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DONOR S Tax Multiple Choice Question
DONOR S Tax Multiple Choice Question
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
Ø 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
Ø 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
Ø 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
Ø 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.
Ø 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
Ø 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
Ø B
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
Ø 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
Ø 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
Ø 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
Ø 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.
Ø 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.
Ø D
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.
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.
Ø 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
Ø 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.
Ø A
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
a. P750 c. P1,350
b. P1,700 d. Exempt
Ø B
Gross gift P100,000
March 10 20,000
On P100,000 Exempt
85,000 x 2% P1,700
33. Exempted from the donor’s taxation are gifts made (BEQ)
a. For the use of the barangay.
b. In consideration of marriage
c. To a school which is a stock corporation.
d. To a for-propfit government corporation.
Ø A
34. All of the following except one, are exempt from donor’s tax. Which is it?
a. Donation to the Philippine Red Cross.
b. Donation to the Development Academy of the Philippines.
c. Donation directly given to the victims of the eruption of Mount Bulusan.
d. Donation to the City of Davao for public purpose.
Ø C
To be exempt from donor’s tax, the donation must be given to the following non-profit institutions: 1) educational,
2) charitable, 3) religious, 4) cultural, 5) social welfare, 6) accredited non-government organization, 7)
Philanthropic organization, and 8) research institution.
Donations directly given to private individuals, no matter how much they may be inspired by charitable impulses
give rise to no exemption.
35. A non-stock, non-profit school always had cash flow problems, resulting in failure to recruite well trained
administrative personnel to effectively manage the school. IN 2015, Don Leon donated P100 million peos to the
school, provided the money shall be used solely for paying the slaries, wages and benefits of administrative
personnel. The donation represents less than 10 % of Don Leon’s taxable income for the year. Is he subject to
donor’s taxes? (BEQ)
a. No, since the donation is actually, directly, and exclusively used for educational purposes.
b. Yes, because the donation is to be wholly used for administrative purposes.
c. Yes, since he did not obtain the requisite NGO certification before he made the donation.
d. No. because the donation does not exceed 10 % of his taxable income for 2015.
Ø B
36. There is reciprocity when the donor and the donated property-
Donor Property
a. Nonresident alien intangibles
b. Nonresident citizen immovable
c. Nonresident alien Tangible personal
d. Resident alien Any kind of property
Ø A
a. P780,000 c. P245,000
b. P295,000 d. P220,000
Ø A
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
Ø 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
Ø D
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.
42. Which of the following is not a factor in the determination of taxable gifts?
a. Identification of transfers included in gross gift
b. Application of exempt transfers
c. Subtraction of allowed deductions,
d. Multiplying net gift by the applicable rates.
Ø D
Taxable gift refers to the properties subject to gift tax. A net gift multiplied by the applicable tax rates results
to donors (gift) tax and not to taxable gift.
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
Ø 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
Ø C