Chapter 12 TAX Answer KEY PDF

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The transfer is either bilateral or unilateral Unilateral transfer is subject to transfer tax Bilateral transfers are subject to income tax Unilateral transfers include sales and barters Bilateral transfers include inheritance and donations Donations inter-vivos are subject to estate tax A donation mortis causa is subject to donor’s tax The transferee in a donation is referred to as a donee The transferee in a succession is referred to as an heir The transferor in a donation inter-vivos is a donor The transferee in a donation mortis causa is a decedent Complex transfer are subject to both income tax and transfer tax What constitutes an “adequate consideration” is a question of fact Both the transfer and exchange element of a complex transfer are subject to transfer tax Transfer tax supports income taxation

Transfer tax is intended to recoup future reduction in business tax Transfer tax can be viewed as a mode of redistribution of wealth to society The dominant view of transfer tax is the ability to pay theory Transfer tax is a tax on the privilege to transfer property gratuitously Transfer tax are national taxes Transfer tax is a form of specific tax Transfer tax is an indirect tax Transfer tax is a revenue tax Transfer taxpayers are classified into two groups: residents and non-residents Non—resident aliens are subject to tax only on transfers of Philippine properties Citizens are subject to tax on transfer of properties regardless of location Aliens are subject to tax only on transfers of properties situated in the Philippines Residents are subject to tax on transfers of properties regardless of location Non-residents are taxed only on transfers of property located in the Philippines The reciprocity rule on intangible personal property applies only to non-resident aliens

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The reciprocity rule may apply to movable personal property located in the Philippines The reciprocity rule applies to intangible properties of any alien located in the Philippines Franchises are subject to transfer tax in the place where they are exercised The shares and bonds of domestic corporations are presumed situated in the Philippines for purposes of transfer taxation Shares and bonds of foreign corporations are always presumed situated abroad for transfer tax purposes For purposes of transfer tax, the interest in a business partnership organized abroad is presumed situated abroad Cash is considered an intangible property Shares of stocks and bonds are tangible personal properties Donations inter-vivos are subject to transfer tax at the point of death of the donor Donations mortis causa are subject to transfer tax at the death of the decedent Donations inter-vivos are inspired by the generosity of the donor A donation mortis causa is effected by the death of the decedent As a rule, all properties of the donor existing at the point of death constitute his donation mortis causa All forms of gratuitous transmission of property while the donor is living is considered donation inter-vivos Transfer in contemplation of death are donations made inter-vivos but are actually donation mortis causa The transfer of property which conveys title to the property only upon death of the donor are donations mortis causa Estate tax rates are higher than donor’s tax rates Incomplete transfers are not subject to tax upon physical transfer of the property Incomplete transfers which are pre-terminated by the death of the transferor are subject to estate tax When incomplete transfers are completed during the lifetime of the transferor, the transfer is subject to donor’s tax

Which is subject to transfer tax –D. Gratuitous and complex transfer (A and C) Which is subject to transfer tax – Donation A property is transferred for less than full consideration when it is sold – below the FV of the property Gratuity is not characterized by – presence of adequate consideration Transfers for full or adequate consideration is subject to – income tax Transfer for inadequate consideration is subject to - C. Income tax and Transfer tax (A and B) 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 – state partnership 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 – ability to pay theory 17. Which is not a characteristic of transfer tax – direct tax 18. Transfer taxes are not – fiscal taxes 19. Transfer taxes are – regressive taxes 20. Who is subject to transfer tax – transferee 21. Which statement is generally correct? – all Philippine transfers are subject to transfer taxes 22. Which statement is incorrect? – the amount of transfer tax is dependent upon the value of the thing transferred

1. Transfer tax on donation mortis causa applies to – natural person 2. Transfer tax on donation inter-vivos applies to a – 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 global 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 – tangible and intangible properties located in the Philippines 9. Which of the following is an intangible personal property – bonds 10. Which of these subject is to tax only on transfers of properties situated in the Philippines – a citizen of the Philippines residing in the Philippines 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 – insufficiency of consideration 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...