Transfer Taxes

TAXATION: TRANSFER TAXES

D

1. Transfer tax is a tax imposed on the privilege to transfer property ownership A. through a will B. mortis causa C. inter vivos D. gratuitously

C

2. The NIRC of 1997 imposes different kinds of taxes on dispositions on property. There are VAT, excise taxes, estate taxes, donor’s taxes, etc. Which among the following transactions would be subject to a transfer tax? A. Sales of articles that are exempt from the VAT. B. Sales of cigars and cigarettes by a wholesaler. C. Sale of an automobile for less than an adequate and full consideration. D. Sale of shares of stock that are not listed and traded at the stock exchange.

D

3. Inheritance tax is imposed on the privilege to A. transfer property inter vivos B. transfer property mortis causa C. receive property inter vivos D. receive property mortis causa

B

4. Estate tax is imposed on the privilege to A. transfer property inter vivos B. transfer property mortis causa C. receive property inter vivos D. receive property mortis causa

D

5. Which among the following distinguishes an estate tax from other kinds of taxes that are presently imposed under the provision of the NIRC of 1997? A. It is a tax imposed on the privilege to transfer property ownership. B. It is a tax imposed upon gratuitous transfers. C. It is a tax imposed upon the net value of the properties that are transferred. D. it is the tax that is imposed only upon the death of a person.

A

6. Donor’s tax is imposed on the privilege to A. transfer property inter vivos B. transfer property mortis causa C. receive property inter vivos D. receive property mortis causa

C

7. Noynoy died leaving several parcels of land. Before the properties are distributed to his heirs, the tax to be paid is known as A. donor’s tax B. inheritance tax C. estate tax D. transfer tax

B

8. The estate tax is to be computed starting from the death of the decedent because A. the provision of the NIRC of 1997 requires it. B. the privilege to transfer properties takes place upon death. C. it is only upon the decedent’s death that his heirs are known. D. it is at the time of death that estate taxes are due.

C

9. Which among the following should be treated as real property? A. an Amorsolo painting B. a Porsche sports car C. a contract for the construction of a public road D. Shares of stock of San Miguel Corporation

D

10. Mr. AS, Filipino citizen, died abroad leaving the following properties: house and lot in Texas, USA; shares of stock in San Miguel Corporation and PHILEX, both local companies; bank deposits in New York City and in the Bank of the Philippine Islands in Makati; a Toyota Camry sedan registered in the name of his son aged 21 years. He was buried in Manila and expenses were incurred to bring the remains home and for his funeral. Which of the above properties should be excluded from his estate tax return? A. The house and lot in Texas B. The shares of stock in San Miguel Corporation C. The bank deposit in New York D. The Toyota Camry sedan

A

11. Cliff Robertson, an American citizen, was a permanent resident of the Philippines. He died in Miami, Florida. He left 10,000 shares of Meralco, a condominium unit at the Twin Towers Building at the Pasig, Metro Manila; a house and lot in Los Angeles, California, USA; a lease contract over a condominium located in Florida, USA. Which among the following assets should be excluded in the Estate Tax Return to be filed with the BIR? A. The value of the Florida, USA condominium B. The value of the Pasig, Metro Manila condominium C. The value of the house and lot located in California, USA D. The value of the 10,000 Meralco shares

C

12. Mr. Siok Tong, a Chinese citizen, met an accident and died while visiting the Philippines. Which among the following properties are to be included as part of his gross estate for Philippine tax purposes? In A. His house and lot in China. B. A condominium unit in California, USA. C. Shares of stock in Philippine Long Distance Telephone Company (PLDT). D. Accident insurance issued by a Philippine insurance company payable to his wife.

B

13. John Doe, an American domiciled in South Africa, died in 2009. He left the following properties: a. a rest house in Florida, USA; b. a villa in Switzerland; c. shares of stock in (1) Hongkong Corporation; (2) San Miguel Brewery, a Philippine Corporation; (3) An American Corporation operating `in and with office at Makati; d. time deposits with PNB; e. Philippine Treasury bills; f. lease contract over his Manhattan apartment leased to the Philippine consulate. Which of the following properties forms part of his gross estate in the Philippines? A. The lease contract. B. The shares of stock in the American corporation. C. The rest house in Florida, USA. D. The villa in Switzerland.

D

14. John Doe, an American domiciled in South Africa, died in 2009. He left the following properties: a. a rest house in Florida, USA; b. a villa in Switzerland; c. shares of stock in (1) Hongkong Corporation; (2) San Miguel Brewery, a Philippine Corporation; (3) An American Corporation operating `in and with office at Makati; d. time deposits with PNB; e. Philippine Treasury bills; f. lease contract over his Manhattan apartment leased to the Philippine consulate. Which of the following properties should be excluded from his gross estate in the Philippines? A. The shares of stock in the American corporation. B. The shares of stock in San Miguel Corporation. C. Time deposits with PNB. D. The rest house in Florida, USA.

C

15. Jose Ortiz owns 100 hectares of agricultural land planted to coconut trees. He died on May 30, 2009. Prior to his death, the government, by operation of law, acquired under the Comprehensive Agrarian Reform Law all his agricultural lands except five (5) hectares. Upon the death of Ortiz, his widow asked you how she will consider the 100 hectares of agricultural land in the preparation of the estate tax return. What advice will you give her? A. Exclude the 100 hectares because Jose Ortiz did not have any interest in the said property at the time of his death. B. Include the 100 hectares in the estate tax return but deduct the same property deemed taken for public use. C. Include only the five (5) hectares which were retained because this is the extent of the interest that Jose Ortiz had in the said property at the time of his death. D. Exclude the 100 hectares because these are properties that were taken for public use by operation of law.

C

16. X owns a residential lot with a BIR determined zonal valuation of P1million. In 2008 he sold the same t Y for P1million subject to the condition that while X is still alive he shall be allowed to use part of the property as a garage for whatever personal car he would own but limited only to one car. The proper taxes attendant to the sale were paid. X died in 2009. What should be the treatment of the value of the residential lot in the preparation of the estate tax return? A. Include because X retained the right to enjoy a portion of the property which right ends with his death. B. Include because there is no showing in the problem that the title to the property was already transferred to Y. C. Exclude because there was a bona fide sale of the residential lot for sufficient and adequate consideration. D. Exclude because the execution of the deed of sale and the payment of the taxes effectively deprived X of ownership over the property.

C

17. Which among the following transfers of property, by trust or otherwise, during the lifetime of the transferor is not included as part of a deceased transferor’s gross estate? A. When the deceased transferor has reserved to himself the power to alter, amend, revoke, or terminate the transfer and such power is relinquished in contemplation of the transferor death. B. Where the deceased transferor has reserved for himself the power to determine who could alter, amend, revoke or terminate the transfer and such power is relinquished in contemplation of the transferor death. C. Where the deceased transferor had made the transfer through a bona fide sale and for adequate consideration but he has made a reservation of the power to alter, amend, revoke or terminate the transfer prior to his death. D. Where the deceased transfer had made the transfer but he has reserved for himself the enjoyment thereof subject to his death to any change by himself or in connection with any other person could alter, amend, revoke or terminate the transfer and such power is relinquished in contemplation of the transferor’s death.

D

18. X Corporation took a Keyman insurance on the life of its president, Mr. Rodel Cruz, designating Mr. Cruz’ wife as its revocable beneficiary. In the event of death of Mr. Cruz, will the insurance proceeds from part of the gross estate of MR. Cruz? A. Yes, because Mrs. Cruz was designated as a revocable beneficiary. B. No, because the premium was not paid by Mr. Cruz C. Yes, because the insurance proceeds form part of the benefits of Mr. Cruz enjoyed by him as an employee of C Corporation D. No, because Mr. Cruz had no interest in the proceeds at the time of his death hence this is not property that he transferred at the time of his death.

C

19. On 30 June 2007, X took out a life insurance policy on his own life in the amount of P 2 million. The premiums were paid from his separate property. He designated his wife, Y, as irrevocable beneficiary to P 1 Million and his son Z, to the balance of P 1 Million but, in the latter designation, reserving his right to substitute him for another. On 1 September 2009, X died and his wife and son went to the insurer to collect the proceeds of X’s life insurance policy. Are the proceeds of the insurance to form part of the gross estate of X?

A. All of the proceeds would not form part of X’s gross estate. The insurance company is obligated to pay to the named beneficiaries, thus no part of the proceeds should appertain the X’s estate. B. All of the proceeds would form part of X’s gross estate. The premiums were paid from the separate property of X hence the insurance proceeds are also part of his separate property subject to estate tax. The proceeds though would not be taken from the named beneficiaries. C. Only the proceeds that were paid to the son would form part of X’s gross estate. X retained an incident of ownership in the insurance when he retained the right to revoke the designation of his son as beneficiary. D. Only a portion of the insurance proceeds that appertain to his wife should form of X’s gross estate. The insurance proceeds paid to the wife forms part of the conjugal partnership property hence X’s share should appertain to his estate. D

20. Which among the following should be included as part of the gross estate of a decedent resident alien? A. The transmission from the first heir, legatee or done in favor of another beneficiary, in accordance with the desire of the predecessor. B. Reversion of the right of usufruct to the owner of the naked title. C. Property transferred under a general power of appointment. D. Property transferred for the use of the Government of the Republic of the Philippines.

D

21. A died in 1999 leaving a will which directed all real estate owned by him not to be sold or disposed of for a period of 10 years after his death and ordered that the property be given to B upon the exipry of that period. In 1999, the estate left by A had a BIR zonal value of P 500, 000. In 2009, the fair market value of said estate increased to P 2, 500, 000. It was declared for taxation in 2009 for P 1, 500, 000 and the BIR zonal valuation was P 3, 000, 000. What value should be used for the purpose of estate taxation? A. P 3 Million B. P1.5 Million C. P 2.5 Million D. P 500, 000

C

22. Jose Cernan, Filipino citizen married to Marie Cernan, died in a vehicular accident in NLEX on July 10, 2008. The spouses owned, among others, a 100- hectare agricultural land in Sta. Rosa, Laguna with current fair market value of P 20 Million and a BIR zonal valuation of P 30 Million. This property was the subject matter of a Join Venture Agreement about to be implemented with Star Land Corp. (SLC), a wellknown real estate development company. He bought the said real property for P2million 50 yrs. ago. On January 5, 2009, the administrator of the estate and SLC jointly announced their big plans to start conversion and development of the agricultural lands in Sta. Rosa, Laguna, into first class residential and commercial centers. As a result, the prices of the real properties in the locality have doubled. Which among the ff is the proper valuation of the 100-hectare property for estate tax purposes? A. The current fair market value at the time of Jose Cernan’s death. B. The current fair market value at the time of filling of estate tax return. C. The zonal valuation at the time of Jose Cernan’s death. D. The original acquisition price of the said property.

D

23. When Procopio died, he left an estate valued at P10million. His heirs spent P700,000.00 for all the funeral services rendered by St. Peter Memorial Chapel, including the expenses attendant to the wake, coffin, cremation services and the urn where the ashes were placed. P300,000.00 out of the P700,000.00 funeral expenses were shouldered by friends and relatives. Which among the ff amounts may be deducted from his gross estate for funeral expenses? A. P500,000.00 B. P700,000,00 C. P400,000.00 D. P200,000.00

C

24. X, an American citizen, who is a permanent resident of the Phil. died while on a vacation in his place of birth in the United States. Which one of the ff is a valid deduction from his gross estate? A. Estate taxes paid in the Phil. B. Income tax paid on income earned and received after X’s death. C. Unpaid income taxes on salaries received by X before his death. D. Real property taxes on X’s Quezon City condominium due after his death.

D

25. Vanishing deduction is availed of by taxpayers to: A. correct his accounting records to reflect the actual deductions made B. reduce his gross income C. reduce his output value-added tax liability D. reduce his gross estate

C

26. Gary died in April 2007 leaving all his properties to his only son Martin. Gary left no creditors. Martin promptly executed an affidavit of self-adjudication, paid the proper estate taxes and had the properties titled in his name. In August 2009, Martin died leaving as his only heirs, his two surviving children. If vanishing deduction finds application what percentage of the value of the properties Martin inherited from Gary should be allowed as a deduction? A. 20% B. 40% C. 60% D. 80%

D

27. In which among the ff instances is the filing of an estate tax return a requirement? A. the gross value of the estate is P100,000.00 and is exempt from the payment of estate tax. B. the gross value of the estate exceeds P100,000.00 but is below P200,000.00 and is exempt from the payment of estate tax. C. the gross value of the estate does not exceed P200,000.00 and is exempt from payment of estate tax D. the gross value of the estate exceeds P200,000.00 but is exempt from payment of estate tax.

C

28. A died in June 2009 in LA, California, her last residence and domicile. She left properties consisting of among others, shares of stocks in BMC, Inc., a company organized and existing under the laws of the Phil. with principal office at Makati, MM. the estate tax due on said shares were correspondingly paid to the state of California. For the Phil. estate tax purpose what should be tax treatment of the estate tax paid to the state of California? A. The California estate taxes are allowed to be deducted from A’s gross estate. B. Since there is no showing of reciprocity then the California estate taxes should not be considered in determining the Phil estate tax. C. The amount of the California estate taxes are allowed to be deducted from the Phil. estate tax that is due from A’s estate. D. Since the California estate taxes have already been paid there is no need anymore to pay the Phil. estate tax.

D

29. VCC is the administrator of the estate of his father, NGC. In the estate proceeding pending before the MM regional trial court, last year, he received from the commissioner of internal revenue a deficiency assessment for the estate in the amount of P1million, but he ignored the notice. Last month, BIR effected a levy on the real properties of the estate to pay the delinquent tax. Considering the above facts, which among the ff statements is correct? A. VCC should file a motion with the probate court to stop the enforcement and collection of tax because the properties from the tax to be enforced are in custodial legis. B. VCC should within 30 days from the receipt of the levy file a petition for review with an application for the suspension of the tax before the Court of tax appeals. C. VCC should advise the BIR commissioner that it could not enforce the levy because of the pendency of the estate proceedings before the Regional trial court. D. VCC should raise P1million and pay the deficiency assessment so that the real properties would not be the subject of levy.

D

30. The Commissioner of Internal Revenue may grant an extension of time of payment of the estate tax or any part thereof, in case the estate is settled through the courts for a perios not exceeding A. 2 yrs. From the grant of extension B. 2 yrs. From the settlement of estate C. 5 yrs. From the settlement of estate D. 5 yrs. From the grant of extension

B

31. A, an individual, sold to B, his brother-in-law, his residential lot with a market value of P1million for P600,000.00. A’s cost in the lot is P100,000.00. B is financially capable of buying the lot. What tax should be imposed and collected from A as a result of the transaction? A. presumed capital gains tax B. donor’s tax C. real property tax D. tax on the transfer of real property

B

32. Which among the ff is subject to the payment of donor’s tax? A. a general renunciation of a surviving spouse in his/her share in the inheritance of the deceased spouse. B. a general renunciation by the surviving spouse of his/her share in the conjugal partnership of gains upon its liquidation as a result of the death of the other spouses. C. a remuneratory donation where there is a legally demandable obligation. D. donation made outside the Phil. by a non-resident alien of property located outside the Phil.

D

33. Mr. Bill Morgan, a Canadian citizen and a resident of Scarborough, Ontario, sends a gift check of $20,000 to his future Filipino daughter-in-law who is to be married to his only son in the Phil. is the donation subject to Phil donor’s tax? A. Yes, but only up to extent that exceeds the allowable P10,000 exemption for donations by reason of marriage. B. yes. There is no showing in the problem that marriage actually took place within 1 yr. from the date of donation. C. no. the donor is a non-resident alien hence he is not subject to Phil donor’s tax. D. no. the donation took place outside the Phil hence not subject to Phil. donor’s tax.

D

34. Who among the ff donations is considered a stranger for purposes of donor’s taxation? A. a first cousin of the donor B. the brother of the donor’s father C. the donor’s great grandchild D. the mother of donor’s spouse

C

35. Who among the ff is not a stranger for purposes of donor’s taxation? A. the donor’s father-in-law B. the donor’s stepmother C. the donor’s great grandfather D. husband of donor’s sister 36. state whether the ff transactions are: a. VAT exempt; b. subject to VAT at 12%; c. subject to VAT at 0% a. Sale of fresh vegetables by Aling Ining at the Pamilihang Bayan ng Trece Martirez. b. Services rendered by Jake’s Construction Company, a contractor to the World Health Org. in the renovation of its offices in Manila. (subject to VAT at 0%) c. Sale of tractors and other agricultural implements by Bungkal Incorporated top local farmers. (subject to VAT at 12%) d. Sale of RTW by Cely’s Boutique, a Filipino dress designer, in her dress shop and other outlets. (subject to VAT if gross sales exceeded P1.5million annually) e. Fees for lodging paid by students to Bahay-Bahayan Dormitory, a private entity operating a student dormitory, monthly fee of P1,500. (VAT exempt)