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 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 done 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. II.
There shall be donor’s tax on the donation even if it may be revoked in case of non-fulfillment of the donation. 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 c. Statements III and IV b. Statements II 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. 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. III. 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.
IV.
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 27.Justina donated cash ti his son follows: January 15, 2015 March 10,2015 July 15, 2015 September 10, 2015 -
c.
Statements 2 and 3
d. Statements 1 and 2 on account of marriage on October 2014 as P25,000 20,000 50,000 100,000
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 of the following except one, are exempt from donor’s tax. Which is it?
a. b. c. d.
Donation Donation Donation Donation
to the Philippine Red Cross. to the Development Academy of the Philippines. directly given to the victims of the eruption of Mount Bulusan. 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. 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.
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.ABNO de SOBRA donated P500,000 80% of the outstanding capital stock tax due to the donation isa. P14,000 b. P150,000 B
to XYZ Corporation. The donor owns of the done-corporation. The donor’s c. P40,000 d. None
Whenever the done is a judicial person, it is always considered to be stranger to the donor regardless of the extent of control by the donor on the capital of the juridical person. Thus, the tax is computed as follows: Net gift
500,000
Rate of tax (stranger)
30%
Gift tax due
150,000
42.When Alcala’s son, Biscocho, was married to his childhood sweetheart, Calalang, Alcala gave as wedding gift a residential house worth P1,500,000 to his son, and a brand new car to Calalang with a value of P700,000. All the time of the donation, the residential house was mortgage with metrobank for P200,000 which was assumed by Biscocho. The donor’s tax payable by Alcala on the above donation isa. P93,200 c. P109,200 b. P92,600 d. P277,200 D To Biscocho: Gross gift
1,500,000
Less: deduction/Exemption Mortgage assumed by done
200,000
On account of marriage
10,000
Net gift
210,000
1, 290,000
Tax on P1,000,000 290,000x8% Gift tax due
44,000 23,200 67,2000
To Calalang: Net gift
700,000
Rate of tax (stranger)
30%
Gift tax due
210,000
Gift tax due on Biscocho
67,200
Gift tax due on Calalang
210,000
Total donor’s tax payable
277,2000
Number 37 to 39 are based on the following data: 43.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
c. P245,000 d. P220,000
Land , California Land and building in Sulu
P250,000 175,000
Car, California
225,000
Jewelries in the Philippines
45,000
Share of stocks, USA
60,000
Accounts receivable, Philippines Gross gift
25,000 780,000
44.The gross gift of Annie if she is a nonresident alien without reciprocity isa. P780,000 c. P245,000 b. P295,000 d. P220,000 C Land and building in Sulu Jewelries, Philippines Accounts receivable, Philippines Gross gift
175,000 45,000 25,000 245,000
45.The gross gift if Annie is a nonresident alien with reciprocity isa. P780,000 c. P245,000
b. P295,000 D
d. P220,000
Land and building , Sulu
175,000
Jewelries, Philippines
45,000
Gross gift
220,000
46. 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.
47.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% Gift Tax
412,5000 2,000 8,500 10,500
48.Magulang gave gifts to the following persons to his 75 th birthday:
A second hand car worth P350,000 to Kaskasero, his trusted driver. The donation was made orally. Since then the driver had taken possession of the property. To his Mayordoma, Miss Angut, a lot with bungalow theron. The value of the property is P1,200,000. The donation provides that it may be revoked anytime at the pleasure of Magulang. His flower shop worth P700,000 to Hardinero, his gardener. The donation is provided in his will. Cash of P50,000 each to the three housemaids. How much is the donor’s tax due on the above donations? a. P720,000 c. P45,000 b. P100,000 d. P1 (,000 C Gross gift (50,000x3)
150,000
Rate of Tax (stranger) Gift tax
30% 45,000
The donation to Kaskasero is void. reduced in writing.
To be valid, the donation must be
The donation to the bungalow to Miss Angut is a revocable transfer. Therefore, the donation is subject to estate tax. The donation of the flower shop to Hardinero is a mortis causa donation. It is subject to estate tax. The donation to the housemaids are donations to stranger.
