Taxation based on the old tax laws PDF

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Taxation (OLD LAW)Multiple Choice Identify the choice that best completes the statement or answers the question. The tax imposed on the transfer of property without consideration between two or more persons who are living at the time the transfer is made. a. Estate tax c. Donor’s tax b. Business tax...

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Taxation (OLD LAW) Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The tax imposed on the transfer of property without consideration between two or more persons who are living at the time the transfer is made. a. Estate tax c. Donor’s tax b. Business tax d. Personal tax 2. Which is true? Legal or intestate succession does not take place a. If a person dies without a will, or with a void will, or one which has subsequently lost its validity b. When the heir instituted is capable of succeeding c. When the will does not dispose of all the property belonging to the testator d. If the suspensive condition attached to the institution of heir does not happen or is not fulfilled 3. Certain parts of the estate of a deceased Filipino citizen cannot be freely disposed of because Philippine law reserves them for the “compulsory heirs”. This portion of the decedent’s estate is known as a. Legitimes c. Legacy b. Free Portion d. Bequest 4. Probate of a will involves the following processes, which one is not? a. Collecting the decedent’s estate. b. Liquidating liabilities and paying necessary taxes. c. Distributing property to the heirs d. Collecting the heir’s estate. 5. Which of the following is not a valid will? a. That which increases the legitime of a compulsory heir. b. That which transfers the portion of legitime to other successors other than compulsory heir(s). c. That which reduces the free portion of the estate tax. d. That which transfers a part of free portion to a compulsory heir. 6. It deprives an heir to inherit properties by the decedent through the issuance of a will. a. Disinheritance c. Legitimate b. Distributable share d. Disqualification 7. Statement 1: Representation is a right created by fiction of law by virtue of which the representative is raised to the place and degree of the person represented and acquires the rights which the latter would have if he were living or if he could have inherited. Statement 2: If a compulsory heir dies ahead of the testator, his legitime goes to the child by representation. 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 8. Which among the following statements is not correct? I Estate taxation is governed by the statute in force at the time of death of the decedent. II Estate tax accrues as of the death of the decedent. III Succession takes place and the right of the State to tax the privilege to transmit the estate vests instantly upon death.

a. I only b. II only

c. III only d. None of the above

9. Mr. Wais thought that due to old age, death may be imminent. Knowing that the value of estate tax is high, he disposed his properties to his rightful heirs prior to his death (transfer in contemplation of death). To prevent undue avoidance of tax, inter-vivos disposition in contemplation of death is subject to: a. Donor’s tax c. Income tax b. Estate tax d. Excise tax 10. Which of the following is subject to the rule of reciprocity? a. Car in the Philippines owned by a non-resident alien decedent; b. Investment in stock in a US Corporation owned by a non-resident alien decedent; c. Investment in bonds in a US Corporation that has acquired business situs in the Philippines, and is owned by a resident alien; d. Shares owned by a non-resident alien in a partnership established in the Philippines. 11. Which of the following is not included in the gross estate? a. Revocable transfer where the consideration is not sufficient b. Revocable transfer where the power of revocation was not exercised c. Transfer passing under general power of appointment d. Transfer for sufficient consideration 12. The power of appointment may be exercised by the donor-decedent through the following modes I By will II By deed to take effect in possession or enjoyment at or after his death. III By deed under which he has retained for his life or any period not ascertainable without reference to his death or for any period which does not in fact end before his death. a. I only c. I and II only b. II only d. I, II and III 13. In determining whether the value of a property transferred onerously by a decedent during his lifetime should be included in his estate, ask yourself, “was the consideration insufficient?” I If yes, then add the excess of the FMV at the time of death over the consideration received. II If no, then it was a bona fide sale. Exclude the property in determining the decedent’s gross estate a. I only c. Both I and II b. II only d. Neither I nor II 14. Proceeds of life insurance where the beneficiary of the decedent is not his estate, executor or administrator is a. Part of gross income if the beneficiary is revocable b. Part of gross income regardless of whether the beneficiary is revocable or irrevocable c. Not part of gross estate if the beneficiary is irrevocable d. Part of gross estate regardless of whether the beneficiary is revocable or irrevocable 15. Which of the following exempt transmissions will still require inclusion of the property in the gross estate? a. Merger of the usufruct in the owner the naked title b. Legacy to a charitable institutions whose administrative expenses did not exceed 30% of the legacy; c. Transfer from a first heir to a second heir designated by the decedent; d. Death benefits under the GSIS and GSIS. 16. Following are exclusion from gross estate, except: a. Transfer in contemplation of death b. Transfer as a result of which there is merger of usufruct in the owner of the naked title; c. Amount received from SSS or GSIS . d. All of the above.

17. Under which of the following situations an estate tax return is not required to be filed? a. Transfers which are subject to estate tax. b. The gross value of the estate exceeds P200,000. c. The estate consists of registered or registrable properties for which a clearance from the BIR is required as a condition precedent for the transfer of ownership. d. The gross value of the estate consisting of non-registrable properties does not exceed P200,000 and the deductions amounted to P150,000. 18. The following were incurred in connection with the wake and burial of a decedent: Mourning clothing of the decedent's surviving spouse P1,500 Mourning clothing of the decedent's dependent children 3,200 Mourning clothing of the grandchildren 10,000 Mourning clothing of the decedent's married children 15,000 Expenses of the wake preceding the burial 40,000 Publication charges for death notices 5,000 Telecommunication expenses incurred in informing relatives of the deceased 3,000 Cost of burial plot 20,000 Interment fees and charges 12,000 Expenses for the performance of the rites & ceremonies 5,000 incident to interment Expenses incurred for prayers after the interment 3,000 The value of the gross estate was P2,000,000. The deductible funeral expenses should be: a. P200,000 c. P92,700 b. P89,700 d. P100,000 19. Which of the following is not deductible from the gross estate of a decedent? I Income taxes on income received after death II Property taxes not accrued before death III Estate Tax a. I and II only c. All of the above b. II and III only d. None of the above 20. Which of the following taxes is deductible from the gross estate? a. Income tax paid on income received after death b. Property tax not accrued prior to death c. Estate tax paid on a foreign country d. Donor's tax accrued prior or before death 21. One of the following is allowed as a deduction from the gross estate of a non-resident alien, but is prorated between Phil. Gross estate and the total or world gross estate a. Expenses, losses, indebtedness, taxes, etc. b. Share of the surviving spouse c. Vanishing deduction d. Amount received under R.A. 4917 22. In the absence of a marriage settlement, or when the regime agreed upon was void, the property relations of the spouses who were married on or after August 3, 1988 would be: a. Absolute community of property b. Conjugal partnership of gains c. Absolute separation of property d. Either absolute community or conjugal partnership of gains 23. Statement 1: Under the regime of absolute community of property, property acquired during the marriage is presumed to belong to the community, unless it is proved that it is one of those excluded therefrom.

Statement 2: Under the system of conjugal partnership of gains upon dissolution of the marriage or of the partnership, the net gains or benefits obtained by either or both spouses shall be divided equally between them. 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 24. Statement 1: Judicial expenses for the settlement of the estate are charges against community property. Statement 2: Funeral expenses including the construction of a tombstone or mausoleum shall be chargeable to community property. 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 25. The following are exclusive property of each spouse. Which one is not? a. That which each acquires during the marriage by lucrative title. b. That which is purchased with the exclusive money of either spouse. c. That which is acquired by exchange with other property belonging to the spouses. d. That which is brought to the marriage as his or her own. 26. A married, nonresident citizen decedent has the following common properties, obligations, and expenses Real property, Philippines P4,000,000 Real property, USA 5,000,000 Funeral expenses 300,000 Judicial expenses 200,000 Claim against insolvent persons 50,000 Unpaid taxes 50,000 Medical expenses 650,000 Additional information: · The real property in the Philippines includes the family home valued at P1,500,000. · Judicial expenses include P50,000 incurred to settle conflicting claims of the heirs. How much is the taxable net estate? a. P6,325,000 c. P2,025,000 b. P3,050,000 d. P2,050,000 27. The following data were provided by the administrator of a decedent who was married with a surviving spouse: Conjugal real properties P5,000,000 Conjugal family home 1,500,000 Exclusive properties 2,500,000 Paraphernal properties 1,250,000 Deductions claimed: Funeral expenses 300,000 Casualty losses exclusive 100,000 Unpaid taxes 50,000 Miscellaneous deductions 1,000,000 1,450,000 Medical expenses 500,000 Net taxable estate P8,300,000 Additional Information: · 25% of the funeral expenses were borne by the estate · 25% of “Miscellaneous deductions” were judicial expenses incurred to settle the conflicting claims of the heirs · Unpaid taxes pertain to property taxes (conjugal assets) incurred after death of the decedent

· 50% medical expenses were compensated by a health insurance company The taxable net estate is a. P3,275,000 c. P7,450,000 b. P4,525,000 d. P8,300,000 THE NEXT ITEM(S) IS/ARE BASED ON THE FOLLOWING A married decedent who was under absolute community of properties died on October 15, 2014. His estate provided the following information; Real properties inherited during marriage from his father who died 3 years before the present decedent's death P500,000 Real property given as gift by his uncle 4 ½ years before the present decedent's death 1,500,000 Land inherited during the marriage from an aunt who died 6 years before the present decedent's death 500,000 House built on the inherited land using communal fund 900,000 Cash income from the real property received as gift 100,000 Real properties received by the surviving spouse before the marriage 1,800,000 Real properties acquired by the spouses during the marriage 1,500,000 Personal properties acquired during the marriage 1,000,000 The following were considered as deductions from the gross estate: Actual funeral expenses P 100,000 Judicial expenses 150,000 Medical expenses 200,000 Obligations incurred before marriage that benefited the community properties 250,000 Claims against an insolvent debtor 50,000 Unpaid mortgage on inherited land 100,000 Loss of car through theft on December 31, 2014 (part of personal properties acquired during marriage) 300,000 Unpaid realty tax on real property received as gift from his uncle 30,000 Additional information: - The value of the real properties at the time of inheritance was P300,000. - The value of the real property received as gift from an uncle was P1,000,000 at the time of donation. - The inherited land and the house built on it were certified as the family home of the decedent and his family by the Barangay Captain in the locality where they were situated. 28. How much was the total community deductions? a. P1,007,529 c. P600,000 b. P757,385 d. None of the choices 29. The amount derived by the ratio of net estate in foreign country over net estate from all locations on the Philippine estate tax. a. Vanishing deductions c. Estate tax credit limit b. Estate tax credit d. Limitation A 30. An American, residing in the Philippines, died leaving the following: Net taxable estate, Philippines Net taxable estate, Singapore

P600,000 300,000

Net taxable estate, USA Estate tax paid, Singapore Estate tax paid, USA The estate tax due after tax credit is a. P21,000 b. P33,000

100,000 30,000 4,000 c. P34,500 d. P55,000

31. Statement 1: The estate tax imposed under the Tax Code shall be paid by the executor or administrator before the delivery of the distributive share in the inheritance to any heir or beneficiary. Statement 2: The executor or administrator of an estate has the primary obligation to pay the estate tax but the heir or beneficiary has subsidiary liability for paying that portion of the estate corresponding to his distributive share in the value of the total net estate. 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 32. For estate tax purposes, the estate tax return is filed with the a. Office of the Commissioner of BIR c. Provincial assessors office b. Register of deeds d. Any of the any of the above choices 33. Estate tax return should be filed a. At the time of death b. Within 30 days after death

c. Within six months after death d. Within one (1) year after death

34. Statement 1: The Commissioner or any of the Revenue Officer authorized by him pursuant to the tax Code shall have the authority to grant, in meritorious cases, a reasonable extension not exceeding thirty (30) days for FILING the return. Statement 2: The application for the extension of time to FILE the estate tax return must be filed with the RDO where the estate is required to secure its TIN and file tax return of the estate. 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 35. One of the following is not correct a. The estate must be valued at the time of death of the decedent b. Real estate situated in foreign countries will be included in the gross estate of a resident alien decedent c. The Commissioner shall have authority to grant, in meritorious cases, a reasonable extension not exceeding 6 months for filing the return d. Vanishing deduction is subject to limitation 36. Since a donation to a charitable institution has a deduction without any ceiling. Statement 1: The net gift will be zero, so that in computing the donor’s tax, the donation may be omitted in gross gifts as if it is likewise omitted in the deductions. Statement 2: The gross gifts should be reported and the deduction shall be claimed. 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 37. Donations to a legitimate child of properties: Property in Manila Property abroad on account of marriage

P110,000 200,000

Donor’s tax paid abroad Donor’s tax due after tax credit a. P3,208.33 b. P4,625.50

4,500 c. P2,750 d. P2,000

38. In the case of gifts made by a nonresident, the return may be filed with: a. Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer b. Directly with the officer of the Commissioner c. Either “Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer” or “Directly with the officer of the Commissioner” d. Neither “Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer” nor “Directly with the officer of the Commissioner” 39. Under the tax code, he following are major internal revenue business taxes, except: a. Value added tax c. Excise tax b. Percentage tax d. Income tax 40. Statement 1: Any non-vat registered person whose gross sales or receipts do not exceed P1,919,500 and is not exempt from business tax shall be subject to other percentage taxes. Statement 2: Vat may be imposed together with other percentage tax. a. Only statement 1 is correct c. Both statements are correct b. Only statement 2 is correct d. Both statements are incorrect 41. Statement 1: Sale of real properties shall refer to real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller Statement 2: in the case of sale of real properties on the installment plan, the real estate dealer shall be subject to VAT on the installment payments, including interest and penalties, actually and/or constructively received by the seller a. Only statement 1 is correct c. Both statements are correct b. Only statement 2 is correct d. Both statements are incorrect 42. Which of the following shall not be subject to vat? I MP Promotions, vat registered, but gross sales for the year do not exceed P1,919,500. II Mayweather Corporation, a foreign licensor or nonresident lessor who is not vat registered III Mailag Company, a domestic corporation required to register under vat system but failed to register a. MP Promotions and Mayweather Corporation b. MP Promotions and Mailag Company c. All of the above d. None of the above 43. A lessor of residential units shall be exempt from vat when: I Annual gross receipts do not exceed P1,919,500 II Monthly rental per unit does not exceed P12,800 a month a. I only c. Either I and II b. II only d. Both I and II 44. A lessor of commercial units shall be exempt from vat when: I Annual gross receipts do not exceed P1,919,500 II Monthly rental per unit does not exceed P12,800 a month a. I only c. Either I and II b. II only d. Both I and II 45. Which of the following transactions is exempt from value-added-tax? a. Sale of books, newspaper and magazines. c. Sale of musical composition b. Sale of literary works d. All of the above

46. Which of the following statements is correct? I Sale to export oriented enterprises is considered export sales under the tax code at the level of the supplier of raw materials only. II Sale of raw materials or packing materials to an export-oriented enterprise is considered export sales only when export sales of such enterprise exceed 70% of total annual production. a. I only c. Both I and II b. II only d. Neither I nor II 47. Under the value added tax law, which of the following sales may not be zero-rated? a. Export sales b. Foreign currency denominated sales c. Sale of goods to the Asian Development Bank d. None of the above 48. In the value-added tax on sale of services, the output tax is computed: a. On billings of the month b. On collections of the month on all billings made c. On the contract price of contracts completed during the taxable period d. Only and strictly on labor performed under the contract for services 49. A dealer in securities has the following for the year 2012: Sales, shares held for sale in the ordinary course of trade or business Sales, shares held as capital asset Cos of shares, held for sale in the ordinary course of trade or business Cos of shares, held as capital asset Supplies expense, net of vat Rent expense, net of vat How much is the vat payable? a. P470,000 c. P270,000 b. P324,000 d. vat exempt

P5,000,000 1,500,000 2,000,000 500.000 100.000 200,000