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DONOR S Tax Multiple Choice Question 1
DONOR S Tax Multiple Choice Question 1
1. An act of liberty whereby one disposes gratuitous of a thing or right in favor of another who
accepts it-
a. Succession c. Donation
b. Occupation d. Tradition
C
2. A tax imposed on the gratuitous transfer of property between two or more person who are living
at the time the transfer is made
a. Estate tax c. Income tax
b. Gift tax d. Transfer tax
B
3. The gift tax is imposed on the transfer of property (not on the property itself) which is why it has
been sustained as a (an)
a. Entity theory c. Cone’s tax
b. Property Tax d. Poll tax
A
4. A donation made by a stockholder to a corporation is subject to donor’s tax because of the
following principles, except
a. Entity theory c. Benefit received principle
b. Lifeblood theory d. Tax benefit rule
D
5. What is the tax implication if a corporation condones the debt of a stockholder because of a
good thing done by the latter to the corporation
a. The condonation is based on the liberality of the corporation; therefore, it is subject to
donor’s tax.
b. The condonation is subject to donor’s tax on the corporation because it is based on its
liberality. Moreover, it is equivalent to a payment of dividend to the stockholder which is,
therefore, subject to a dividend tax of 10%.
c. It is tantamount to a declaration of dividend. Therefore, it is an income which is subject to
10% dividend tax on the stockholder. However, it is not subject to donor’s tax on the
corporation.
d. It is just a simple case of extinguishment of an obligation which is neither subject to income
tax on the stockholder not subject to donor’s tax on the corporation.
C
6. Madz went to Bersabren Resort and was given a prize of P50,000 by the resort for being its
1,000th guest. Is the prize subject to donor’s tax? Income Tax?
Donors Tax Income tax
a. Yes Yes
b. No Yes
c. Yes No
d. No No
B – The prize given is for business motive and not for donation purposes. Therefore it is
not based on the liberality of the donor.
7. The following are the requisites of a donation for purposes of the donor’s tax, except (RPCPA)
a. Capacity of the donor
b. Capacity of the done
c. Delivery of the subject
d. Donative intent
B
8. A donation of one (1) hectare of timberland
a. Can be done orally or in written
b. Must be in writing
c. Maybe in private document
d. Must be in public document
D
9. One of the following is a valid donation
a. Oral donation of a cellular phone worth P4,5000
b. Oral donation of a passenger jeepney worth P150,000
c. A parcel of land worth P5,000 in private document
d. A parcel of land worth P500,000 in a private document
A
10. Which of the following constitutes a taxable gift?
a. Creditor’s gratuitous discharge of a debtor’s obligation
b. One day rent- free use of another’s property
c. A gratuitous transfer by an incompetent
d. An agreement to make a future transfer which is not supported by a consideration
A
11. Antonio donated a share of stocks of Cayetano Corporation to Barandilla on April 20, 2015 with a
right to revoke it. The donor delivered the property April 25, 2015. On June 20, 2015 Antonio
relinquished the right to revoke. Ten days after, the donor died.
For purpose of donor’s tax, the gross gift should be bases on the value of the shares on
a. April 20, 2015 c. June 20,2015
b. April 25,2015 d. June 30, 2015
C
12. Warren wrote a letter to Lamont on December 31, 2014 donating his car worth P350, 000. The
letter was received by the latter on January 7, 2015 who accepted the donation. The letter of
acceptance was received only by Warren on January 15, 2015. The donor’s tax was not paid
until May 22, 2016. The donation was consummated on
a. December 31, 20114 c. January 7, 2015
b. January 15, 2015 d. May 22, 2016
B
13. On August 18, 2015 Elizabeth loaned to her sister Martha P200, 000 at an interest of 12% per
annum payable one (1) year thereafter. One month before the debt become due, Martha’s
husband died. Consequently, Elizabeth informed her sister that she is condoning the loan
including the interest. How much is the value of the donation made by Elizabeth to Martha?
a. P200, 000 c. P220,000
b. P224,000 d. None
C
14. Which of the following examples is not taxable (RPCPA)
a. A Filipino citizen donated a parcel of land located in the United States to B, nonresident
alien.
b. On June 12, 2015, A made a gift of P200 ,000 to his daughter on account of her marriage
celebrated may 21, 2014.
c. Mr. Ramos, a multi-millionaire, gives his wife a diamond ring worth P120, 000 as birthday
gift.
d. A and B are the only heirs of C. A renounces his share of inheritance in favor of B.
D
15. Which of the following is subject to donor’s tax?
a. Donation inter-vivos to Iglesia ni Kristo
b. Donation inter-vivos to International Rice Research Institute.
c. Cash contribution to a political candidate, duly reported on the Commission on Elections
d. Remission of debt where the debtor did not render service in favor of the creditor.
D
16. A tax minimization scheme which is done by spreading the gift over numerous calendar years to
avail the lower tax liability-
a. Spread-out method c. Donation of life insurance
b. Splitting gift d. Void donation
B
17. The spouses Helena and Federico wanted to donate a parcel of land to their son Dondon who is
getting married in December 2014. The parcel of land has a zonal valuation of P420,000.00.
What is the most efficient mode of donating the property?
a. The spouses should first donate in 2014 a portion of the property valued at P20, 000.00 then
spread the P400,000.00 equally for 2015, 2016, 2017 and 2018.
b. Spread the donation over a period of 5 years by the spouses donating P100, 000 each year
from 2014-2018.
c. The spouses should each donate a P110, 000.00 portion of the value of the property in 2014
then each should donate P100, 000.00 in 2015.
d. The spouses should each donate a P100, 000.00 each in 2015. Then in 2016, Helena should
donate the remaining P20, 000.00.
C
18. Statement 1: When the done is exempt from income tax, the donation made by a taxable
individual is also tax exempt.
Statement 2: Proceeds of life insurance policy on the life of decedent where the designation of
the beneficiary is irrevocable is always subject to donor’s tax.
Statement 1 Statement 2
a. True False
b. False True
c. False False
d. True True
C
19. Statement 1: The agreement between the donor and the done that the latter shall assume the
tax burden is binding on the government.
Statement 2: There is no donor’s tax in a donation on account on marriage if the marriage did
not actually take place.
a. Only the first statement is wrong.
b. Only the second statement is wrong.
c. Both statements are wrong.
d. Both statements are correct.
C
20. On June 23, 2015, Freddie Boy, a mentally defective 12 year old boy, executed a deed donating
to his brother Aldy a one hectare lot worth P250,000 located in Magarao, Camarines Sur which
was also donated to Freddie Boy by his father a year ago. The donation is-
a. Void, because Freddie Boy does not own the property considering that the donation made
to him by his father is void.
b. Void, because Freddie Boy, the donor is minor and mentally defective.
c. Valid, although enforceable.
d. Valid, although voidable because the donor is not capacitated to donate property.
D
21. Which of the following donations is subject to donor’s tax?
a. Those made between persons who were guilty of adultery or concubinage at the time of the
donation.
b. Those made to conceived and unborn children.
c. Those made to a public officer by reason of his office.
d. Those made between husband and wife during their marriage.
B
1. Those made between persons who were guilty of adultery and concubinage at the time
of the donation.
2. Those made between persons found guilty of the same criminal offense, in consideration
thereof;
3. Those made to a public officer of his wife, descendants and ascendants, by reason of his
office.
22. Antiquia donated a 1000 square meter land to Botor with a condition that within two years from
the date of donation, Botor will construct a two-story building thereon, and that failure of the
done to comply with the condition shall be sufficient ground for the revocation of the donation.
I. There shall be donor’s tax on the donation even if it may be revoked in
case of non-fulfillment of the donation.
II. In case of revocation of the donation, the donor’s tax paid to the
government may refunded to the donor.
23. Which of the following statements is false? The gross gift of a non-resident alien.
a. Will include all intangible personal properties regardless of location.
b. Will include all intangible personal properties situated in the Philippines.
c. With reciprocity will not include all intangible personal properties regardless of location.
d. Without reciprocity will not include all intangible personal properties situated outside the
Philippines.
A
As a rule, nonresident aliens are not subject to reciprocity. If they are subject to reciprocity,
intangible personal properties (whether within or without) are not included in the gross gift.
24. Which of the following is not considered as an intangible personal property within?
a. Franchise which must be exercised in the Philippines.
b. Shares of stocks issued by a domestic corporation.
c. Obligation or bonds issued by a foreign corporation with business situs in the Philippines.
d. Shares of stocks issued by a foreign corporation 51% of the business of which is located in
the Philippines.
D
In order that shares of stock shall be considered as intangible personal property within, at
least 85% of the business of the issuing foreign corporation is located in the Philippines.
Non-resident citizens and resident aliens are subject to donor’s tax on donated properties
regardless of location.
COMPUTATION:
26. Which of the following cannot claim P10,000 exemption on gifts given on account of marriage?
a. Resident citizen c. Resident alien
b. Nonresident citizen d. Nonresident alien
D
27. One of the following exemptions cannot be claimed by a non-resident alien donor.
a. P10,000 dowries or gifts given on account of marriage of a legitimate son.
b. Donation to the National government, its agencies and instrumentalities or political
subdivision thereof.
c. Donation to a non-profit educational institution not more than 30% of the gift is used for
administration purposes.
d. The exemption of P100,000 in the tax table for donor’s tax.
A
28. Given the following statements:
I. A donation by a husband and wife jointly of a conjugal property will require two
separate computations of donor’s tax which will be contained in two separate donor’s
tax return.
II. If the property donated is a community property of the spouses, the spouse who
opposes the donation shall not be considered as a donor and will not be required to pay
donor’s tax return.
III. If the property donated is a community property of the spouses, each of them is
considered as a donor of his or her share in the co-owned property and shall be liable
for whatever tax that may accrue on such donation.
IV. As a rule, a donation inter vivos between spouses during the marriage is voidable.
Every donation grant of gratuitous advantage, direct or indirect, between the spouses during
the marriage shall be void, except moderate gifts which the spouses may be give each other
on the occasion of the family rejoicing.
For efficient, effective and economical governance the purpose of which is the genral
welfare of the city and its inhabitants pursuant to Section16 of this Code, the mayor shall:
30. Justina donated cash ti his son on account of marriage on October 2014 as follows:
January 15, 2015 - P25,000
March 10,2015 - 20,000
July 15, 2015 - 50,000
September 10, 2015 - 100,000
March 10 20,000
On P100,000 Exempt
85,000 x 2% P1,700
a. P780,000 c. P245,000
b. P295,000 d. P220,000
A
Land , California P250,000
38. The gross gift of Annie if she is a nonresident alien without reciprocity is-
a. P780,000 c. P245,000
b. P295,000 d. P220,000
C
39. The gross gift if Annie is a nonresident alien with reciprocity is-
a. P780,000 c. P245,000
b. P295,000 d. P220,000
D
40. Butch made donations to his children in 2015. I which of the following successive donations will
Butch pay donor’s tax?
a. January 15 – To Alma on account of marriage, P40,000.
b. March 15 – To Ara on account of graduation, P45,000
c. May 15 – To Aiko on account of her 18th birthday, P50,000
d. In all of the above donations.
C
March 15 45,000
25,000x 2% P500
Donation on January 15 and March 15 are not subject to tax because they do not exceed the
P100,000 exemption in the tax table.
Taxable gift refers to the properties subject to gift tax. A net gift multiplied by the applicable
tax rates results to donors (gift) tax and not to taxable gift.
44. Mr and Mrs. Abubot donated the following community properties to their children on May 30,
2015.
Amount Donee
P125,000 Baron For graduating cum laude at Central Philippine University, Iloilo City
P200,000 Caricot On account of marriage celebrated April 30, 2014
? Dakila For placing 3rd in the May 2015 CPA Licensure Examinations
If the donor’s tax payable by Mr. Abubot is P10,500, the amount of the donation given by the
spouses to Dakila is?
a. P250,000 c. P500,000
b. P490,000 d. Cannot be determined
C
Algebraic approach:
4%X+2,000 = 10,500
4%X = 10,500-2,000
X = 8,500/4%
X = 212,500
First 200,000
(125,000+200,000)1/2 +X = 412,500
62,500+100,000+X = 412,500
X = 412,500-162,500
X = 250,000
2X = 500,000
Alternative Solution:
212,500x4% 8,500
For donor’s tax purposes, a stranger is a person who is not a Brother, sister (whether of the
whole or half blood ), spouse, ancestor, lineal descendant, or a relative by consanguinity in
the collateral line within the 4th degree of relationship.
To be considered relative, the child must be legally adopted child of the donor.
A great grandchild is a lineal descendant. Relatives belonging to direct line are not strangers
to each other regardless of the number of degrees of relationship between them.
46. Sayers who is a single, gave an outright gift of P150,000 to a friend, Johnson who needed the
money to pay medical expenses-
a. The donation is not taxable because the gift is outright.
b. The donor’s tax payable is P1,000
c. The donor’s tax is P45,000
d. The donation is deductible from the gross income of Sayers
C
47. Celia donated P110,000.00 to her friend Victoria who was getting married. Celia gave no other
gift during the calendar year. What is the donor’s tax implication on Celia’s donation?
a. The P100,000.00 portion of the donation is exempt since given in consideration of marriage.
b. A P10,000 portion of the donation is exempt being a donation in consideration of marriage.
c. Celia shall pay a 30% donor’s tax on the P110,000 donation.
d. The P100,000 portion of the donation is exempt under the rate schedule for donor’s tax.
C
48. Given the following statements:
I. For the purposes of donor’s tax, a relative done must always be a blood