Donor s Tax Exam- Answers PDF

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UNIVERSITY OF SANTO TOMASIAC 17 - Integrated Review Course in TaxationTAX – Donor’s TaxMULTIPLE CHOICE EXERCISES A tax imposed on the gratuitous transfer of property between two or more persons who are living at the time the transfer is made a. estate tax c. income Tax b. donor’s tax d. transfer tax...

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UNIVERSITY OF SANTO TOMAS IAC 17 - Integrated Review Course in Taxation TAX – Donor’s Tax

MULTIPLE CHOICE EXERCISES c. 1. A tax imposed on the gratuitous transfer of property between two or more persons who are living at the time the transfer is made a. estate tax c. income Tax b. donor’s tax d. transfer tax 2. One of the following is not a distinction between donation inter vivos and donation mortis causa. a. Donation inter vivos takes effect during the lifetime of the grantor while donation mortis causa takes effect after the death of the grantor. b. Donation inter vivos is subject to donor's tax while donation mortis causa is subject to estate tax. c. Donation inter vivos requires a public document while donation mortis causa may not require a public document. d. Donation inter vivos is valued at fair market value at the time the property is given while donation mortis causa is valued at the fair market value at the time of the death of the grantor. 3. Donor’s tax is: a. A property tax

b.

A personal tax

c. A business tax d. An excise tax

4. The following are the requisites of a donation for purposes of the donor’s tax, except one. a. Capacity of the donor b. Capacity of the donee c. Delivery of the subject matter or gift d. Donative intent 5. Which of the following is subject to donor’s tax? a. Those made between persons who were guilty of adultery or concubinage at the time of the donation. b. Those made to conceived but yet to be born children. c. Those made to a public officer by reason of his office. d. Those made between husband and wife during their marriage. 6. Which of the following is not subject to donor’s tax? a. Donation mortis causa. b. Donation which will take effect upon birth of the donee. c. A creditor who, out of his affection, cancelled the debt of the debtor. d. A parcel of land in U.S.A. donated by a nonresident Filipino to a foreigner. 7. Which of the following donations inter vivos may not require that it be in writing? a. Donation of personal (movable) property, the value of which exceeds P5,000. b. Donation of personal (movable) property, the value of which is P5,000.

Donation of real (immovable) property, the value of which is less than P5,000. d. Donation of real (immovable) property, the value of which exceeds P5,000. 8. 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. 9. When is the donation perfected? a. The moment the donor knows of the acceptance by the donee b. The moment the thing donated is delivered, either actually or constructively, to the donee c. Upon payment of the donor’s tax d. Upon execution of the deed of donation 10. The donation of an immovable property shall be made a. In writing c. Either A or B b. In public instrument d. Orally 11. Using the preceding number, acceptance by the donee may be made: a. In sam e deed of d onation b. In a sepa ra te document c . Ei t h er A o r B d. N e i t h e r A o r B 12. A non-resident citizen donor is taxed on his donation of properties: a. Situated in the Philippines only. b. Wherever situated. c. Situated outside the Philippines only. d. Situated in the Philippines only subject to the rule of reciprocity. 13. Which of the following is taxable only with respect to properties donated within the Philippines? a. Resident citizen b. Non-resident citizen c. Resident alien d. Non-resident alien 14. Which of the following statements is correct? I. A donation by a nonresident alien of shares of stock of a domestic corporation is subject to donor’s tax if such corporation have acquired business situs in the Philippines. II. A donation by a resident alien of shares of stock of a foreign corporation will only be subject to donor’s tax if at least 85% of the business of such corporation is located in the Philippines. III. A donation by a nonresident alien of bonds of a foreign corporation (90% of the business of such corporation is located in the Philippines) is subject to donor’s tax.

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IV.

A donation by a nonresident citizen of a franchise is subject to donor’s tax even if such franchise is exercised outside of the Philippines. a. III only b. IV only

c. III and IV only d. II, III and IV only

15. 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 16. 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. 17. A gift that is incomplete because of reserve powers becomes complete when: I. The donor renounces the power

II.

His right to exercise the reserve power ceases because of the happening of some event or contingency or the fulfillment of some condition other than because of the donor’s death.

a. I only b. II only

c. Either I or II d. Neither I nor II

18. Which of the following is subject to donor’s tax? I. Pedro donated a house and lot to Ana. Pedro reserved the right to live in the house and lot until he dies. II. Stanley donated a commercial complex apartment to Wendy. Stanley reserved the right to the rentals for five years from the date of donation. Stanley died on the third year.

III.

Angelica donated a mango farm to Sergio. Angelica reserved the right to the fruits for five years from the date of donation. Angelica died on the seventh year.

a. II only b. III only

c. I and II only d. None of the above

19. When an indebtedness is cancelled without any service rendered by the debtor in favor of the creditor, the forgiveness of debt will result to: a. taxable income b. distribution of dividend c. taxable donation d. taxable estate 20. 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 21. 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. 22. Which of the following renunciations shall not be subject to donor’s tax? a. 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/s b. General renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent c. Renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent categorically in favor of identified heir/s to the exclusion or disadvantage of the other co-heirs d. None of the choices 23. Which of the following events is not subject to donor’s tax? a. A Filipino citizen donated a parcel of land located in the United States to B, non-resident alien. b. A resident alien made a gift of P200,000 to his daughter on account marriage. c. A non-resident citizen gives his girlfriend a diamond ring worth P100,000 as a birthday gift. d. A and B are the only heirs of C. A renounces his share of inheritance in favor of B. 24. Jay sold his car to Jana for P200,000. Jay’s car costs P500,000, and had a fair market value of P400,000 at the time of sale. What is the tax consequence of the sale? a. There is a taxable gift of P300,000 b. There is a taxable gift of P200,000. c. There is a taxable gift of P50,000. d. The transfer is for insufficient consideration, hence, not subject to donor’s tax 25. Cito Yu has a building located in Shorthorn Quezon City currently leased to various tenants. Since he is old already and wants to retire from active business, he sold the same to Janjan, his son, for 20 million pesos. The value of the building at the

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time of sale is 40 million pesos. Which of the following statements is correct? a. The sale is for sufficient consideration b. The sale is for insufficient consideration subject to donor’s tax c. The sale is for insufficient consideration but exempt from donor’s tax since the object is a real property d. The sale is subject to capital gains tax and donor’s tax. 26. Pedro sold to Juan (brother-in-law) his residential lot with a market value of P1,000,000 for P600,000. Pedro bought the lot three years ago for P400,000. Juan is financially capable of buying the lot. What tax should be imposed and collected from Pedro 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 27. Pedro donated to Juan (brother-in-law) his residential lot with a market value of P1,000,000. Pedro bought the lot three years ago for P400,000. What tax should be imposed and collected from Pedro 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 28. 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 Next three (3) questions are based on the following data: Rody, a resident citizen made the following donations. a. To Mar, a land worth P450,000 in Manila. b. To Leni, jewelry worth P100,000 in Japan. c. To Miriam, PLDT shares amounting to P150,000. d. To Jojo, a building in Italy P1,600,000 mortgaged for P50,000 assumed by the donee. e. To Allan, land in Davao worth P300,000. f. To Antonio, P300,000 cash, PNB New York g. P200,000 receivable to Joy, 50% condoned by Rody Rody also transferred the following properties: Selling Price FMV Car, Makati P200,000 P300,000 Car, Malaysia 300,000 200,000 Rest House, Tagaytay 1,000,000 2,000,000 Rest House, Malaysia 1,500,000 2,500,000

30. If he is a non-resident Alien, his gross gift is: c. P1,100,000 a. P3,200,000 b. P1,200,000 d. P850,000 and

there

c. P1,050,000 d. P700,000

32. Which of the following is not a deduction from gross gift? a. Unpaid mortgage on the donated property assumed by the donee b. Unpaid real estate tax on the property donated assumed by the donee c. Diminution on the donated property specifically provided by the donor d. Unpaid donor’s tax on the donated property assumed by the donee 33. Which of the following is not exempt from gift tax under special laws? a. Donation to Integrated Bar of the Philippines b. Donation to Development Academy of the Philippines c. Donation to Philippine Institute of Certified Public Accountants d. Donation to International Rice Research Institute 34. Which of the following is subject to donor’s tax? a. Donation to the Philippine National Red Cross b. Donation to the Development Academy of the Philippines c. Donation directly given to the victims of the typhoon Yolanda d. Donation to the City of Davao for public purpose 35. A tax minimization scheme which is done by spreading the gift over numerous calendar years to avail of lower tax liability a. Spread-out method b. Donation of life insurance c. Splitting of gift d. Void donation 36. Your bachelor client, a Filipino residing in Quezon City, wants to give his girlfriend a gift of P400,000. He seeks your advice, for purposes of reducing if not eliminating the donor’s tax on the gift, on whether it is better for him to give all of the P400,000 on Christmas (December 25, 2018) or to give P200,000 on Christmas and the other P200,000 on January 1, 2019. Which of the following will be your advice? a. Split the donation to totally relieve the donor from the donor’s tax. b. Split the donation to reduce the donor’s tax. c. Splitting the donation will not reduce the applicable donor’s tax. d. The gift should be made on account of their planned marriage to avail of dowry exemption. 37. 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.

29. How much is the gross gift? a. P5,200,000 c. P4,100,000 b. P4,200,000 d. P3,200,000

31. If he is a non-resident alien, reciprocity law, his gross gift is:

a. P850,000 b. P950,000

is

38. 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...