AIR - Donor's Tax

DONOR’S TAX

1.

2.

3.

4.

For donor’s tax purposes, who among the following is/are stranger(s) to you? I. The grandson of the daughter of your grandson II. The grandfather of the mother of your grandmother III. The brother of the father of your grandfather IV. The grandson of the sister of your mother a. I and II c. III only b. III and IV d. IV only Statement 1: The gift is perfected from the moment of the donor effects the delivery either actually or constructively of the property donated. Statement 2: Donor’s tax is a property tax imposed on the property transferred by way of gift inter vivos. a. True, True c. False, True b. True, False d. False, False Statement 1: For purpose of the donor’s tax, second degree cousins are strangers to each other Statement 2: Encumbrance on the property donated, if assumed by the donor is deductible for donor’s tax purposes. a. True, True c. False, True b. True, False d. False, False Statement 1: Where real property is transferred during lifetime for less than adequate and full consideration in money or money’s worth, the amount by which the value of the property exceeded the value of the consideration shall for the purpose made of the donor’s tax, be deemed a gift. Statement 2: Gifts of conjugal property made by both spouse shall be considered as having been made onehalf by the husband and the other half by the wife and is taxable ½ to each donor spouse. a. True, True c. False, True b. True, False d. False, False

a. b.

True, True True, False

c. False, True d. False, False

8.

All of the following are exempt from gift tax under special laws, except one: a. Donation to the Integrated Bar of the Philippines b. Donation to the Development Academy of the Philippines c. Donation to Philippine Institute of Certified Public Accountants d. Donation to International Rice Research Institute

9.

One of the following statements is false: a. Contracts of donation between husband and wife are void in all cases. b. The donation by Chavit to President Aquino in view of his public office is void. c. Donations between persons guilty of adultery or concubinage are void. d. Donations to conceived or unborn children are valid.

10.

During the current year, Mr. and Mrs. Reyes, nonresident citizen, donated the following: September 25 – To Bea, a legitimate child, on account of marriage last month a conjugal property located in the Philippines, FMV P400,000. October 9 – To Gale, a legitimate child, conjugal property in the Philippines, FMV P100,000. The gift tax payable on September 25 gift of the husband is: a. P 7,600 c. P 1,800 b. P 2,600 d. P 3,353

11. Using the data in number, 3, the gift tax payable on the October 9 gift of the husband is: a. P 9,600 c. P 1,800 b. P 5,907 d. P 3,600

5.

Using the preceding number, the acceptance of the done may be made a. In the same deed of donation b. In a separate document c. Either A or B d. Neither A or B

6.

Statement 1: Dowries or gifts made on account of family celebration, on or before its celebration, or within one year thereafter, by parents to each of their legitimate, recognized natural or adopted children, to the extent of the first P 10,000 shall be exempt from donor’s tax. Statement 2: Donations in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institutions, accredited non-government organization, trust or philanthropic organization or research institution or organization provided that no amount of said gifts shall be used by the done for administration purposes shall be exempt from donor’s tax. a. True, True c. False, True b. True, False d. False, False

12. The following property transfers/gifts were given by a resident donor in 2009 at the given fair valuation:  A vehicle gifted to the Ramon Magsaysay Foundation, P160,000  A dowry, made in cash, to her legally adopted child who is to be married, P90,000  Baptismal presents to his godson, P15,000  A Toyota car, acquired for P175,000 with a book value of P120,000, but fairly valued at P150,000 given to her sister for a consideration of P20,000  Mountain bike gifted to his nephew, P25,000  Cash gift to his step daughter in account of her marriage, P45,000  Jewelry’s gifted to his mother but subject to revocation, P100,000  Old clothes donated to the victims of fire, P15,000  Old furniture sold for P50,000 to his neighbor, FMV is P85,000 The taxable net gift to stranger is a. P245,000 c. P235,000 b. P110,000 d. P155,000

7.

Statement 1: As a rule, donation between husband and wife during the marriage is void. Statement 2: Donation can be made to conceived or unborn children.

13. Using the preceding information, the taxable net gift to relatives is a. P160,000 c. P235,000 b. P110,000 d. P155,000

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DONOR’S TAX

14. The husband and the wife gave the following gift of conjugal property, January 20, 2010 – Land valued at P180,000. Donee is a brother of the wife and the gift is on account of marriage of the brother held on January 10, 2008. The total donor’s tax due on the gift is a. P 1,600 c. P28,600 b. P 27,000 d. P54,000 15. Donations of properties, with fair market values: Land in Indonesia P 1,000,000 Land and Building in the Philippines 1,500,000 Shares of stock of a domestic corporation 500,000 Shares of stock of a foreign corporation 400,000 Receivable from a friend (residing in the same country as that of donor) 50,000 There was a transfer inter vivos (to take Effect during the lifetime of the transferor) of property in the country of the transferor. Consideration received – P 90,000; Fair Market Value of the property at the time of transfer was 200,000 Cancellation of indebtedness of a resident of the country where the transferor resides, as an act of liberality 20,000 Gross gift if the donor was a citizen or resident of the Philippines? a. P2,080,000 c. P3,580,000 b. P2,580,000 d. P3,510,000 16. Estate tax as distinguished from donor’s tax a. Payment is made as the return is filed. b. Notice is not needed. c. There is optional valuation date. d. Exemption per tax table is P200,000 17. Exempt from donor’s taxation are gifts made a. For the use of the barangay b. In consideration of marriage c. To a school which is a stock corporation d. To a for-profit government corporation 18. Which is not true about donation between spouses? a. Husband and wife cannot donate any conjugal or community property without the consent of the other b. Husband and wife may make a joint donation of conjugal or community property c. In a joint donation of conjugal or community property, each spouse shall be considered a separate donor of his or her interest in the property d. When a spouse makes moderate donations for charity or on occasions of family rejoicing or family distress, the consent of the other spouse is needed. 19. Statement 1: In order that the donation of an immovable property may be valid, it must be made in public instrument specifying therein the property donated. Statement 2: General renunciation of the heir, including the surviving spouse, of his or her share in the hereditary estate left by the decedent is not subject to donor’s tax. a. Both statements are false b. 1st statement is false while 2nd statement is true c. 1st statement is true while 2nd statement is false d. Both statements are true

20. The following donations were made to a legitimate child of a citizen donor:  Property in the Philippines P210,000  Property outside the Philippines on Account of marriage 300,000  Donor’s tax paid in foreign country 7,500 The donor’s tax due after tax credit for foreign donor’s tax paid is a. P14,000 c. P7,500 b. P 8,120 d. P6,500 21. Three of the following are declared exempt or “excluded” from the donor’s tax. Which is the exception? a. P150,000 given by a parent at the marriage celebration of an illegitimate child b. Donation to a Filipino by a British national of a condominium in Hong Kong c. P15,000 donation to a non-stock and non-profit school, 25% of the said amount is used for administrative purposes. d. Donation by a resident American of P10,000 cash to his daughter upon her marriage to a Filipino. 22. Donor’s tax shall be filed a. Within 30 days after the gift is made b. Within 6 months after the gift is made c. Within 20 days after the gift is made d. Within 30 days after the month when the gift is made 23. Candy gave the following donations to her legitimate son on account of marriage on December 31, 2011 Date Property Amount 1/30/2011 Cash P 7,500 3/7/2011 Personal Property 25,000 5/25/2011 Cash 80,000 The amount of deduction on account of marriage on March 7, 2011 a. None c. P 7,500 b. P 2,500 d. P10,000 24. Using the preceding given, the donor’s tax due on the May 25, 2011 donation a. P2,050 c. P 50 b. P 250 d. Exempt 25. Gienneth Lou wrote to James on December 31, 2011 donating his car worth P850,000. The letter was received by the latter on January 7, 2012 who accepted the donation. The letter of acceptance was sent by James on January 15, 2012 and was received by Gieneth Lou on January 20, 2012. The donor’s was not paid until May 22, 2012. For donor’s tax purposes, the gross gift should be based on the value of the property on a. December 31, 2011 c. January 15, 2012 b. January 7, 2012 d. January 20, 2012 For items number 26-28, refer to the following information: Mr. and Mrs. Crisante gave the following donations in 2011: Date Donor Property Amount Donee 1/5/11 Mr. Crisante Separate P150,000 Lito, legitimate son on account of marriage on June 1, 2011

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DONOR’S TAX

4/6/11

Mr. Crisante

Separate

175,000 Gemma, his mother 5/7/11 Mr. and Mrs. Conjugal 500,000 Timmy, daughter, on account of marriage on June 1, 2010 9/9/11 Mrs. Crisante Separate 200,000 Timmy, daughter, on account of Marriage 26. The donor’s tax and payable due on the January 5, 2011 donation is a. Exempt c. P45,000 b. P 1,000 d. P 800 27. The donor’s tax due and payable of Mr. Crisante on May 7, 2011 a. P 10,700 c. P26, 500 b. P 3,600 d. P 25,700 28. The September 9, 2011 donation’s donor’s tax due is a. P 2,000 c. P11,600 b. P 8,000 d. Exempt 29. At the testimonial dinner for new CPAs, Christian was requested to sing the theme song of the movie “Ghost”. Mae was so delighted that she feels she is falling in love with Christian, so she decided to cancel Christian’s indebtedness to her. As a result, a. Christian realized a taxable income as compensation for services. b. If Christian accepts the cancellation, he will pay donor’s tax. c. Christian received a gift from Mae and therefore not part of his taxable income. d. The amount of indebtedness cancelled is partly taxable, and partly exempt. 30. For donor’s tax purposes, who of the following is not considered as a stranger? a. Son of a first cousin b. Wife of the brother c. First cousin d. Father of the wife 31. Mr. Earl Montera, single, a Filipino citizen and a religious leader, is a cancer patient with remaining 3 months to live during the calendar year. His only asset is composed of cash amounting to P 5,000,000. Prior to his death, he asks you whether he would transfer his property through donation (donor’s tax) or fact of death (estate tax) to his brother. You presented to him the donor’s tax rate applicable for P 5,000,000 is 12% and the estate tax rate applicable for P 5,000,000 is 15%. Accordingly, he noted that his preference is to pay the tax through donation because it has lesser transfer taxes. Is Mr. Montera correct? a. Yes, because the tax savings would be P 150,000. b. No, because whether donor’s tax or estate tax is to be paid, the amount of related transfer tax is the same. c. Yes, because he is still alive. d. No, because the estate tax is cheaper by P 49,000. 32. 1st Statement: Dowries made on account of family celebration, on or before its celebration, or within one year thereafter, by parent to each of their legitimate,

recognized natural or adopted children, to the extent of the first P 10,000 shall be exempt from donor’s tax. 2nd Statement: Donation in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic organization or research institution or organization provided no amount of said gifts shall be used by the donee for administration purposes shall be exempt from donor’s tax. a. True, True c. False, True b. True, False d. False, False 33. 1st statement: Dowries made by non-resident alien parents to their children before marriage are exempt from gift tax up to P 10,000. 2nd statement: Donors can always claim a tax credit for donor’s taxes paid to a foreign country. a.

True, True

c. False, True

b.

False, False

d. True, False

For items 28 – 31, refer to the following information: On February 25, 2012, Mr. and Mrs. Bayabas donated their conjugal land worth P500, 000 to their three sons, but on account of marriage to one of them who got married 5 months ago. On June 9, 2012, they also donated to the child of Mrs. Bayabas by first marriage, jewelry worth P75, 000 on account of marriage more than a month after the donation. Finally on December 25, 2012, they donated to the nephew of Mr. Bayabas a building worth P750, 000, 40% of which was co- owned by their Kumpare who agreed to the donation and executed the necessary documents donating his share. 34. The donor’s taxes due on the February 25, 2012 donation should be: a.

P 14, 000 for Mr. & Mrs.

b.

P 3, 600 each for Mr. & Mrs.

c.

P 4, 000 each for Mr. & Mrs.

d.

P 5, 750 each for Mr. & Mrs.

35. The donor’s tax due on the June 9, 2012 donation is: a.

Mr. – 0; Mrs. – P1, 875

b.

Mr. – 11, 250; Mrs. – P4, 700

c.

Mr. – 11, 250; Mrs. – P1, 100

d.

Mr. – 11, 250; Mrs. – P1, 875

36. The donor’s tax due on the December 25, 2012 for Mr. & Mrs. are: a.

Mr. – 9, 875; Mrs. – P13, 500

b.

Mr. – 67, 500; Mrs. – P67, 500

c.

Mr. – 9, 000; Mrs. – P13, 500

d.

Mr. – 9, 000; Mrs. – P67, 500

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DONOR’S TAX

37. The donor’s tax due on the December 25, 2012 for their Kumpare is: a.

P 90, 000

c. P 0

b.

P 6, 000

d. P 30, 000

38. A donor gave the following donations in year 2012: January 24 -Land located in the Philippines valued at P 2,000,000 to her uncle subject to the condition that her uncle will pay the donor’s tax due and to assume the mortgage to which he agreed to pay the mortgage amounting to P 500,000. November 30- Building in US valued at P 4,500,000 to her sister. Donor’s tax paid in US was P 400,000.

43. The donation of a movable property may be made a. Orally c. Either A or B b. In writing d. Neither A or B 44. Using the preceding number, the donation and acceptance should be in writing if the value of the property donated is a. Less than P 5,000 c. P 5,000 or more b. P 5,000 or less d. More than P 5,000 45. A donation which takes effect upon the death of the donor. a. Donation mortis causa b. Partakes of the nature of a testamentary disposition c. Shall be governed by the law on succession d. All of the above.

The donor’s tax due on January 24 was a. P 84,000 c. P 92,000 b. P 450,000 c. P 480,000

46. The donation of an immovable property shall be made a. In writing c. Either A or B b. In public instrument d. Orally

39. The donor’s tax due and payable on the November 30 donation in number 11 amounted to a. P 131,000 c. P 524,00 b. P 47,000 d. P 124,000

47. A donor gave the following donations in year 2012 Jan. 24- Land located in the Philippines valued at P2,000,000 to her uncle subject to the condition that uncle will pay the donor’s tax due and mortgage to which she agreed to pay the mortgage amounting to P500,000. Nov.30Building in US valued at P4,500,000 to her sister. Donor’s tax paid in US was P400,000. The donor’s tax on the gift on Jan. 24 is:

40. The spouses Helena and Frederico wanted to donate a parcel of Land to their son Gerrick who is getting married in December, 2011. The parcel of land has a zonal valuation of P 420,000. What is the most efficient mode of donating the property? a. The spouses should first donate in 2011 a portion of the property valued at P 20,000 then spread the P 400,000 equally for 2012, 2013, 2014 and 2015. b. Spread the donation over a period of 5 years by the spouses donating P 100,000 each year from 2011 to 2015. c. The spouses should each donate a P 110,000 portion of the value of the property in 2011 then each should donate P 100,000 in 2012. d. The spouses should each donate P 100,000 portion value of the property in 2011, and another P 100,000 each in 2012. Then, in 2013, Helena should donate the remaining P 20,000 41. Matubo Corp. donated P 100,000 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 a full deduction for income tax purposes. a. Both statements are incorrect. b. Both statements are correct. c. Only Statement 1 is correct. d. Only Statement 2 is correct.

42. Statement 1: If the value of the movable property donated is P 5,000 or more the donation and the acceptance shall be made in writing, otherwise, the donation shall be void. Statement 2: Regardless of the value of the immovable property donated, the donation and acceptance shall be made in writing, otherwise, the donation shall be void. a. True, True c. False, True b. True, False d. False, False

a.

P 84,000

b.

P 92,000

c. P 450,000 d. P 480,000

48. The donor’s tax due on the Nov. 30 donation is: a.

P 131,000

c. P47,000

b.

P 524,000

d. P124,000

PROBLEMS Problem1. During the calendar year, Mr. Masagana paid a total donor’s tax amounting to P38,000 to his legitimate children on account of marriage. On his first donation during the year, he paid a donor’s tax amounting to P13,600. a. The amount of gross gift made on the first donation _________________ b. The amount of gross gift made on the second donation _________________ Problem 2. Mr. Haiko Kuri, a Malaysian residing in Cebu, made the following gifts for the year:  Property located in Malaysia donated to a Filipino relative, P1,000,000  Property located in the Philippines donated to Nigerian friend, P2,000,000 Compute the donor’s tax due and payable to Philippine government if the amount of donor’s tax paid to Malaysian government is P 70,000. ____________________

Problem 3. Mikaela made a donation of property with a FMV of P1,000,000 to his legitimate daughter, Gina and Jano on

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DONOR’S TAX

December 25, 2010 on account of Gina’s marriage to Jano to be celebrated on February 14, 2012. Mikaela filed the donor’s tax return on February 28, 2011. a. The donor’s tax due for gift made to Gina. ________________ b. The donor’s tax due for gift made to Jano ________________ c. The total donor’s tax due and payable on February 28, 2011. _________________ Problem 4. S, made the following donations in 2014: a. February 26: To T, a legitimate son on account of T’s graduation, P 150,000.

b.

April 26: To U, an acknowledged natural child on account of U’s forthcoming marriage on January 14, 2015, P 7,000. c. May 26: To V, a legitimate daughter on account of V’s marriage celebrated on June 14, 2013, P 8,000. d. July 26: To T, on account of T’s graduation on January 14, 2014, P 100,000. e. October 26: To U, additional gift on account of U’s marriage on January 14, 2015, P 93,000. f. December 26: To V, additional gift on account of V’s marriage on June 14, 2013, P 92,000. Determine the donor’s tax due on each donation.

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