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GROSS ESTATE

1. Succession is a mode of acquisition by virtue of which:
(a) Properties,
(b) Rights, and
(c) Obligations, to the extent of inheritance.

are transmitted by the death of a person to another or others, by will (testamentary or
voluntary succession) or by operation of law (intestate or involuntary succession).

2. Which of the following may be the subject of succession?
(a) Properties;
(b) Rights;
(c) Obligations;
(d) All of the above.

Answer: d
Obligations may pass to the heirs, but only to the extent of the inheritance---in other
words, only to the extent of the value of the properties and rights inherited.

3. Statement 1. The estate tax is imposed on the privilege of a person to transmit his
properties upon his death.
Statement 2. The inheritance tax is imposed on the privilege of a person to receive the
properties of the person who died.
(a) True, true; (b) False, false; (c) True, false; (d) False, true.
(Modified/expanded/reformatted BAR examination question)

Answer: a

4. Statement 1. The estate tax is a tax on property (a property tax);
Statement 2. The estate tax is a tax on privilege (an excise tax).
(a) True, true; (b) False, false; (c) True, false; (d) False, true.
(Modified/expanded/reformatted BAR examination question)

Answer: d

5. Statement 1. The estate tax is an excise tax on a person for transmitting his properties
upon his death;
Statement 2. The donor’s tax is an excise tax on a person for transmitting his properties
effective while still alive.
(a) True, true; (b) False, false; (c) True, false; (d) False, true.
(Modified/expanded/reformatted BAR examination question)

Answer: a

6. Statement 1. The estate tax accrues upon the death of the decedent-owner of the
properties transmitted by succession;
Statement 2. The estate tax should be paid by the executor or administrator, or the heir,
before title to any registerable property may be registered in the name of the heir to
whom it is given by succession.
(a) True, true; (b) False, false; (c) True, false; (d) False, true.
(Modified/expanded/reformatted BAR examination question)

Answer: a

7. There are two kinds of decedents:
(a) The resident or citizen of the Philippines; and
(b) The non-resident, not citizen of the Philippines.

A decedent who was a citizen of the Philippines, residing in the Philippines at the time
of his death, is decedent (a).
A decedent who was a citizen of the Philippines, not residing in the Philippines at the
time of his death is decedent (a).
A decedent who was not a citizen of the Philippines, but residing in the Philippines at
the time of his death is decedent (a).
A decedent who was not a citizen of the Philippines, and not residing in the Philippines
at the time of his death is decedent (b).

8. Properties in gross estate are real properties (e.g., land and building), tangible personal
properties (e.g., car), and intangible personal properties (e.g., receivables).

The gross estate of a decedent who was a citizen or resident (Decedent [a] ) shall
include all properties regardless of location.

The gross estate of a decedent who was not a citizen, and not a resident (Decedent [b] )
shall include only properties located in the Philippines.

9. By statutory provision, the following are intangible personal properties located in the
Philippines, and shall be included in the gross estate:

(a) Franchise which must be exercised in the Philippines;
(b) Shares, obligations or bonds issued by a domestic corporation.
(c) Shares, obligations or bonds issued by a foreign corporation eighty-five percent
(85%) of the business of which is located in the Philippines.
(d) Shares, obligations or bonds issued by a foreign corporation, if such shares,
obligations or bonds have acquired a business situs in the Philippines; and
(e) Shares or rights in any partnership, business or industry in the Philippines.

The enumeration in the law is not exclusive, however. Any other intangible property (e.g.,
receivables) in the Philippines shall be included in the gross estate.

10. Although intangible personal properties in the Philippines shall be included in the gross
estate of the decedent who was not a citizen or resident of the Philippines (Decedent [b]),
such intangible personal properties shall not be included in the gross estate if the
reciprocity clause in the estate tax law applies.
Under the reciprocity clause, the intangible personal property in the Philippines shall not
be included in the gross estate.

(a) If the country of which the decedent was a citizen and (not or) resident at the time of
his death either had no death tax at all, or,
(b) If having a law imposing a death tax, totally exempts from that death tax the
intangible personal properties located there belonging to a citizen of the Philippines
not residing there.

11. The property, rights and obligations of a person which are not extinguished by his death
and those which have been accrued thereto since the opening of succession:
(a) Assets;
(b) Capital;
(c) Estate;
(d) Income.

Answer: c (CPA Exam)

12. Which of the following is not subject to estate tax?
(a) A succession to the property of a decedent who left no last will and testament;
(b) A donation mortis causa;

(c) A donation inter vivos;
(d) A transfer during the lifetime for less than full and adequate consideration.

Answer: c
A donation mortis causa takes effect upon death, and the rules on succession apply. A
donation inter vivos takes effect during the lifetime of the transferor, and are not coverd
by the rules on succession, but by a separate set of rules on donation. A transfer for less
than full and adequate consideration has a unique place in the estate tax law and the value
t include in the gross estate is the excess of the fair market value at the time of death over
the consideration received.

13. Which of the following statement is wrong?

(a) The gross estate of a non-resident citizen would include all properties regardless of
location;
(b) The gross estate of a non-resident, not citizen of the Philippines would include
intangible properties in the Philippines;
(c) The gross estate of a resident, not citizen of the Philippines would include all
properties regardless of location;
(d) The gross estate of a non-resident citizen of the Philippines would include only
properties in the Philippines.

Answer: d

14. The personal properties of a non-resident, not citizen of the Philippines, would not be
included in the gross estate if:
(a) The intangible personal property is in the Philippines;
(b) The intangible personal property is in the Philippines and the reciprocity clause of the
estate tax law applies;
(c) The tangible personal property is in the Philippines;
(d) The personal property is shares of stock of a domestic corporation 90% of whose
business is in the Philippines.

Answer: b

15. Mr. A, a resident citizen, died on the United States leaving the following properties:
Real properties in the United States;
Family home in the Philippines;
Office condominium in the Philippines;
Shares of stock of a domestic corporation;
Cash in bank; and
Personal belongings.
Without any obligation.
Statement 1. His gross estate shall include all the properties;
Statement 2. His gross estate shall include only the properties in the Philippines.
(a) True, true; (b) False, false; (c) True, false; (d) False, true.
(Modified/expanded/reformatted BAR examination question)
Answer: a
(For a citizen of the Philippines, his gross estate will include all properties regardless of
location.)

16. Mr. V, a subject of a foreign country, residing in the Philippines, died with the following
properties:
Shares of stock of a domestic corporation;
Condominium unit in Metro Manila;
House and lot in his home country.
Statement 1. His gross estate shall include all the properties;
Statement 2. His gross estate shall include only the properties in the Philippines.

an American residing in Taipeh. On other insurance contracts the proceeds shall be included in the gross estate if already receivables at the time of death.) 17. died leaving the following properties: Real property in the United States. false. Statement 2. operating in and with office as. or if the beneficiary designated is a third person and the designation of beneficiary is revocable. operating in. leased to the Philippine consulate. Time deposit with a Philippine Bank. the resort in Italy. The shares of stock of the Taipeh corporation. Value to include in the gross estate. (b) Receivables from persons who are insolvent shall be in the gross estate at the full amounts and not just amounts realizable. (d) The estate shall be valued at fair market values of the properties at the time of death. true. false. the shares of stock of a Taipeh corporation with business in Taipeh only and the lease contract. Statement 1. true. Philippine Treasury bills. undiminished by the mortgage. In the case of real property. and with office at the Philippines. Shares of stock of a Taipeh corporation. his gross estate will include all properties regardless of location. the Philippines is property located in the Philippines because it is shares of stock of a foreign corporation that had acquired a business situs in the Philippines. (Modified/expanded/reformatted BAR examination question) Answer: d (which means that the gross estate shall not include the real property in the United States. shall not be included in the gross estate. with payment for it not yet received. (a) True. the value shall be the value as shown in the schedule of values fixed by the Provincial and City Assessors. (d) None. It the life insurance was taken out not by the decedent himself. false. W. whether or not the designation is revocable. His gross estate shall include only the properties in the Philippines. true. (b) False. (a) Mortgaged property shall be included in the gross estate at its fair market value. Mr. because they are intangible personal properties owned at the time of death. (c) True. (a) True.) 18. D owned one hundred hectares of agricultural land. Mr. (c) Proceeds of life insurance taken out by the decedent on his own life shall be included in the gross estate if the beneficiary designated is his estate. Lease contract on his real property in the United States. A resort in Italy. (b) False. executor or administrator. Shares of stock in a Taipeh corporation with business in Taipeh only. the proceeds shall not be included in the gross estate. . false. The government took nine hundred ninety-five hectares under the Agrarian Reform Act. (d) False. (Modified/expanded/reformatted BAR examination question) Answer: b 19. What value shall be included in his gross estate? (a) One hundred hectares of agricultural land. His gross estate shall include all the properties. (c) True. (b) Five hectares of agricultural land plus the amount receivable from the Government on the appropriation of ninety-five hectares. but if not yet receivable at the time of death. (Modified/expanded/reformatted BAR examination question) Answer: a (For a resident of the Philippines. (zonal value) whichever is higher. (c) Five hectares of agricultural land. (d) False. true. D died. Mr. or the fair market value as determined by the Commissioner of Internal Revenue.

Proceeds of a life insurance policy taken out by the decedent on his own life are includible in the gross estate if the beneficiary is: (a) The estate. (CPAExam) Answer: c For proceeds to be includible in the gross estate of the insured. Statement1. The widow. (e) An inventory of the gross estate shall be filed with the Bureau of Internal Revenue. Statement 2.000. is part of the gross estate. (a) True. false. with a loan taken by the decedent on it. The P350. Proceeds of life insurance inludible in the taxable gross estate.000 by the insurer and airline. (a) Insurance proceeds from SSS or GSIS. The P350. Answer: c 22. (c) Proceeds of property insurance receivable when the decedent was still alive is part of the gross estate. A received P500. (d) Proceeds of group insurance secured by the employer. designate in the policy by the insured. and the par value. whether the designation is revocable or irrevocable. showing among others: registered or registerable property. For death of a father in an airplane crash.000 shall not be included in the gross estate because the life insurance was not taken out by the decedent himself on his own life. false. the value shall be the book value.000). Hence. if common shares. Mrs. 21. (c) A third person and the designation is revocable. (b) The executor or administrator. the fair market value shall be the arithmetic mean between the highest and lowest quotation of the stock on the valuation date. the children received insurance proceeds of P350. motor vehicles. net of the loan on it. Which statement is correct? (a) Proceeds of accident insurance. Should the . the policy should be taken out by the insured himself. When the gross estate exceeds two million pesos (P2. (b) Amount receivable by any beneficiary irrevocable. (d) False. It the shares are unlisted. and shares of stock. In the case of shares of stock listed and traded in a stock exchange. (c) Amount receivable by any beneficiary designated in the insurance policy. if preferred shares. (c) True.000 under a life insurance of her husband. true. (b) False. Which is wrong? (Modified/expanded/reformatted BAR examination question) Answer: d 23. (Modified/expanded/reformatted BAR examination question) Answer: d 24. when the revocable beneficiary is the wife. is includible in the gross estate at its value. since the life insurance in (d) was not taken by the insured himself. paid by the insurance company directly to a revocably designated beneficiary is part of the gross estate of the decedent. (b) Proceeds receivable under life insurance taken out by the decedent on his own life with wife as revocable beneficiary. (d) A third person and the designation is irrevocable. (d) Proceeds of group insurance taken out by a company for employees.000 shall be included in the gross estate because it was a receivable at the time of death. true. whether the designation of is revocable or irrevocable. the estate tax return and inventory shall be accompanied by a certificate of a Certified Public Accountant. the proceeds shall not be included in his gross estate. 20. or the date nearest the valuation date.

regardless of when the estate tax may be collected. Answer: b 26.000. Which statement is wrong? The gross estate shall be valued: (a) At its fair market value at the time of death. (c) If real property. because the estate should be valued at its fair market value at the time of death. (b) The Commissioner of Internal Revenue shall assess the estate tax on a value of P3. and (c) assumes that the life insurance was taken out by the decedent on his own life. Q A provided in his last will and testament that the properties he would leave should not be sold or disposed of for a period of the years after his death. (b) At its fair market value at the time the return is due.000 ten years after death. provided that the valuation of the gross estate e as at the last day of the period of extension.000 27.000 and a fair market value at the time of death of P1.000. proceeds of life insurance be included in the gross estate? (a) Yes. The value of the properties increased from P2. and that his property be given to Mr. A taxpayer who inherited properties could not pay the estate tax on the original due date. at book value. (d) Shall be in the gross estate at the owner’s equity of P100.000. (b) Yes. which may be higher than the fair market value.000. Which statement is correct? Real property with a cost of P300.000. Which statement is correct? (a) The Commissioner of Internal Revenue shall assess the estate tax on a value of P1. (Modified/expanded/reformatted BAR examination question) Answer: a 28. executor or administrator of Mr. if the estate.000. (b) Yes. the zonal value.000. (b) Shall be in the gross estate at the decedent’s equity of P800. Which statement is wrong? (Modified/expanded/reformatted BAR examination question) Answer: d (a).000 Net taxable estate P 800. A was designated as revocable beneficiary.000. Was the position of the Bureau of Internal Revenue correct? (a) No. In the last will and testament.000. a decedent provided that the properties he leaves should not . (b).000. (d) In the case of shares of stock.000 but subject to a mortgage of P200. Mr. (c) Yes. 25. if Mrs. (d) Yes.000.000 at the time of death to P3. Q after such period. A. (Modified/expanded/reformatted BAR examination question) Answer: a 29.000. because the Bureau of Internal Revenue had to wait for the last day of the extension period before it could proceed to collect. (c) Shall be in the gross estate at P300.000: (a) Shall be in the net taxable estate at P800.000 Less: Mortgage thereon 200. He asked for extension of time as he had to sell some properties to have cash with which to pay the estate tax. Answer: a Gross estate P1. The Bureau of Internal Revenue agreed to the petition for extension. if the estate was designated as irrevocable beneficiary. A who insured Mr. A was designated as revocable beneficiary. and her designation as beneficiary was irrevocable. if it was Mrs.

B pleases. Mr. Where the transfer of property was under a limited power of appointment.000. the value to include in the gross estate shall be the excess of the fair market value at the time of death over the consideration received.000 Zonal value – P3. What value shall be used for purposes of estate tax? (a) P3. or even take back the property. Statement 2. or (b) Revocable transfer.000. Mr. (b) Five hectares of agricultural land plus the amount receivable from the Government on the appropriation of ninety-five hectares. A revocable transfer is a transfer where the transferor. could change the terms of possession or enjoyment by the transferee.000. He had real estate in his gross estate as follows: At the time of death – zonal value of P500. A transferred property to Mr.000. B. so that the property was not anymore with Mr. The value of the property shall not be included in the gross estate of Mr.000 At the end of ten years after his death: Fair market value – P2.000. (Modified/expanded/reformatted BAR examination question) Answer: b 31. (d) None. The gross estate shall include properties not physically in the estate. A donation inter vivos is subject to estate tax. during his lifetime.000 (b) P1. this is called donation mortis causa. . But if the consideration was not full and adequate. (b) and (c). D transferred property to Mr. B can give such property to whomsoever Mr. F at the time of his death.500. Declared value in the estate tax return – P1. if such properties were transferred by the decedent during his lifetime by way of: (a) Transfer in contemplation of death. B. (c) Five hectares of agricultural land.500. although death may not be imminent. E. (Modified/expanded/reformatted BAR examination question) Answer: d 30. E transferred the property to Mr. F. F. B at the time of his death. In any of the transfers (a). E transfer the property. F. be sold or disposed of for ten years following his death. A donation mortis causa is subject to estate tax. if the transfer was in the nature of a bona fide sale with full and adequate consideration.000 (d) P500. The Government took nine hundred ninety-five hectares under the Agrarian Reform Act. with payment for it not yet received. A transfer under a limited power of appointment is illustrated thus: Mr. In law. or (c) Transfer under general power of appointment. Mr. no value shall be included in the gross estate. B transferred the property to Mr. Mr. the transfer should be only in favor of Mr. Statement 1. A saying that Mr. D owned one hundred hectares of agricultural land. so that the property was not anymore with Mr. What value shall be included in his gross estate? (a) One hundred hectares of agricultural land. A transfer in contemplation of death is a transfer motivated by the thought of death.5000. no value shall be included in the gross estate. Mr. The value of the property shall be included in the gross estate of Mr. D died. D saying that should Mr.000 (c) P2. C. 32. Mr.500. (See Plate 13) A transfer under a general power of appointment is illustrated thus: Mr.

(Modified/expanded/reformatted BAR examination question) Answer: b 34. (b) False. O died. true. Answer: d 35. (Modified/expanded/reformatted BAR examination question) Answer: d 33. there is no excess. P is succeeding to the estate of Mr. (b) The value of the painting should be included in the gross estate of Mr. (c) Shall be included in the gross estate at P100. (d) False.000: (a) Shall be included in the gross estate at P180. (a) The value of the painting should be included in the gross estate of Mr. A revocable transfer with the following circumstances: Fair market value at the time of transfer – P300. Mr. (d) Mr. because they were not his properties anymore at the time of death. (a) True. N. O. On the same day. since the donations were not simultaneous with the execution of the last will and testament. P as successor to the painting. The will of Mr. N gave Mr. consideration received when transferred – P200. if the donor’s tax had been paid already on the donations. (c) Transfer under a general power of appointment where the consideration was not sufficient. with stage three cancer. (b) Shall be included in the gross estate at P200. Mr. 36. because they were not transfers in contemplation of death. fair market value at the time of death – P180. and should be governed by the rules on estate tax. (c) No. A revocable transfer.000. N and not of Mr. O. 37. Succession to property under a limited appointment is not from the immediate decedent. (d) Shall not be included in the gross estate. In the present case. Which of the following is not included in the gross estate? (a) Revocable transfer where the consideration is not sufficient. (c) True.000. (b) Revocable transfer where the power of revocation was not exercised. made a last will and testament disposing of properties mentioned in the last will and testament.000. false. O by last will and testament.000 . because the donations were donations mortis causa. Mr. Which answer is wrong? (Modified/expanded/reformatted BAR examination question) Answer: b The power of appointment is a limited power of appointment. A few days later he died. (b) Yes. D.000. but from the first decedent. (c) The value of the painting should not be included in the gross estate of Mr. false. When Mr. true. O the power to appoint by will Mr. N died leaving a painting to his son Mr. with a consideration received: Consideration received P200. Are the donated properties to be included in the gross estate? (a) No. (d) Transfer under a limited power of appointment. (d) No. he made gifts inter vivos to his children. P succeeded to the property. Answer: d There shall be included in the gross estate of the property transferred only if the fair market value at the time of death exceeds the consideration received.000. O.

Which of the following is not true: A transfer in contemplation of death for less than full and adequate in money may result in a: (a) Value included in the gross estate. Which of the following shall not be taxed? (a) Amounts received for war damages. shall be used for administration purposes. (b) Amounts received from the United States Veterans Administration. that not more than thirty percent (30%) of said bequests.000 Value to include in the gross estate P 50.000. (d) Value to consider as taxable income. Answer: e They are all exemptions under special laws.000 Fair market value of property at the time of death 250. legacies or transfers to social welfare. devices. (d) All bequests. (b) P250. Fair market value Consideration At transfer At death Received Revocable transfers . legacies or transfers to social welfare.000 38. (e) All of the above. (d) All bequests. cultural and charitable institutions.000. Fair market value of property at the time of transfer 300.000 Answer: d Fair market value at the time of death P250. (c) The transmission from the first heir. (CPAExam) Answer: d Bequests. (c) Benefits received from the Government Service Insurance System. Answer: d 39. (b) Transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicommisary. 40. 41. (c) The merger of usufruct in the owner of the naked title. etc.000. (c) Value included in the net estate. 42.000 Value to include in the gross estate: (a) P300. (d) Benefits received from the Social Security System. cultural and charitable institutions no part of the net income of which inures to the benefit of any individual: Provided.000 Less: Consideration received 200. devises. (d) P50. legatee or done in favor of another beneficiary in accordance with the will of the predecessor. devises or transfers to social welfare. The following are transactions and acquisitions exempt from transfer tax except: (a) Transmission from the first heir or done in favor of another beneficiary in accordance with the desire of the predecessor. cultural and charitable institutions shall be exempt from transfer tax only if not more than thirty percent of such bequests. (b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicomissary. (b) Nothing included in the gross estate. devises or transfers shall be used by such institutions for administrative purposes. The following acquisitions and transmissions are exempt from the estate tax: (a) The merger of the usufruct in the owner of the naked title. (c) P100.

000 less P3. general power 2. (c) P2.000 300. A citizen and resident of the Philippines died leaving: Cash on hand and in banks (of which P150.000.000 Real property in Malaysia.000 Zonal value per Bureau of Internal Revenue 500.000 400.000.000 Shares of stock 500. for accident that happened one year ago 50.000 P5.000 Farm land.000. Land P4.000 1.000 less P1.200.000 From a sister whose ratio of assets to liabilities is 1:3 15.000) 50.000.000.000.800.000.000 Bonds 200.000) 800.000. fair market value 450.350.000) 2.000 The gross estate? (a) P800.000 200.000 and consideration received was P10. fair market value 450.000.627.000.000 Amounts under insurance contracts: Receivable under life insurance.000 0 600.000) 60.000 Car in the Philippines 400.000 400.000 Car 1.000. (d) P1.000 Real property in the Philippines (at zonal value) 500. 200. Land and building.000 and consideration Received was P50. with the father as revocable beneficiary 250. with a mortgage of P200.000 Selling price of adjacent piece of land the day preceding the date of death 600. with the mother as irrevocable beneficiary.500.000.200.000 Real property in the Philippines: Assessed value per assessment rolls of the city 100.807.737.000 Gross estate P3.000 Receivables: From a friend from whom there is no possibility of recovery 20.000 Car 0 Shares of stock 0 Bonds 0 Land and building (P1.000 and consideration received was P30.000.000 P3.000 43.000 To father (fair market value at the time of transfer was P30.000 Revocable transfers: To sister (fair market value at the time of transfer was P40.000: (c) P2.000) 70.000.000.000 1.000 Answer: a Cash on hand and in banks P1.000 250.000 Receivable under life insurance.000 was provided in the will to be given to a charitable institution) P1.000 Transfer under power of appointment.000.200.000 Receivable under accident insurance.000 500.000 The gross estate is: (a) P2.000 Car in the Philippines. (b) P2. for damage caused to his car 12.200.000 Real property in Malaysia.800.000.000 Receivable under property insurance. (b) P3. (d) Some other amount Answer: b Revocable transfer of land (P5.000 . limited power 1.000 To mother (fair market value was P40.000 1.

000 Gross estate P6.000 Receivable from life insurance.000 Amounts under insurance contracts: Receivable under life insurance.000 Property insurance.020.000. with the estate as revocable beneficiary 50.000 Gross estate P2. taken by the decedent on his own life. with a daughter as revocable beneficiary 400.000 Shares of stock: Of a domestic corporation deposited in a band safety deposit box in Malaysia 200.020.000.000.000 Receivable from life insurance. with his estate as revocable beneficiary 500.000 45.000 Receivable from accident insurance 20.000 From a sister whose ratio of assets to liabilities is 1:3 15. with the father as revocable beneficiary 250.000 Farm land in the Philippines.000 Piece of land with vacation house 1.000 Answer: d Family home P2. The decedent was a resident decedent.000 Revocable transfers: To sister (fair market value at the time of transfer was P30.000 Of a foreign corporation the entire business of which is In the Philippines. were: Family home (land and residential house) in the Philippines P2.000 Life insurance policy.000 Receivables under insurance policies: Life insurance policy.920. (d) P6. taken by the decedent on his own life with a son as irrevocable beneficiary 300.920.000. Properties left.000 Life insurance policy.500.737. with properties in Malaysia and in the Philippines. for loss of property 250.000 1.000.000 Receivable under accident insurance.000 Receivable from a friend who has no property whatsoever 50.020. taken by the decedent on his own life.000 Shares of stock of domestic corporation 200. with daughter as beneficiary 400.500.000 Receivable under property insurance.000 44. for injury sustained 20. residing in Kuala Lumpur.000 Farm land in the Philippines 1. for damage caused to his car 12.000) 40.000 Accident insurance. Receivables: From a friend from whom there is no possibility of recovery 20.000.000 Shares of stock of foreign corporation 100. at fair market values. with estate as beneficiary 500. A citizen of Malaysia.000 Piece of land with vacation house in Malaysia 1.000 and consideration received was P10. (c) 4. with a mortgage in favor of the Philippine National Bank for P600.000 Receivable from property insurance 250.000 Life insurance (group) taken by the employer of the decedent.000 The gross estate? (a) P5. for accident that happened one year ago 50.000 Receivable from a friend 50. had the following data on properties and rights at the time of his death and . deposited in a bank safety deposit box in Malaysia 100.000. (b) 5.

who left the following properties ( at fair market values) Land in the Philippines P1.000. 000 47..000 Shares of stock of a Malaysian corporation 300.000. doing business in the Philippines only 100.000 Shares of stock of a domestic corporation 200. (b) P0 (c) P600..000. or (b) Conjugal partnership of gains. Answer: d Real estate.000 Shares of stock of an Indonesian corporation. 000. or relative community of property. 000 Shares of stocks if A co. Malaysia P1. 350. 700. Philippines P2. 000. with the certificate in foreign bank 700. (d) p2.000 Receivable under a life insurance with an insurance company doing business in Malaysia 250. Answer: a The “reciprocity clause” does not apply on properties which are not intangible. The following shall be exclusive properties: (a) Property acquired during marriage by gratuitous title (inheritance or gift) by either . Land in the Philippines P 1. (b) P3.000 46.000.000 Philippine peso deposit in BDO bank 500. foreign corporation (90% of its business is in the Philippines) 500. 000. their values: Real estate. foreign corporation (85% of its business in the Philippines) 400. Absolute community of property.000. 000 Land and building in X Foreign Country 2. in foreign bank: Shares of stock of B Co.. 000 Total P 1. X Foreign Country. 000 Shares of stock of C Co. 000 Car in the Philippines 600.800. 600. 600.000.000. Property relationship between husband and wife may be: (a) Absolute community of property. 000 Car in the Philippines 600.000. 000.000 Philippine peso deposit in BDO bank 500. The gross estate in the Philippines? (a) P1.000 Real estate. foreign corporation (with business in the Philippines) 200. (d) 1. 000. 000 Certificates of shares of stock. Philippines 2. 000 X foreign Country has no death tax on a succession. and residing in.000 The gross estate that should be reported in the Philippines is: (a) P4.000 Shares of stock of a domestic corporation 200.000.000 Gross estate P2. 000 Shares of stocks of a domestic corporation. (c) P4. 000.800.000 Shares of stock of an Indonesian corporation doing business in the Philippines only 100. The decedent was a citizen of.

if any. 000. Property that cannot be clearly identified as exclusive shall be presumed to be conjugal (belonging to husband and wife). 000 Personal property received by the wife as gift before the marriage 400. In general. 000. purchased with the exclusive money of the wife 500. becomes community property (belonging to husband and wife). 000 Cash – income during the marriage P2. is exclusive property. 000 Jewelry purchased with the exclusive cash of the decedent 1. 200. The decedent was married at the time of death. 000 Property acquired by the decedent with cash owned before the marriage 600. 000. 000. and the fruit as well as the income. is exclusive property. 600. 200 000. or purchased with exclusive money. In general. if any. 000. 000 Answer: a Conjugal Absolute Partnership Partnership Cash owned by the decedent before the marriage Exclusive Community Real property inheritance by the decedent during the marriage Exclusive Exclusive . and the fruits as well as the income thereof. 48. or of the husband. 000 Answer: d Community gross estate if the spouses were under the system of absolute community of property? (a) P10. (c) P9. (b) Property for personal and exclusive use of either spouse. The following shall be exclusive properties: (a) That which is brought to the marriage as his or her own. (c) That which each acquires by right of redemption or by exchange of property belonging to one of the spouse. 200. 200. 000 Property unidentified when and whom acquired 1. anything owned before the marriage. However. 600. anything acquired during the marriage in exchange of exclusive property. (d) P7. 000. 000. (b) P8. 200. 000 Real property inherited by the decedent during the marriage 6. upon marriage. 000 Exclusive gross estate if the spouses were under system of conjugal partnership of gains? (a) P10. 000 Clothes of the decedent. (b) P10. Anything acquired during the marriage in exchange of exclusive property. 200. Income during the marriage is conjugal. In general. (b) That which each acquires during the marriage by the gratuitous title of inheritance or gift. jewelry shall form part of the community property. unless it is expressly provided by the benefactor that they shall be part of the community. 000. (c) P6. or purchased with exclusive money. (c) Property acquired before the marriage by either spouse who has legitimate descendants by the former marriage. spouse. (d) P12. income during the marriage is community property. and the exception are in (a) and (c). Conjugal partnership of gains or relative community of property. Cash owned by the decedent before the marriage P5. of such property. 600. 000. (d) That which is purchased with the exclusive money of the wife.

The bank was in error in allowing the withdrawal of the deposit if it had knowledge of the death of Mr. (a) True. (2) Judicial expenses of testamentary or intestate proceedings. Answer: a The bank can give information on the deposit because the National Internal Revenue Code itself provides that inquiry on bank deposits can be made by the Bureau of Internal Revenue to determine the gross estate and estate tax of a person who died. The deduction from the gross estate allowed by the National Internal Revenue code had been categorized by a revenue regulation into: (a) Ordinary deductions. and the Bureau of Internal Revenue shall not be precluded from collecting the tax by the error of the bank. Joint properties. Answer: a 50. The bureau of Internal Revenue was correct. asking them to give information on the bank deposits of Mr. True. purchased with the exclusive money of the wife Not included Exclusive Jewelry purchased with the exclusive cash of the decedent Exclusive Community Cash owned by the decedent before the marriage Exclusive Community Jewelry purchased with the exclusive cash of the decedent Exclusive Community Unidentified property Conjugal Community Cash – income during the marriage Conjugal Community Exclusive gross estate under the conjugal partnership gains P12. Mr. (5) Unpaid mortgage or indebtedness on property Taxes: Losses: (b) Transfer for public use. B objected on the ground that the account is not really a joint account. Ordinary deductions: (a) Expenses. and the balance in the account was allowed by the bank to be withdrawn already by Mrs. B. False. Personal property received by the wife as gift before the marriage Not included Community Property acquired by the decedent with cash owned before the marriage Exclusive Community Clothes of the decedent. B. B maintained a joint account with Mrs. Mr. (4) Claims against insolvent person. 600. B died and the Bureau of International Revenue included the cash in the bank in that account in the gross estate of Mr. (c) True. True.(b) False. 200. etc. B or Mrs. Statement 2. Statement 1. taxes. B (“and/or account”).\ (3) Claims against the estate. (d) False. U. (b) No. False. losses. U. The Secretary of Bank Deposit Law provides for this exception. Mrs. Can the bank give information on the bank deposit? (a) Yes. (conjugal or community) are includible in the gross estate of the person who died. B. 000 Community gross estate P10.: (1) Funeral expenses. . With information from an obituary in a newspaper on the death of Mr. the Bureau of Internal Revenue communicated with banks. DEDUCTIONS FROM GROSS ESTATE 1. B in a bank with authority to withdraw either by Mr. 000 49. indebtedness. and (b) Special deductions.

220. (c) P2. (d) P2. The share of the surviving spouse in the net community or net conjugal estate is a deduction from the net estate.000 Medical expenses 400. (b) Losses..620.120. Answer: a How much art the special deductions from the gross estate? (a) P1. (b) P1. Answer: d For a deduction for legacy to the Government. legacy to the Government.000. (b) P2. (b) Standard deduction.000.223. Thus: Net estate (after deducting ordinary and special deductions) Pxxx Less: share of the surviving spouse in the net community or net conjugal estate xxx Net taxable estate Pxxx 2.000 Vanishing deduction 28. national and local) 100. not citizen decedent.000.000 Family home 700.000 Amounts receivable under Republic Act 4917 20. (d) Amount receivable by heirs under Republic Act.000 .000. No.000 Net share of the surviving spouse in the conjugal/ community estate 950. (c) Vanishing deduction Special deductions: (a) Family home.620. (d) P2.000.000 Judicial expenses 500. (c) Medical expenses.000. From the following: Funeral expenses P 150. 3. Which of the following is not a deduction from the gross estate under the National Internal Revenue Code? (a) Taxes.620.000 Standard deduction 1.000 Claims against the estate 200. the property given as legacy should first be included in the gross estate.000 How much are the ordinary deductions from the gross estate? (a) P1.000. (c) Legacy to the Government.000 Taxes 25.000.4917 The special deductions are not allowed to the estate of non-resident. (d) Legacy to a charitable institution.g.000 Transfer for public use (e. (c) P723.000 Losses 60. Answer: d Ordinary Special Funeral expenses P 150.000.000 Judicial expenses 500.123.000 Mortgage or indebtedness on property 120.000 Claims against insolvent persons 40.

(a) Funeral expenses. There may be funeral expenses deducted: (a) Whether paid or unpaid. If the estate is not settled judicially.000 Claims against insolvent persons 40.000 Transfer for public use 100.000. Medical expenses 400.000. Obligations of the decedent that already prescribed during his lifetime.000 Taxes 25. 5.000 Amounts received under Republic Act 4917 _________ 20. but was not.223.000 Family home 700. Judicial expenses would include administration expenses of the estate. Funeral expenses are deductible from the gross estate at whichever is the lowest of actual funeral expenses. (b) Even if there is a memorial plan. (d) At not more than P200. are not claims against the estate. Expenses related to the death but after interment are not anymore funeral expenses. (b) Judicial expenses.000 Loses 60. reduced into writing. (c) Claims against the estate. or P200. the debt instrument must be notarized (except for loans granted by financial institutions where notarization is not part of the business practice or policy of the institution).000 P2.000 4. It the monetary claim against the decedent did not arise out of a debt instrument. (c) In case of a family plot and mausoleum.000 Totals P1. or obligations of the decedent under contracts which must (under the Statute of Frauds0.120. Claims against the estate are obligations contracted during the decedent’s lifetime. five percent (5%) of the gross estate. the requirement of a notarized debt instrument does not apply. the cost of the property is the actual funeral expense. the administration expenses paid or incurred by the heirs in the extra judicial settlement of the estate are deductible from the gross estate as administration (judicial) expenses. and enforceable if he were alive. Which of the following statement is wrong.000 Claims against the estate 200. If the claim is out of debt instrument. the administrator or executor must submit a statement showing the disposition of the proceeds of the loan. If the claim was out of a loan incurred within three years prior to death. Judicial expenses in the judicial settlement of the estate are deductible if paid or incurred prior to the last day for filling of the estate tax return and payment of the estate tax (within six months from the date of death).000.000 Mortgage or indebtedness on property 120. .000 Vanishing deduction 28.000 Standard deduction 1.

December 2. J. because it is related to the death of Mr.000 Unpaid 40. 2013 Gross estate P3.900. 2013 3. which was well within five percent (5%) of his gross estate.000 Appearance in court.000. 2013 3. (b) No. (b) Shall be allowed even if the estate is extra judicially settled.000 . 2013 100. Which of the following statements on judicial expenses. is wrong? (a) Shall be allowed if the estate is under judicial settlement. (CPAExam) Answer: c 8. 2013 3. The expenses for the dinner amounted to P50.000 Evidenced by a notarized document 200. October 15. (d) P500.000 Claims against the estate: Evidenced by a typical promissory note 100. (c) Shall include judicial expenses to settle the conflicting claims of the heirs. (c) P499. June 16. Date of death February 5. 2013 3.000 Court appearance. April 5. (b) P593.000 103.000. June 16.000 Funeral expenses: Paid 150.000 Total of other ordinary deductions from the gross estate? (a) P493. (d) Shall be allowed even if the decedent is a non-resident alien and represent expenses outside the Philippines.000 Appearance in court. In the first year anniversary of the death of Mr.000 Judicial expenses- Acceptance fee 100.000. (Modified/expanded/reformatted BAR examination question) Answer: b 7. and the hospital personnel who attended to his last illness. (a) They must be existing against the estate. as deductions from the gross estate. (b) They must be reasonably certain as to amounts. except. 6. (d) They must be enforced by the claimants. his children hosted a dinner to which were invited friends and relatives. Is the cost of the dinner deductible from the gross estate? (a) Yes.000 Appearance in court. Answer: c Only the part that corresponds to the decedent.000. Answer: a Funeral expenses: Paid P150. The following are the requisites in order that claims against the decedent’s estate may be deductible.000 Payments to the lawyer assisting in the settlement of the estate: Acceptance fee. (c) They must have been prescribed. J.000 P190. because funeral expenses have a cut-off point – that of interment.000 Unpaid 40. Answer: c 9.000.

000. (4) Occurring during the settlement of the estate. (c) If arising out of a debt instrument of the insolvent.000 10. (e) Transfer for public use. the following taxes cannot be deducted from the gross estate: (1) Income tax on income received after death. if a debtor had no property whatsoever. (3) Not claimed as a deduction in the income tax return for the estate. and (4) Barangays.000 Total P493. (d) Taxes that accrued prior to the decedent’s death are deductible from the gross estate.000 and obligations of P400. or any political subdivision thereof. theft or embezzlement. the claim against insolvent persons shall be the whole amount of the receivable. Claim against the estate (evidenced by a notarized Document) 200. and the debtor had properties of P100. in favor of the Government of the Philippines. (a) Claim against insolvent person. A transfer for public use which is a deduction from the gross estate is a provision in a last will and testament (legacy or devise). for an exclusively public purpose. Political subdivisions in the Philippines are: (1) Provinces. and (5) Occurring before the last day for the payment of the estate tax (within six months from the date of the decedent’s death). robbery.000. (d) Needs no preliminary filing of a case against the insolvent. (2) Property taxes not acrid before death. A mortgage or indebtedness on property is a deduction from the gross estate but the value of the property. (b) Not included in the net taxable estate. . Which of the following statements is wrong? A claim against an insolvent person. and the uncollectible portion of the claim shall be the deduction from the gross estate. the debt instrument must be notarized.000. Thus. shipwreck or other casualty. (2) Not compensated by insurance or otherwise. storm.000. By statutory provision. and (3) Estate tax.000/P400. for example. with no properties whatsoever is: (a) Included in the gross estate. (2) Cities. the claim is P40.000 x P40. If. or a transfer during the lifetime but to take effect after death. must first be included in the gross estate. (3) Municipalities. When there is a claim against an insolvent person. or P30. (b) Mortgage or indebtedness of property. undiminished by the mortgage. 11. the deduction for claim against insolvent is P300. (c) Losses: (See Plate 15) Losses are deductible from the gross estate if: (1) Arising from fire. the gross estate must include the gross of the receivable.

Claims against insolvent persons. Mr. B are P20.000 Ratio of obligations that shall not be paid to obligations to ordinary creditors 1/3 Deduction of A for uncollectible receivable from insolvent B 1/3 of P60. (c) Can give rise to deduction even if the debtor had some properties.000 Properties available to ordinary creditors P200. One of the following statements is wrong. among other. B has properties worth P220. and interest to accrue on the note from the date of death to the date of maturity – P400. Which of the following is deductible from the gross estate? (a) Income tax paid on income received after death. 000. 000. (b) If entirely uncollectible. The estate of Mr.000 Less: Property to be applied to preferred credit (The Government is a preferred creditor) 20. (d) P 0. 000 Face value of the not 10. Included in the obligations of Mr. Answer: c A notarized debt instrument as a requirement for deduction is required of claims against the estate. (d) Can be a deduction even if secured by a mortgage.000 20.000 Obligations to ordinary creditors that shall not be paid P100. A died with a receivable from Mr.000. accrued interest on the note at the time of death – P600. may be omitted in the computation for the net taxable estate. Answer: c Real property tax P20. A. (c) P31. (d) P21. 2013. (b)41. the following charges and obligations: Real property tax for the calendar year 2013 – P20. (b) Property taxes not accrued prior to death. Mr. leaving. 12. Mr. A has a deduction for claim against insolvent of: (a) P60. (c) P20.000 Obligations of B P320. B died on June 30. (b) P30. 600. B. On an interest- bearing promissory note (notarized): face value of the note – P10.000 14.000 Less: Obligation of preferred creditor (Government) 20.000. 000.000 Obligations to ordinary creditors P300.000 owed to Mr. . (a) Should always be included in the gross estate. Answer: c Properties of B P220. 000 15.000 owed to the Government of the Republic of the Philippines for unpaid taxes of P60.000 Less: Obligations that shall be paid from the properties 200. 000.000 and obligations of P320. not of claims against insolvent persons. 600.250. Answer: b 13. 000 Interest accrued at the time of death 600 Interest to accrue from the date of death to the date of maturity 400 Deduction P31. The deduction from the gross estate is: (a) P20.000.000 Obligations to ordinary creditors P300.

world deductions It does not matter where the ordinary deductions came about whether in the Philippines or outside the Philippines. the loss of the property is not deductible from the gross estate. 1992 and his estate incurred losses due to: 1st loss: From fire on February 2. died on November 5. Philippines x World ordinary Gross. False. Statement 1: Vanishing deduction for the estate of a non-resident. 1993 of household furniture also not compensated by insurance. (c) Estate tax paid to foreign country. (c) There can be a vanishing deduction. Taxes a. is allowed only if the property is located in the Philippines. (b) Both losses are not deductible. True. a Filipino resident. Taxes that accrued after death are not deductible.(b) False. (c) True. (See Plate 28) 19. the property would not be included anymore in the gross estate. not citizen of the Philippines. 1992 of improvement on his property not compensated by insurance. not citizen of the Philippines. is allowed only if the property is located in the Philippines. (a) True. not citizen of the Philippines: (a) There are no special deductions from the gross estate. Statement 2: Losses can be deducted only if incurred prior to the last day for the filing of the state tax return and payment of the estate tax (a) True. (d) False. False. Answer: a 18. (c) True. not citizen of the Philippines: Only a portion of the world ordinary deductions. The Philippines deductions is always a portion of the world deductions. estate. d and c accrue after death. Statement 2: deduction for transfer for public purposes for the estate of a non-resident. True. True. If the property is not included in the gross estate. Answer: a . False.(b) False. 2nd loss: From flood on February 25. Answer: d Taxes that accrued prior to the decedent’s death are deductible from the gross estate. True. 17. 16. Answer: a On the property lost even before he died. (d) Donor’s tax accrued prior to death. Ordinary deduction from the gross estate of a non-resident. (d) 1st loss is deductible and 2nd loss is not. (c) Both losses are deductible. (d) False. Which statement is wrong? For a non-resident. computed at follows: Gross estate. Answer: b 20. (a) 1st loss is not deductible and 2nd loss id deductible. (b) There can be deductions for funeral expenses entirely incurred outside the Philippines. Statement 1: Losses can be deducted only if incurred during the settlement of the estate. False. Y. (d) There can be a deduction for transfer for public use.

800. 000 P 920. 300. 000 Judicial expenses of testamentary proceedings. 21. 000 Losses. 000 Other claims against the estate. (b) P1. Philippines 300. . foreign 800. 000 Losses. foreign 350. not citizen of the Philippines. (d)Some other amount Answer: b Funeral expenses P200. foreign country 20. 000 Claims against insolvent person. 000. 000 Administration expenses outside the Philippines 200. 000. 000 Other claims against the state. 000 Mortgage payable. VANISHING DEDUCTION. 000 x P1. 000. 000 Transfer to the Philippine Government. 000. 000 P1. 800. Philippines 250. 000. 000. 000 Claims against the estate in the Philippines 800. 550. 000 Total world ordinary deductions P1. foreign country 180. 300. 000 P6. (b)P1. Mr. 080. Philippines 900. Philippines 300. 000 Mortgage payable. 000. 000. (c) P1. Philippines. 000 Unpaid taxes. 000 Claims against the estate in the Philippines 800. 000 Administration expenses in the Philippines 300. He left the following obligations and charges: Medical expenses. foreign country 20. 000 23. Philippines 250. 000 Funeral expenses. 000 Claims against the estate outside the Philippines 300. (c) P1. 000 Claims against the estate outside the Philippines 300. Philippines 100. (d) P1. 000. 000 22. 000. 000 Total P2. Philippines 100. 000. 000 Answer: d Funeral expenses. 000. foreign 350. 000. 500. (b) The property on which vanishing deduction is being claimed must be located in the Philippines. 000 Administration expenses in the Philippines 300. The requisites are: (a) The present decedent died within five years from receipt of the property from a prior decedent or donor. foreign country P200. 000 Funeral expenses outside the Philippines 400. 000 and outside the Philippines of P6. 000. The decedent was a non-resident alien Gross estate in the Philippines P6. 000 Claims against insolvent person. who died with a gross estate in the Philippines of P4. foreign country 180. 000 Gross estate outside the Philippines 4. 000 For purpose of the Philippine estate tax: Allowable deduction from the gross estate? (a) P1. single. 160. 000 Administration expenses outside the Philippines 200. Z was a non-resident. 250.000 x P2. Philippines 900. 000. 760. 000 P4. 800. 080. in the year of death P1. 000 Judicial expenses of testamentary proceedings. 000 Judicial expenses of testamentary proceedings. 000/P10. for public use of property in the foreign country 400. 000 Judicial expenses of testamentary proceedings. 000. 000 Unpaid taxes. 000 Deduction from the Philippine gross estate is: (a) P1. 000/P10.

Second. What percentage of deduction will be used in computing the amount of vanishing deduction? (a) 80% of the value taken as basis for vanishing deduction. the value shall be reduced by the second step shall be further reduced by a formula. 80%. The vanishing deduction is computed in four steps. or of the taxable gift of the donor. which is: the value at which the property was previously taxed. there is no more vanishing deduction. or the value in the present estate. more than three years but not more than four years. more than one year but not more than two years. the property should . However. Rudolfo. (b) 100% of the value taken as basis for vanishing deduction. 1991. Among his gross estate are properties inherited from his deceased father who died on April 4. (c) The property must have formed part of taxable estate of the prior decedent. (c) The property with respect to which deduction is sought can be identified. The following are requisites for vanishing deduction. and estate tax would have been ascertained and paid on it. 1988. First. 25. the property should be located in the Philippines. the property outside the Philippines would have formed part of the gross estate of the prior decedent because his gross estate would include all property regardless of location. (b) The present decedent died within five (5) years from date of death of the prior decedent. and multiplied by the ordinary deductions. 24. more than two years but not more than three years. or something acquired in exchange thereof. it is subject to vanishing deduction. as follows: the value as reduced in the second step divided by the gross estate. (d) The estate tax on the prior succession. (d) 40% of the value taken as basis for vanishing deduction. (e) The property on which vanishing deduction is being claimed must be identifies as the donor. Fourth. died testate on May 10. (d) The property must have formed part of the gross estate situated in the Philippines of the prior decedent. After five years. 100%. (c) 60% of the value taken as basis for vanishing deduction. 40%. or the donor’s tax on the gift. If such property was already in the Philippines at the time of the present precedent’s death. a citizen of the Philippines and resident of Bacolod City. 60%. except one: (a) The estate tax of the prior succession must have been finally determined. if such property was already in ht Philippines at the time of the present decedent’s death (although includible in the present decedent’s estate) it is not subject to vanishing deduction.more than four years but not more than five years. Which of the following statements is wrong? (a) If the decedent was a citizen or resident of the Philippines. and (f) No vanishing deduction on the property was allowable to the estate of the prior decedent. whichever value is lower. (b) If the decedent was not a citizen nor resident of the Philippines. Answer: d If the prior decedent was a citizen or resident of the Philippines. (CPAExam) Answer: d 26. 20%. This initial value shall be reduced by any mortgage or indebtedness on the property paid by the decedent prior to his death. Third. must have been finally determined and paid. an initial value must be taken. The value arrived at after the third step is called the basis of the vanishing deduction on which shall be applied a percent (%). as follows: Where the time interval between receipt of the property and death of the decedent was not more than one year.

be located in the Philippines. true. 30. (c) True. R and the child. (d) A resident alien and on property in the Philippines. W subject to estate tax? (a) Yes (b) (b) no (Modified/expanded/reformatted BAR examination question) Answer: a Inheritance from Mr. (c) If the decedent was not a citizen but a resident of the Philippines. the property should be located in the Philippines. there should always be two deaths within five years from receipt of property.825. Mr. R and a child Mr. Answer: d Only property located in the Philippines at the time of the present decedent’s death may be allowed vanishing deduction. but both within five years from present death. R was (1/2 of P19.000 . (b) False. 27. if there is the same applicable percentage on the two sets of properties. died in an accident. false. there is no situation of a two taxes on the same property. Statement 2. If the estate tax on the prior succession was not previously finally determined and paid. (c) True.000. One of the following statements is wrong. there can be a consolidated computation of vanishing deduction. the property may be located anywhere. For two acquisitions by lucrative title at different dates. Statement 2. 29.000. there may be one consolidated computation only for the vanishing deduction. W. Statement 1. true. For a vanishing deduction. R.200. (c) A non-resident citizen.000 divided by 2) P4. and Mrs. The underlying reason for vanishing deduction is to offer a relief from heavy burden of taxation if the same property is subjected to two estate taxes within a short period of time because of proximate dates. Which is it? Vanishing deduction is allowed to: (a) A resident citizen. In order that there can be vanishing deduction. (b) A resident citizen. exclusive properties of P1.300. With the following properties in the Philippines: Mrs. exclusive properties of P5. community properties of P19. (d) False. false. and on property in the Philippines. W. false. Answer: a There can be a heavy burden of taxes if two estate taxes were to be paid. Answer: b 28.300. false. (b) False. (a) True.000 Is the estate of Mr. if the property subject of vanishing deduction was acquired by gift. and on property located in the Philippines. R.000. Answer: d On Statement 1. true. Mrs. the estate tax on a prior succession must have been previously finally determined and paid. (a) True. true. Mr. (d) If the decedent was a citizen and resident of the Philippines. (d) False. R died one day after the death of Mr. Statement 1. the donor need not be dead in order that there can be vanishing deduction. and on property located outside the Philippines. On Statement 2. Mr.

(c) P313. But of course. He left.000. W P6.800.200 .000. The Bureau of Internal Revenue. (Modified/expanded/reformatted BAR examination question) Answer: a 32. the requirement of a prior estate tax payment would have been satisfied. 31. The Bureau of Internal Revenue of the Philippines seeks to impose the Philippine estate tax on the same property. and his legitime is on the ½ share of Mr. So that Mr. the law should be liberally construed to cover situations where the period to pay the estate tax of the prior decedent and the present decedent are within almost the same time frame. The estate tax of the United States was paid on this property. false. (b) False.000 78. (c) True. with properties and charges thereon: Properties: Inherited two and one-half years ago: Property outside the Philippines P300.000 Fair market value at death 700.000 Vanishing deduction at 60% P313. (d) P208.000 Basis of vanishing deduction P522. the older person shall be presumed to have died ahead of the young person.000 Mortgage on the property when inherited 150. The Bureau of Internal Revenue is correct because his estate subject to Philippine estate tax would include all properties regardless of location.025. R before the net taxable estate of Mrs. R. W 1. false. Mr. (b) P417. shares of stock of a Philippine corporation. Statement 2. R? (a) Yes (b) No Yes. (a) True.200. cannot allow an exclusion of such property from the gross estate but can allow only a tax credit against the Philippine estate tax for the foreign estate tax paid. At the time of his death.000 Less: P600.000 Charges: Ordinary deductions from the gross estate 390. R is computed.000 Property acquired thru own labor 2.000xP390. R on the community estate. among others. Answer: c Initial value of inherited property in the Philippines P650.600.000/P3. If the decedent was a citizen of the Philippines is the Philippine Bureau of Internal Revenue correct in what it seeks? Statement 1.000 Under the law on succession.000 Balance P600. Mr. W inherited from Mr. A was a resident of the United States. true.000. Can there be a vanishing deduction in the estate of Mrs.000 Less: Mortgage paid 50.000 Vanishing deduction? (a) P522. The only doubtful element for vanishing deduction is that the estate tax on the prior succession must have been finally determined and paid. (d) False.200. Decedent was a citizen of the Philippines who was single at the time of death. Exclusive property of Mr. true. If the estate tax was paid on the estate of Mr.000 Mortgage on the property at death 100.000 Total estate.000 Property in the Philippines: Fair market value when inherited 650.

before computing for vanishing deduction. not including vanishing deduction P2.200.000. (b) P405.000 Judicial expenses 500.000 when inherited and subject to a mortgage of P1. (b) P960.000 P2. (d) P100.000 property received as gift three and one-half years ago (fair market value of P5. (c) P1.000.000 Less: Mortgage paid 1.000 Answer: c Inherited Gift Fair market value when received P5.000 Judicial expenses 500.000 Judicial expenses 100.000 Mortgage on exclusive property 40.000 Amount received under R.000 P3.000/P10.000 Bequest to the Philippine Government 60.000* ________ 600. and allowable deductions.400.200. from the gross estate.000 when inherited) 3.000* 800.000.000.000 (40%)P 960.000.000 *Ordinary deductions: Unpaid mortgage on inherited property P 200.000.33.000 In formula for vanishing deduction where: Initial basis of property x Deductions Gross Estate The multiplier “deductions” is: (a) P400.600.000 Bequest to charitable institution 5.000 Claims against the estate (not including mortgage) 1.000. The decedent had a gross estate.000 Judicial expenses 100.000 Claims against conjugal properties 120.000.000. Answer: a Funeral expenses (assumed lesser than 5% of gross estate) P 80.000 P3.000 Mortgage on exclusive property 40. (d) P2.000 Medical expenses 300.000 Funeral expenses (Maximum) 200.000) P7.000/P10.000.000 . 4917 60.000 Basis of vanishing deduction P3.100.000.400.000.000 Unpaid mortgage on inherited property 200.A.000. Property inherited four and a half years ago (fair market value of P5.000 Vanishing deduction (20%) P 640. the multiplier “deductions” P400.000. (c) P 40.000 Bequest to the Philippine Government 60.000 Total.000.000 Claims against the estate (not including mortgage) 1.000 Total ordinary deductions.000xP2.000 Balance 4.000.000 Less: P4.100.000 34.000.000xP2.000.000. as follows: Funeral expenses P 80.000 Vanishing deduction? (a) P640.000 Funeral expenses 300.000.000 Claims against the estate 120.000.000.

Medical expenses.000/ P7. or P500.500. Answer: a On property received from: Father Mother Initial basis: Land and building (family home) P1.000 when inherited) 100. (d) P1. Tax formula per revenue regulation: Total of net exclusive and net community estate Pxxx Less: Special deductions: Medical expenses Pxxx Family home xxx Standard deduction xxx xxx Net estate Pxxx Less: Share of the surviving spouse (1/2 of net community estate) xxx Net taxable estate Pxxx 37.500.000.000.530.000 Cash 500.000 Claims against the estate 600.000 Car P500.000 The vanishing deduction is: (a) P1. Ramon Asuncion.000 150. .000.000.000 P 500. The multiplier also does not include special deductions. 35.000. ON SPECIAL DEDUCTIONS. The bequest to the charitable institution is not part of the multiplier because it is not a deduction under the National Internal Revenue Code.000/P7.000 Basis of vanishing deduction P1.000 Total P2.000 Less: P1. (b) P1. if incurred within one year prior to death. whichever is lower.000 Unpaid mortgage on the land and building inherited (from an original of P600. died leaving the following properties: Real and personal properties P3.000.080.000 Applicable rate of vanishing deduction 80% 100% Vanishing deduction P1.000 Cash (including P500.000.000 36.000 Less: Mortgage paid 500.000 x P700.000 Car purchased with cash received as gift from the mother during the year 500.000 Land and building inherited from the father 1 ½ years ago (with a fair market value at that time of P1.000) 2.000 x P700. Medical expenses are deductible.500.500.000.000 Balance P1. It is a deduction under a special law (and and exempt acquisition or transmission by provision of the National Internal Revenue Code). Medical expenses are deductible from the gross estate at actual medical expenses. Mr.000 P450.000 received by inheritance from the father) 1.000 _________ 50.080. whether paid or unpaid at the time of death. (c) P450.500.000. a citizen and resident of the Philippines.000.130.350.000 P450.

except one. Which is the exception? (a) Vanishing deduction. (b) False. (c) May be allowed for two family homes (one in the city and another in the province). the deduction for family home is ½ of its value. The standard deduction. true. Only one statement is correct. (d) The standard deduction is against the total of exclusive and community estate. Statement 1. should be paid or take place within a certain period in order to be deducted from the gross estate of a resident or citizen decedent. the deduction for family home is ½ of its value. Statement 2. Answer: d The revenue regulation states that medical expenses. 000. 41. 42. Answer: a . (d) False. 38. 000. such medical expenses cannot be deducted from the gross estate. (b) Is actual medical expenses or P500. are not deductible from the gross estate. with vanishing deduction and unpaid mortgage or indebtedness. (d) Must be unpaid at the time of death. and from the total of exclusive and community estate. (b) If the family home is community property. Medical expenses incurred more than one year prior to the date of death. based on cost. The following expenses. the standard deduction need not classified as exclusive or conjugal/community deduction. Medical expenses are allowable as deduction only if incurred within the day prior to death. not even as claims against the estate. false. only those incurred before the last day of filing of the return will be allowed as a deduction. Medical expenses deduction from the gross estate: (a) Is only if the decedent was a citizen or resident of the Philippines at the time of death. Deduction for family home: (a) Shall be allowed if the family home is in the Philippines. whichever is lower. Which of the following statements is wrong? (a) If the family home is community property. (d) None. as deduction from the gross estate is always P1. Answer: a 39. Answer: d On vanishing deduction. And if the medical expenses were incurred more than one year prior to death. false. (b) Shall be at a maximum of P1. For a married person with exclusive conjugal/community properties. (c) Medical expenses. true. the value of the family home is already reduced to zero. 000 if. 000. both in the Philippines and with certification of the barangay captains. the property on which the deduction is being claimed must have been received within five years prior to death. 000. 000. (c) Need not be on the illness resulting in death. Answer: a 40. and still unpaid at the time of death. and from gross community estate to arrive at net community estate. whether paid or unpaid at the time of death are allowable as deductions from the gross estate. on judicial expenses. (c) Medical expenses are deductions from the total of exclusive and community estate. (c) True. One of the following statements is wrong. (b) Judicial expenses. 000. Identify. (d) Shall be deducted at lesser than P1. even if unpaid. (a) True.

000. 43. and not exceeding P200. (c) Family home – not exceeding P1. 45. 000. (b) Medical expenses – nor exceeding P500. Returns and reportorial requirements NET TAXABLE ESTATE AND ESTATE TAX. the family home is exclusive property. family home and standard deduction (recent deductions in the National Internal Revenue Code by an amendatory law) were classified by the regulation as special deductions. 000. (c) Deduction may be claimed for a family home of a non resident citizen of the Philippines located outside the Philippines (d) A family home is always conjugal/community property. Net distributable estate\ 3. If the family home acquired during the marriage is from exclusive funds. By the revenue regulations. Net taxable estate 2. Deduction from the gross estate allowed by a special law is a special deduction. 1. (c) True. On letter (d). Answer: a On letter (a). Tax credit for foreign estate tax paid 4. under the law and implementing regulations a single person who is head of the family is entitled to a deduction for family home. a family home of a single individual is exclusive property. (a) True. Which statement I true? (a) A single person. true. 000. Tax formula (per revenue regulation): Exclusive Community Total Gross estate Pxxx Pxxx Pxxx Less: ordinary deductions xxx xxx xxx . SPECIAL PROBLEMS 1. Answer: a Medical expenses. (b) False. 44. Amount received by the heirs under Republic Act 4917 is a special deduction. false. true. Statement 2. DEDUCTIONS WITH CEILING are: (a) Funeral expenses – not exceeding five percent (5%) of the gross estate. (d) False. only deductions under the National Internal Revenue Code are ordinary deductions. A family home acquired during marriage and from conjugal/community funds is conjugal/community property. false. (b) There can be a deduction for two family homes if their aggregate value does not exceed P 1. who is not a head of the family. 000. Statement 1. Amount receivable under republic act 4917 which was among the recent deductions should be considered also as special deductions. On letter (c) the special deduction for family home is allowed only to a decedent who was a resident or citizen of the Philippines at the time of death. 000. may not have a deduction for family home.

000. 905. (b) P500. and are charges against the community/conjugal property (e. 000 Net taxable estate P 95. if exclusive or community/conjugal. 000 Mortgage on the property paid by the present decedent 30. 000 Mortgage on the property when inherited 60. 200 . 000 Vanishing deduction on: Inheritance Gift . not including vanishing deduction 500. He left the following: Property inherited2 ½ years ago: Value in the present estate P500. depending on the classification of the property to which it is related. 000 Vanishing deductions: On property received as inheritance 180. (d) P275. Net exclusive/community [or conjugal] estate Pxxx Pxxx Pxxx Less: Special deductions xxx Net estate Pxxx Less: share of the surviving spouse in the net community [or conjugal] estate (1/2) xxx net taxable estate Pxxx 2. 000. Answer: a Properties received as inheritance P500. 000. 000 Other properties P1. The decedent was a resident citizen. 000 Fair market value when inherited 400.000 Gross estate P2. obligations contracted during the marriage are presumed to have benefited. 3.g. As general rule. Vanishing deduction may be a deduction against exclusive or community/conjugal property. 000. 000. A deduction. 000. claims against the estate). funeral expenses. 000 405. 000. (c) P320. 000 Properties received as gift 300. If the property to which the deduction is related is exclusive property in the gross estate. 000 Properties received as gift within the year: Value in the present estate 300. 000 Value when received 320. if the property to which the deduction is community/conjugal property in the gross estate. single at the time of death. 000 On properties received as gift 225. 000 Less: ordinary deductions Others P500. whether against exclusive or community/conjugal estate follows the classification of the property in the gross estate. The deduction is against the community/conjugal gross estate. judicial expenses. 000 Ordinary deductions. 000 Special deduction – Standard deduction 1. 000 Other properties P1. 000 Net taxable estate? (a) P95. 000 Total deductions P1.

200. . 000. 000) 1. 000 Vanishing deduction (P80. 000 Basis of vanishing deduction P80. 000 Unpaid mortgage on car 500. 750. (d) Some other amount. 000. 000. 000 x P500. He died leaving: Land and house acquired during the marriage. except vanishing deductions 600. 336. 000 P225. 000 Deductions against community properties. (b) P1. which mortgage was paid in full by the decedent) P250. 000. 000 Car inherited during the marriage six years before 1. 336. 000 Net taxable estate? (a) P1. 000 Administration expenses on extrajudicial partition of the estate 500. 000 4. 000. 000 Balance 100. 000 Net community estate 2. 000 Vanishing deduction 64. 000 Less: Ordinary deductions – Other 600. 168. 000 Less: P400. Property inherited one and one-half years ago and before the marriage (with a fair market value of P160. 000 Other real and personal property 1. 000 20. 000. 000 Claims against an insolvent friend 50. 336. 950. 000 Unpaid mortgage on inherited land 300. 000. 000 664. 000 _______ 75. used as family home P2. 000 Less: Share of the spouse in the net community estate ( ½ of P2. 000 Net taxable estate? (a) P0. 000/P3. 700. 000 Less: Special deduction Standard deduction 1. 000 Less: Mortgage paid 60. 000 Percent to apply 60% 100% Vanishing deduction P180. 000 Gross estate P3. (c) P1. (d)some other amount Answer: b Properties inherited before the marriage P 250. 000. (c) P2. 000 when inherited and a mortgage of P60. 336. 000 Net estate P1. 336. 000 Other properties 2. The decedent was married and under the system of absolute community of property. 000/P2. 000 x 80%) P64. 000 P300. 000 P300. 000/P2. 000 Other properties 2. 000 Balance: P400. The decedent was under the system of absolute community of property. 000 Net taxable estate P 168.Initial value to take P430. 250. 000. 000 Actual funeral expenses 300. 000 5. 000 Clothes of the decedent purchased with exclusive money 300. 000 Medical expenses 600. 000 P100. 000. 000. 000 x P600. 000 Basis of vanishing deduction P300. 000 Claims against the estate (other than mortgage) 700. 000 Less: P100. 750. 000 P225. 000 Vanishing deduction: Initial value to take P160. 000 Less: mortgage paid 30. 000. 000 x P500. (b) P168.

000 Claim against insolvent 50. 000 Net exclusive/ community estate P800. from a mortgage on the property of P800. 000 P1. 2013 3. December 2. 000 assumed by the decedent. June 16. 400. 000.000) 480. on illness on January 6. 000 Payments to the lawyer assisting in the settlement of the estate: Acceptance fee. 700. 000 Medical expenses (maximum) ( 500. 750. 000 Unpaid mortgage 500. with an unpaid purchase price of P100. 000 Cash remaining of P500. 000 is P1. 000 Funeral expenses (maximum) 200. 000 If under the absolute community of property.944. 000 Funeral expenses (paid of P160. 950 . 000. 000 Real property in Quezon City acquired during the marriage 4. purchased with income during marriage 600.000. 000. 000 Totals P500. 750. 000 Appearance in court.000) 300.000 and unpaid of P3000. 000 Appearance in court. April 5.152. 000 300. unpaid. 000. 950. 700. 2013 3.000. 250. Data at the time of death: Real property in Manila inherited from the father two and one-half (2 ½ ) years ago and before the marriage.000 Answer: b . 000 P4. 000) 1. October 15. 000. the net taxable estate is: (a) P4. 000 Personal properties acquired thru own labor 400. 2013. with affair market value at that time of P2. (c) P3. 000 Cash from the earnings of the wife 600. (d) P3.000 P3. 000 Clothes of decedent P300. 000 Totals P1. 2012 600.000 and unpaid of P140. The unpaid price as paid out of the proceeds of the sale).944. 000 Mortgage payable on the real property in Manila. 2013 3. 000 Medical expenses. 000 Appearance in court. 000 Car 1.464. (b) P1. 000 Clothes of the surviving spouse. 000 Claim against insolvent 100. 950.Answer: a Exclusive Community Total Land and house P2. 300. 000 Claims against insolvent _________ 50. 000 Net estate P1. 000 P1. 000 Medical expenses on last illness two weeks before death: (paid of P180. 350. 2013 100. 000 Claims against the estate 700. 000 Other properties 1. 700.000 when inherited 500. 000 Other obligations 497. 000) (maximum) (1. 000) Standard deduction (1. 000 Net taxable estate P ________0 6. 000 Less: Share of surviving spouse In the net community estate ( ½ of P2. 475. 000 proceeds from a sale of personal property (property was received within the year as gift with a value of P200. 500. 000. 000) Family home ( ½ of P2. 000 Administration expenses 500. Date of death was March 5.000.000 P2.

Cash Real Property Initial value to take P 200.464.500.400. a citizen and resident of Brisbane.000 Totals 80.976. Lauren McDonald.000 + P300.000 20. Mrs.000 Personal properties 400.000 x P1.000 is family home P 3.000) ( 2.000/P7.000.400.000 Cash from proceeds of sale P 400.000 Share of the surviving spouse in the Net conjugal estate (1/2 of P3. Data on her properties and obligations follow: Properties in Australia (inherited within the year) of which P1.000.000/P7.000 Claim against insolvent _______ 100.000 P 1.000 P 4.624.000.000 Unpaid obligations in Australia 700.000.000 Other obligations 497.000) P 80.944.000 Funeral expenses 200.000 Net exclusive/community estate P 320.600.000 Real property in Quezon City 4. Australia.000 Special deductions: Standard deduction ( 1.312.000 Cash from earnings of the wife 600.000) ( 480.000) ________ Balance P 100.000 Claim against insolvent 100.000 Properties in the Philippines 1.000 (100% of P80.000 Less: P1.000.500.000.000 Ordinary deductions: Mortgage payable P 500. died leaving properties and obligations in Australia and in the Philippines.624.000 P 1.000) P 576.000 Vanishing deduction (Schedule) P 80.000 7.000.000 P 100.000 240. Exclusive Community Total Gross estate: Real property in Manila P 1.000) Medical expenses (P180.000 576.000 Total P 400.000 .000 P 6.200.000 Vanishing deduction (60% of P960.000 Funeral expenses in Australia 250.200.000 Court appearance.000) Payment on unpaid price (100.000 x P1.000 Schedule on vanishing deduction.000 Judicial expenses- Acceptance fee 100.000 Less: Payment on mortgage (300. 2013 3.000 P 4.000) Net taxable estate P 1.000) Net estate P 3.152.000 Medical expenses in the Philippines 200.000 P 1.000 P 960.000 _______ Basis of vanishing deduction P 80. June 16.

medical expenses and family home or an amount receivable under R.000 Less deductions: Funeral expenses in Australia (Maximum allowable under Philippine law) P 200. which is not a deduction from the taxable gross estate. not citizen decedent has no deduction for standard deduction. . less actual diminutions of the estate equals the net distributable estate. Net taxable estate and net distributable estate may be at different amounts because of deductions to arrive at net taxable estate which are paper deductions only but do not physically diminish the gross estate: Net taxable estate and net distributable estate may be at different amounts because there are deductions from the gross estate to arrive at net taxable estate which are only at maximum amounts provided by law. 1. which is not a deduction from the gross estate. The taxable estate is the result of the formula under the National Internal Revenue Code: Gross estate. on the other hand. but which reduces the distributable gross estate at the actual amount.000.The taxable estate in the Philippines is: (a) P1. (b) Funeral expense already paid as at the time of death (e. incurred more than one year prior to death. which is a deduction from the taxable gross estate at a statutory maximum. Any of the following may result in the net distributable estate being at a figure different from that of the net taxable estate: (a) Funeral expense. which can be deducted from the taxable gross estate. and are not the actual diminutions of the estate. The taxable estate on which the estate tax rates are applied is not the same as the net distributable estate.000 Total P 900. Answer: c Gross estate. which is deduction from the taxable gross estate at a statutory maximum. but which shall physically diminish the distributable gross estate as it is still a liability of the estate.000.000 x P900.000 A non-resident.000 225. but which shall not physically reduce the distributable gross estate.000. Philippines P 1. but which physically diminishes the distributable gross estate.000.A. (g) Judicial expense incurred beyond the period provided by the law for filing the estate tax return and payment of estate tax.g. NET DISTRIBUTABLE ESTATE.000 P1. is: Properties physically in the estate. which is still allowable as a deduction from the gross estate but which will not physically reduce the distributable gross estate anymore. (c) P775.000 Net taxable estate P 775.. (d) PO.000/P4. (h) A claim against the estate arising from a debt instrument which is not notarized. memorial plan) which is still allowable as deduction from the taxable gross estate but which does not physically reduce the distributable gross estate anymore.000. (d) Medical expense already paid as at the time of death. but which reduces the distributable gross estate at the actual amount. 4917. paid by a pre-need company. (e) Medical expense. (f) Medical expense.000. (c) Medical expense.000. (b) P800. still unpaid.000 Unpaid obligations in Australia 700.

000. but which is not a physical diminution of the distributable gross estate.000 Total 7.000.000 P 6.000 Unpaid at the time of death 150.000) Other obligations ( 1. which is a deduction from the taxable gross estate. as irrevocable beneficiary 500. (o) The share of the surviving spouse in the net conjugal or net community estate is a deduction from the taxable gross estate at an amount computed applying the rules on gross estate and deductions under the estate tax law.000. (k) Vanishing deduction.000.000 Net taxable estate? (a) P5. which is a deduction from the taxable gross estate.912.000.000) ( 150.062.000. (d) P4.300.000.000.000) .000.000 Other obligations of the decedent 1.000. Decedent was single at the time of death.000 Receivable under life insurance. with estate As beneficiary 1. Real and personal properties in the Philippines P 6. which is a deduction from the taxable gross estate. in order to be deductible from the gross estate must occur before the last day for filing the estate tax return and payment of the tax.000 Funeral expenses: Paid by the time of death 100. (c) P5.000.000.450.300.000.000) ( 1.052. but which does not physically diminish the distributable gross estate. (l) Family home.000 Medical expenses (P 500.052. but which shall physically diminish the distributable gross estate even without the certification. (See Plate 16) 2. (n) Amount receivable under RA 4917 which is deduction from the gross estate but which does not physically diminish the distributable gross estate.000 Proceeds of life insurance: Receivable by the estate. (j) A loss.000) ( 400.000.000.000.000. as revocable beneficiary 1. (b) P4.000 Answer: c Net distributable estate? (a) P5.000 1.000) Standard deduction ( 1.000.000. but which would physically diminish the distributable gross estate even if beyond such period. which is not a deduction from the taxable gross estate. (i) A claim against the estate arising from a debt instrument which was contracted within three years prior to the decedent’s death must be supported by a statement from the executor or administrator showing the disposition of the loan in order to be deductible from the taxable gross estate. Answer: c Taxable Distributable Gross estate P 6. (p) The estate tax on the net taxable estate is not a deduction from the taxable gross estate while it is a diminution of the physical gross estate.000 Medical expenses within one year prior to death: Paid by the time of death 300.000 Unpaid as at the time of death 400.000.000). but which shall physically diminish the distributable gross estate. (b) P3. but which is not a physical diminution of the distributable gross estate.000) Funeral expenses ( 200. (c) P4. (m) Standard Deduction of one million pesos (P1.000 Receivable by the spouse. (d) P5.000 7. while it is a diminution of the distributable gross estate at an amount computed under the civil law on succession in the New Civil Code and the Family Code of the Philippines.000.

000. He left the following properties and charges thereon: Personal properties owned for ten years and before the marriage P 1.000 Real property received as gift six years ago and during the marriage 5. 2013 120.630.000.000 Personal and real properties acquired during the marriage 4.000 P 9.000) Losses ( 100.000) Net exclusive/community estate P 5.000.000. 2013 200. (c) P6.000) ( 2.300.000 P 4.000 ( 388.000.000 Personal and real properties acquired during the marriage _________ 4.000) Net taxable estate P 6.000.000 Net taxable estate P 4.000 Standard deduction ( 1.250.000 Actual funeral expenses 500.250.000.250.500 Exclusive Community Total Personal properties owned before marriage P 1.500.000 Judicial expenses on November 6. (b) P6. Answer: a Exclusive Community Total Personal properties owned before marriage P 1. Total deductions P 2.000 Net taxable estate? (a) P7.000.000. (d) Some other amount.500.500. He died on January 2.000.000 3.630.500.250.700.000 Estate tax P 388.087. 2013.000 Loss of property on February 6. (d) Some other amount. The taxpayer was married and under the system of absolute community of property.000 Judicial expenses on March 1.000 Gross estate P 5. (c) P5. 2013 200.000) Net distributable estate P 5.000. (b) P6.000.000 Loss of property on October 16.000 Estate tax P 652.062.000 Funeral expenses ( 200.000 .000. 2013 100.940. Answer: b Net distributable estate? (a) P6.000) Judicial expenses ( 200.000 P 5.000.000.000 Real property received as gift P 5.000) Net share of surviving spouse in The net community estate (1/2 P4.000.

Limitation A: Computative limitation A by country.000) Net exclusive/community estate P 8.880.000 Funeral expenses ( 500. (See Plate 17) 1. ( P3.000) Losses ( 300.000 Gross estate P 5. Add the tax credits by country Pxxx Compare with: .940. Only the estates of citizens or reridents of the Philippines at the time of death can claim credit for foreign estate tax/es paid. Certain items of deductions may have to be apportioned: Examples are: (a) Funeral expenses.000 P 10.000.500) Net distributable estate P 6.000 P 5. net estate by country has to be arrived at. Tentative tax credit. tax credit for foreign estate taxes shall be computed.500 TAX CREDIT FOR FOREIGN ESTATE TAX PAID. gross estate and the related deductions must be identified by country.000.000.000) Estate tax ( 852.000. foreign county x Philippine estate Net estate world tax = Pxxx Compare with: Foreign estate tax paid Pxxx Tax credit allowed.000 divided by 2) ( 1.000. and (c) Standard deduction.000.880.087.000 equals P3. If there was one foreign country only to which an estate tax was peid.880. In computing for the vet estate by country. the estate tax credit shall not exceed the amount arrived at with the use of the following formula: Net estate. Real property received as gift P 5.000 Net share of surviving spouse in The net community estate Less P300.000) Judicial expenses ( 320.000 Personal and real properties acquired during the marriage ________ 4. whichever is lower (This is called Limitation A) To compute for tax credit. Where there were two or more foreign countries to which foreign estate taxes were paid. as follows: Step 1. (b) Medical expenses.

Philippines: Net estate of P1.000. Limitation B: Net estate.000 Estate tax P 245.000.166. (b) P204.000 .000.000.000. or Limitation B.000 Net estate P 5.000/P6.833.000. and all deductions.000 in Foreign Country A. There was a payment of P50.000 P 6.00 (d) P12.000 of the estate tax of Foreign Country A.000 P 40. Country A P 100.000. The decedent was a resident and citizen of the Philippines. (c) All kinds of decedents.200. Step 2.000 Net estate.000.00 Answer: b Net estate. Data were: Country A: Net estate of P100. Country B: Net estate of P200.000.833. Final tax credit (Limitation A.000 Less: Net share of the Surviving spouse in the Community estate 3.000 and estate tax paid of P12.000.000. Answer: a 3.000.67 4. under the system of absolute community of property during the marriage.333.200.67.000 Less estate tax credit – Foreign estate tax paid P 50. with properties of P7. from the gross estate of P2.000 in the Philippines and P4.00 (b) P18.000 3.000. Estate tax credit for foreign estate tax paid is available to the estate of: (a) Resident or citizen of the Philippines.000. Philippines 1.000.33 (c) P20. Tentative tax credit. Country B 200. except the net share of the surviving spouse in the community properties.33 Allowed 40.000.000.00 P1.000 and estate tax of P8. Estate tax credit for foreign estate taxes paid? (a) P19. The decedent was a citizen of the Philippines.000 in Foreign Country A. whichever is lower) Pxxx 2.000.25. (c) P201.000 Net taxable estate P 3.33 Estate tax still due P204.000 in the Philippines and P3. Answer: b Philippines Country A Total Properties P 7.000. foreign countries x Philippine estate Net estate world tax = Pxxx Compare with: Total foreign estate taxes paid Pxxx Tax credit allowed.000.000 Net estate. The taxpayer was single at the time of death. whichever is lower Pxxx Step 3.000 All deductions 2. (b) Non-resident alien.166.000. (d) Some other amount. (d) All of the above.000.000 x P245.000. Estate tax still due after tax credit? (a) P195.000 P 4.000 P 1.435.00.

67 Foreign estate tax paid P 12. Tax credit against the Philippines estate tax? (a) P25.000.00 Allowed P 6.000.000.000 x P95.000 P 55.000 x P55.000 x P55.625 Allowed P25.500 and to Foreign Country B of P18.000.00 Tax credit to apply (Limitation A) P 18.000.500.000 6.000/P2. Limitation A.405.000/P1.000 Net taxable estate P 500.500. Net estate.625 Foreign estate tax paid P 18.625.000/P1. as follows: Philippines Malaysia Indonesia Gross estate P 7.000 _______ _______ 375.125.000 P750.000 . (c) P27. taxable P 1. A resident citizen died leaving (all before standard deduction): Net estate in the Philippines – P1.000 P 20. The decedent was single leaving properties in three countries: Philippines.000 P 19.000 P 125.000.000 x P1.500 Allowed P 6.000 125.000/P1.000 P 4.000.333.625 Allowed tax credit against Philippine estate tax (Limitation A) P25.000 3.000 Less: Standard deduction – P1.00 Answer: a Philippines Country A Country B Net estate before standard deduction P 1.000 P250.000 x P95.000 Ordinary deductions 2.33 Limitation B: P300.000/P1.000 P 6.000.125 Total P25.00 Total P 18.000 Tax credit. Net estate in Foreign Country A – P250.000.875 Foreign Country B:: P375.333. (d) P26.000.000.33 Foreign estate tax paid 8.000. His estate paid estate taxes to Foreign Country A of P7.000 P 750.000. Malaysia and Indonesia.875 Foreign estate tax paid P 7.000.500.000/P1.000 P 5.000.000.000.33 Country B: P200.333.000 x P95.000 x P1.000.000.000/P2.000.000/P2.000 Estate tax credit: Limitation A: Foreign Country A: P125.000.000/P1.000.500 Total of foreign estate taxes paid P25.000 P 250.00.00 Total of foreign estate taxes paid P 20.00 Allowed P 12.000 Estate tax P 95. (b) P25.125 Allowed 18.500.00.000 x P1.33 5. Net estate in Foreign Country B – P750.000 Estate tax on P1.000.666.000 1.000 P27.000.000 375. Country A: P100.000.000.000.00 Allowed P 19.000 500.000 P 12.000.000.333.000 P 6.5000.000 Limitation B: P500.000 x P55.

065. C.417 P1.500) Net taxable estate P 4.065.687 Allowed P 325.444.000. (c) P17. charges thereon.000) 250.000.000 (100.000 Net taxable estate P 9. a citizen and resident of the Philippines.000.000 Limitation A: Estate tax credit- Actually paid P 400.000/500.000 Estate tax paid 15.000 225.000 (100.000 Philippine estate tax after tax credit? (a) P595. (b) P19.000 250.000/P9.000 Less: Standard deduction ( 437.000 P443.583.000.500.000 P 199. Estate tax paid 4.104 Final tax credit P 525.000.562.44.000 P 195.750.583 Schedule.000.000 x P1.000 x P1.417 P 195.000.000 x 200.000 Less.104 7.000 600. Mr.000 Medical expenses 200.000 Estate tax before tax credit on P9. exclusive properties in Country X and Country Y.065.065.000 P 1.000 is family home) in the Philippines.000 P 2. (b) P544. and foreign estate taxes paid. (c) P595.000 is P1.500.417 Estate tax still due P 544.687.750. Tax credit.000) .000 Funeral expenses 250.000 Estate tax credit for foreign estate tax paid? (a) P18.500 P 2. died with data on community properties (of which P850.000 P 1.000 Less: Standard deduction 1.000 P 1.500. (d) Some other amount Answer: b Net estate P 10.55. Answer: a Philippines Country X Country Y (Community) (Exclusive) (Exclusive) Gross estate P 3.000.000 Other charges 400.065.104 Allowed P 525.750/P9. as follows: Philippines Country X Country Y Gross estate P 3.000 Formula: P2.500/P9.000 1.000 x P1. (d) Some other amount.000.687.44.000/500.000 P 1.000 P 1.000 P 325.000 5.417 Limitation B: Total actually paid P 595.000 P 3.000) ( 312. Philippines Malaysia Indonesia Net credit before Standard Deduction P 5.000 x 200.000 P 525.000 195.000 P 1.344.500.500) ( 250.555.000.000. Tax credit (Schedule) P 520.000 Total of Limitation A P 520.000.000.000.500 Estate tax on P9.000 Ordinary deductions: Funeral expenses- 250.000.000.

000) Family home (1/2 of 850.250.000 19.000 (500.000 1.000 x 55.000) ________ ________ Net taxable estate 200.555.000/6. Philippines P 4. (c) P265.000 Share of the surviving spouse in the Net community estate (1/2 of P2.000.000/2.000/6.000) (1.500.000) Medical expenses – 200.000 Estate tax on P1.000/2.000.000.000 (250.800. of the Philippines is not entitled to tax credit for foreign estate. Other charges (400.000/2.55 Allowed 19.444.000 Tax credit.444.000.000 x P2.500.11 Allowed 5.000 250.000.000.44 Allowed 13.00 250.000) (1.000 Estate tax on P4.175.000/800.000.000.444. Limitation A: Country X – Estate tax paid to Country X 15. .44 Tax credit. and there was a foreign estate tax payment of P500. (b) Refund of P57.000.000 6.250.000/ P10.44 Country Y – Estate tax paid to County Y 5. Philippines P 6. (d) P443.000 500.200.000 x 1.44 8. not citizen.000 ________ (375.800.00 550.000) 1.55 Tax credit to apply (Limitation A) 18.250.000.000 55.000 x 1.000.000 1.450.00 800.000 Special deduction: Standard deduction – 3.000 500.000) (425.000 P 4.000.000 1.555.000 x 1. 2-2003 1.000.444.000 13.000 P 443.000.000.000) Net exclusive/community estate 2.00 Total 18. RETURNS AND REPORTORIAL REQUIREMENTS. Limitation B: Total of foreign estate taxes paid 20.000 Claims against the estate 1.000 How much was the Philippine estate tax due if the decedent was a non-resident.250.000 Less: Tax credit for foreign estate tax 0 Estate tax still due P 443.000) 600.000. not citizen of the Philippines.000 x 500.000) ________ Net estate (per Rev.000. Answer: d Gross estate.000.000.000) (225.000/6. Reg.111.000 500.000 250.000 x 55.000 The estate of a non-resident.000.000.000 x 500.500.000) 1.000 Claims against the estate: P6.000 (250.000? (a) P O.000.000.800.000 (125.000 x 55.500. Data on an estate: Philippines Foreign Gross estate P 6.000/800.000 Net taxable estate.

000 – Notice of death When the gross estate exceeds P200. When the gross estate exceeds P2. 5.000. Required returns and reports: When the gross estate exceeds P20. after paying the estate tax. Statement 2. (b) P2.000: (a) Notice of death. An executor or administrator. (b) Estate tax return.000.000: (a) Notice of death. The period within which the estate tax return may be filed may be extended by the Bureau of Internal Revenue for a period not exceeding thirty days. (b) When the estate is not subject to estate tax but the gross estate exceeds P200. (c) Where the gross estate includes registered real property. false. Which statement is wrong? An estate tax return is required to be filed: (a) When the estate is subject to estate tax. or other similar property for which clearance from the Bureau of Internal Revenue is required as a condition precedent for the transfer of ownership therof in the name of the transferee”. (c) The court where the estate was being settled. Answer: a . (b) Estate return tax.1. must secure a written discharge from personal liability from: (a) The heirs. (a) True. (b) False. and to escape a future liability for a deficiency estate tax. Statement 1. where the said gross estate consists of registered or registerable property. The estate tax return should be accompanied by a certificate of an independent Certified Public Accountant if the gross estate is: (a) P2. Regardless of the value of the gross estate. (d) Need not secure a written discharge as long as he has a receipt on payment of the estate tax. shares of stock or similar property) where clearance of the Commissioner of Internal Revenue is required in order to transfer title to the transferee.000 or over. the law states: “Regardless of the amount of the gross estate. (d) P50. false. motor vehicle. Answer: d On c. (c) CPA certificate.000. a return is required if there is registered or registerable property (land.000. (c) Over P2. (d) False.000. true.000. true. Answer: b 3. (d) In all cases where there is a gross estate.000. Answer: c 4. The estate tax return may be signed by any one of the heirs if the estate is not settled judicially. 2. (b) The Commissioner of Internal Revenue. (c) True. or shares of stock.000 or over. motor vehicle.

There will be a penalty to pay even if an estate tax return was filed and the estate tax was paid if notice of death was not given to Bureau of Internal Revenue. The estate tax return should be filed with the authorized agent bank. true. (d) False. Statement 1. (c) True. A notice of death is given at any time within two months after the decedent’s death. Answer: d 9. (d) False. true. false. in case the estate is settled through the courts. (d) False. (a) True. (c) By each of the heirs. (c) True. false. not a citizen of the Philippines. (d) The eldest of the heirs and closest in relationship to the decedent. (c) No Register of Deeds shall transfer to any heir the title of a decedent to real property without a certification from the Bureau of Internal Revenue that the tax has been paid. (c) True. false. the annual income of the estate becomes part of the estate subjected to the estate tax. he may extend the time for payment of such tax or any part thereof. Answer: a The law: When the Commissioner of Internal Revenue shall find that the payment of the estate tax on the due date would impose undue hardships upon the estate or any one of the heirs. false. true. the payment being for his distributive share in the estate tax. false. in case the estate is settled extra-judicially. or two years. false. Collection Agent or duly authorized treasurer of the municipality in which the decedent was domiciled at the time of his death. (d) None of the above. the estate tax return may be filed and the estate tax paid. (a) True. Statement 1. . When an estate under administration has income-producing properties. Statement 2. true. true. When an estate is settled extra-judicially.6. Answer: a 10. Statement 1. (b) A bank shall not allow the co-depositor of a deceased to withdraw from the joint bank account without a certification from the Bureau of Internal Revenue that the tax has been paid. The payment of the estate tax may be extended for a period not exceeding two years if there is an extrajudicial settlement of the estate. The payment of the estate tax may be extended for a period not exceeding five years if there is judicial settlement of the estate. Answer: a 7. If the decedent was a non-resident. (b) Only by the heir with written authority from the other heirs. Statement 2. Which of the following statements is not correct? (a) No judge shall order a distribution of any part of the estate to an heir without a certification from the Bureau of Internal Revenue that the tax has been paid. (b) False. true. (b) False. the estate tax return may be filed with the Commissioner of Internal Revenue. Revenue District Officer. with a right of reimbursement from the other heirs. Answer: a 11. 8. Statement 2. not to exceed five years. Statement 1. (a) By any of the heirs. (b) False. (a) True.

distributed the estate to the heirs. The administrator of an estate. Answer: d 12. false. false. (Modified/expanded/reformatted BAR examination question) . (a) True. (b) The Bureau of Internal Revenue cannot ask the executor or administrator to pay because he would have been discharged from liability for the estate tax to the state. Statement 2. (d) The Bureau of Internal Revenue shall have a lien on the properties of the estate once a demand for payment had been made. (a) True. (d) False. (d) False. Answer: b 13. The Bureau of Internal Revenue can go after the heirs or beneficiaries of the estate. false. (b) False. (d) There is the estate tax in addition to the donor’s tax previously paid. Answer: a 14. (a) True. true. Which of the following statements is false? When an estate tax return had been filed and the estate tax had been paid but subsequently. as ascertained by the Bureau of Internal Revenue. true. true. The Bureau of Internal Revenue can collect the estate tax by the summary proceedings of distraint and levy without first securing authority from the court in which the settlement of the estate is pending. a deficiency estate tax has to paid: (a) The Bureau of Internal Revenue can ask payment from the heirs to whom the estate had been distributed. the estate and the heirs once an estate tax had been paid on the estate that he administered. (b) False. should the administrator not be able to pay the estate tax because the heirs or beneficiaries are subsidiarily liable for the estate tax. Statement 2. The estate tax is a personal liability of the administrator and can be held liable if she did not pay and secure a written discharge from personal liability from the Bureau of Internal Revenue. (c) The donation shall not pay any transfer tax anymore. and there can be a refund for the wrong payment of the donor’s tax. (c) True. (Modified/expanded/reformatted BAR examination question) Answer: c 15. When an estate under administration has income-producing property. false. which of the following is true? (a) The donation shall be required to pay the estate tax on its proper valuation at the time of death. (b) The donation shall be required to pay the estate tax so that the estate tax computed shall be reduced by the donor’s tax already paid. even if the heirs have dissipated the inheritance. When a donation which paid a donor’s tax was actually a donation mortis causa. (b) False. (c) True. true. (c) True. Statement 1. because of errors in the return. The Bureau of Internal Revenue is seeking to collect the tax from the heirs. (c) The Bureau of Internal Revenue can still ask the executor or administrator to pay. The Bureau of Internal Revenue cannot collect the estate tax when the estate is still under settlement in court because the property is in custodia legis. false. (d) False. Statement 1. the annual income is not part of the estate subject to estate tax but when distributed in the year that the income was earned becomes income to the heir subject to income tax. false. without first paying the estate tax. Statement 2. true. if the executor or administrator did not ask for a written discharge from liability from the Bureau of Internal Revenue. true.

(c) Shares. obligations or bonds issued by a foreign corporation. the following are intangible personal properties located in the Philippines. Any other intangible property (e. obligations or bonds issued by a foreign corporation eighty-five percent (85%) of the business of which is located in the Philippines. at the time of his donation is donor (a). A donor who is not a citizen of the Philippines. and not a resident (Donor [b]) shall include only properties located in the Philippines. 5. 4. The formula starts with gross gifts.. obligations or bonds have acquired a business situs in the Philippines. and shall be included in gross gifts: (a) Franchise which must be exercised in the Philippines. and (e) Shares or rights in any partnership. (b) Shares. A donor who is a citizen of the Philippines. The gross gifts of a donor would depend on what kind of donor he is. 3. and not residing in the Philippines at the time of his donation is donor (b). Gross gift shall include real properties (e. not citizen of the Philippines. business or industry in the Philippines. land and building). A donor who is not a citizen of the Philippines.g. or (b) A non-resident. 2. There is no tax on the donee. The one who gives is called the donor and the one who accepts is called the donee. A donor who is a citizen of the Philippines. at the time of the donation.. The acceptance may be on the same document that makes the donation or in a separate document that makes the donation or in a separate document of acceptance. The enumeration in the law is not exclusive. Donation is an act of liberality whereby a person gives property gratuitously to another who accepts it. and intangible properties (e. is donor (a). if such shares. tangible personal properties (e.g. such intangible personal properties shall not be included in the gross gifts if the .g. and after being reduced by the allowable deductions.g. Only when a donation is perfected shall there be a tax – on the donor. residing in the Philippines. The gross gifts of a donor who is a citizen or resident (Donor [a]) shall include all properties regardless of location.. There is no perfected contract of donation until the donee accepts the donation. Although intangible personal properties in the Philippines shall be included in the gross gifts if donor who is not a citizen or resident of the Philippines (Donor [B]). car). but residing in the Philippines. at the time of his donation is donor (a). Answer: a DONOR’S TAX GROSS GIFTS 1. net gifts is arrived at on which to apply the donor’s tax rates. By statutory provision. The gross gifts of a donor who is not a citizen. receivables) in the Philippines shall be included in gross gifts. residing in the Philippines. obligations or bonds issued by a domestic corporation.. (d) Shares. however. whether he is: (a) A resident or citizen of the Philippines. receivables).

Under the reciprocity clause. but the donor’s tax should be paid by the donor. The corporation cannot deduct the donation made because under the income tax law. and not by the donees-spouses. Filipino citizen donated a parcel of land located in the United States to B. (d) Donative intent. as a general rule. Both distinctions are correct. When Mr. the donation does not qualify as an ordinary and necessary business expense. (b) On June 1. (b) Capacity of the donee. Which of the following is correct? a. 1st distinction is correct while 2nd distinction is wrong. 1st distinction is wrong while 2nd distinction is correct. the corporation. c. a non- resident alien. the intangible personal properties in the Philippines shall not be included in gross gifts: (a) If the country of which the donor was a citizen and (not or) resident at the time of the donation either has no donor’s tax at all. 000 to his daughter on account of her . b. there are cases when the capacity of the prospective done himself is not required. The following are the requisites of a donation for purpose of the donor’s tax. Tan’s daughter got married to the son of a senator. reciprocity clause in the donor’s tax law applies. A made a gift of P20. it seems that the capacity of the done. Tan was the president of a profitable corporation which was engage in the marketing of Mercedes Benz. but they should pay gift tax. Which of the following examples is not taxable? (a) A. in a donation to conceived child. 6. However. the corporation gave the newly-wedded couple a brand new Mercedes Benz sedan worth P2. 7. For a prospective done to know the legal consequences of acceptance. Mr. except one: (a) Capacity of the donor. 000 (modified on amount to correspond to TRA tax rates). or. (b) Both statements are false. 2nd statement: The donor corporation should pay the donor’s tax and deduct it from its gross income. 000. There is no donation until there is acceptance. Answer: b While the best answer is b. Both distinctions are wrong. (CPA Exam) Answer: b There is a true donation. (c) First statement is true while second statement is false. 9. is also required. (CPA Exam) Answer: a 8. 000 while the estate tax is P200. For example. 2nd distinction: The donor’s tax exemption is only P100. totally exempts from that donor’s tax the intangible personal properties there belonging to citizen of the Philippines not residing there. 1993. (d) First statement if false while second statement is true. 1st statement: The Mercedes Benz is not taxable income to the couple because it is truly a wedding gift. the acceptance of the child is not required by law. (a) Both statements are true. d. (c) Delivery of the subject matter of gift. he must have the capacity to give his consent. (b) If having a law imposing a donor’s tax. 000 and entered the wedding gift in its book as an advertising expense. however. Donor’s tax distinguishes from the estate tax: 1st distinction: The rates of donor’s tax are lower than those for the estate tax. Acceptance requires knowledge of the legal consequences of the act.

and he was to be paid P50. 000. and hence. with accost of P1. A receivable from a debtor can be a donation only is the creditor notifies the debtor that he is not collecting anymore and the debtor makes a positive act signifying his acceptance of the benevolence of the debtor. The Bureau of Internal Revenue is collecting the income tax from the girl. C gave Mr. Mr. Which means that the legitimates of compulsory heirs should not be prejudiced. 000 but at the time of sale with a book value of P3. B introduced a friend. For all intents and purposes. false. 000. Mr. Y. 11. One or more of the transactions/event are income. sold to a brother. B. 000 under a contract signed by both parties. Shares in a wholly owned corporation. false. Is there donation on the one million pesos? Case D. Statement 2. (c) Mr. and there would be a resulting refundable donor’s tax. C was able to get a profitable contract with the corporation. Is the Bureau of Internal Revenue correct? Is there a gift to the girl? Statement 1. (c) True. 000. Mr. Answer: a A donation is an act of liberality that requires acceptance on the part of the beneficiary. with a cost of P100. Answer: d When an heir renounces the inheritance in favor of nobody in particular. X collected the P50. The selling price was P600. D if his selling prices are compared with his costs. (a) True. the Board of Directors resolved to give him a gratuity of one million pesos over and above his retirement pay. and not subject to the donor’s tax. C to an influential member of the Board of Directors of a multinational corporation. B? Case C. true. 000. Mr. false. X? Case B. true. Answer: a 12. 000. B a car by way of appreciation of the help of Mr. X. true. In view of his loyalty and invaluable service. (d) false. a son. There should be some evidence of acceptance. D properties as follows: Real property. 000 and fair market value of P5. sold to executives of the corporation so that they would have a stake in. 1992. he is deemed not to have received it at all. M was in a “live-in” relationship with a hospitality girl. All the transactions/events are gifts subject to the donor’s tax. 000 and fair market value of P1. 000. 000 as a birthday gift. upon his retirement. . Is there a donation to Mr. Ramos gives his wife a diamond ring worth P100. 000. the chief accountant of a hospital. Statement 2. the property would have passed directly from C to B. Mr. Z performed services to Mr. (d) False. Mr. true. (b) false. (b) False. The selling price was at a book value. A renounces his share of inheritance in favor of B. Z assigned his right under the contract to Mr. the Bureau of Internal Revenue asserts that car is income to Mr. He executed a deed of sale to the girl of the condominium unit which is their love nest. 10. loyalty to the corporation. Is the car a donation to Mr. (a) True. A donation inter vivos that had paid the donor’s tax can still be reduced if the legitimates of the compulsory heirs were prejudiced. Mr. false. (d) A and B are the only heirs of C. was paid a retirement pay according to the retirement plan of the hospital. marriage celebrated on May 1. 000. Under the law. a person cannot give by way of donation more than what he can give by way of inheritance. The transactions have income tax consequences because gains accrue to Mr. Case A. (c) True. Statement 2. The transactions have donor’s tax consequences because they are gifts. Mr. Mr. B.\ Statement 1. There was no consideration in money on the transfer. Statement 1.

F donated a piece of land to Mr. true. (d) False. 15. for exclusively public purposes. The donation to the Municipality of Y. is exempt from donor’s tax. the donation is subject to the donor’s tax. true. (a) True. Statement 2. the property is still the property of Mr. (d) False. a donation to a political subdivision of the government. A donation mortis causa is an act of liberality where a person disposes of gratuitously property in favor of another who accepts it. H. for relocation site of informal settlers. Statement 2. Case B. Statement 1. Statement 1. true. false. Answer: a 14. If the donation is given to a particular candidate. On statement 2. true. The gifts are not subject to donor’s tax (a) True. Answer: a While the transactions are gifts. a multinational corporation doing a business in the Philippines donated one hundred shares of stocks to Mr. Statement 1. The awarding of parcels of land and houses to the settlers by the municipality is exempt from the donor’s tax. is exempt from donor’s tax. Mr. (a) True. false. If the donation is given to a political party of the candidate. (b) False. Answer: a On statement 1. Case A. true. false. true. true. F. F. A donation inter vivos is an act of liberality where a person disposes of gratuitously property in favor of another who accepts it. a political subdivision. (d) False. gave a gift check of $50. false. The transactions are gifts. true. (c) True. false. false. (c) True. but did not pay the donor’s tax. Statement 2. (d) False. Province of Z is exempt from donor’s tax. they are no subject to donor’s tax because the donors are non- resident. Answer: c 13. Answer: a . (b) False. (d) False. Mr. (a) True. Province of Z. false. The income from the property does not belong to. Statement 1. not citizen/domestic corporation and do not involve properties in the Philippines. true. true. The municipal government awarded parcels to the settlers. (c) True. F. (d) False. false. (c) True. (b) False. G Co. (b) False. a subject of a Japan and resident of Tokyo. (c) True. G began employing the income tax from the land. (a) True. 000 to a future daughter in law who is to be married to his son in the Philippines. Statement 2. Mr. The transfer of ownership is not negated by the payment of the donor’s tax on the transfer. When the Bureau of Internal Revenue sought to collect income tax from Mr. Statement 1. a municipality. Statement 2. The A Co. false. the donation is exempt from the donor’s tax. F because with the donor’s tax not having been paid. (a) True. false. G. 17. he alleged that the property is still owned by Mr. G. Mr. true. false. and houses were built on them. to its resident manager in the Philippines. (b) False. (b) False. donated a piece of land to the Municipality of Y. Answer: a 16. true. (c) True. L made a donation during apolitical campaign period for campaign materials. false. and is not enjoyed by Mr.

false. (a) Property situated abroad.The difference between the two donations is that a donation inter vivos takes effect during the lifetime of the donor while a donation mortis causa takes effect after the death of the donor. But a donation of real property must be in public document. 000 may be made orally. depending on what is being donated. but donated to a citizen of the Philippines will not pay the donor’s tax. 18. Statement 1. The first donation is subject to the donor’s tax while the second donation is subject to estate tax. 19. false. true. Answer: c A donation inert vivos of personal property worth not more than P5. Which of the following statements is wrong? A distinction between a donation inter vivos and a donation mortis causa is: (a) The first takes effect during the life time of the grantor while the second takes effect after the death of the grantor. Statement 2. All the following statements are correct. Which means that if the property is worth more than P5. The gross gifts of a donor who is a non-resident. (d) False. not citizen of the Philippines. the donation must be in writing. Which of the following statements is wrong? (a) The gross gifts of a non-resident citizen would include all properties regardless of location. (b) Property situated in the Philippines but donated to a done abroad will pay the donor’s tax. a donation mortis causa may be in writing which may be a public document or not. (d) The first is valued at a fair market value at the time the property is given while the second is valued at fair market value at the time of the death of the grantor. If the donor is a non-resident. (d) An individual who pays premiums on the life insurance of another. (c) A partnership making a donation. Who is not subject to the donor’s tax? (a) An individual making a donation. regardless of location. not citizen of the Philippines would include intangible properties in the Philippines. (c) The gross gifts of a non-resident citizen of the Philippines would include all properties regardless of location. (c) The first always requires a public document while the second may not require a public document. Hence. (d) The gross gifts of a non-resident citizen of the Philippines would include only properties in the Philippines. (b) The first is subject to the donor’s tax while the second is subject to the estate tax. not citizen of the Philippines. But the formalities required of a donation inter vivos should also apply. (b) A corporation making a donation. 000. (b) The gross gifts on a non-resident. will include only property located in the Philippines. (b) False. (c) True. True. although the writing need not be a public document. A donation mortis causa is in the nature of a testamentary disposition and covered by the rules on last wills and testaments. (a) True. (c) Property outside the Philippines donated on account of marriage to a resident of the . except one. Answer: a 22. Answer: d 20. Answer: d 21. The gross gifts of a donor who is a citizen or resident will include all properties.

But even if the property donated is in the Philippines. 000 Gross gifts. resident Not citizen Real property in the Philippines P4.000. (d) P7. 000 Tangible personal property in Thailand 900. (d) Non-resident alien. (c) P 6.000 . The reciprocity clause in the donor’s tax law applies to a: (a) Non-resident citizen. 000 P4. (b) Tangible personal property. 000. only property ties located in the Philippines shall be subject to the donor’s tax. 200. if the donor is not a citizen nor resident of the Philippines? (a) P 6. 000 Intangible personal property in Malaysia 500.000. regardless of whether the donee is a citizen or resident of the Philippines or a non-resident. not citizen.600. 23. 600. 000. 600. If the property donated is outside the Philippines.600. 000. 000. 000 Tangible personal property in the Philippines 1. 000 Intangible personal property in the Philippines 1. 000. (c) Resident citizen. 000 Intangible personal property in the Philippines 1. therefore.200. (c) P6. (c) Intangible personal property. Answer: b Gross gifts. if the donor is a citizen or resident of the Philippines? (a) P6. (b) P 10. 000 Real property in Indonesia 3. 000. 000 Tangible personal property in Thailand 900. net gifts are not exceeding P100. 000 do not pay the donor’s tax. 000. 200. (b) P10. 000.000. 000 Tangible personal property in the Philippines 1. 000. 000 Real property in Indonesia 3. 200. (b) Resident alien. Answer: a Citizen or Non- resident. 000. Answer: c For a donor who is a non-resident. Answer: d 24. Real property in the Philippines P4. 000. there is no deduction for donation on account of marriage. 000 1. will pay the donor’s tax. 200. it shall not be included in the gross gifts. (d) Property in the Philippines with a value of P150. 000. 600. The following were donations all in one date. 000 Intangible personal property in Malaysia 500. Philippines has a deduction of P10. (d) All of the above Answer: c 25. 000 1. 000. The reciprocity clause applies to: (a) Real property.000. donated to a citizen of the Philippines.600. not citizen of the Philippines. 000. (d) P 7.

Statement 2. 2012. 600. This is a legitimate tax planning. 000 and a zonal value of P12. 000. After all. 000. 000 Shares of stocks of a domestic corporation 500. not citizen of the Philippines P2. (See plate 18). false. 2013 is P10. 000. Answer: c There comes to play what is called “gift splitting”. he donated the other half pro- indiviso to the same son. 2013is P1. (c) P3. 000 Shares of stocks of a foreign corporation 400. (c) True. if donor is a non-resident. not citizen Land in the Philippines P1. 000 Gross gifts. 000. 000. (b) P2. (d) Some other amount. fair market value of the property at the time of transfer was 200. 580. 000 Gross gifts. 000 there was transfer inter vivos (to take effect during the lifetime of the transferor) of property in the country of the transferor. nobody could say that there would be another donation. 000 If donor was a non-resident. On December 31. if donor is a citizen or resident of the Philippines P3. 000 and on January 2. 000 26. 000 Gross gifts. as an act of liberality 20. On January 2. K owns real property with a cost of P1. 000. 200. 000 less P90. Gross gifts P10. 000. 000. Answer: c If the donor was a citizen or resident: Land in Indonesia P1. 000 Cancellation if indebtedness of a resident of the country where the transferor resides. 000 Shares of stocks of a domestic corporation 500. with a fair market value of P10. 500. 000. 000 to the son. 000) 110. 2013. 2012 is P20. The value of the gross gift on December 31. as at December 31. 000 Receivable from a friend 50. 000. 080. 000. 000 because the splitting up the donations into two is from a single intent of donating P20. Donations of properties. 000 Shares of stocks of a domestic corporation 500. 000 Land and building in the Philippines 1. with fair market values: Land in Indonesia P1. true. (b) False. true. 000. 000 27. (a True. . 000 Transfer for insufficient consideration (P200. if the donor was a citizen or resident of the Philippines? (a) P2. (d) False. 2012. he donated one-half of the property pro-indiviso interest a son. 580. 28. 000 Receivable from a friend (residing in the same country as that of the donor) 50. 000 Cancellation of the indebtedness 20. 000 Shares of stocks of a foreign corporation 400. 580. 000. 000. Mr. 000. 000. 000 Land and building in the Philippines 1. 000. Consideration received – P90. Statement 1. A donation by husband and wife out of joint property (community or conjugal) is one-half (½ ) a donation by the husband and one-half (½ ) a donation of the wife. false. 500. The value of the gross gift on December 31. 000 P6.

Donations were made by a parent. (b) Made by a parent. (e) A donation on account of marriage to one who was sheltered and treated as a child has a deduction of P10. 2. are in a provision of the law with a heading “Exemptions of certain gifts”. Which of the following statements is wrong? (a) A donation on account of marriage to a legitimate child has a deduction of P10. or (3) Legally adopted child. Deductions from gross gifts. Any mortgage or indebtedness on the property which is assumed by the done shall be a deduction from the gross gift. 000). that not more than thirty percent (30%) of said gifts shall be used by the done for administration purposes. Which statement is wrong? (a) A donation on account of marriage on January 1. whether (1) a resident or citizen donor or (2) a non-resident. 2013 has a deduction of P10. Answer: a *Since under the Family Code of the Philippines. the distinction between “recognized natural child” and “illegitimate child” has been removed. 000. 2013 (date of celebration of marriage) has a deduction of P10. however. (d) To the extent of the first ten thousand pesos (10. a donation on account of marriage to an illegitimate child should have a deduction of P10. (d) A donation on account of marriage to a child whose parent are not married (called the Family Code of the Philippines as illegitimate child) has a deduction of P10. 2012 has a deduction of P10. if: (a) made before the celebration of the marriage or within one year after the celebration of the marriage. research institution or organizations: Provided. religious. 2013 has a deduction of P10. (c) A donation on account of marriage to a child of single parents (natural child) has a deduction of P10. 3. (c) A donation on account of marriage on December 25. 000. (c) To a: (1) Legitimate child. Available deductions from the gross gifts of: (a) All donors. accredited non-government organization. 2012. 000. 000. and (2) Gifts in favor of an educational and/or charitable. to arrive at net gifts on which to impose the donor’s tax. (b) A donation on account of marriage on a legally adopted child has a deduction of P10. 000. trust or philanthropic organization. 000. 000. (e) A donation on account of marriage on December 30. 000. (b) A donation on account of marriage on December 5. 000. DEDUCTIONS FROM THE GROSS GIFTS 1. (d) A donation on account of marriage on January 15. 000. not citizen donor: (1) 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 profits. (b) Available only to a resident or citizen donor (See plate 18): Dowry or donation on account of marriage. (2) Recognized natural child. 000. and one who was a natural child under the New Civil Code is now called “illegitimate child”. Answer: e . Which of the following statements is wrong? A marriage of legitimate child was celebrated on December 25. 2013 has a deduction of P10. cultural or social welfare corporation or institution.

(d) A donation on account of Marriage No. 000 on the donation of June 1. on the date of the celebration of the marriage. 000 on June 10. where the marriage was annulled at a later date. Answer: e 5. 2013 and another donation on account of marriage of P15. (a) True. false. (c) True. true. age of the parties) is an ordinary donation to the son and his fiancée. 000. on the occasion of a double wedding. has a deduction of P7. A joint donation made by husband and wife. and the P20. false.The donation on account of marriage can have a deduction of P10. true. 000 to a legitimate son.000 on account of marriage was made by a parent to the son and daughter-in-law. The law does not require for deductibility that the donation should be in the same year as the celebration of the marriage. 000 against the aggregate net gift of P40. 000. 2013 has a deduction of P10. Statement 1. (a) True. (b) A donation by a parent to a son and his fiancée. 000 on June 1. 000 to the daughter-in-law. 4. 1 of the son (second marriage because the wife by the first marriage died) are both donations on account of marriage. true. 2013. (c) A donation on account of marriage of P7. On the donation of P50. (d) False. the law does not qualify). On the donation of P50. 000 to the son. Answer. 000 if made before marriage (no matter how long before. is nonetheless a donation on account of marriage. 000. 2013. 000 made by a parent to a son because of his forthcoming marriage. 2013 has a deduction of P10.0 Answer: a 8. Statement 1. 000 on the donation of June 1. where the marriage celebrated is void for lack of the requirements in the law for marriage (e. 2013. 000. (b) A donation on account of marriage of P20. (d) A donation on account of marriage of P15. and no deduction on the donation of June 10. and one-half by . A donation of P100. is one-half by the husband. true. has a deduction of P10. (e) A donation on account of marriage of P20. 000 on June 1. Statement 2. 000 on the donation of June 10. 000. (c) True. 2013. 000 to a legitimate daughter. A donation on account of marriage made by a parent who is getting married (for the second time?) has an exemption on the foist P10. was still a donation on account of marriage. 000 was not returned to the parent. entitled to a deduction of P10. 000 on June 10. A legitimate son got married. there is a deduction of P10. there is a deduction of P10.000. 000 on June 1. (b) False. Donations were made by a parent. Which statement is wrong? (a) A donation on account of marriage of P20. 2013 and a deduction of P3.g. (b) False. A donation on account of marriage made by a parent to a legitimate child has an exemption on the first P10. Which of the following statements is wrong? (a) A donation of P20. or within one year after the celebration of the marriage. false. 000. Answer: c 6. (c) A donation on account of marriage of the son. and each donation is entitled to a deduction of P10.. (d) False. The marriage was celebrated on June 5. false. and a donation on account of marriage of P20. 2013 has a deduction of P10. but when the marriage did not take place. 000. 2013 and another donation on account of marriage of P13. c 7. 000 on June 10. 2013. Statement 2. 000.

false.000 on a consolidated computation for donor’s tax. (a) True. true.000. 10.000. Answer: a 11. false. on separate computations for donor’s tax. (c) Shall be allowed to a resident alien when the property donated is located outside the Philippines. Husband and wife made out of conjugal/community cash of P100. or a political party is exempt from the donor’s tax by provision of the Election Code of the Philippines. false. (c) Donation to social welfare institution. Each parent is entitled to a deduction of P10. (d) Shall be allowed to a non-resident alien when the property donated is located within the Philippines. A donation to a candidate for election. Answer: a 13. Which of the following statements is correct on deduction for donation on account of marriage? (a) P10. (b) Shall be allowed to resident citizen when the property donated is located within the Philippines. (c) True. (d) Donation to a political party. Answer: d . (b) P 5. to a legitimate child. A donation on account of marriage will give a donor a deduction from the gross gifts made if: (a) The donee is a legitimate child.000 to each spouse. false. A deduction from gross gift for donation on account of marriage is available to a donor who is a citizen or resident of the Philippines. (d) False. the wife: In a joint donation on account of marriage by father and mother: Statement 1. (a) True. Statement 1. on separate computations for donor’s tax. true. (d) P20. a donation on account of marriage. A deduction from gross gift for donation on account of marriage is not available to a donor who is not a citizen and not a resident of the Philippines. Statement 2. Answer: c 9. (c) True.000 to each spouse. (c) P10. (b) The donee is anybody. (d) False. Statement 2. true. (b) False.000 on a consolidated computation for donor’s tax. Answer: a 12. Which of the following donations is not entitled to deduction? (a) Donation to charitable institution. Answer: none of the choices. Each parent is entitled to a deduction of P5. (b) Donation to scientific organization. provided it is reported to the Commission on Elections. true. Which of the following statements is wrong? A deduction for a donation on account of marriage: (a) Shall be allowed as a deduction to a resident citizen when the property donated is located outside the Philippines. (c) The donee is a stranger. (b) False.000. (d) None of the above.

Deduction for dowries or donations on account of marriage is allowed only to a donor
who is a citizen or resident of the Philippines, regardless of where the property donated is
located. The deduction is not allowed to a donor who is a non-resident, not citizen of the
Philippines.

14. Since a donation to a charitable institution has a deduction without any ceiling,
First statement: The net gift will be zero, so that in computing the donor’s tax, the
donation may be omitted in gross gifts if it is likewise omitted in deductions.
Second statement: the gross gifts should be reported and the deduction shall be claimed.
(a) True, true; (b) False, false; (c) True, false; (d) False, true.

Answer: d
The deduction is subject to verification by the Bureau of Internal Revenue that not more
than thirty percent of the donation shall be used by the done for administrative purpose.

15. On a contribution to the Roman Catholic Church by an individual, which of the following
correctly state/s in computing the donor’s tax?
(a) There is no deduction from the gross gift;
(b) It is not considered a gift on which there will be a donor’s tax;
(c) It is considered a gross gift and a deduction from the gross gift;
(d) It pays the donor’s tax at the time of the contribution at the graduated rates of donor’s
tax.

Answer: c

16. Mr. A, a citizen and resident of Country Z, made a donation of shares of stock of a
corporation in Country Z to a son in the Philippines who is getting married to a Filipina.
Country Z has no transfer tax on donations.
Statement 1. The deduction of P10,000 for donation on account of marriage is not
available to Mr. A;
Statement 2. The rule on reciprocity shall preclude the imposition of the Philippine
donor’s tax.
(a) True, true; (b) False, false; (c) True, false; (d) False, true.
(Modified/expanded/reformatted BAR examination
question)

Answer: a
The deduction is not available because the donor is a non-resident, not citizen of the
Philippines. There is no circumstance on which to apply the reciprocity clause because
the donation in the Philippines is exempt from the donor’s tax.

17. Donations were made as follows:
Of cash in the Philippines:
To a legitimate daughter, on account of marriage P 500,000
To an illegitimate son, on account of marriage 600,000
To a legally adopted daughter, on account of marriage 9,500
To a friend, on the occasion of her birthday 50,000
To the Paco Catholic church, Philippines
Of cash in the United States:
To a recognized natural child 100,000
To the Quiapo Catholic Church, in Philippine pesos 60,000
Of land in Malaysia, to a legitimate son, on account
of marriage, but the son will assume a mortgage
on the land of P200,000 500,000
Deductions from the gross gifts, if the donor was a citizen or resident of the Philippines?
(a) P559,500; (b) P359,500; (c) P449,500; (d) Some other amount.

Answer: a

Deductions from the gross gifts, if the donor was not a citizen nor resident of the
Philippines?
(a) PO; (b) P50,000; (c) P250,000; (d) Some other amount.

Answer: b
Citizen or Non-
resident,
Resident Not
citizen
For donations on account of marriage
Of cash:
To a legitimate daughter P 10,000
To a legally adopted daughter 9,500
To an illegitimate child 10,000
Of land, to a legitimate son 210,000
Of cash, donation to the Paco Catholic Church,
Philippines 50,000 P 50,000
Of cash, donation to the Quiapo Catholic
Church, Philippines, in pesos 60,000
Of land in Malaysia (P10,000 + P200,000) 200,000 ______
Total P559,500 P 50,000

18. Donations were made, as follows:
On account of marriage:
Of property in the Philippines, to a legitimate son P500,000
Of property in Malaysia, to a recognized natural daughter 600,000
Of property in Indonesia, to an illegitimate child
300,000
Of property in the Philippines, to an adopted child 200,000
Of property in the Philippines, to a brother, with an assumption
By brother of a P15,000 mortgage on the property 50,000
Of cash to the Philippine National Government 150,000
Of cash to the Philippine National Red Cross 20,000
Deductions from the gross gifts, if the donor is a resident or citizen of the Philippines?
(a) P200,000; (b) P180,000; (c) P195,000; (d) P215,000.

Answer: d

Deductions from the gross gifts, if the donor is a non-resident, not citizen, of the
Philippines?
(a) P170,000; (b) P185,000; (c) P205,000; (d) P195,000.

Answer: b

If the donor is a resident or citizen of the Philippines:
On the donations, on account of marriage:
To a legitimate son P 10,000
To a recognized natural daughter
10,000
To an adopted child 10,000
To a brother, for the mortgage assumed
15,000
On the donation to the Philippine National Government 150,000
On the donation to the Philippine National Red Cross 20,000
Total deductions if the donor is a resident or citizen P 215,000

If the donor is a non-resident, not citizen of the Philippines

On the donation to brother, for mortgage assumed by the brother P 15,000 On
the donation to the Philippine National Government 150,000 On the
donation to the Philippine National Red Cross 20,000
Total P 185,000

SPECIAL PROBLEMS

1. Net gifts and the donor’s tax
2. Tax credit for foreign donor’s tax paid
3. Returns and reportorial requirements

NET GIFTS AND DONOR’S TAX

1. Tax formula:

On a first donation in a calendar year:

Gross gifts
Less: Deductions from these gross gifts
Equals: Net gifts

On a subsequent donation in the same calendar year:
Gross gifts on this date
Less: Deductions from these gross gifts
Net gifts made on this date
Add: All prior net gifts within the same calendar year
Aggregate net gifts within the same calendar year

Donor’s tax on aggregate net gifts within the same year
Less: Donor’s tax on all prior net gifts within the
same calendar year
Donor’s tax due on the net gifts of this date

2. The donor’s tax is at graduated rates on the taxable net gift, if the donee is not a
stranger.

The donor’s tax is at a single rate of 30% on the taxable net gift, if the donee is a
stranger. Who is a stranger? A stranger is a person who is not the spouse, not a
brother or a sister, not an ascendant or descendant, and not a relative by
consanguinity in the collateral line within the fourth degree of relationship.

A donee who is not a blood relative is a stranger. A corporation, or any artificial
being, as a donee, is a stranger.

Thus-

A donation to a son of P250,000 is subject to the donor’s tax of:

Gross gifts made P 250,000
Less: Deduction (None. This is an ordinary deduction) 0

Net gift made P 250,000
Donor’s tax:
On P200,000 P 2,000
50,000 at 4% 2,000
P250,000 P 4,000

(b) There are two or more donations to donees who are strangers. Answer: d 6. Answer: d Two provisions of law: A provision of the donor’s tax law says that the donor’s tax is based on the net gifts of the calendar year. Statement 1. One or some of the following is a stranger. true. (b) False. Statement 2. (d) Ancestor. (d) False. false. The two provisions made during the same year with credits for donor’s taxes previously paid . (c) A granduncle. A donation to a corporation is a donation to a stranger. (e) Lineal descendant. When the donee is a stranger. (b) A brother or sister by half blood. (c) There is/are donations to non-strangers and strangers. The total of the two donor’s taxes is the donor’s tax of the date. This is an ordinary deduction) 0 Net gift made P 250. (a) True. A donation to a friend of P250. Answer: a 7. (f) Relative by blood within the fourth degree of relationship. (b) Computed and paid within thirty days from the date of donation. the donor’s tax is a flat 30% of the net gift. A donation by one spouse to the legitimate child by a former marriage of the other spouse is a donation to a stranger. true. 5.000 Less: Deduction (None. (c) True.000 3. (d) Becomes proportionately bigger on later donations. (c) The spouse. If on the same date: (a) There are two or more donations to donees who are non-strangers. (g) A friend. there shall be one computation of the donor’s tax on the net gifts to strangers of that date. (d) A second cousin. (Modified/expanded/reformatted BAR examination question) Answer: g 4. Who is he or who are they? (a) A brother or sister by whole blood.000 Donor’s tax at 30% P 75. Who of the following is a stranger under the donor’s tax law? (a) A child of a brother. (c) Computed separately for each spouse in case of a joint donation. there shall be separate computations for the donor’s on the net gifts to non-strangers and the net gifts to strangers. Another provision of the same law says that the donor’s tax should be paid within thirty days from the date of the donation. false. (b) A grandchild. Which statement is wrong? The donor’s tax is: (a) Computed on the basis of the net gifts of a calendar year.000 is subject to the donor’s tax of: Gross gifts made P 250. there shall be one computation of the donor’s tax on the net gifts to non-strangers of that date.

(c) P430. (b( P580. Hence.000 To M. To M. On July 19.000.000 Deductions for- Donation to L on account of marriage P 10.000. (c) P590. a and b are correct. P150. on account of marriage. The net gifts made are: (a) P680.000. P150.000. on account of marriage 200. Hence. 8. a legitimate daughter.000. of property and cash.000 Deduction none P 150.000. 2013 Gross gift made P 150.000 but subject to a mortgage of P100. (c) Is a donation on which the husband must pay a donor’s tax of 30% on his net gift.000 to Anton. (d) P700.000 Total 700.000 to his father. a legitimate son.000. land with a fair market value of P500. 2011. 2. (d) P460. cash of P200.000 Net gifts made P 580. 3. (b) P450. the donor must also consider: (a) All prior net gifts during his lifetime. 2013.000.000 11. 2013. on account of marriage. (CPAExam) Answer: b June 1. as follows: To L. Jose made the following gifts: 1. on account of her scheduled marriage on October 25. Which of the following statements is wrong? A donation by husband and wife out of community or conjugal property to a brother of the wife: (a) Is one-half a donation to a non-stranger by the wife. on account of marriage P 500. his son. Answer: b Gross gifts made: To L. 2013. Statement d would be correct if the donations being considered are all made to non-strangers is a flat 30%. (b) Is one-half a donation to a stranger by the husband. on account of his marriage celebrated on May 1.000 dowry to his daughter Dana. How much is the total net gifts? (Years involved were changed) (a) P500.000 120.000. Answer: b 9. each is considered a donor. (d) Only the present donation. 2013. (b) All prior net gifts during the calendar year. In computing the donor’s tax on a subsequent donation. Donations on one date by K. On September 30. On June 1. In 2013. father. (d) Is a donation on which the husband must pay the graduated donor’s tax on his net gift. (c) The present and the immediately preceding donation.000 which is assumed by L. letter d which gives an absolute rule is wrong. within the same year.000 Donation to M on account of marriage 10. a parcel of land worth P180.000. Answer: d 10.000 .000 Mortgage assumed by L on the property donated 100. In the case of husband and wife. subject to the condition that the father would assume the mortgage indebtedness of Jose in the amount of P40.

000.500.000 Donor’s tax? (a) P3.000 Donor’s tax at graduated rates P 3.000 P 600.000 Deduction none 20. (b) P3.400 Tricia is a stranger to the donor. Mr.000 Total donor’s tax (P19.000 To a legitimate daughter 40.2013 Gross gift made P 20.200. (d) P199. on account of marriage P 200.000 To close friend _______ P 10.400 P 180. July 10.000 P 750.000 To a close friend 10.000 12. (c) P6.000 Total net gifts P 450. 2013: To a legitimate child. The donor’s tax is: (a) P77.000 November 20.000.000 September 30.200.200 Donor’s tax of 30% P 3.000 To legitimate daughter 40.750.000 P 10.000 140. son and daughter-in- law. A citizen and resident of the Philippines made the following donations in a calendar year: March 10. (d) Some other amount Answer: c Non-stranger Stranger Gross gifts: To legitimate son.000) is P199.000 Deductions for: Donation on account of marriage ( 10.000 which was assumed by the donees. (b) P84.000 Total P 240. but subject to a mortgage of P300. 2013 Gross gift made P 180.950.950. Donations were made on one date.000) Mortgage assumed by donee ( 150.000 Deduction for donation on account of marriage 10.400.000 140. .000. on account of marriage P 200. cash of P250. Answer: d Ato Tricia Gross gifts made Donations on account of marriage P 750. of real property with a fair market value of P1.000 Donor’s tax P 19. on account of marriage. (c) P185.2013 Gross gift made P 150.000 ______ Net gifts made P 230.000 Deduction for mortgage 40.200 14.000 Deduction for donation on account of marriage 10.000 One payment only – P6. on account of marriage. 13.000) ( 150.000) Net gifts made P 590.400 + P180. as follows: To a legitimate son. Lodovigo Cruz made donation to Ato Cruz and Tricia Santos.

600. A citizen and resident of the Philippines made the following donations: October 5. (b) P3.000 assumed by the donee.000. 2013? (a) P50. Answer: a March 10. 2013 Gross gift made P 1.000 with a mortgage of P600.000 ______ Net gifts made P190.000 To friend P 100.600 November 19.600. 2013 Gross gift made P 250.000 Deduction for mortgage assumed by the donee 600. Answer: b (b) Donor’s tax on the donation of November 19.000 P 100. 2013: Gross gifts: To legitimate daughter P 200. (c) P87.400 Less: Donor’s tax paid on prior net gifts 3.000 Donation to a friend 100.800. (d) Answer: b Non-stranger Stranger Total October 5. Donor’s tax on the donation of March 10. (b) P18.600 Donor’s tax due P 18.800 15. (c) P44.000 Deduction for donation on account of marriage 10. (b) P22.000 Donor’s tax on aggregate net gifts P 22.000.000.000.000 December 6. (d) Some other amount.800. (d) Some other amount.000 Add: Prior net gift within the year 240.000.000 Donor’s tax P 3.000. 2013? (a) P4. on account of marriage P 200.000 Deduction for donation on account of marriage 10.000.000 .400. (b) P30. 2013? (a) P18.000 Donation to his controlled corporation 50.800. (c) P72.000 Net gift made P 240. November 19. (d) Some other amount.000 Donor’s tax on the donations of October 5. Answer: a Donor’s tax on the donations of December 5. an ordinary donation of real property with a fair market value of P1.000 Aggregate net gifts P 640. 2013: Donation to legitimate daughter P 100.000. 2013: Donation to legitimate daughter. 2013: To a legitimate daughter.000 Net gift made on this date P 400.2013? (a) P31. (c) P45.

made the following donations: April 2.000 P 150.000 Add: Prior net gifts within the year 190. (b) P2.000 Deduction for donation on account of marriage (The maximum P10.000 had been fully used) 0 Net gift made on this date P 140. A citizen of the Philippines residing in Japan.000 Donation on account of marriage to a legitimate daughter 150.800 December 6.000 Total donor’s on this date 31.600 Less: Donor’s tax on prior net gift P 1.000 31. 2013? (a) P3. 2013: Donation on account of marriage.000 P 50. 2013: Donation to son on account of marriage P 140.800 At flat rate of 30% P 30.800 16.000 September 3. (d) Some other amount. with an assumption by the daughter of a P50. to the legitimate son P 140. 2013 Donation to legitimate daughter of property with a fair market value of P150. The donor’s tax is based on data only within a calendar year.000 P 18.000. 2012: Donation on account of marriage to a legitimate son P 180.000 April 11. 2012: Donation to legitimate son P 100.000 Donor’s tax on aggregate net gifts P 5.000 Add: Prior net gifts within the year 140.800 Donor’s tax due P 3.800.800 P 15.600 45. Husband and wife. (c) P3. 2013: Gross gift made to daughter P 150. with a legitimate son and a legitimate daughter.000 indebtedness of the property. Donor’s tax At graduate rates P 1.000 Donor’s tax on aggregate net gifts P 3.800 30.000 Aggregate net gifts P 290.000 Net gift made on this date P 100.000 Aggregate net gifts P 240. citizens and residents of the Philippines.600. 17. Answer: b March 6.000 Deduction for indebtedness assumed by daughter 50.000 To corporation P 50.000 100.100.000 30. 2013: Gross gifts To daughter P 100.000 P 50. Donor’s tax on the donation of April 11. made the following .000 Deductions 0 0 Net gift made on this date P 100.600 Less: Donor’s tax on prior net gift 800 Donor’s tax due P 2.000 June 12.800 P 1.800 There is no need for computations for the calendar year 2012.000 Donor’s tax P 800 April 11.000 March 6. 2012: Donation to legitimate daughter P 120.

000 Donor’s tax P 800 P 800 September 5.000 Deduction 0 0 Net gifts made on this date P 50.000 Deductions for donations on account of marriage 10. Husband and wife. (b) P1.000. 2013? (a) P90. 2013? (a) P1. made the following donations: June 2.000 P 150.000.800 P 1. (d) Some other amount.000 P 78.000 18.000 P 78.000 0 10.600. (d) Some other amount.000 P250. 2013? (a) P68.000.000 P240. 2013: To legitimate son.000.200.800 Less: Donor’s tax on prior net gift 800 800 Donor’s tax due P 1. cash of P100.000 P 140. (c) P78. 2013 To legitimate daughter P 100. on account of marriage P 300.000 Donor’s tax on aggregate net gifts P 1. 2013: To an illegitimate child of the husband.000 Donor’s taxes on the donations of the husband on June 2. Answer: c Donor/s tax of the wife on the donations of July 2.000 September 5.600 P 75. on account of marriage to be celebrated on June 15.600 P 3. (c) P1.000 0 Net gifts made P240.000. Answer: b Husband Wife Non-stranger Stranger Total Non-stranger Stranger Total June 2.000 Donor’s tax P 3.000 P250. Donor’s tax of husband on the donations of June2. 2013: To a daughter and future son-in-law.600 July 2.000 P 50.000. (d) Some other amount. (c) P1. 2013? (a) P800.000 Aggregate net gifts P 190.000 50. citizens and residents of the Philippines. 2010. cash of P1.600 P 75. (b) P15. 2013: Gross gift made to daughter P 50. Answer: a Donor’s taxes on the donations of the wife on September 5.000 P 140. (c) P75.000 P250. 2013: .000 Add: Prior net gifts within the year P 140. (d) Some other amount. 2013: Gross gifts made to son P 150.600. July 2.000 10.000 P 190. (b) P75.000.000.000 P250.000 P 1. Answer: c Husband Wife June 2. donations: June 2.600. 2013: Gross gifts: To daughter and Son-in-law P250.200. (b) P1.000 P250.000 Deduction for donation on account of marriage 10.000 Net gifts made P 140.200.

a citizen and resident of the Philippines. (d) False. Final tax credit (Limitation A.000 Less: Prior donor’s tax 3. (b) False.000 Aggregate net gifts P290.000 P 50. Tentative tax credit.000 Donor’s tax due P 2.000 P 50. Tax credit for donor’s tax paid to a foreign country is allowed only if the donor is a citizen or resident of the Philippine. tax credit for foreign donor’s taxes shall be computed as follows: Step 1. If there was one foreign country only to which a donor’s tax was paid. if his donation of property outside the Philippines paid a foreign donor’s tax. whichever is lower (this is called Limitation A) Pxxx Where there were two or more foreign countries to which foreign donor’s taxes were paid. false.000 TAX CREDIT FOR FOREIGN DONOR’S TAX PAID (See Plate 24). whichever is lower Pxxx 2. the donor’s tax credit shall not exceed the amount arrived at with the use of the formula: Net gifts. true. Limitation B: Net gifts. Limitation B. (a) True. There can be a donor’s tax paid to a foreign country even if the citizen or resident donor had no donation of property in the Philippines. foreign country x Philippine donor’s Net gifts world tax = Pxxx Compare with: Foreign donor’s tax paid Pxxx Tax credit allowed.000 P250. Statement 1. 2013 as follows: .600 75. Answer: a The donation of property outside the Philippines by a citizen or resident donor is subject to the foreign donor’s tax and the Philippine donor’s tax. Add the tax credits by country Pxxx Compare with: Step 2.600 P 90. Limitation A: Compute limitation A by country. Tax credit for foreign donor’s tax paid may be claimed by a donor who is a resident or citizen of the Philippines. Gross gifts made: To illegitimate child of husband P 50. Statement 2. made donations on January 10. foreign country x Philippine donor’s Net gifts world tax = Pxxx Compare with: Total foreign donor’s taxes paid Pxxx Tax credit allowed.000 Prior net gifts 240. 3. or Limitation B. true. Tentative tax credit.000 P 15. Mr. Leonardo de Velez.000 P300.000 Deduction 0 0 Net gifts made P 50. 1. whichever is lower Pxxx Step 3.000 Donor’s tax on agg- regate net gifts P 5. (c) true. false.

cash in the Philippines of 100. 500 Allowed (whichever is lower) 3. (b) P1. C. 000 Net gift (cash) to Arnan 100. 000 x P6. a citizen and resident of the Philippines. 000 (c) P600. 000 Net gifts made on this date P 200. 200 was paid). 000 Property outside the Philippines. Donation to Arnan.S. 000 x P2. with a fair market value of P110. on account of marriage. A made donations of property on the Philippines to a non-stranger. a legitimate child. 33. donor’s tax of P1. 000 P 190. made the following donations on February 14. 200 Allowed (whichever is lower) P 1. Answer: b Gross gift to Arnan. 000 P 1. 000 Donation to Arnan. 000 Total P 300. (d) P850. 000 Foreign donor’s tax paid P 1. 750. Mr. In taking a credit for the foreign donor’s tax paid. 625. Mr. 000/P200. 208. 200. 800 Still due P 2. (b) Donation to the stranger. 000 Donor’s tax before credit for foreign donor’s tax paid P 6. 800 Foreign donor’s tax paid P 4. B. (c) P4. 000 Donor’s tax paid to foreign country 4. 000 Deduction for donation on account of marriage 10. 200 5. Answer: c 6. 50.S.00. (b) P2. 000 Donor’s tax on P200. Answer: a Gross gifts made: Of property in the Philippines P 110. 000/P300. 000 P 100. on account of marriage 200. 000 Of property outside the Philippines. 000 Less: tax credit Formula: P190. and of property outside the Philippines to a stranger. (d) P3. on account of marriage . 2013: To Mr. On one date. property in the United States (on which a U. to be celebrated on February 14. the credit shall be against the Philippines donor’s tax on the: (a) Donation to the non-stranger. 500 Donor’s tax due after the credit for foreign donor’s tax paid: (a) P2.: (a) P1. gross P200. 000 Deduction for donation on account of marriage 10. 2013. 000 Donor’s tax credit for donor’s tax paid to the U. on account of marriage P110. 000 Tax credit: P100. 000 4. a legitimate son. Donations to a legitimate child of properties: Property in the Philippines P 110. 000 P 3. 200. 000 P 2. (d) None given. (c) Donation to the non-stranger plus that to the stranger.

of properties in Country Y and Country Z.33 8. respectively.00 Less: Foreign donor’s tax credit P300. 000 P 30. 000. to B Co. 000 Net gifts P 600. 00. The property in country Y had a fair market value of P300.00 Donor’s tax on aggregate net gift P91. (d) P31.. 000 Mortgage assumed by donee. 333.00 Less: donor’s tax paid on prior net gifts 1. On July 8. 000. 000.00 Donor’s tax before tax credit P90. 666. 000. 000 x P92. 60.67 Donor tax still due P29. (d) P10. (b) P52. (c) P35. 000 which was assumed by D. 000 P 100. a citizen and resident of the Philippines. 000 P 160. 000 Tax credit: P600. 666.67 Foreign donor tax paid P 70. A donation was made by Mr. (c) P42. P300. 000 while the property in country had a fair market value of P200. How much was the donor’s tax on the donation to B Co. 628. 00 Allowed P42. donor’s taxes were paid to Country Y and Country Z of P95. he made donations to Mr. Answer: b Net gift made to B Co.00 Donor’s tax P90. 857. 2013. 14 Foreign donor’s tax paid P52. 000 was paid. Answer: c Donee is Non-stranger Stranger Gross gifts P 610. 000 The tax credit for foreign tax paid: (a) P34. 000 Answer: d . 00. 000. 857. 000. 00. (d) P32. Foreign donor’s tax of P700. 000) with a fair market value of P 610. 000 P42. 520. 000 To Mr. 333. 677. 43. 14. 000. 000 x P50. 14 7. (b) P15. 000 Total donor’s tax (P20. 000. 000 P 60. 000. 000/P450. 67. of property in a foreign country with a fair market value of P300. 000 = P30. Q. 000. There was a donation earlier in the year of P150. 000) is P50. P is a citizen and resident of the Philippines. 33. C. 33. subject to a mortgage of P60. 000. 857. Fair market value of the property P 160. a friend. 06. (c) P145. 000 and P50.00 Donor’s tax on prior net gift 1. on the same day.00 Add: prior net gifts within the year P150. property in Malaysia (which paid the Malaysian donor’s tax of P52. 000. ordinary donation of property in the Philippine. A. after foreign donor’s tax credit? (a) P20. 000 Deduction: Donation on account of marriage 10. Donor’s tax still due after credit for foreign donor’s taxes paid? (a) P0. (b) P29. 000. 000/P700. 333. 000 cash to Mr. a legitimate child. a friend. 000. 000 Donor’s tax P 20. Mr. D. 000.00 Allowed 60.

000 RETURN AND REPORTORIAL REQUIREMENTS 1. One of the following statements is correct. in the city of Manila. 000 P300. 000 P 145. 000/P500. One of the statements that follow is correct. 000 = P150. (b) At the residence of the donee. (c) True. Answer: b Although the donor’s tax on the basis of net gifts made during a calendar year. 000 P 140. B executed a deed of acceptance in Quezon City. (a) True. Tax credit Limitation A Country Net gifts Formula Foreign Country Net gifts Formula tax Allowed Y Country P300. (b) False. 000 P 145. 000 Donor’s tax due P 10. 000 Less: donor’s tax credit (Schedule) 140. Which is it? a deed of donation was executed by Mr. true. 000 Total P500. 000 or more. hence there must be two separate donor’s tax returns. B. Answer: c On personal property. 000 50. or the fair market value. 000 P 95. 000 Limitation B: P500. 000 x P150. The donor’s tax return must be filed with the Bureau of Internal Revenue Office: (a) At the residence of the donor. there are two separate donors. 000 x P150. (c) Must be accompanied by a certificate of an independent Certified Public Accountant if the gross gift is P50. 000 P200. 2. the law requires that the donor’s tax return should be filed within thirty days from the date of donation was made. (d) In the case of husband and wife making donations. 000 Schedule.Net gift. false. 000 Net gift. Statement 2: In showing gross gifts in donor’s tax return. 000 Tax credit to apply (Limitation A) P 140. 000/P500. as determined by the Commissioner of Internal Revenue. false. resident of Manila. as shown in the assessment rolls. . Mr. 000 x P150. personal property must be valued at current fair market value or at cost. In the case of husband and wife making a donation. 000 Z Country 200. one donor’s tax return shall be filed signed by either the husband or the wife. 000/P500. (d) False. 000 Donor’s tax at 30% P150. whichever the donor chooses. 000 500. 000 50. A. valuation shall be at fair market value on the date of donation. 000 = P60. whichever is lower. Statement 1: In showing gross gifts in the donor’s tax return. Country Y P300. Answer: a 3. a resident of Quezon City. true. Country Z 200. (c) At the residence of the donor or of the donee. 000 P 90. (b) Must be filed within thirty days from the date of donation. The donor’s tax return: (a) Must be filed within thirty day after the end of celebration of the calendar year. (d) None of the above. 000 = P90. whichever is higher. There is no requirement on a certificate of an independent Certified Public Accountant under the donor’s tax law as determined by the amount of the gross or net gifts. in favor of Mr. real property shall be valued at the current and fair market value.

(c) If there were previous donations to a strangers during the year. “Exemptions of certain gifts” are exempt from the requirement of filing the donor’s tax return. (b) Each failure is subject to penalties for non-filing and non-payment of the tax on time. or fraud on the part of the taxpayer. Answer: a 7. each required payment of tax shall have an extended period of not more than six months. (b) The return may be filed in one municipality and the tax paid in another municipality. no extension of time for payment of the tax may be granted by the Commissioner of Internal Revenue. (b) There will beone donor’s tax return only. (d) A gross gift of P50. because the amount of donation of P50. international disregard of rules and regulations. When a donor with several donations during the year fails to file the donor’s tax return for each of the dates that donations were made: (a) Such failure can be cured by filing a donor’s tax return at the end of the year reflecting all the donations made within the year and paying the taxes shown in that one return. 4. In such cases the amount is respect of which the extension is granted shall be paid on or before the date of the expiration of the period of extension. there is no need to file a donor’s tax return. by a parent to a son and daughter-in-law shall be considered as donations to a non-stranger and stranger. 6. the total being the donor’s tax to pay. This is referred to in taxation as the “pay-as-you-file” system. 5. Answer: a Regarding d. the prior net gifts to strangers need not be added anymore in the computation of the aggregate net gifts. Where the return is required to be filed with the office of the Bureau of Internal Revenue having jurisdiction over the municipality where the donor has his domicile. however. (c) He can voluntarily file late the donor’s tax return for each date that donations were made and make payments on the tax due shown on each return. in meritorious cases. the donors tax must be paid at the same place. grant extension of time within which the donor’s tax return be filed. One of the following statements is wrong: (a) The Commissioner may. only those making donations are covered by the provision. and such extension shall not exceed thirty days. (d) If the different donor’s taxes were not paid on the original due gates because of requests for extension seasonably filed with the Commissioner of Internal Revenue. where the donor’s tax at graduated rates on the donation to a non-stranger will be shown together with the donor’s tax at the flat rate of 30% on the donation to a stranger. donor’s tax on aggregate net gifts and donor’s tax due on the donations to strangers. Statement 1: when a donor’s tax return was filed and it was found by the Bureau on . (c) When a donor’s tax is assessed by reason of negligence. (d) A donation on account to marriage. Although b provision of law. Which is it? If on any one date there is a donation by one donor to a donee who is not a stranger together with a donation to a donee who is a stranger: (a) There will be two separate donor’s tax return because the donor’s tax on the donation to a non-stranger is at graduated rates while the donor’s tax on the donation to a stranger is at the flat rate of 30%. Answer: b The donor’s tax must b ad at the time the return is filed. before the marriage. with penalties. One of the following statements is not true. 000is exempt from the donor’s tax (see donor’s tax table). a request for extension of time to pay the donor’s tax may be granted by the Commissioner of Internal Revenue if the payment of the tax on the original due date will impose undue hardship upon the donor. One of the following statements is wrong. 000 for the whole year to non-strangers need not be covered by a donor’s tax return.

the donor may be required to pay the deficiency although he does not possess or own the property anymore. false. Statement 2: title to the donated real property cannot be transferred to the donee in the Register of Deeds unless the donor’s tax on the donation had been paid. 000 for a consideration of P50. short of judicial action. 000 less P50. false. false. A cancelled the indebtedness of Mr. (c)True. Mr. Any deficiency donor’s tax is the liability of the donor. (a) True. Situation 2: Mr. there is a donation. (d) Situation 2 involves a donation of P200. (b) False. It is not considered a mere bad bargain. 00 from Mr. 000) P150. When a sale is for less than full adequate consideration. (c) Situation 2 shall be considered a bad bargain and not involving a taxable donation. D personal property worth P200. 000. to take effect immediately during the lifetime of the transferor. A. It is considered a donation. to take effect immediately upon receipt of the consideration. Answer: a Cancellation of indebtedness is not a bad debt expense of business if utmost effort was not taken to collect. in trading business. had a receivable of P150. (a) True. (b) false. (b) Situation 1 is bad debt expense of the business and should not be treated as involving a taxable donation. 000 and should be covered by a donor’s tax return within thirty days from the date of cancellation of the indebtedness. Answer: d . Situation 1: Mr. A for it. hence a donor’s tax return should be filed for that donation. It is a direct tax. B notified Mr. 9. true. false. 8. and cannot be shifted by a taxpayer. hence it is imposed on the donor. (d) False. true Answer: a The donor’s tax is a tax on the privilege to transmit property by way of gift. 000. Which statement is correct? (a) Situation1 involves a donation of P150. (d) False. true. B and the latter thanked Mr. Internal Revenue to have errors which gave rise to a deficiency donor’s tax. B. 000 and should be covered by donor’s tax return within thirty days from the date of the sale. true. There should be a donor’s tax return showing a gross gift of (P200. (c) True. Without exerting utmost effort to collect. Statement 1: A donation on which the donor’s tax was not paid is not a valid donation. C sold to Mr. Statement 2: The government is not bound by any agreement between the donor and the donee that the latter shall pay the tax on the donation. The amount that should be considered as a donation is the excess of the fair market value at the time of transfer over the consideration received.