MCQ TRANSFER TAXATION REVIEWER PRACTICE SET PDF

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DONOR’S TAX 1. Which of the following donors is taxable only on gifts of property within the Philippines? a. Resident citizen donor b. Non-resident citizen donor c. Resident alien donor d. Non-resident alien donor 2. The reciprocity rule in donor’s tax is applicable only to nonresident alien donors who donate: a. Tangible personal property within the Philippines b. Intangible personal property within the Philippines c. Tangible real property within the Philippines d. All of the foregoing 3. Which of the following transactions is deemed a taxable gift? a. Condonation or remission of a debt b. Sale of residential house and lot for less than an adequate and full consideration in money or money’s worth c. Both (a) and (b) d. Neither (a) nor (b) 4. Determine which of the following gifts given by a parent to his child is entitled to the P10,000 exemption? a. Gift given on account of the child’s 18 th birthday b. Gift given on account of the child’s college graduation c. Gift given on account of the child’s successful recovery from cancer d. None of the foregoing 5. One of the following gifts given on account of marriage is not entitled to the P10,000 exemption: a. Gift given before the celebration of the marriage b. Gift given exactly one year after the celebration of the marriage c. Gift given to an adulterous child d. Gift given to a naturally adopted child 6. Who among the following donors is not entitled to claim the P10,000 exemption on account of marriage: a. Resident alien donor b. Non-resident alien donor c. Both (a) and (b) d. Neither (a) nor (b) 7. Determine which of the following exempt gifts shall be included as part of the gross gifts in the donor’s tax return: a. Gift given on account of a child’s marriage b. Gift given to the government c. Gift given to educational, religious, cultural or social welfare institutions d. All of the foregoing 8. Which of the following items may be deducted from the gross gifts? a. amount of mortgage assumed by the donee b. gifts declared as exempt by law c. Both (a) and (b) d. Neither (a) nor (b) 9. Which of the following statements relative to donor’s tax is false? a. The spouses shall file separate donor’s tax returns where the thing donated is common property b. Each parent shall be entitled to the P10,000 exemption on account of marriage of a child c. Exemptions and deductions cannot be claimed where the 30% tax rate on stranger is applicable d. None of the foregoing 10. Which of the following statements in relation to donor’s tax is correct?

a.

Spouses who donate their common property shall file only one donor’s tax return for the said donation. b. The unpaid mortgage on the property donated that is to be assumed by the donee is deductible from the fair market value of the gift at the time of the donation. c. In the sale of real property classified as a capital asset for less than an adequate and full consideration, the deficiency shall be deemed a gift subject to donor’s tax. d. A wedding gift that is given to a “stranger” can avail of the P10,000 exemption of gifts given on account of marriage. 11. Which of the following transfers is subject to donor’s tax? a. Residential lot with market value of P1,000,000 was sold for only P600,000 b. Listed shares of stock with market value of P500,000 were sold for only P250,000 c. Company vehicle with book value of P700,000 was sold by way of bona fide sale for only P600,000 d. None of the foregoing. 12.X donated a motorbike valued at P100,000 to Y, son of X’s first cousin. What is the tax consequence of the foregoing donation? a. X is liable to pay donor’s tax in the amount of P30,000 b. X is liable to pay donor’s tax in the amount of P2,000 per the graduated donor’s tax rates c. X is liable to pay capital gains tax in the amount of P6,000 d. X is not liable to pay any tax on the transfer 13. S sold his residential house and lot to his best friend for P4,000,000. At the time of the sale, the property had a fair market value of P5,000,000. What is the tax consequence of this foregoing sale for insufficient consideration? a. S shall be liable to pay donor’s tax in the amount of P300,000 b. S shall be liable to pay donor’s tax in the amount of P1,500,000 c. S shall be liable to pay capital gains tax in the amount of P240,000 d. S shall be liable to pay capital gains tax in the amount of P300,000 14. Gifts are to be computed on a cumulative basis provided the said gifts are given during the same: a. calendar year b. fiscal year c. calendar quarter d. calendar month 15. In applying the graduated donor’s tax rates, no donor’s tax liability shall arise where the taxable net gifts amount to: a. P100,000 b. P200,000 c. Both (a) and (b) d. Neither (a) nor (b) 16. X (unmarried) made the following donations to his spurious son on account of the latter’s marriage on December 1, 200A: on July 20, 200A P50,000 on December 1, 200A 50,000 on January 2, 200B 50,000 Which of the following statements is correct? a. No gift tax is payable on the 3 gifts. b. Gift taxes are payable on the 3 gifts. c. Gift taxes are payable on the 2nd and 3rd gifts. d. Gift tax is payable on the 3rd gift. 17. X (unmarried) made the following donations to his legally adopted son on account of the latter’s marriage on June 1, 200A: on January 10, 200A P50,000 on June 1, 200A 60,000

on December 0 1, 200A 50,000 Which gifts or gifts shall be liable to pay donor’s tax? a. All the 3 gifts b. 2nd gift c. 3rd gift d. None of the gifts 18. A gift that is given to one of the following donees shall be subject to the 30% gift tax rate on strangers: a. Grandchild b. Aunt c. Sister-in-law d. Brother 19. A gift that is given to one of the following donees shall be subject to the graduated donor’s tax rates? a. Naturally adopted child b. Child with a mistress c. Sister-in-law d. Child of “first cousin” 20. Husband (H) and wife (W) gave a used car as birthday gift to X, a legitimate child of W from her former marriage to Z who is now deceased. This vehicle, valued at P100,000, was inherited by W from her parents during her marriage to Z. Who shall be liable to pay donor’s tax on the foregoing gift? a. H and W b. H c. W d. Neither H nor W 21. Husband (H) and wife (W) are recently separated by judicial decree. Custody of their 15-year old child, X, was awarded by the court to W. When X turned 18 years of age, she married Y. H and W gave the newly-wed couple a diamond ring as wedding present. This ring was purchased by H a week before the celebration of the marriage of X and Y. What is the legal consequence of the donation for purposes of donor’s tax? a. H and W shall each report one-half (1/2) of the value of the ring as gross gift, and claim P10,000 exemption each on account of marriage. b. H shall report the entire value of the ring as gross gift, and claim P10,000 exemption on account of marriage. c. W shall report the entire value of the ring as gross gift, and claim P10,000 exemption on account of marriage. d. None of the foregoing. 22. Assume the same facts above, except that the diamond ring was donated to H by a wealthy relative at a time when H and W were not yet married. What is the legal consequence of the donation for purposes of donor’s tax? a. H and W shall each report one-half (1/2) of the value of the ring as gross gift, and claim P10,000 exemption each on account of marriage. b. H shall report the entire value of the ring as gross gift, and claim P10,000 exemption on account of marriage. c. W shall report the entire value of the ring as gross gift, and claim P10,000 exemption on account of marriage. d. None of the foregoing. 23. . Husband (H) and wife (W) gave a lot as wedding gift to X (widowed mother of H). This lot was donated to W when she bore her first child with H a year after their marriage. The current market value of the lot when it was donated to X was P500,000. Which of the following statements is correct? a. W shall be liable for gift tax based on the 30% tax rate on stranger on her net gift of P500,000. b. W shall be liable for gift tax based on the graduated donor’s tax rates on her net gift of P500,000.

c.

H shall be liable for gift tax based on the graduated donor’s tax rates on his net gift of P500,000. d. H shall be liable for gift tax based on the graduated donor’s tax rates on his net gift of P250,000, and W shall be liable for gift tax based on the 30% tax rate on stranger on her net gift of P250,000. 24. The donor’s tax return, as well as the donor’s tax due thereon, shall be filed and paid not later than: a. 1 month from the date of the gift b. 30 days from the date of the gift c. 3 months from the date of the gift d. 90 days from the date of the gift 25. X is a Chinese national who is residing in China. He donated his Philippine shares of stock to his Chinese friend, Y, who is residing in the Philippines. Assume Chinese tax law imposes gift tax on all real and personal properties donated by Chinese citizens, whether located in China or elsewhere, but does not allow any tax credit for gift taxes paid in foreign countries. X paid gift taxes to both the Chinese and Philippine governments. Which of the following statements is correct? a. X may claim a tax credit for the China gift tax because he also paid Philippine donor’s tax. b. X may claim a tax credit for the China gift tax because of the burdensome effect of “international double taxation” on the same property. c. X cannot claim a tax credit for the China gift tax because of the absence of reciprocity. d. X cannot claim a tax credit for the China gift tax because a non-resident alien is not allowed to claim a tax credit for foreign gift taxes under Philippine tax law.

ESTATE TAX 1. The following properties were valued at the time of H’s death: (a) Common properties of H and W (husband and wife, respectively) – P700,000; (b) Exclusive properties of H – P300,000; and (c) Exclusive properties of W – P200,000. The gross estate of H amounts to: a. P1,200,000 b. P1,000,000 c. P700,000 d. P0 2. Assume the same facts as above. Assume further that no tangible and verifiable records or receipts could support any deductions that may be claimed from the gross estate. The taxable net estate of H that will be subject to the graduated estate tax rates amounts to: a. P1,200,000 b. P1,000,000 c. P700,000 d. P0 3. X, unmarried, left behind the following properties upon his demise: House and lot (purchased from lump-sum pension) P700,000 Used van (bequeathed to parish church per last will and testament) 200,000 Cash (bequeathed to Cagayan de Oro City per last will and testament) 100,000 The gross estate of X amounts to: a. P1,000,000 b. P700,000 c. P300,000 d. P0 4. Which of the following properties is exempt from estate tax because of the presence of reciprocity? a. Patent of a non-resident alien decedent exercised in the Philippines b. Foreign shares of stock of a non-resident alien decedent (60% of business in the Philippines) c. Bank deposit of a non-resident alien decedent in a Taiwan bank d. Vehicle of a non-resident alien decedent located in the Philippines 5. Which of the following intangible personal property of a nonresident German decedent is exempt from estate tax because of the presence of reciprocity? a. Time deposit at a German bank b. Domestic shares of stock (certificates of stock kept in Germany) c. Franchise exercised in Europe d. None of the foregoing 6. X is an American citizen residing in the United States. Upon his demise, he left behind, among others an automobile registered in his name in the Philippines. Assume U.S. law grants an exemption from estate tax to non-resident Filipino decedents owning vehicles in the United States. Fr purposes of Philippine estate tax, the automobile is: a. Exempt because the decedent-owner is a non-resident alien. b. Exempt because of the presence of reciprocity. c. Taxable because the reciprocity rule does not apply to tangible personal property within the Philippines d. Taxable because all real and personal properties of a nonresident alien decedent are taxable. 7. Which of the following properties shall be excluded from the gross estate of a decedent?

a.

Proceeds of life insurance policy on the life of the decedent payable to his youngest daughter b. The transmission of the inheritance from the decedent to the fiduciary heir c. Both (a) and (b) d. Neither (a) nor (b) 8. Who among the following transferors is not liable for estate tax on the property transferred during his lifetime? a. The testator who bequeaths property to his heirs in a last will and testament executed and probated during his lifetime b. The donor who reserves his right to amend or revoke the donation of property in favor of the donee c. The donee of an appointed property who is required under a power of appointment to transfer such property upon death to his eldest child d. The transferor of personal property who sold it for insufficient consideration 9. X executed a power of appointment transferring his piece of land (appointed property) to Y (donee), the latter being empowered to designate in his last will and testament any person of his choice to inherit the said property upon his death. Thereafter, Y died. Which of the following statements is correct? a. The land shall form part of Y’s gross estate because he is the owner of the appointed property. b. The land shall not form part of Y’s gross estate because Y is merely a trustee over the land. c. The land shall not form part of Y’s gross estate because the land belongs to the beneficiary after Y’s demise d. The land shall not form part of Y’s gross estate because such transfer is not valid. 10. Assume the same facts above, except that Y is empowered to choose from any part of his male children as the beneficiary of the appointed property. Which of the following statements is correct? a. The land shall form part of Y’s gross estate because he is the owner of the appointed property. b. The land shall not form part of Y’s gross estate because Y is merely a trustee over the land. c. The land shall not form part of Y’s gross estate because the land belongs to the beneficiary after Y’s demise d. The land shall not form part of Y’s gross estate because such transfer is not valid. 11. X sold his condominium unit to Y for P3,000,000. X died a year later. The fair market value of the unit at the time of the sale was P4,000,000 but rose to P5,000,000 at the time of X’s death. The value of the condominium unit to be included in X’s gross estate for estate tax purposes shall be: a. P0 b. P1,000,000 c. P2,000,000 d. P5,000,000 12. X took a life insurance policy on his own life for P1,000,000, naming B as the irrevocable beneficiary. B predeceased X. What is the treatment of the insurance proceeds for estate tax purposes? a. The P1M forms part of B’s gross estate because his vested right over the policy continues to be effective until X’s death b. The P1M forms part of X’s gross estate because X’s estate became the beneficiary after B’s death c. The P1M does not form part of B’s gross estate because he is an irrevocable beneficiary who is not the executor or administrator of X’s estate....