax on interest income of deposits of Bank A is
d. a direct tax, while GRT on interest income on loan transaction is an indirect tax.
e. None of the choices

6. In cases of deductions and exemptions on income tax returns, doubts shall be

resolved
a. Strictly against the taxpayer
b. Strictly against the government
c. Liberally in favor of the taxpayer
d. Liberally against the government

ESTATE TAX
7. It is a well settled rule that estate taxation is governed by the statute in force at the
time of:
 a. Creation of the last will testament or death of the decedent in case of intestate
succession
b. Death of the decedent
c. Filing of estate tax return
d. Either letter “b” or “c” whichever will result to higher estate tax liability

8. A resident alien decedent left a gross estate amounting to P5,000,000, which of the
following statements is correct?
a. The estate may be liable to estate tax.
b. The estate may not be liable to estate tax.
c. The estate is absolutely not liable to estate tax.
d. The estate is absolutely liable to estate tax.

9. Which of the following will not form part of claims against the estate?
a. Unpaid funeral plan at the time of death
b. Unpaid medical expenses at the time of death
c. Both “a” and “b”
d. Neither “a” nor “b”

10. Ms. Ty bought a condominium from Ayala Corporation. Based on the contract to sell
executed between the parties, the buyer is obligated to secure a life insurance
designating the seller as the irrevocable beneficiary. The insurer is mandated to pay
whatever is the unpaid obligation of the buyer to the seller in the event of untimely
death of the former. Unfortunately, Ms. Ty died while there is still an unpaid obligation
to the seller amounting to P3,000,000. The zonal value of the condominium at the
time of death is P6,000,000. How much should be included in the gross estate?
a. P9,000,000 c. P6,000,000
b. P3,000,000 d. zero

11. Based on the preceding number, how much is the deductible claims against the
estate?
a. a. P9,000,000 c. P6,000,000
b. b. P3,000,000 d. zero

12. The following deductions are also part of the gross estate, except:
a. Claims against the estate
b. Claims against insolvent persons
c. Transfer for public use
d. Death benefits under Republic Act. 4917

13. In determining the gross estate of a married decedent, which of the following should
be excluded?
a. Exclusive properties of the decedent
b. Share in the common properties by the decedent
c. Share in the common properties by the surviving spouse
d. None of the above
14. The following properties will be classified uniformly under Conjugal Partnership of Gains
and Absolute Community of Property, except:
a. Property inherited or received as donation during the marriage
b. Property acquired from labor, industry, work or profession of spouses
c. Fruits or income due or derived during the marriage coming from common
 properties
d. Fruits or income due or derived during the marriage coming from exclusive
properties

15. The following deductions are also part of the gross estate, except:
a. Claims against the estate
b. Claims against insolvent persons
c. Transfer for public use
d. Death benefits under Republic Act. 4917

16. Which of the following is not allowed to claim family home allowance as deduction in
determining estate tax?
a. Non-resident citizen
b. Resident alien
c. Non-resident alien
d. Both “a” and “c”

17. D borrowed 10,000,000 from Bank C which remained unpaid at the time of death. The
heirs negotiated with the Bank to settle the loan for P7,000,000 only due to financial
constraints. How much can be claimed as deduction by the estate of D in the
determination of estate tax liability?
a. P3,000,000 c. P7,000,000
b. P10,000,000 d. zero

18. When the Commissioner finds that the payment of the estate tax or of any part thereof
would impose undue hardship upon the estate or any of the heirs, he may extend the
time for payment. Which of the following cases will not be a sufficient ground for the
Commissioner to deny the request for extension?
a. Simple negligence
b. Gross negligence
c. Intentional disregard of rules and regulations
d. None of the choices

19. If the estate is settled judicially, the allowed extension for filing is:
a. Within 30 days from the statutory due date
b. Within six (6) months from the statutory due date
c. Within two (2) years from the statutory due date
d. Within five (5) years from the statutory due date

QUESTIONS 20-25
20. Ms. Inah Taque, a resident alien married to a Filipino, died leaving the following:
Family home (500 sq. meters, zonal value is P50,000 per square meter) P19,000,000
Bank deposit (50% subjected to 6% final tax) , 5,000,000
Life insurance proceeds, beneficiary is the wife who is the executor,
designation is irrevocable 4,000,000
Life insurance proceeds, beneficiary is his son, designation is irrevocable 2,000,000
Donation to the City of Tacloban made in the will 1,000,000

Claims against an insolvent debtor (40% 1,500,000

uncollectible)
Funeral expenses (P300,000 still unpaid at 850,000
the time of death)
Judicial expenses 460,000
Medical expenses (55% paid at the time of 1,200,000
death)

How much is the exclusive gross estate?

a. P1,000,000 c. P16,500,000
b. P33,000,000 d. none of the choices

21. How much is the common gross estate?

a. P1,000,000 c. P16,500,000
b. P33,000,000 d. none of the choices

22. How much is the exclusive deduction?

a. P1,000,000 c. P600,000
b. P1,440,000 d. P720,000

23. How much is the common deduction?

a. P1,000,000 c. P400,000
b. P1,440,000 d. P720,000

24. How much is the special deduction?

a. P14,500,000 c. P15,000,000
b. P24,000,000 d. none of the choices

25. How much is the estate tax payable?

a. P76,800 c. P46,800
b. P226,800 d. zero

QUESTIONS 26-28
26. Donald Trunk, a married American residing in Florida U.S.A., died in 2021 leaving the
following assets in the Philippines:
a. Shares of stocks in Ayala Land Corp. with cost of P3,500,000 and unrealized gain of
P500,000 at the time of death.
b. Ordinary unlisted shares with book value amounting to P1,800,000 and par value of
P1,500,000.
c. Preferred unlisted shares with book value amounting to P900,000 and par value of
P600,000.
d. Condominium in Trump Tower costing P6,000,000 but with zonal value amounting to
P9,000,000 and fair market value per real property tax declaration of P7,000,000. It has
unpaid mortgage amounting to P1,600,000 at the time of death.

The gross estate abroad of the deceased is equivalent to 80% of the total gross estate
worldwide.

27. How much is the total gross estate to be reported in the Philippines?
a. P15,40,000 c. P14,900,000
b. P15,700,000 d. P15,200,000

28. How much is the total ordinary deductions? a. P1,600,000 c.

P320,000
b. P6,600,000 d. P1,320,000

29. How much is the net taxable estate?

a. P7,040,000 c. P7,540,000
b. P14,580,000 d. P15,080,000

30. With reciprocity,the intangible PERSONAL property in the Philippines of a resident alien
will be exempt from estate tax.
Aside from the estate tax,the income derived by the estate of the decedent is also
subject to income tax
a. Both True
b. Both False
c. Statement I True
d. Statement II true

31. The BIR may examine the bank deposit of a decedent for the purpose of determining his
gross estate without violating the Bank Secrecy Law( RA 1405)
The inheritance tax is no longer imposed in addition to the estate tax
The estate tax is the same as the inheritance tax
a. All True
b. All False
c. Statement I True
d. Statement II true
e. Statement III true

32. Notice of death is required to be given to the BIR within 2monthsfrom the date of death
Judicial expenses can no longer beclaimed as deduction from gross estate
a. Both True
b. Both False
c. Statement I True
d. Statement II true

33. Under CPG any propert y acquired by inheritance or donation shall always be the
separate property of the recipient spouse
Under ACP any propert y acquired by inheritance or donation shall always be the
separate property of the recipient spouse
a. Both True
b. Both False
c. Statement I True
d. Statement II true
34. Under ACP , jewelry acquired by inheritance during marriageby inheritance ordonation
shall be the coomon property of the spouse
Under CPG , jewelry acquired by inheritance during marriageby inheritance ordonation
shall be the separate property of the recipient spouse

a. Both True
b. Both False
c. Statement I True
d. Statement II true

35. The making of a will is a strictly personal act. It cannot be left whole or inpart of the
discretion of a third party or accomplished through the instrumentality of an agent or
attorney
The burden of proof the that the testator was not of sound mind at the time of making
his disposition is on the person who opposes the probate of the will.
a. Both True
b. Both False
c. Statement I True
d. Statement II true

36. If the testator,one month or less, before making his will was publicly known to be
insane, the person who maintains the validity Of the will must prove that the testator
made during a lucid interval.
a. True
b. False

37. Which of the following properties constitutes the common property of the spouse M and
Eunder a regime of CPG
a. Land inherited by Mduring marriage
b. Fruits of land in (a)
c. Jewelry inherited by E during Marriage
d. Building donated to E before marriage

38. Which of the following properties constitutes the common property of spouse M and E
under the regime ACP?
a. Land inherited by Mduring marriage
b. Fruits of land in (a)
c. Lawbooks of E for her law practice during Marriage
d. None of the above

39. The ff. deductions are included in the gross estate, except

a. Property previously tax

b. Value of the mortgage operty
c. Family home
d. Claims against the estate
The estate of Jiraiya Walana, non-resident Japanese, married, who died on April 1, 2018 are
as follows:

Exclusive properties, Philippines P5,600,000

Conjugal properties, Philippines 4,200,000
Conjugal properties, Abroad 18,200,000
Claims against insolvent persons 1,000,000
Funeral expenses 200,000
Judicial expenses 850,000
Claims against the estate 1,500,000
Losses: occurring 8 mos. after death
due to fire 1,700,000
Donation mortis causa to Makati City
Hall 1,800,000
Family Home (inc. above), located
abroad 10,000,000
Standard deduction 10,000,000

40. The net taxable estate

a. 5,165,000
b. 4,665,000
c. 4,165,000
d. 21,000,000

41. If the decedent is a Filipino citizen, the taxable net estate is:
a. 11,490,000
b. 12,645,000
c. 4,100,000
d. 7,900,000
The estate of Pedro Namahinga, resident citizen decedent, married, who died on April 1, 2018 are as follows:
House and lot (Family Home) P14,000,000
The lot was acquired at a cost of
P3,000,000 before marriage while
the house was constructed on
March 1, 2018, during marriage,
at a cost of P10,000,000 from
partnership funds. The lot had a
fair market value of P4,000,000
after construction of the house.
Other properties acquired during 6,000,000
marriage
Car inherited on Feb. 14, 2017, 2,500,000
during marriage, then with a fair
market value of P1,300,000
Property in U.S., received as gift 2,300,000
during marriage from a friend on Jan.
12, 2017 (the applicable donor’s tax
was not paid by the donor)
Rental income on the above property 1,200,000
up to time of death
Expenses/Claims:
Funeral expenses 420,000
Judicial expenses 800,000
Casualty losses incurred on Dec. 10, 600,000
2018
Claims against the estate 1,600,000
Medical expenses within 1 year prior 4,000,000
to death, only half was receipted
Use the above data for the next two (2) questions:
42. How much is the net taxable estate under Conjugal Partnership of Gains?

a. P3,926,000 c. P3,426,000
b. P6,426,000 d. P1,348,000

43. How much is the net taxable estate under Absolute Community of Property?

a. P4,836,000 c. P1,174,000
b. P1,948,000 d. P2,174,000

44. Mr. Sabillo Deds resident decedent, married, died, leaving the following properties:
Real and personal properties P 3,000,000
acquired during the marriage
House and lot inherited from his 2,000,000
father one year and 3 months before
he died (fair market value when
inherited, P1,500,000) used as the
decedent's family home
Car purchased with cash received as 500,000
gift from his mother during the year
he died
Cash (inclusive of P500,000 received 1,500,000
as inheritance from the father)

The following obligations and expenses were also made available:

Claims against conjugal properties 600,000

Unpaid mortgage on the inherited house 100,000
and lot (original mortgage was for
P600,000)

How much is the vanishing deduction?

a. P1,530,000 c. P1,000,000
b. P1,080,000 d. None of the choices

45. Teh Pok died on November 20, 2018. Some of the properties he left are the following:

Mode Market Value

of Date Date Date of
Asset Acquisition Acquired Acquired Death

Land Purchase 7-3-14 500,000 350,000

Car Donation 10-2-17 800,000 980,000

OTHER INFO:
a) The gross estate of the decedent amounts to P3,000,000.
b) The car was mortgaged for P50,000 when it was acquired and Teh Pok paid
the same before he died.
c) The allowable deductions totaled P325,000, which includes judicial expenses
of P30,000 and funeral expenses of P150,000.
The vanishing deductionis
a. 581,000
b. 571,000
c. 648,783
d. 637,617

DONOR’S TAX
46. Which of the following statements is correct?
a. The donor’s tax shall be 6% computed on the basis of the total gifts.
b. Any contribution in cash or in kind to any candidate, political party or coalition of parties
for campaign purposes shall be governed by TRAIN Law.
c. The donor’s tax is not a property tax , but is a tax imposed on the transfer of property
by way of gift inter vivos.
d. All of the choices.

47. What is the formal requirement in-order for the donation of an immovable may be valid?
a. It must be in writing.
b. It must be in a public document.
c. There must be simultaneous delivery
d. There is no formal requirement

48. The transfer of property by gift is completed when?

a. the moment the donor knows of the acceptance by the donee.
b. the moment it is delivered, either actually or constructively
c. either “a” or “b” whichever comes first
d. neither “a” nor “b”

49. Renunciation by the surviving spouse of his/her share in the conjugal partnership or
absolute community after the dissolution of the marriage in favor of the heirs of the
deceased spouse or any other person/persons is:
a. subject to donor’s tax
b. subject to donor’s tax if the renunciation is general
c. subject to donor’s tax if the renunciation is specific
d. subject to estate tax

50. When is the deadline for filing the donor’s tax return reckoned from the date the gift is
made or completed?
a. 1 year c. 3 months
b. 6 months d. 30 days

51. Where property, other than real property subject to 6% capital gains tax, is transferred for
less than an adequate and full consideration in money or moneys’ worth, then:
a. It is subject to donor’s tax regardless of circumstances
b. It is subject to donor’s tax if with donative intent
c. It is not subject to donor’s tax regardless of circumstances
d. It is subject to 15% capital gains tax

52. Which of the following gifts is not exempt?

a. Gifts made to or for the use of the National Government
b. Gifts made to or for the use of the Local Government
c. Dowry
d. Gifts in favor of an educational institution

53. Mr. Hinada, a Japanese citizen residing in Osaka, sold his shares of stock in UCC Corp. to Ms.
Japlos, a Filipina, for P700,000 at the time when its fair market value was P1,000,000. It was
agreed between the parties that as long as the seller lives, he shall be entitled to the dividends.
After two years from the date of sale, Mr. Hinada died. The fair market value of the shares at
that time is already P1,500,000. Other than Japan (Head Office), UCC Corp. only operates in
Singapore, Korea, France, United Kingdom and USA.

Based on the above data, which of the following statements is correct?

a. The sum of P300,000 shall be subject to donor’s tax.
b. The estate of Mr. Hinada will include P800,000 in the computation of gross estate.
c. The above transaction may be subject to donor’s tax or estate tax upon the election of Mr.
Hinada or the executor or administrator of his estate.
d. The above transaction is neither subject to donor’s tax nor estate tax.

54. What is the tax implication if a corporation condones the debt of a shareholder because
of a good thing done by the latter to the corporation?
a. The condonation is based on the liberality of the corporation, therefore, it is subject to donor’s
tax.
b. The condonation is subject to donor’s tax on the corporation because it is based on its
liberality. Moreover, it is equivalent to a payment of dividend income on the shareholder,
which is therefore, subject to a final withholding tax on income of 10%.
c. It is tantamount to a declaration of dividend. Therefore, it is an income which is subject to
10% final withholding tax on the shareholder. However, it is not subject to donor’s tax on the
corporation.
d. It is just a simple case of extinguishment of an obligation which is neither subject to income
tax on the part of the shareholder nor a donor’s tax on the corporation.

55. If an individual performs services for a creditor who in consideration thereof cancels the
debt, the cancellation of indebtedness may amount to a
a. Gift
b. Capital contribution
c. Donation inter vivos
d. Payment of income

56. Alpha Corporation is transferring its office from Makati to Manila. It sold to Omega
Corporation its existing lot and office building valued at P80M for P60M. What tax should
be imposed and collected from Alpha Corporation as a result of the transaction?
a. Capital gains tax
b. Donor’s Tax
c. Real property Tax
d. Capital gains tax and Donor’s Tax

57. When the donee or beneficiary is a stranger, the tax payable by the donor for donations
beginning January 1, 2018 shall be:
a. 30% of the gross gifts.
b. 30% of the net gifts.
c. 6% of net gifts in excess of P250,000
d. Based on the graduated rates.

58. For the donation to be considered valid, acceptance of the donation must be made:
a. During the lifetime of the donor only.
b. During the lifetime of the donee only.
c. During the lifetime of the donor and the donee.
d. None of the choices.

59. X, a multinational corporation not doing business in the Philippines, donated 100 shares of
stock of said corporation to Mr. “Y”, a Filipino citizen. What is the tax liability, if any, of “X”
corporation?
a. The donation is not subject to donor’s tax.
b. The donation is subject to 30% donor’s tax based on net gift.
c. The donation is subject to graduated rates based on net gift.
d. The donation is subject to 30% donor’s tax based on gross gift.
60. If a donor is a non-resident alien and the rule of reciprocity applies, which of the following
properties will not form part of his gross gift?
a. Real properties in the Philippines
b. Tangible personal properties within the Philippines
c. Intangible personal properties within the Philippines
d. All of the choices

61. Statement 1: A donation can be both a part of the gross gift of the donor and a taxable
income to the donee.
Statement 2: A donation may be exempt from donor’s tax but not necessarily a deduction
from the donor’s gross income.
a. Only statement 1 is true
b. Only statement 2 is true
c. Both statements are true
d. Both statements are false

62. ABC Corporation donated P600,000 to the barangay for the purpose of cementing a
barangay road where its factory is located.
Statement 1: The donation is exempt from donor’s tax
Statement 2: The corporation may claim full deduction for income tax purposes
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true

63. Statement 1: The Commissioner of Internal Revenue shall have authority to grant under
meritorious cases,
a reasonable extension of not more than 30 days for filing the donor’s tax return.

Statement 2: In case of gifts made by nonresidents, the return may be filed with Philippine
Embassy or Consulate in the country where he is domiciled at the
time of the transfer, or directly with the Office of the Commissioner.
 a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

For numbers 63-67:

On February 14, 2020, Mr. and Mrs. Mar Egalo donated residential land to their
daughter on account of her wedding to be celebrated on June 12, 2020. The FMV of the land at the
time of
donation was Php 1.2M with an unpaid mortgage of Php 300,000 to be assumed by their daughter.
The FMV
of the land at the time of marriage was Php 1.3M.

On July 30, 2020, they donated Php 500,000 to the sister of Mr. Egalo who was diagnosed with
COVID19. The donated amount was used for the medication of Mr. Egalo’s sister.

On August 31, 2020, they sold 400,000 shares of VGS Corporation to their only son for Php
400,000. The
book value per share as per latest audited financial statement of VGS Corporation is Php 2.00 per
share.
The shares of stocks were acquired three years ago for Php 100,000.

64. How much is the donor’s tax still due of Mr. Egalo on the February 14, 2020 transfer?
a. Php 40,500 c. Php 12,000
b. Php 81,000 d. Php 24,000

65. How much is the donor’s tax due of Mrs. Egalo on the July 30, 2020 transfer?
a. Php 15,000 c. Php 7,500
b. Php 30,000 d. Php 27,000

66. How much is the capital gains tax due of Mr. Egalo on the August 31, 2020 transfer?
a. Php 45,000 c. Php 30,000
b. Php 22,500 d. none

67. How much is the donor’s tax still due of Mr. Egalo on the August 31, 2020 transfer?
a. None c. Php 24,000
b. Php 12,000 d. Php 6,000

BIR FORM

Mr. John Go Lo, resident citizen, died on November 10, 2019 with the following relevant data
for filing the estate tax return:
Residence of Mr Go: 1008 P. Noval Street, Sampaloc, Manila TIN of Mr. Go: 123-456-789-0000
TIN of Estate of Mr. Go: 654-321-987-0000 Executor: Mr. Honey Sy Ga
TIN: 987-123-654-00000
Residence of Administrator: Dela Rosa St. Brgy. San Lorenzo, Quezon City
 Claims against the estate 1,000,000
Unpaid Mortgage 3,500,000
Unpaid Real Estate Tax 500,000
Industrial Lot, Exclusive (FMV 2M) 3,000,000
Unpaid Mortgage, Exclusive 1,000,000
Family Lot, Conjugal (FMV 10M) 9,000,000
Family House, Conjugal 5,000,000
DMCI Homes, Inc., Conjugal
(Listed, 5,000 shares) 5,000,000
Cash in Eastwest Bank
(Saving Account No. 1986-1056-37) 8,000,000

REQUIREMENT: Fill up the form based on the above data

Preparation of Donor’s Tax Return

Poling Bobadila, married, a resident alien, made the following donations of common
properties, with the consent of his spouse, for the year 2019:
TIN: 123-345-678-00000
Date Donee Particulars
Mike (TIN BMW Car
11-14-19 No. with
635-425-
234- engine
00000) number
112233
amounting to
2.5million
pesos. It has
unpaid
chattel
mortgage
amounting to
P500,000
assumed by

Mike.
Bryan (TIN House and
12-23-19 No. lot
542-715-
614- located in
00000 Brgy. Di
Mahanap,
Quezon City
with TCT No.
98547

Requirements: Fill up the donor’s tax return for the 12-23-19 donation.