MIDTERM EXAMINATION

Business and Transfer Taxes

1. The gross gift of donors shall be comprised of properties:

Resident or citizen donor Non-resident Alien donor
a. Wherever situated wherever situated
b. Situated in the Philippines Situated in the Philippines
c. Wherever situated Situated in the Philippines
d. Situated in the Philippines Wherever situated
2. One of the following is not allowed as a deduction from the gross gift of a non-resident
alien donor:
a. Dowry or gift on account of marriage
b. Gifts made to or for the use of the National government or any entity created by
any of its agencies which is not conducted for profit, or to any political
subdivision of the said government
c. Gifts in favor of an educational and/or charitable, religious, cultural or social
welfare corporation, institution, accredited non-government organization, trust,
or philantrophic organization.
d. Encumbrance on the property donated assumed by the donee
3. Donor’s tax credit is allowed to:
a. Resident citizen donor c. Non-resident citizen donor
b. Resident alien donor d. Non-resident alien donor
4. Which of the following is a stranger for donor’s tax purposes?
a. A child born out of wedlock of parents who are legally impede to marry each
other at the time the child is being conceived
b. The son of the donor’s first cousin
c. The donor’s grandmother
d. The donor’s spouse
5. Which of the following deductions from gross gifts is not found in the tax code?
a. Donation to educational institutions c. encumbrance on the donated
property
b. Donation to philanthropic organizations d. Donation to research
organizations
6. The amount of exempt dowry given to a stepchild is to the extent of:
a. The first P10,000 b. The first P20,000 c. The first P30,000d. None
7. One of the following is a stranger under the donor’s tax law:
a. A child of a brother b. A grandchild c. A granduncle d. A
second cousin
8. 1st statement: A legally adopted child who is not a relative by consanguinity of the
adopting parent is a stranger for donor’s tax purposes.
2nd statement: the relatives by consanguinity of the wife are strangers as far as donor-
husband is concerned.
a. True, False b. False, False c. True, True d. False, True
9. In computing the donor’s tax on a subsequent donation, the donor must also consider:
a. All prior net gifts during his lifetime
b. All prior net gifts during the calendar year
c. The present and the immediately preceding donations
d. Only the present donation
10. Which of the following example is not taxable?
 a. Pinoy, Filipino citizen, donated a parcel of land located in the United States to
Eitty, a non-resident alien
b. On June 1, 2017, Father made a gift of P200,000 to his daughter on account of
marriage celebrated on May 1, 2016
c. Mr. Goodheart gives his wife a diamond ring worth P100,000 as a birthday gift
d. Juan and Thou are the only heirs of Fif. Juan renounces his share of inheritance in
favor of Thou.
11. One of the statements that follow is correct. Which is it? A deed of donation was
executed by Mr. Donor, resident of Manila, in favor of Mr. Donee, a resident of Quezon
City, Mr. Donee executed a deed of acceptance in Quezon City. The donor’s tax return
must be filed with the Bureau of Internal Revenue Office:
a. At the residence of the donor
b. At the residence of the donee
c. At the residence of the donor or the donee, whichever the donor chooses
d. None of the above
12. Mrs. Co donated a wristwatch valued at P3,000 to his friend Mrs. Mo on January
5, 2016. She sent the gift to Maragondon, Cavite via Eastern Union on the same day.
Her friend received the package on January 7, 2016 and communicated his receipt and
acceptance of the gift to Mrs. CO through e-mail. When would be the last day for the
filing of a donor’s tax return?
a. February 5, 2016
b. March 7, 2016
c. February 6, 2016
d. No return was necessary; the donation was invalid because it was not in writing
13. Which of the following is not allowed as deduction from the gross gift?
a. Dowry deduction c. Unpaid mortgage on the property
donated
b. Encumbrance on the property donated d. Vanishing deduction
14. The following are the requisites of a donation for purposes of the donor’s tax,
except one:
a. Capacity of the donor c. Capacity of the donee
b. Delivery of the subject matter of gift d. Donative intent
15. The donation of personal (movable) property may be made:
I. Orally, if the value is P5,000 or less requiring simultaneous delivery
II. In writing, if the value is more than P5,000
a. Both I and II are correct c. Only II is correct
b. Both I and II are incorrect d. Only I is correct
16. For donor’s tax, one of the following is a stranger:
a. Brother of the donor c. Spouse of the donor
b. Father of the donor d. Son-in-law of the donor
17. It is a tax imposed for the gratuitous passing of private properties owned in case
of death or donation.
a. Income tax b. Business tax c. Estate tax d. Transfer tax
18. All is true about estate tax except:
a. Exempt from tax is P200,000 c. Filing of tax return is within 6
months
b. Higher progressive estate tax rates is 0%-20% d. Filing of tax return is
within 30 days
19. A person or artificial person named in the will by the testator to carry out its
provisions or instructions.
a. Executor b. Legitimate heir c. Administrator d. Successor
20. When does an estate tax return require a certification of a CPA?
a. When the gross estate does not exceed one million pesos (P1,000,000)
b. When the gross estate does not exceed two million pesos (P2,000,000)
c. When the gross estate exceed one million pesos (P1,000,000)
d. When the gross estate exceed two million pesos (P2,000,000)
21. It is an act whereby a person is permitted, with the formalities prescribed by law,
to a certain degree, the disposition of his estate to have effect after his death.
a. Donation b. Will c. Inheritance d. Trust
22. Mr. Domingo Namayapa died on September 30, 2017. He left a gross estate
amounting to P500,000. The estate tax return should be filed on or before
a. October 31, 2017 c. March 31, 2018
b. December 31, 2017 d. September 30, 2020
23. The estate tax imposed by Section 84 of the tax code shall be paid
a. Within thirty (30) days from the decedent’s death
b. Within sixty (60) days from the decedent’s death
c. At the time the return is filed by the executor, administrator, or heirs
d. At the time the notice of death is given to the BIR Commissioner
24. 1st statement: The payment of the estate tax may be extended for a period not
exceeding five years if there is judicial settlement of the estate.
2nd statement: The payment of the estate tax may be extended for a period not
exceeding two years if there is extrajudicial settlement of the estate.
a. Both statements are true c. Only first statement is true
b. Both statements are false d. Only second statement is true
25. Which statement is false about succession?
a. The successor inherits all the transmissible property of a decedent including his
liabilities
b. The successor can be made liable for the obligations of the decedent beyond the
value of the asset he received.
c. In succession, fruits and credits maturing after the death of the decedent pass to
the heirs even if they received were not subjected to estate tax.
d. In succession, the successor can refuse the inheritance.
26. Mrs. Mina Malas, a Filipino resident, died on November 5, 2016 and his estate
incurred loss due to:
First loss: From fire on February 2, 2016 of improvement on his property not
compensated by insurance.
Second loss: From flood on February 2, 2017 of household furniture also not
compensated by insurance.
a. First loss is not deductible but second loss is deductible
b. Both losses are deductible
c. Both losses are not deductible
d. First loss is deductible but second loss is not deductible
27. The following are requisites for vanishing deduction to be allowable, except one:
a. The estate tax of the prior succession must have been finally determined and
paid.
b. The present decedent died within five years from the date of the death of the
prior decedent.
c. The property with respect to which deduction is sought can be identified.
d. The property must have formed part of the gross estate situated in the
Philippines of the prior decedent.
28. A contract entered into by a man and woman about to be married for the
purpose of fixing the terms and conditions of their property relations with regard to the
present and future property.
a. Ante-nuptial agreement c. Contract of partnership
b. Marriage contract d. Certificate of No Marriage
29. The following are transactions and acquisitions exempt from transfer tax except:
a. Transmission from the first heir or donee in favor of another beneficiary in
accordance with the desire of the predecessor.
b. Transmission or delivery of the inheritance or legacy by the fiduciary heir or
legatee to the fideicommisary.
c. The merger or usufruct in the owner of the naked title.
d. All bequests, devises, legacies, or transfers to social welfare, cultural, and
charitable institutions.
30. One of the following is not a community property of the spouses.
a. Property inherited by the husband before marriage
b. Winnings from gambling
c. Fruits of property inherited during the marriage
d. Fruits of property inherited before the marriage
31. An automatic deduction not requiring substantiation is:
a. Standard deduction b. Family home c. Judicial expensesd.
Medical expenses

32. Which of the following items is not included as part of funeral expenses for
estate tax purposes?
a. Expenses for the wake preceding the burial
b. Publication charges for death notices
c. Burial expenses borne or defrayed by relatives
d. Telecommunication expenses in informing the relatives of the deceased
33. Which of the following is not a cause for the disinheritance of children and
descendants?
a. When a child or descendant has been convicted of adultery or concubinage with
the spouse of the testator.
b. Maltreatment of the testator by word or deed, by the child or descendant.
c. When a child or descendant leads a dishonorable or disgraceful life.
d. None of the above
34. Under the partnership of gains regime, which of the following items is considered
as a conjugal property?
a. That which is brought to the marriage as his or her own
b. Those which are acquired by right of redemption, or by barter or by exchanges
with other property belonging to any one of the spouses.
c. That which acquires during the marriage by lucrative or gratuitous title.
d. Property obtained from the labor, industry, work, or profession of either or both
of the spouses.
35. I. Taxation of the estate shall be governed by the statute or law in force at the
time of distribution of the estate to the heirs.
II. The share of the surviving spouse in the conjugal property is part of the gross estate
of the surviving spouse.
a. Both statements are true c. Only the first statement is true
b. Both statements are false d. Only the second statement is true
36. Which of the following is not a remedy against indirect double taxation?
a. Vanishing deduction
b. Tax credit for foreign estate tax
 c. Exemption from transfer tax of merger of usufruct in the owner of the naked title
d. Transfer for public use

Mr. Dedo Pumanaw executed the document presented below:

19 February 2017

I, Dedo Pumanaw, of legal age, and a resident of 123 Kabaong St., Kandila Ave.,
Brgy. Puntod,
Quezon City, Philippines, of sound and disposing mind, hereby executes this last will
and testament.

I wish that my properties be distributed as follows:

 Cash in bank of Madagascar, P1,000,000, to my spouse Byuda, and who shall
manage
the settlement of my estate;
 My only car worth P1,000,000 to my legitimate son Ulila;
 A parcel of land in Cavite worth P1,000,000 to my best friend, Umasa; and
 My collection of academic books in my library with a value of P1,000,000 to my
Alma Mater,
PUP-Manila.
37. The document executed above by Mr. Dedo Pumanaw is a/an
a. Ordinary will b. Codicil c. Holographic will d. Notarial will
38. Biyuda, who was appointed by Mr. Dedo Pamanaw to manage the administration,
settlement, and distribution of his estate is referred to as a/an
a. Executor b. Administrator c. Fiduciary d. Heir
39. Umasa is referred to as a/an
a. Forced heir b. Donee c. Devisee d. Legatee
40. Which of the following statements is false?
a. The cash in bank of Madagascar will be excluded from gross estate if there is
reciprocity between the Philippines and Madagascar.
b. The inheritance in favor of PUP is exempt from estate tax.
c. Should Mr. Dedo Pumanaw die, a notice of death should be filed with the BIR.
d. Should Mr. Dedo Pumanaw die, an estate tax return should be filed with the BIR.
41. Refer to Mr. Dedo Pumanaw’s last will and testament found at the first part of
this exam, with the following additional information:

Funeral Expenses P 190,000

Judicial Expenses 250,000
Medical Expenses 400,000
How much is Mr. Dedo Pumanaw’s taxable gross estate?
a. P1,000,000 c. P3,000,000
b. P2,000,000 d. P4,000,000
42. Refer to Mr. Dedo Pumanaw’s last will and testament. Assuming the first two (2)
properties identified are conjugal while the last 2 properties are exclusive. Assume also
that all ordinary deductions are conjugal.
How much is the taxable net estate?
a. P1,150,000 b. P1,160,000 c. P2,150,000 d.
P2,160,000
43. An unmarried head of the family died leaving the following properties:
 Total Real Properties P 5,000,000
Family Home 2,000,000
Ordinary Deductions 2,600,000
Medical Expenses 400,000

How much was the net taxable estate?

a. P4,000,000 b. P3,000,000 c. P2,000,000 d. Zero
44. The following expenses with supporting documents were incurred during an
ailment of the decedent two (2) years before he died:
Hospital bills P 200,000
Medicine 300,000
Doctor’s fees 150,000
The doctor’s fees remained unpaid at the time of death. For estate tax purposes, the
estate’s administrator could deduct medical expenses amounting to:
a. P650,000 b. P500,000 c. P150,000 d. Zero
45. A married resident alien died leaving the following:
Conjugal real properties (others) P 5,000,000
Conjugal family home 2,000,000
Exclusive real properties 2,000,000
Conjugal deductions 2,000,000

How much was the net taxable estate?

a. P1,000,000 b. P3,000,000 c. P2,500,000 d.
P4,000,000

The executor of the married decedent presented the following information about his
estate:

Properties within the Philippines P2,500,000

Properties outside the Philippines 5,000,000
Actual funeral expenses in the Philippines 90,000
Actual funeral expenses outside the Philippines 60,000
46. Assuming that the decedent was a citizen or resident of the Philippines, the
deductible funeral expenses is:
a. P90,000 b. P150,000 c. P200,000 d. P375,000

Mr. Paht Hayna, single, a nonresident, not a citizen of the Philippinesm died leaving a
gross estate in the Philippines of P10,000,000 and a gross estate outside the
Philippines of P30,000,000. His expenses and transfers were: Funeral expenses outside
the Philippines of P1,000,000, mortgage of property outside the Philippines of
P2,000,000, and in the Philippines of P500,000, and transfer to the Philippine
Government of property outside the Philippines of P1,000,000.
47. The allowable deduction from the Philippine gross estate is:
a. P375,000 b. P875,000 c. P1,000,000 d. P1,500,000 e. P
P675,000
48. Ms. Vina Ngungot, a Filipino decedent, owns a property valued at P5,000,000 at
the time of her death. The said property was sold, during her lifetime to Mr. Sen Huerte
for P2,500,000 when its real value was P3,000,000. If it was agreed by both parties that
the transfer of ownership will take place after Mrs. VIna’s death. For purposes of
Philippine estate tax, the amount to be included in the gross estate would be:
 a. P2,000,000 b. P2,250,000 c. P2,500,000 d.
P5,000,000

Mr. Nat Odas, a citizen and resident of the Philippines, died on October 10, 2017,
leaving the following properties, rights, obligations, and charges:

Conjugal properties (including a family home of P3,000,000 and amount

receivable under R.A. 4917 of P200,000)
P6,000,000
Exclusive properties (including cash of P500,000 inherited
4 ½ years ago
4,000,000
Medical expenses unpaid, January 2017
600,000
Funeral expenses 350,000
Judicial expenses ` 500,000
Other obligations 100,000
49. The deductible medical expenses amount to:
a. P 0 b. P250,000 c. P500,000 d. P600,000
50. The amount of deductible funeral expenses is:
a. P100,000 b. P200,000 c. P350,000 d. P500,000
51. The amount of allowable vanishing deduction is:
a. P92,000 b. P138,000 c. P184,000 d. P460,000
52. How much is the taxable net estate of Mr. Odas, assuming all allowable
deductions are conjugal except vanishing and other obligations?
a. P2,858,000 b. P2,958,000 c. P3,858,000 d.
P3,908,000
53. The amount of estate tax due and payable is:
a. P229,380 b. P240,380 c. P339,380 d. P344,880
54. A non-resident alien, not citizen of the Philippines died. He left a gross estate of
P3,000,000 in the Philippines, and a gross estate of P1,000,000 outside the Philippines.
His expenses and transfers were: Actual funeral expenses, P100,000; unpaid mortgage,
P250,000; medical expenses, P300,000; and transfer to the Philippine Government,
P100,000. How much were the allowable deductions from the Philippine gross estate?
a. P100,000 b. P262,500 c. P362,500 d. P337,500

Mr. Dee Huminga, a citizen of the Philippines and a resident of Canada, under the
system of conjugal partnership of gains, died in Canada and was shipped to and buried
in the Philippines. He had the following data:
Real property in the Phil. (inherited 3 ½ years ago, with a FMV of
P700,000 when inherited) P1,000,000
Real property in Canada, family home
3,000,000
Tangible personal property in the Phil
500,000
Tangible personal property in Canada
700,000
Funeral Expenses in the Phil
110,000
Funeral Expenses in Canada
150,000
 Unpaid obligations 300,000
Claims against insolvent person in the Phil.
500,000
Estate tax paid in Canada 300,000
55. The gross estate is:
a. P5,700,000 b. P5,750,000 c. P5,800,000 d.
P6,000,000

56. Mr. Sui Sayd, a citizen of the Philippines, single, died a resident of the USA,
leaving the following properties:
Real properties in USA, inherited from the mother 1 ½ years ago
P5,000,000
Personal property in the Philippines, inherited from the father
4,000,000
Family home in the United States
3,000,000
Actual funeral expenses paid in USA
150,000
Other obligation contracted within the last two years
300,000

The gross estate subject to Philippine Estate Tax is:

a. P4,000,000 b. P8,000,000 c. P10,000,000 d.
P12,000,000

Mr. Banky, a Filipino citizen residing in Makati, died leaving the following:
Land in Makati P2,000,000
Land in Manila 3,000,000
Gross estate-Canada 5,000,000
Deductions claimed by the estate:
Actual funeral expenses 180,000
Judicial expenses 100,000
Claims against the estate 120,000
Transfer of the land in Makati to the
Philippine Government (in decedent’s will) 2,000,000
Estate tax paid in Canada 385,000

The Land in Manila when inherited 3 ½ years ago had a value of P2,400,000 with a
mortgage thereon of P400,000 which was paid prior to Mr. Banky’s death.
57. The allowed vanishing deduction is:
a. P608,000 b. P729,600 c. P912,000 d. P1,094,000
58. The taxable net estate is:
a. P4,992,000 b. P5,992,000 c. P6,992,000 d.
P7,992,000
59. The allowed estate tax credit is:
a. P0 b. P333,587 c. P385,000 d. P421,372

60. The estate tax still due or payable is:

a. P192,428 b. P228,800 c. P613,800 d. P763,800
61. The estate tax credit if the decedent is a nonresident alien:
a. P0 b. P333,587 c. P385,000 d. P421,372
Mrs. Castro, a foreign and resident of the Philippines, died on August 10, 2005, leaving the
following properties, rights, obligations, and charges:

Conjugal properties (including a family home of P1,200,000

and amount received under RA 4917 of P300,000)
P4,000,000
Exclusive properties (including claims against
insolvent person, P200,000)
2,000,000
Unpaid medical expenses 600,000
Funeral expenses 250,000
Judicial expenses 350,000
Other obligations 100,000

62. The allowed funeral expenses is:

a. P100,000 b. P200,000 c. P250,000 d. P300,000
63. The net conjugal estate is:
a. P3,200,000 b. P3,250,000 c. P3,050,000 d.
P3,650,000
64. The taxable net estate is:
a. P1,225,000 b. P1,725,000 c. P1,825,000 d.
P2,225,000
65. The following donations were made to relatives:

January 30, 2017 P2,000,000

March 30, 2017 1,000,000
August 15, 2017 500,000

How much was the tax payable on the August 15, 2017 donation?
a. P40,000 b. 50,000 c. P84,000 d. P254,000

Mr. Chito Pascual, widower, has three sons: Paul, 27 years old; Kiko, 25 years old; and Tino,
23 years old. On August 15, 2016, Mr. Pascual donated two lots, each with fair market
value of P350,000, one each to his sons, Paul and Kiko. On November 15, 2016, Mr. Pacual
gave P350,000 cash to his third son, Tino, as dowry on account of his forthcoming
marriage on December 25, 2016.
66. The donor’s tax due on the donation on August 15, 2016 is
a. P8,000 b. P21,200 c. P26,000 d. P47,200
67. The donor’s tax due to and payable on the donation on November 15, 2016 is
a. P8,000 b. P21,200 c. P26,000 d. P47,200
68. On July 17, 2016, Mr. Juan Cruz gave a property with a fair market value of
P550,000 to Anton, a legitimate son, and Ella, Anton’s bride, on accpount of their
marriage celebrated on January 3, 2017. The donor’s tax payable was:
a. P15,800 b. P38,000 c. P84,100 d. P87,100

69. Mr. John GiBB, resident citizen, made the following donations on August 11,
2016:

 To John, Jr., legitimate son, on account of marriage, property in Indonesia valued

at P610,000 at the time of donation. Indonesian donor’s tax paid was P52,000.
 To Joy, a friend, a property in the Philippines valued at P160,000 at the time of
donation, subject to a mortgage of P60,000, which was assumed by Joy.
 How much was the donor’s tax credit allowed?
a. P31,520 b. P34,628 c. P42,857 d. P52,000

70. John sold his car to Sam for P200,000. John’s car cost P500,000, and had a fair
value of P400,000 at the time of sale. What was the tax consequence of the sale?
a. There was a taxable gift of P300,000
b. There was a taxable gift of P200,000
c. The transfer was for insufficient consideration, hence, not subject to donor’s tax.
d. The transfer involved a personal property, hence, not subject to donor’s tax.
71. Mr. De Guia made a donation to Red and Jaycee, son and daughter in law, on
account of marriage, of a real property with market value of P2,500,000, but subject to
a mortgage of P500,000, which was assumed by the donees. The donor’s tax amount
to:
a. P43,400 b. P300,000 c. P343,400 d. P344,000

72. Donations to a legitimate child of properties:

Property in the Philippines P110,000

Property outside the Philippines, on account of marriage 200,000
Donor’s tax paid to foreign country 4,500

Donor’s tax due after tax credit for foreign donor’s tax paid is:
a. P2,200 b. P2,750 c. P3,208.33 d. P4,625.50

73. Mr. & Mrs. Smith, citizens and residents of the Philippines, made the following
donations of conjugal property:

June 6,2017 To Brad, a legitimate son, on account of marriage, P460,000

To Angelina, a legitimate daughter, a property with mortgage of
P4,000 assumed by Angelina, with fair market value of P20,000.
October 10, 2017 To Pitt, a legitimate son of Mrs. Smith by a prior marriage, given on
account of marriage, P80,000.
November 4, 2017 To the Manila Catholic Church, P100,000
To Jollie, a family friend, P40,000

On donation on June 6, 2017, the donor’s tax of Mr. Smith is:

a. P1,170 b. P3,120 c. P4,320 d. P7,800
74. Donor’s tax due of Mr. Smith on October 2017 is:
a. P0 b. P1,200 c. P4,320 d. P12,000
75. The total taxable net gift (relative and stranger) of Mrs. Smith on November 4,
2017 is:
a. P50,000 b. P100,000 c. P278,000 d. P328,000