DONOR’S TAX MULTIPLE CHOISE QUESTIONS 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 C 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 B 3. The gift tax is imposed on the transfer of property (not on the property itself) which is why it has been sustained as a (an) a. Entity theory c. Cone’s tax b. Property Tax d. Poll tax A 4. 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 D 5. 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. C 6. Madz went to Bersabren Resort and was given a prize of P50,000 by the resort for being its 1,000th 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 B – The prize given is for business motive and not for donation purposes. Therefore it is not based on the liberality of the donor. 7. The following are the requisites of a donation for purposes of the donor’s tax, except (RPCPA) a. Capacity of the donor
b. Capacity of the done c. Delivery of the subject d. Donative intent B 8. 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 D 9. 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 A 10.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 A 11.Antonio donated a share of stocks of Cayetano Corporation to Barandilla on April 20, 2015 with a right to revoke it. The donor delivered the property April 25, 2015. On June 20, 2015 Antonio 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 C 12.Warren wrote a letter to Lamont on December 31, 2014 donating his 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 B 13.On August 18, 2015 Elizabeth loaned to her sister Martha 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, Elizabeth 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 C 14.Which of the following examples is not taxable (RPCPA)
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. Ramos, 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. D 15.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. D 16.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 B 17.The spouses Helena and Federico wanted to donate a parcel of land to their son Dondon 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. C 18.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 C
19.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. C 20.On June 23, 2015, Freddie Boy, a mentally defective 12 year old boy, executed a deed donating to his brother Aldy a one hectare lot worth P250,000 located in Magarao, Camarines Sur which was also donated to Freddie Boy by his father a year ago. The donation isa. Void, because Freddie Boy does not own the property considering that the donation made to him by his father is void. b. Void, because Freddie Boy, the donor is minor and mentally defective. c. Valid, although enforceable. d. Valid, although voidable because the donor is not capacitated to donate property. D 21.Which of the following donations is subject to donor’s tax? a. Those made between persons who were guilty of adultery or concubinage at the time of the donation. b. Those made to conceived and unborn children. c. Those made to a public officer by reason of his office. d. Those made between husband and wife during their marriage. B The following donations shall be void: 1. Those made between persons who were guilty of adultery and concubinage at the time of the donation. 2. Those made between persons found guilty of the same criminal offense, in consideration thereof; 3. Those made to a public officer of his wife, descendants and ascendants, by reason of his office. 22.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 refunded to the donor. Which of the following statements is correct? a. Statement 1 only b. Both statements A
c. Statement 2 only d. Neither statements
23.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. A As a rule, nonresident aliens are not subject to reciprocity. If they are subject to reciprocity, intangible personal properties (whether within or without) are not included in the gross gift. 24. 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. D In order that shares of stock shall be considered as intangible personal property within, at least 85% of the business of the issuing foreign corporation is located in the Philippines. 25.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
c. Statements III and IV d. Statements I and IV
Non-resident citizens and resident aliens are subject to donor’s tax on donated properties regardless of location.
COMPUTATION: 26.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 D 27.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. A 28.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
c. Statements 1, 2, and 3 d. Statements 2 and 3
Every donation grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may be give each other on the occasion of the family rejoicing. 29. 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 propter nuptias is not also valid. II. Donations propter nuptias 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.
III.
IV.
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 propter nuptias. There is no P10,000 exemption from gross gift on a donation propter nuptias 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
c. Statements 2 and 3 d. Statements 1 and 2
For efficient, effective and economical governance the purpose of which is the genral welfare of the city and its inhabitants pursuant to Section16 of this Code, the mayor shall: Solemnize marriages, any provisions of law to the contrary notwithstanding. 30.Justina donated cash ti his son on account of marriage on October 2014 as follows: January 15, 2015 P25,000 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 B
c. P1,350 d. Exempt
Gross gift
P100,000
Less: Exemptions/ Deductions Net gift
------------100,000
Add: Prior net gifts January 15 (25,000-10,000) March 10
P15,000 20,000
July 15
50,000
Total net gifts On P100,000
85,000
185,000 Exempt
85,000 x 2% Gift tax due
P1,700 1,700
31.Which of the following donations result to a net gift of P80,000? a. Alakdan donated property to Balbakwa 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. Altura requested Busina to pay Altura’s liability with Cabangis in the amount of P100,000 and in return, the personap property of Altura valued at P180,000 will be donated to Busina. c. The daughter of Ananias was married to her boyfriend. As a gift, Ananias 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. B 32.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. B 33.Exempted from the donor’s taxation are gifts made (BEQ) 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-propfit government corporation. A
34.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. C To be exempt from donor’s tax, the donation must be given to the following non-profit institutions: 1) educational, 2) charitable, 3) religious, 4) cultural, 5) social welfare, 6) accredited non-government organization, 7) Philanthropic organization, and 8) research institution. Donations directly given to private individuals, no matter how much they may be inspired by charitable impulses give rise to no exemption. 35.A non-stock, non-profit school always had cash flow problems, resulting in failure to recruite well trained administrative personnel to effectively manage the school. IN 2015, Don Leon donated P100 million peos to the school, provided the money shall be used solely for paying the slaries, 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? (BEQ) 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. B 36.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 A
Number 37 to 39 are based on the following data: 37.Annie donated the following properties Land in Los Angeles, California, USA Land and building in Jolo, Sulu Car registered in the States of California, USA Jewelries in the Philippines Shares of stock in a corporation based in USA Accounts receivable, debtor is in the Philippines
P 250,000 175,000 225,000 45,000 60,000 25,000
If Annie is a resident citizen, the gross gift isa. P780,000 b. P295,000 A Land , California Land and building in Sulu Car, California
c. P245,000 d. P220,000 P250,000 175,000 225,000
Jewelries in the Philippines
45,000
Share of stocks, USA
60,000
Accounts receivable, Philippines Gross gift
25,000 780,000
38.The gross gift of Annie if she is a nonresident alien without reciprocity isa. P780,000 c. P245,000
b. P295,000 C
d. P220,000
Land and building in Sulu
175,000
Jewelries, Philippines
45,000
Accounts receivable, Philippines
25,000
Gross gift
245,000
39.The gross gift if Annie is a nonresident alien with reciprocity isa. P780,000 c. P245,000 b. P295,000 d. P220,000 D Land and building , Sulu
175,000
Jewelries, Philippines
45,000
Gross gift
220,000
40. Butch made donations to his children in 2015. I which of the following successive donations will Butch pay donor’s tax? a. January 15 – To Alma on account of marriage, P40,000. b. March 15 – To Ara on account of graduation, P45,000 c. May 15 – To Aiko on account of her 18th birthday, P50,000 d. In all of the above donations. C Net gift, May 15
P50,000
Add: Net gift Jan. 15 (40,000-10,000)
30,000
March 15
45,000
Total net gifts
125,000
Tax on P100,000
exempt
25,000x 2% Gift tax
P500 500
Donation on January 15 and March 15 are not subject to tax because they do not exceed the P100,000 exemption in the tax table. 41.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. C 42.Which of the following is not a factor in the determination of taxable gifts?
a. b. c. d.
Identification of transfers included in gross gift Application of exempt transfers Subtraction of allowed deductions, Multiplying net gift by the applicable rates. D Taxable gift refers to the properties subject to gift tax. A net gift multiplied by the applicable tax rates results to donors (gift) tax and not to taxable gift.
43.Given the following statements: I. The donor’s tax payable on the present donation includes the previous donations made during the current year. II. 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. III. The tax rate on the tax table for donor’s tax are relatively lower than the tax rates in the tax table for estate tax. IV. 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. B
44.Mr and Mrs. Abubot donated the following community properties to their children on May 30, 2015. Amount Donee P125,000 Baron For graduating cum laude at Central Philippine University, Iloilo City P200,000 Caricot On account of marriage celebrated April 30, 2014 ? Dakila For placing 3rd in the May 2015 CPA Licensure Examinations If the donor’s tax payable by Mr. Abubot is P10,500, the amount of the donation given by the spouses to Dakila is? a. P250,000 c. P500,000 b. P490,000 d. Cannot be determined C Algebraic approach: Let X = Over P200,000 of net gift 4% X = Rate of tax on over P200,000 of net gift 4%X+2,000 = 10,500
4%X =
10,500-2,000
X
=
8,500/4%
X
=
212,500
Excess over
212,500
First
200,000
Net gift
=
Let X =
Share of Mr. Abubot on the donation of community
2X
Total donation of spouses
412,500
property =
(125,000+200,000)1/2 +X
=
412,500
62,500+100,000+X
=
412,500
X
=
412,500-162,500
X
=
250,000
2X
=
500,000
Alternative Solution: To Baron (125,000/2)
62,5000
To Caricot (200,000/2)
100,000
To Dakila (squeeze)
250,000
Gross gift
412,500
Less exemptions
-----------
Net gift Tax on P200,000 212,500x4%
412,5000 2,000 8,500
Gift Tax 45.A stranger in donor’s taxation a. Great grandchild adoption b. Nephew C
10,500 c. Child by natural d. Grand auntie
For donor’s tax purposes, a stranger is a person who is not a Brother, sister (whether of the whole or half blood ), spouse, ancestor, lineal descendant, or a relative by consanguinity in the collateral line within the 4th degree of relationship.
To be considered relative, the child must be legally adopted child of the donor. A great grandchild is a lineal descendant. Relatives belonging to direct line are not strangers to each other regardless of the number of degrees of relationship between them. A nephew is collateral relative in the 3rd degree. A grand auntie is a collateral relative in the 4 th degree. 46.Sayers who is a single, gave an outright gift of P150,000 to a friend, Johnson 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 C Gross gift
150,000
Rate of Tax (stranger)
30%
Donor’s tax
45,000
47.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. C 48.Given the following statements: I. For the purposes of donor’s tax, a relative done must always be a blood
