THEORIES

1. The estate tax rate is

a. Proportional c. Regressive

b. Progressive d. none of the above

2. Which of the following is not included in the gross estate?

a. Transfer in contemplation of death where the consideration is not sufficient

b. Revocable transfer where the power of revocation was not exercised

c. Proceeds of life insurance where the beneficiary designated is the

executor and the designation is irrevocable

d. Proceeds of life insurance where the irrevocably designated beneficiary

is the mother

3. Which of the following is to be classified as intangible for estate tax?

a. Cash

b. Goodwill

c. Franchise

d. All of the above

4. The donation of movable property may be made:

a. Orally
b. Writing

c. Either A or B

d. Neither A or B

5. Using the preceding number, the donation and acceptance should be in

writing if the value of the property donated is:

a. Less than 5,000

b. 5,000 or less

c. 5,000 or more

d. More than 5,000

6. Statement 1: Filing and payment of donor’s tax is within 30 days from

donation.

Statement 2: The accrual period of donor’s tax is upon the death of the
decedent.

a. True, True

b. True, False

c. False, True

d. False, False
7. One of the following statements is wrong. 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

b. Each failure is subject to penalties for non-filing and non-payment of the

tax on time

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, with penalties

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, each required payment of tax shall have an extended
period of not more than six months.

8. A creditor merely desires to benefit a debtor. On January 01, 2023 without

any consideration from the debtor, cancel the debt. Should the amount of
debt condoned be considered as donation by the creditor?

a. Yes

b. No

c. Maybe

d. Either a or b
9. What happen if the value of the personal property exceeds 5,000 and the
donation and acceptance made orally?

a. The donation is void

b. The donation is valid

c. The donation is voidable

d. None of the above

10. In computing the donor’s tax on a subsequent donation, the donor must
also consider

a. Only the present donation

b. All prior net gifts during his lifetime

c. The present and immediately subsequent donations

d. All prior net gifts during the Calendar year

11. Who has the personal liability to pay estate tax?

a. The decedent

b. The estate as a juridical entity

c. The heirs or successors

d. The administrator or executor

12. The list provided below is not included in the gross estate of a decedent,
except:

a. Share in common properties of the surviving spouse

b. Exclusive property of the surviving spouse

c. Properties outside the Philippines of a non-resident alien decedent;

d. Intangible personal property in the Philippines of a non-resident alien when

the rule of Reciprocity applies

13. Jack had been working with an estate planner for several years prior to
his death. Accordingly, Jack made many transfers during his life in an
attempt to reduce his potential estate tax burden, and Jack's executor, Tom,
is thoroughly confused. Tom comes to you for clarification of which assets to
include in Jack's gross estate. Which of the following transactions will not be
included in Jack's gross estate?

a. Jack gave $40,000 to each of his three grandchildren two years ago. No
gift tax was due on the gifts.

b. Jack purchased a life insurance policy on his life with a face value of
$300,000. Jack transferred the policy to his son two years ago.

C. Jack and his wife owned their personal residence valued at $250,000 as
tenants by the entirety.

D. After inheriting a mountain vacation home from his mother, Jack and gifted
be a vacation home to his daughter to remove it from his gross estate. Jack
continued to use the property as a weekend getaway and continued all
maintenance on the property.

14. The______ tax is often referred to as the "death tax"

a. excise
b. medicare
c. estate
d. property
e. none of the above

15. The maximum amount that a wife can inherit from her husband without
owing any federal estate tax is
a. $14,000
b. $850,000
c. $850,000 less excess gift tax
d. unlimited

PROBLEMS:

Mr. B made the donation worth in the year: (For items 16-17)

06/25/23 – P1, 800, 000

The donation is a car to his nephew during his birthday. It has already been
owned by Mr. B for two years and still has an unpaid mortgage amounting to
P400, 000 which will now be shouldered by his nephew.
16. How much is the taxable net gift?

a. 1,250,000

b. 1,400,000

c. 1,150,000

d. 1,800,000

17. How much is the donor’s tax payable?

a. 69,000

b. 60,000

c. 93,000

d. 84,000

18. Mr. Ley bought a brand-new car for his only daughter. The car was
purchased at an instalment price of P1, 560,000 payable in three equal
annual instalments of P520, 000. The cash price at the date of acquisition is
P1, 000.000. How much is the amount of gross profit?

a. 520,000

b. 1,000,000

c. 1,560,000

d. 1,040,000

(For items 19-20)

Love, a citizen of the Philippines, made the following donations:

To Harry, a parcel of land worth P4, 500, 000 located in Batangas.

To Ivankov, a parcel of land worth P2, 000, 000 located in Russia.

To Layla, Jollibee shares amounting to P500, 000

To Odette, a building in France worth P2, 000, 000 mortgaged for P500, 000
assumed by the donee.

To Valir, land in Batanes worth P2, 000,000

To Eudora, P500,000 cash in PNB New York

Love has also transferred the following properties:

FMV Selling Price

Car, Tanauan City 600,000 P 400, 000

Car, Singapore 600,000 400,000

Land in Tiaong Quezon 1,000,000 1,000,000

19. Determine the amount of gross gift subject to donor’s tax assuming the
donor is resident alien.

a. 11,900,000

b. 11,400,000

c. 6,700,000

d. 6,200,000

20. Determine the amount of gross gift subject to donor’s tax assuming the
donor is non-resident alien with reciprocity.

a. 11,900,000
b. 11,400,000

c. 6,700,000

d. 6,200,000

(For items 21-22)

Ms. Piamonte a citizen and a resident of the Philippines, donated to Mr.

Masicat, a legitimate child, property in the Philippines with a fair market value
of 500,000 and to Mr. Cruz, a friend property in a Foreign Country B with a
fair market value of 300,000 and a mortgage of 150,000 which was assumed
by the done. Ms. Piamonte paid a donor’s tax of 15,000 to Country B.

21. How much is the taxable gift?

a. 500,000

b. 650,000

c. 300,000

d. 800,000

22. The donor’s tax still due, after credit for foreign donor’s tax paid is
___________________.

a. 24,000

b. 30,000

c. 21,000

d. 15,000
Jollibee married to McDo, died leaving the following: (For items 23-26)

Family Home, communal – P10,000,000

Exclusive personal properties – 9,500,000

Exclusive real properties inherited from his mother one and half years ago –
4,000,000.

Communal properties –13,000,000

Deductions claimed

Unpaid mortgage on real property inherited the mortgage assumed at that

time was 600,000 but the balance now is P300,000.

Unpaid obligations – 2,000,000

Losses on communal properties assumed 3 months after death due to fire

with 100,000 insurance – 300,000.

Donation mortis causa to City Government of Tanauan from exclusive

properties – 950,000. (Round-off to the whole number)

23. How much is the total gross estate?

a. 9,900,000

b. 23,000,000

c. 36,500,000

d. 32,500,000

24. How much is the ordinary deduction?

a. 1,250,000
b. 3,450,000

c. 2,600,000

d. 3,250,000

25. Compute for the vanishing deduction.

a. 3,200,000

b. 2,680,219

c. 2,780,416

d. 2,960,000

26. Compute for the Estate Tax Due.

a. 598, 187

b. 1,822, 186

c. 1,222, 187

d. 726, 000

27. Mr. Yin, a resident citizen of the Philippines, died on October 10, 2023,
leaving the following properties, rights obligations and charges:

Conjugal properties (including a family home of 15,000,000 and amount

receivable under RA 4927 of 200,000) – 20,000,000

Exclusive properties (including cash of 300,000 inherited three and half

years ago - 3,500,000

Medical Expenses, unpaid January 2016- 400,000

Funeral Expenses- 200,000

Other Obligations- 100,000

How much is the deduction for family home?

a. 10,000,000

b. 7,500,000

c. 4,200,000

d. 5,000,000

28. Mr. Aldous transferred his property with 500,000 at that time to Mr. Chou.
The transfer was subject to revocation. On that date Mr. Aldous died the
value of the said property was 300,000. Mr. Chou paid 200,000 in
consideration of the property to. The amount to be included in the gross
estate on account of the above transfer is;

a. 500,000

b. 300,000

c. 200,000

d. 100,000

29. The decedent is citizen and resident of the Philippines:

Gross Estate 13,000,000

Claims against the estate 2,000,000

How much is the net taxable estate if the decedent was single?

a. 11,000,000

b. 10,000,000

c 6,000,000

d. 13,000,000

30. Pedro died in 2021. The following claims against Pedro’s estate were
claimed by his heirs as deduction from the decedent’s gross estate.

Notes payable (notarized) P500,000

Notes payable (not notarized) 200,000

Unpaid property taxes before his death 300,000

Unpaid property taxes on his estate (after death) 100,000

Unpaid mortgage on his properties before death 50,000

Debts from gambling losses questioned by

decedent while still alive 50,000

How much is the deductible Indebtedness or claim against the estate?

a. 700,000

b. 650,000

c. 800,000

d. 750,000
Key to Correction

THEORIES

1. A
2. D
3. D
4. C
5. D Statement 2: The accrual period of donor’s tax is at the time of gift or donation is made.
6. B
7. A
8. A
9. A
10. D
11. D
12. A
13. A
14. C
15. D

(16-17)
Gross Gift 1,800,000
Less: Mortgage payable - 400,000
Net gift 1,400,000 16. B
Less: Exemption - 250,000
Taxable net gift 1,150,000
Donor's tax rate 6%
Donor's Tax Payable 69,000 17. A

(18). B Installment price is not equivalent to FMV

(19-20)
RC/RA/NRC NRA

Land in Batangas 4,500,000 4,500,000

Land in Russia 2,000,000 -

Jollibee shares 500,000 -

Building in France 2,000,000 -

Land in Batanes 2,000,000 2,000,000

Cash 500,000 -

Car, Tanauan City 200,000 200,000

Car, Singapore 200,000 -

11,900,000 6,700,000
19. A 20. C

(21).B
In the Philippines:

Gift to Mr. Masicat 500,000

In Foreign Country B:
300,000

Gift to Mr. Cruz

Less: Mortagage (150,000) 150,000
Taxable gift 650,000

(22). B
Donor’s tax due
[(650k-250k)*.06] 24,000
Foreign Donor’s tax paid
15,000
Limitation
[(150,000/650,000)*24000]
6,000
Allowed
6,000 6,000
Still due
30,000

(23).C

Exclusive Communal Total

Family home communal 10,000,000 10,000,000

Exclusive personal properties 9,500,000 9,500,000
Exclusive real properties
inherited 4,000,000 4,000,000

Communal properties 13,000,000 13,000,000

Total Gross Estate 13,500,000 23,000,000 36,500,000

(24). B
Exclusive Communal Total
Unpaid mortgage on real property 300,000 300,000

Unpaid obligations 2,000,000 2,000,000

Losses on communal properties
(300k-100k) 200,000 200,000
Donation on Tanauan 950,000 950,000

Total Ordinary Deduction 1,250,000 2,200,000 3,450,000

(25). B
Initial basis Total
 none
FMV at the time of transfer given

FMV at the time of death 4,000,000 4,000,000

Less: Mortgage paid by Jollibee -

(600k-300k) 300,000 - 300,000
New Initial basis 3,700,000
Less: Deductible portion of
Losses, Indebtedness and Taxes
(LIT) and Transfer for Public Use (3,700,000*3,450,000)/
(TPU) 36,500,000 349,726
Final Basis 3,350,274
Multiplied by Applicable Rate .80
Total Vanishing Deduction 2,680, 219

(26). A
Exclusive Communal Total

Total Gross Estate 13,500,000 23,000,000 36,500,000

- -
Less: Total Ordinary Deduction 1,250,000 2,200,000 - 3,450,000
Total Vanishing Deduction - 2,680, 219 - - 2,680, 219

9, 569,781 20,800,000 30,369,781

Less: Standard Deduction - 5,000,000
Family Home (10M/2) - 5,000,000
Share of the Spouse - 10,400,000
Net Taxable Estate 9,969,781
Rate .06
Estate Tax Due 598,187

(27). B
Family Home FMV 15,000,000
Divide 2 /2
Amount to be compared 7,500,000
Limit 10,000,000
Lower 7,500,000

(28). D
FV at the time of death 300,000
Less: Consideration 200,000
Gross Estate 100,000

(29).C
Gross Estate 13,000,000
Claims against the estate - 2,000,000
Standard Deduction - 5,000,000
Net Estate 6,000,000

(30). B
Notes payable (notarized) 500,000.00
Unpaid property taxes before death 300,000.00
Unpaid mortgage before death 50,000.00
Claim against the estate 850,000.00
Reference:

Source:
Tabag E., Garcia, E.(2023). Transfer & Business Taxation (2023 edition). Ane Booksop