Tax2 Midterm Exam-sent

TEST I- MCQ 1. An act of liberty whereby one disposes gratuitous of a thing or right in favor of another who accepts ita. Succession c. Donation b. Occupation d. Tradition 2. A tax imposed on the gratuitous transfer of property between two or more person who are living at the time the transfer is made a. Estate tax c. Income tax b. Gift tax d. Transfer tax 3. A donation made by a stockholder to a corporation is subject to donor’s tax because of the following principles, except a. Entity theory c. Benefit received principle b. Lifeblood theory d. Tax benefit rule 4. What is the tax implication if a corporation condones the debt of a stockholder 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 to the stockholder which is, therefore, subject to a dividend tax of 10%. c. It is tantamount to a declaration of dividend. Therefore, it is an income which is subject to 10% dividend tax on the stockholder. 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 stockholder not subject to donor’s tax on the corporation. 5. ABDON went to ALAMBRA RESORT and was given a prize of P50, 000.00 by the resort for being its 1,000 th guest. Is the prize subject to donor’s tax? Income Tax? Donors Tax Income tax a. Yes Yes b. No Yes c. Yes No d. No No 6. The following are the requisites of a donation for purposes of the donor’s tax, except; a. Capacity of the donor b. Capacity of the donee c. Delivery of the subject d. Donative intent 7. A donation of one (1) hectare of timberland a. Can be done orally or in written

b. Must be in writing c. Maybe in private document d. Must be in public document 8. One of the following is a valid donation a. Oral donation of a cellular phone worth P4,5000 b. Oral donation of a passenger jeepney worth P150,000 c. A parcel of land worth P5,000 in private document d. A parcel of land worth P500,000 in a private document 9. Which of the following constitutes a taxable gift? a. Creditor’s gratuitous discharge of a debtor’s obligation b. One day rent- free use of another’s property c. A gratuitous transfer by an incompetent d. An agreement to make a future transfer which is not supported by a consideration 10.AVANCENA donated a share of stocks of BAES Corporation to BONAOBRA on April 20, 2015 with a right to revoke it. The donor delivered the property April 25, 2015. On June 20, 2015 AVANCENA relinquished the right to revoke. Ten days after, the donor died. For purpose of donor’s tax, the gross gift should be bases on the value of the shares on a. April 20, 2015 c. June 20,2015 b. April 25,2015 d. June 30, 2015 11.BUCARILE wrote a letter to CATUSALEM on December 31, 2014 donating her car worth P350, 000. The letter was received by the latter on January 7, 2015 who accepted the donation. The letter of acceptance was received only by Warren on January 15, 2015. The donor’s tax was not paid until May 22, 2016. The donation was consummated on a. December 31, 20114 c. January 7, 2015 b. January 15, 2015 d. May 22, 2016 12.On August 18, 2015 GLADYS loaned to her sister ANDREA P200, 000 at an interest of 12% per annum payable one (1) year thereafter. One month before the debt become due, Martha’s husband died. Consequently, GLADYS informed her sister that she is condoning the loan including the interest. How much is the value of the donation made by Elizabeth to Martha? a. P200, 000 c. P220,000 b. P224,000 d. None 13.Which of the following examples is not taxable a. A Filipino citizen donated a parcel of land located in the United States to B, nonresident alien. b. On June 12, 2015, A made a gift of P200 ,000 to his daughter on account of her marriage celebrated may 21, 2014. c. MR.DELEGENCIA, a multi-millionaire, gives his wife a diamond ring worth P120, 000 as birthday gift.

d. A and B are the only heirs of C. A renounces his share of inheritance in favor of B. 14.Which of the following is subject to donor’s tax? a. Donation inter-vivos to Iglesia ni Kristo b. Donation inter-vivos to International Rice Research Institute. c. Cash contribution to a political candidate, duly reported on the Commission on Elections d. Remission of debt where the debtor did not render service in favor of the creditor. 15.A tax minimization scheme which is done by spreading the gift over numerous calendar years to avail the lower tax liabilitya. Spread-out method c. Donation of life insurance b. Splitting gift d. Void donation 16.The spouses NAPINTAS and NATAER wanted to donate a parcel of land to their son CARL JOHN who is getting married in December 2014. The parcel of land has a zonal valuation of P420,000.00. What is the most efficient mode of donating the property? a. The spouses should first donate in 2014 a portion of the property valued at P20, 000.00 then spread the P400,000.00 equally for 2015, 2016, 2017 and 2018. b. Spread the donation over a period of 5 years by the spouses donating P100, 000 each year from 2014-2018. c. The spouses should each donate a P110, 000.00 portion of the value of the property in 2014 then each should donate P100, 000.00 in 2015. d. The spouses should each donate a P100, 000.00 each in 2015. Then in 2016, Helena should donate the remaining P20, 000.00. 17.Statement 1: When the done is exempt from income tax, the donation made by a taxable individual is also tax exempt. Statement 2: Proceeds of life insurance policy on the life of decedent where the designation of the beneficiary is irrevocable is always subject to donor’s tax. Statement 1 Statement 2 a. True False b. False True c. False False d. True True 18.Statement 1: The agreement between the donor and the done that the latter shall assume the tax burden is binding on the government. Statement 2: There is no donor’s tax in a donation on account on marriage if the marriage did not actually take place. a. Only the first statement is wrong.

b. Only the second statement is wrong. c. Both statements are wrong. d. Both statements are correct. 19.Antiquia donated a 1000 square meter land to Botor with a condition that within two years from the date of donation, Botor will construct a two-story building thereon, and that failure of the done to comply with the condition shall be sufficient ground for the revocation of the donation. I. There shall be donor’s tax on the donation even if it may be revoked in case of non-fulfillment of the donation. II. In case of revocation of the donation, the donor’s tax paid to the government may refund to the donor. Which of the following statements is correct? a. Statement 1 only b. Both statements

c. Statement 2 only d. Neither statements

20.Which of the following statements is false? The gross gift of a non-resident alien. a. Will include all intangible personal properties regardless of location. b. Will include all intangible personal properties situated in the Philippines. c. With reciprocity will not include all intangible personal properties regardless of location. d. Without reciprocity will not include all intangible personal properties situated outside the Philippines. 21. Which of the following is not considered as an intangible personal property within? a. Franchise which must be exercised in the Philippines. b. Shares of stocks issued by a domestic corporation. c. Obligation or bonds issued by a foreign corporation with business situs in the Philippines. d. Shares of stocks issued by a foreign corporation 51% of the business of which is located in the Philippines. 22.Given the following statements: I. A donation by a nonresident alien of shares of stock issued by a domestic corporation is subject to donor’s tax if such shares 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 of a nonresident alien of bonds issued by a foreign corporation is subject to donor’s tax if 90% of the business of such foreign corporation is situated in the Philippines.

IV.

A donation by a nonresident citizen of a franchise will be subject to donor’s tax in the Philippines even if such intangible is being used outside the Philippines.

Which of the above statements is/correct? a. Statements I and III b. Statements II and IV

c. Statements III and IV d. Statements I and IV

23.Which of the following cannot claim P10,000 exemption on gifts given on account of marriage? a. Resident citizen c. Resident alien b. Nonresident citizen d. Nonresident alien 24.One of the following exemptions cannot be claimed by a non-resident alien donor. a. P10,000 dowries or gifts given on account of marriage of a legitimate son. b. Donation to the National government, its agencies and instrumentalities or political subdivision thereof. c. Donation to a non-profit educational institution not more than 30% of the gift is used for administration purposes. d. The exemption of P100,000 in the tax table for donor’s tax. 25.Given the following statements: I. A donation by a husband and wife jointly of a conjugal property will require two separate computations of donor’s tax which will be contained in two separate donor’s tax return. II. If the property donated is a community property of the spouses, the spouse who opposes the donation shall not be considered as a donor and will not be required to pay donor’s tax return. III. If the property donated is a community property of the spouses, each of them is considered as a donor of his or her share in the co-owned property and shall be liable for whatever tax that may accrue on such donation. IV. As a rule, a donation inter vivos between spouses during the marriage is voidable. Choose the best answer. a. Statements 1and 4 are true are true b. Statements 1 and 2 are true are true

c. Statements 1, 2, and 3 d.

Statements 2 and 3

26.Given the following statements: I. If the marriage is not validly solemnized, the donor is not entitled to the P10,000 exemption because the donation prompter nuptia is not also valid.

II. III.

IV.

Donations prompter nuptia by an adopting parent on account of the wedding of his child by natural adoption will entitle the donor to an exemption from gross gift of P10,000. A wedding ceremony which was solemnized by the mayor is not valid because he is not authorized to solemnize marriages under the Family Code, thus the P10,000 exemption from gross gift cannot be claimed by the donor of a donation prompter nuptia. There is no P10,000 exemption from gross gift on a donation prompter nuptia given by a parent to his daughter who will celebrate her 50 th wedding anniversary.

Choose the best answer. a. Statement 1 is true are false b. Statement 2 is false are true

c.

Statements 2 and 3

d. Statements 1 and 2

27.Justina donated cash ti his son on account of marriage on October 2014 as follows: January 15, 2015 P 25,000 March 10,2015 20,000 July 15, 2015 50,000 September 10, 2015 100,000 The donor’s tax due on September 10, 2015 isa. P750 b. P1,700

c. P1,350 d. Exempt

28.Which of the following donations result to a net gift of P80,000? a. FRANCISCO donated property to GALANG with a market value of P140,000. The property is subject to a mortgage indebtedness of P60,000 which was paid by the donor at the time of the donation. b. MONDERONDO requested OLIVEROS to pay MONDERONDO’S liability with MULLANIDA in the amount of P100,000 and in return, the personal property of MONDERONDO valued at P180,000 will be donated to OLIVEROS. c. The daughter of REO was married to her boyfriend. As a gift, REO donated cash worth P100,000 to his daughter. d. Property worth P80,000 was donated by Bibong to Barangay Maaliwalas for use as site of the Barangay Hall. 29.The following does not result to a gross gift. a. Donation to the Development Academy of the Philippines. b. Donation of a parcel of land to brother, the donation is in private document. c. Donation of a real property to the City of Manila. d. Donation of property the encumbrance therein was assumed by the done.

30.Exempted from the 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 not-for-profit government corporation. 31.All a. b. c. d.

of the following except one are exempt from donor’s tax. Which is it? Donation to the Philippine Red Cross. Donation to the Development Academy of the Philippines. Donation directly given to the victims of the eruption of Mount Bulusan. Donation to the City of Davao for public purpose.

32.A non-stock, non-profit school always had cash flow problems, resulting in failure to recruit well trained administrative personnel to effectively manage the school. In 2015, DON LEON donated P100 million pesos to the school, provided the money shall be used solely for paying the salaries, wages and benefits of administrative personnel. The donation represents less than 10 % of DON LEON’s taxable income for the year. Is he subject to donor’s taxes? a. No, since the donation is actually, directly, and exclusively used for educational purposes. b. Yes, because the donation is to be wholly used for administrative purposes. c. Yes, since he did not obtain the requisite NGO certification before he made the donation. d. No. because the donation does not exceed 10 % of his taxable income for 2015. 33.There is reciprocity when the donor and the donated propertyDonor Property a. Nonresident alien Intangibles b. Nonresident citizen Immovable c. Nonresident alien Tangible personal d. Resident alien Any kind of property 34.Which of the following statements is false? a. Donor’s tax applies also to juridical persons. b. For purposes of donor’s tax, second cousins are strangers to each other. c. Encumbrance on the property donated, if assumed by the donor is deductible for donor’s tax purposes. d. As a rule, donation between husband and wife during the marriage is void. 35.Which of the following is not a factor in the determination of taxable gifts? a. Identification of transfers included in gross gift b. Application of exempt transfers c. Subtraction of allowed deductions, d. Multiplying net gift by the applicable rates. 36.Given the following statements:

I. II. III. IV.

The donor’s tax payable on the present donation includes the previous donations made during the current year. It is not proper to add the prior net gifts during the current year because the taxes paid on the donations will just be credited from the donor’s tax computed. The tax rate on the tax table for donor’s tax is relatively lower than the tax rates in the tax table for estate tax. The highest tax rate on donor’s tax is higher than the highest tax rate on estate tax.

Choose the best answer. a. b. c. d.

Statements 1 and 2 are false Statements 1, 2, and 4 are false Statements 3 ad 4 are correct Statement 2 is false.

37.A stranger in donor’s taxation a. Great grandchild adoption b. Nephew

c.

Child

by

natural

d. Grand auntie

38.RISHEL who is a single, gave an outright gift of P150,000 to a friend, DALEVIN who needed the money to pay medical expensesa. The donation is not taxable because the gift is outright. b. The donor’s tax payable is P1,000 c. The donor’s tax is P45,000 d. The donation is deductible from the gross income of Sayers 39.Celia donated P110,000.00 to her friend Victoria who was getting married. Celia gave no other gift during the calendar year. What is the donor’s tax implication on Celia’s donation? a. The P100, 000.00 portion of the donation is exempt since given in consideration of marriage. b. A P10,000 portion of the donation is exempt being a donation in consideration of marriage. c. Celia shall pay a 30% donor’s tax on the P110,000 donation. d. The P100,000 portion of the donation is exempt under the rate schedule for donor’s tax. 40.Given the following statements: I. For the purposes of donor’s tax, a relative done must always be a blood relative; otherwise he is a stranger to the donor. II. Donation by stockholder to his wholly owned corporation is subject to the donor’s tax computed based on the tax table. III. For purposes of donor’s tax, first cousins who have never met together personally because the donor is in the Philippines, while the done grew up in the US are strangers to each other. IV. For donor’s tax purposes, the brother of the daughter of the donor’s son is a stranger to the donor.

Choose the best answer: a. Statements 1 and 2 are false b. All statements are false

c. Statements 2 and 4 are false d. No statements is false

41.The filing of the donor’s tax return is; a. b. c. d.

Within Within Within Within

30 days after the gift is made 60 days after the gift is made 6 months after the gift is made 180 days after the gift is made

42.The donor’s tax return should set forth the following, except; a. Each gift made during the calendar year which is to be included in computing net gifts b. The deductions claimed and allowable c. The name of the donee d. All of the above 43.Surcharge of 25% to donors tax shall not be imposed if the following are present, except a. b. c. d.

The donor’s tax return was filed voluntarily There was a reasonable cause for failure to file the return Not due to willful neglect None of the above

44.What is the interest rate per annum that shall be imposed on the basic unpaid amount of tax from the date prescribed for the payment? a. b. c. d.

50% 25% 20% 12%

45.The range of donor’s tax rate is; a. b. c. d.

5%-20% 5%-32% 2%-15% 5%-30%

46.The exempt amount for donor’s tax is a. b. c. d.

P P P P

600,000 400,000 900,000 100,000

47.Which statement is wrong? Deductible Items Donor- Citizen or Resident a. Dowries YES b. Encumbrances YES c. Diminution YES d. To Government YES

Donor- Nonresident Alien YES YES YES YES

48.Which statement is wrong? a. Cash gift shall be valued at face amount of the currency b. If the gift is a personal property, the Fair Market Value (FMV) thereof is considered the amount of the gift c. If the gift is a real property, the value of the gift is the FMV as fixed by the assessors or FMV as determined by the BIR Commissioner, whichever is higher d. None of the above 49.There is reciprocity when the following situations exist: I.

There shall be donor’s tax on the donation even if it may be revoked in case of non-fulfillment of the donation.

II. In case of revocation of the donation, the donor’s tax paid to the government may refund to the donor. Which of the following statement/s is/are correct? a. Statement 1 only b. Both statements

c. Statement 2 only d. Neither statements

50.In order that a donation will be valid, the following elements must be present, except: a. b. c. d.

Capacity of the donee Donative Intent Delivery of the Gift Acceptance of the donee

TEST II- Modified True or False (x2) 40 points 1. A donation inter vivos is an act of liberality where a person disposes of gratuitously property in favor of another who accepts it. 2. A donation mortis causa is an act of liberality where a person disposes of gratuitously property in favor of another who accepts it. 3. Where the value of the movable property donated is P5,000 or less, the donation be made orally. 4. The done, not being taxable, is not required to file any return unless he acts as an agent. 5. The surcharge to be imposed for willful neglect to file the return within the prescribed period is 25%.

6. A gift to a parish priest or his church is exempt from gift tax. 7. The donor’s tax shall not apply until and unless there is a completed gift. 8. Donations given to ASIAN INSTITUTE OF MANAGEMENT is exempt from donor’s tax. 9. Spouses who make donation out of conjugal property shall be considered a separate donor of his or her interest in the conjugal property. 10.Donations made between husband and wife during the marriage are void. 11.In relation to number 11, this provision is also applicable to man and woman living together as husband and wife without a valid marriage. 12.A taxable donor does not need to be a natural person. 13.The value of the property or right donated subject to donor’s tax before any deduction is a net gift. 14.Condonation or remission of debt where the donor did not render service in favor of the creditor is a donation. 15.Donative intent is required only in a direct gift. 16.Donations made to unborn children may be accepted by those persons who would legally represent them. 17.Resident alien would be subject to donor’s tax only on their donations of property located in the Philippines. 18. The first P500,000 of the net gift for every year is not subject to donor’s tax. 19.Regardless of the relationship to the done, donations made by the donor are subject to schedular rates of 2% to 15%. 20.Nonresident alien would be subject to donor’s tax only on their donations of real property located in the Philippines. TEST III- Computation: 10 points 1. MR. AND MRS. DON ASION, Citizens and residents of the Philippines, made the following donations: June 6, 2015 - To Mark, a legitimate son, on account of marriage P 460,000.00 - To Althea, a legitimate daughter, property with mortgage of P 4,000.00 assumed by Althea. Fair Market Value 20,000.00 Oct. 8, 2015 - To Robert, a legitimate son of MRS. ASION, by prior Marriage, on account of marriage 60,000.00 Required: On the donation of June 6, 2015 the Donor’s tax of MR. & MRS. ASION? 2. MR. AND MRS. DON ASION, Citizens and residents of the Philippines, made the following donations: June 6, 2015 - To Mark, a legitimate son, on account of marriage P 460,000.00

- To Althea, a legitimate daughter, property with mortgage of P 4,000.00 assumed by Althea. Fair Market Value 20,000.00 Oct. 8, 2015 - To Robert, a legitimate son of MRS. ASION, by prior Marriage, on account of marriage 60,000.00 Required: On the donation of Oct 8, 2015 the Donor’s tax of MR. & MRS. ASION?