Chapter 11- Introduction to Transfer Taxation
CHAPTER 11: SELF-TEST EXERCISES
Discussion Questions
1.
2.
What is a transfer? Discuss the types of transfers.
to
and the type of tax applicable
What are the types of unilateral transfers
each?
3.
What is a "complex transfer"? Explain.
4.
5.
6.
Enumerate
Enumerate and discuss the nature of transfer
the scope
in transfer tax? Discuss
What are the two taxpayer classifications
7.
of transfer taxation for each taxpayer class.
transfer taxation? Explain.
Why is situs of property relevant in
and
explain the theories rationalizing
transfer taxation.
taxes.
taxation.
reciprocity rule in transfer
associated with life.
. E n u m e r a t e examples ofmotives
10. Why is it essential to classify donations? Explain briefly.
8.
Discuss the
11. Enumerate the non-taxable transfers. Cite examples.
and incomplete transfers.
12. Differentiate void transfers, quasi-transfers
revocable transfer are completed.
13. Discuss how conditional transfer and
transters.
14. Discuss the taxation of incomplete complex
True or False 1
T1. Atransfer is either bilateral or unilateral.
Unilateral transfers are subject to transfer tax.
T3. Bilateral transfers are subject to income tax.
2
F 4.
F5
Unilateral transfers include sales and barters.
Bilateral transfers includeinheritance and donations.
subject to estte tax.
F7. Adonation mortis causa is subject to donor's tax.
F6.
8.
9.
Donations inter-vivos
are
The transferee in a donation is referred to as a donee.
The transferee in a succession is referred to
as an
heir.
T 10. The transferor in a donation inter-vivos is a donor,
1 1 . The transferee in a donation mortis causa is a decedent.
1 2 . Complex transfers aresubject to both income tax and transfer tax.
t 3. What constitutes an "adequate consideration" is a question of fact.
T4. Both the transfer and exchange element of a complex transfer are subject to
transfer tax.
15. Transfer tax supports income taxation.,
Trye or False 2
FKTransfer tax is intended to recoup future reduction in business taxes.
T2
Transfer tax can be viewed asa mode of redistribution of wealth to society.
F3. The dominant view of transfer tax is the ability to pay theory.
4. Transfer tax is a tax on the privilege to transfer property gratuitously.
T5
Transfer taxes are national taxes.
P6, Transfer tax is a form of specific tax.
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Chapter 11-Introduction to Transfer Taxation
F 7.'Transfer tax is an indirecttax.
8.
Transfer tax is a
revenue tax.
Transfer taxpayers are classified into two groups: residents and non-
9
residents.
10. Non-Yesident aliens are subject to tax only on transfers of Philippine
properties.
t 11. Citizens are subject to tax on transfers of properties regardless of location.
12. Aliens are subject to tax only on transfers of,properties situated in the
Philippines.
t13. Residents are subject to tax on transfers of properties regardless of
location.
f 14. Non-residents are taxed only on transfers of property located in the
Philippines.
T15. The reciprocity rule on intangible personal property applies only to nonresident aliens.
True or False 3
1 . The reciprocity rule may apply to movable personal property located in the
Philippines.
The reciprocity rule applies to intangible properties of any alien located in
the Philippines.
Franchises are subject to transfer tax in the place where they are exercised.
4. The shares and bonds of domestic corporations are presumed situated in
T 3.
T
5.
the Philippines for purposes of transfer taxation.
Shares and bonds
corporations are always
abroad for transfer tax purposes.
offoreign
presumed
situated
T6. For purposes of transfer tax, the interest in a business partnership
organized abroad
T
7.
E9
is
presumed situated abroad.
Cash is considered an intangible property.
Shares of stocks and bonds are tangible personal properties.
Donations inter-vivos are subject to transfer tax at the point of death of the
donor.
T 10. Donations mortis causa are subject to transfer tax at the death of the
decedent.
T 11. Donations inter-vivos are inspired by the generosity of the donor.
T12.
T13.
F14.
A donation mortis causa is effected by the death of the decedent.
As a rule, all properties of the donor existing at the point of death constitute
his donation mortis causa.
All forms of gratuitous transmission of property while the donor is living is
considered donation inter-vivos.
T 15. Transfers in contemplation of death are donations made inter-vivos but are
actually donation mortis causa.
T 16. The transfers of property which conveys title to the property only upon
death of the donor are donations mortis causa.
T17. Estate tax rates are higher than donor's tax rates.
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Chapter 11- Introduction to Transfer Taxation
18. Incomplete transfers are not subject to tax upon physical transfer of the
property.
19. Incomplete transfers which are pre-terminated by the death of the
20.
transferor are subject to estate tax.
When incomplete transfers are completed during the lifetime of the
transferor, the transfer is subject to donor's tax.
Multiple Choice Theory: Part1
D1. which is subjectto transfer tax?
Gratuitous transfers c.Complex transfers
a.
b.
2.
Onerous transfers
AA and C
Which is subject to transfer tax?
a.
b.
Donation
Sale
d. Loan
Barter
it sold
transferred for less than full consideration when is
above the fair value of the property.
b3. A property is
a.
b.
C.
below the fair value of the property.
at the fair value of the property.
at any price which is deemed unacceptable
to
the seller.
B4. Gratuity is not characterized by
a.
Absence of consideration
b
Presence of adequate consideration
C
Presence of inadequate consideration
A and C
H5.
Transfers for full
oradequate consideration is subject to
c.Both A and
Income tax
b.
C6
7.
Neither
Transfer tax
B
Anor B
Transfer for inadequate consideration is subject to
c. Both A and B
Income tax
a.
d.
Neither A nor B
b Transfer tax
The transfer for adequate consideration is
Exempt from transfer tax
b. Exempt from income tax
C.
Subject to transfer tax
d. B andC
13
8.
The gratuitous component of a transfer for
a.
Subject to income tax
Exempt from
income tax
364
inadequate considerationis
Chapter 11- Introduction to Transfer Taxation
C.
Exempt from transfer tax
d. A andB
9.
Which is not a rationalization of transfer taxation?
b.
Tax evasion
Tax recoupment
C. State partnership
d. All of these
b10. Transfertax is imposed to partially recover future reduction in income tax
which will arise from the split of income producing property to few or
several taxpayers.
What theory statement does the statement describe?
c. Benefit received theory
a. Tax evasion theory
.
Taxreçoupment theory d. Wealth redistribution theory
11.
The government enforces the transfer of property by donation and
succession. By exercising these privileges, the transferor must have to be
taxed.
What theory does the statement describe?
a.
Tax evasion theory
KBenefit received theory
b. Tax recoupment theory d. Ability to pay theory
12. The transfer of wealth should be taxed so that it will benefit the entire
society.
Which theory does the statement describe?
a.
State partnership theory
KWealth redistribution theory
C.
d.
Ability to pay theory
Tax
recoupment theory
A13. Wealth accumulation could not be possible without the government's
indirect participation. The transfer of wealth should be subject to tax
because it is just fair for the government to take its just share on the wealth.
The statement describes
State partnership theory
b. Wealth redistribution theory
T
c.
Ability to
d.
Tax minimization
pay theory
theory
14. Transfers can be structured in such a way to avoid payment of income tax
Thus, the gratuitous component of transfers must be taxed.
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Chapter 11- Introduction to Transfer Taxation
The statement describes
c. Benefit received theory
a.
Tax evasion theory
Tax recoupment theory d/Ability to pay theory
b.
1 5 . Which is not a characteristic oftransfer tax?
a
Privilege tax
b.
National tax
c. Local tax
d. Direct tax
)16. Transfer taxes are not
a.
b.
C. Ad valorem taxes
Fiscal taxes
Progressive taxes
d. Transaction taxes
D17. Transfer taxes are
A18.
a.
Regressive taxes
b.
C.
Indirect taxes
Specific taxes
d.
Revenue taxes
Who is subject to transfer tax?
c. Both transferor and transferee
Transferor
a.
d. None of these
b. Transferee
transfer
19. Statement 1: All Philippine transfers are subject to
taxes.
Statement 2: All foreign transfers are subject to transfer taxes.
Which statement is generally correct?
a.
b.
c. Both statements
d. Neither statement
Statement 1
Statement 2
2 0 . Statement 1: The amount of transfer tax is dependent upon the value of the
thing transferred.
imposed
Statement 2: Donor's tax is
upon the properties of
while estate tax is imposed on a donor.
Which is incorrect?
a.
Statement 1
b.
Statement 2
c. Both statements
d. Neither statement
Multiple Choice Theory: Part2
1.
Transfer
a.
tax on donation
Natural person
Juridical person
mortis causa applies to
c. Both A and B
d. Neither A nor B
366
a
a
decedent
Chapter 11- Introduction to Transfer Taxation
2.
Transfer tax on donation inter-vivos applies to a
aNatural person
b. Juridical person
c. Both A and B
d. Neither A nor B
D3. Which is taxable on all transfers regardless of location?
a.
b.
Resident citizen
Resident alien
Which
c. Non-resident citizen
dAll of these
is not subject to transfer tax on transfer of properties located
abroad?
a.
b.
Resident citizen
Resident alien
Non-resident alien
d.
Non-resident citizen
b5. Anon-resident alien is
a. Exempt from transfer taxes.
b.
C.
d.
Subject to transfer tax on Philippine properties.
Subject to transfer tax on global properties.
Subject to transfer tax only on transfers
oftangible properties.
6 . Which of the following may be exempt on transfers on the basis of
reciprocity?
a.
b.
Resident alien
Non-resident citizen
d.
Non-resident alien
Band C
P7. Which properties does the reciprocity exemption cover?
a.
Intangible personal property located abroad
Intangible personal property located in the Philippines
D8.
C 9.
C.
Tangible and intangible properties located abroad
d.
Tangible and intangible properties located in the Philippines
Which of the
following is an intangible personal property?
a.
Franchise
b.
Stocks
c. Bonds
All of these
Which of these is subject to tax only on transfers of properties situated in
the Philippines?
b.
C.
d.
A citizen of Japan residing in the
Philippines
A citizen
Philippines residing in Hong Kong
A citizen of America residing in Korea
A citizen of the Philippines
in the
of the
residing
367
Philippines
Chapter 11- Introduction to Transfer Taxation
1 0 . Which of these is taxable on global transfers of properties?
A.
An American residing in the Philippines
B.
C.
D.
A Filipino residing in Malaysia
A Sudanese residing in Bahrain
A Chinese residing in the Philippines
a.
A and B
b.
B andD
c.C only
A, B and D
11. Which is subject to donor's tax?
a.
Donation mortis causa
C.
Sale for an adequate consideration
d.
Both B and C
Donation inter-vivos
1 2 . Which is not a characteristic of a donation inter-vivos?
ainspir
)
b.
by the generosity of the transferor
inspired by the thought of death of the transferor
C.
zero consideration
d.
insufficiency of consideration
13. Which ofthese is a donation mortis caus_a?
a.
Donation in contemplation of death
b.
Donation to take effect upon death
C.
Revocable donation pre-terminated by death
All of these
14. Which of the
following
donations made
during the
lifetime of the donor is
subject to donor's tax?
inspired by motives associated with life
the
Donation made during the lifetime of the decedent inspired by
aDonation
b.
thought of the decedent's death
C.
Donation made in
d.
All of these
contemplation of death
15. Which of the following is not a motive associated with life?
aTo settle family dispute
To save on transfer tax,
C.
To see children financially independent
d.
To relieve the donor of the burden of management of the property
16. Donation made on the decedent's last will and testament is
a
b.
donation mortis causa.
a donation inter vivos.
C.
subject to income tax.
d.
subject to donor's tax.
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Chapter 11- Introduction to
D
17. Which of the
following forms of non-taxable transfers will not be subject to
transfer tax?
a. Void transfer
b.
C
Transfer Taxation
c. Incomplete transfer
Quasi-transfer
rA and B,C
18. Which of the following forms of non-taxable transfers may be subject to
transfer tax in the futur?
a. Void transfer
Tncomplete transfer
b. Quasi-transfer
d. All of these
D19. Which is incorrect regarding the taxation of incomplete transfers which are
eventually completed?
a.
b.
c.
They are subject to estate tax.
They are subject to donors tax.
They are subject to both donor's tax and estate tax.
They are subjectto either donor's tax or estate tax.
2 0 . Which is a complete transfer?
a.
Conditional transfer
b.
Transfer in contemplation of death
Irrevocable transfers
d.
Transfer with reservation of certain rights until death
21. A conditional donation may be completed by
Fulfillment of the condition specified by the transferee
b. Waiver of the condition by the transteror
C.
Lapse of the right to revoke
d. A and B
22. Conditional transfers and revocable transfers which are still pending
completion at the point of the transferor's death are
donation inter-vivos.
b.
subject to donor's tax. d . subject to income tax.
Multiple-Choice
1.
subject to estate tax.
a.
Mr. Bonifacio
Problems: Part 1
in 1991 for P500,000 when it was
transferred the property when it was worth
worth
Mr. Bonifacio died when the property was
purchased
worth P450,000. He
a
piece of land
P1,000,000. Subsequently,
P1,200,000.
Assuming that the donation is a
subjected to donor's tax
donation inter-vivos, what is the value to be
a.
P450,000
c.P1,000,000
b.
P 500,000
d.P 1,200,000
369
Chapter 11- Introduction to Transfer Taxation
2.
donation mortis causa, what is the valueto
Assuming that the donation is a
be subjected to estate tax?
a. P 450,000
b. P 500,000
c.P 1,000,000
d.P 1,200,000
Title to
Mang Juan transferred a property with a fair value of P1,000,000.
A 3. the
property was stipulated to be transferred immediately. Subsequently,
Mang Juan died. The property was worth P800,000 at the
date of his death.
Which is correct?
a.
The property is subject to donor's tax at P1,000,000.
a.
b. The property is subject to donor's tax at P800,000.
C.
d.
C 4.
The property is subject to estate tax at P800,000.
The property is subject to estate tax at P1,000,000.
Assume instead that legal title to the property was reserved by Mang Juan
untit death, which is correct?
a.
b.
C.
d.
5.
The property is subject to donor's tax at P1,000,000.
The property is subject to donor's tax at P800,000.
The property is subject to estate tax at P800,000.
The property is subject to estate tax at P1,000,000.
A resident citizen died leaving the following property at the point of his
death:
Acquisition
Fair
Value
House and lot
Car
P
4,000,000
P
800,000
2,100,000
Agricultural land
Cost
2,000,000
1,200,000
500,000
Compute the amount of the donation mortis causa.
a.
b.
6.
PO
P 3,700,000
c.P6,900,000
d. P 7,300,000
Adonor transferred the following properties
on a
certain
Philippines_
Cash
Land
P
1,000,000
3,000,000
Assuming the donor is a
resident citizen, what is the amount of the donation
inter-vivos?
b.
Abroad
+00,000p
Car
a.
day:
P1,000,000
P1,400,000
c.P4,000,000
d.P4,400,000
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Chapter 11- Introduction to Transfer Taxation
7.
Assuming the donor is a resident alien, what is the amount of the donation
inter-vivos?
a.
b.
8.
9
P1,000,000
P1,400,000
c.P4,000,000
d.P4,400,000
Assuming the donor is a non-resident citizen, what is the amount of the
donation inter-vivos?
a. P1,000,000
c. P 4,000,000
b. P1,400,000
d. P 4,400,000
Assuming the donor is a non-resident alien, what is the amount of the
donation inter-vivos?
a. P1,000,000
b.
P1,400,000
c.P4,000,000
d.P4,400,000
10. Assuming the donor is a non-resident alien with a reciprocity exemption,
what is the amount of the donation inter-vivos?
a. P1,000,000
c. P 4,000,000
b. P1,400,000
d. P 4,400,000
Multiple-Choice Problems: Part2
.
Mr. Chucho decedent died leaving the following properties:
Philippines
Investments in stocks
House and lot
Residential lot
P
500,000
Abroad
P
4,000,000
3,000,000
Assuming Mr. Chucho is a non-resident citizen or a resident alien, what is
the amount of donation mortis causa?
c. P 3,500,000
PO
a.
d.P 7,500,000
b. P3,000,000
C
B
Assuming Mr. Chucho is a non-resident alien, what is the amount of the
donation mortis causa?
a. PO
c.P3,500,000
b.
d. P 7,500,000
P 3,000,000
Assuming Mr. Chucho is a non-resident alien and the reciprocity rule
applies, what is the amount of the donation mortis causa?
a.
P0
b.
P 3,000,000
c. P 3,500,000
d. P 7,500,000
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Chapter 11- Introduction to Transfer Taxation
4.
A seller
of goods made the following sales:
P 5,500,000
Fair market value
4,500,000
Selling price
2,500,000
Cost
What is the
a.
b.
amount
subject to income tax?
c.P 1,500,000
PO
P1,000,000
d. P 2,000,000
the
problem, what is
In the immediately preceding
transfer tax?
P0
b.
P 1,000,000
to
a car.
d. P 2,000,000
Data
relating to the sale and
Selling price
Cost
amount
a.
P0;PO
b.
P1,500,000; PO
the
car are as
follows:
P 4,000,000
5,000,000
2,500,000
Fair market value
What is the
subject
c.P 1,500,000
a.
Avalon sold
amount
subject to income tax and to
transfer tax, respectively?
c. P1,500,000; P1,000,000
d.P0; P2,500,000
2014
of his stock investments on July 4,
Mr. Peter made a revocable transfer
died on December 15, 2014.
in favor of his brother, Merto. Peter
The stocks had the following fair values:
P 1,200,000
July 4, 2014
August 20, 2014
December 15, 2014
1,100,000
1,600,0000
Assuming Peter waived the right to revoke
on
August 20, 2014,
what is the
amount subject to transfer tax and the type of transfer tax to apply?
a. P1,200,000; donor's tax
b. P1,100,000; donor's tax
D
c.
P1,600,000; donor's tax
d.
P1,600,000; estate tax
8. Assuming Mr. Peter did
not revoke
the property until the date of his death,
what is the amount subject to transfer tax and the type of transfer ta:
apply?
c.P1,600,000; donor's tax
a. P1,200,000; donor's tax
b. P1,100,000; estate tax
d. P1,600,000; estate tax
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Chapter 11-Introduction to Transfer Taxation
9.
In October 2014, Mrs. Blender transferred a property to her younger sister,
Careen, subject to the condition that Careen must graduate in March 2015.
The property was worth P 800,000 in October 2014 and P 900,000 in March
2015. Mrs. Blender died on July 15, 2015 when the property was worth
P1,200,000.
Assuming that Careen failed to graduate in March 2015, what is the amount
of donation and the transfer tax to apply?
P 800,000; donor's tax
a.
b. P 900,000; donor's tax
C.
d.
P1,200,000; estate tax
None; none
R10. During his birthday, Mr. Fu Chen donated the following properties:
Cash donation to his wife
Oral donation of house and lot
P
500,000
3,000,000
Compute the taxable amount of donation inter-vivos.
a.
PO
c.P3,000,000
d. P3,500,000
b. P500,000
Multiple-Choice
Problems: Part3
51. Aresident alien conveyed the following properties on thefollowing terms:
Consideration Fairyvalue.
0
P
Car
Motorcycle
Laptop
300,000
20,000
P
500,000
300,000
80,000
Compute the total amount subject to transfer tax.
C2
a.
P880,000
c. P 500,00o
b.
P560,000
d. P 60,000
The following relates to a transfer made by a seller:
Selling price
Fair value of property at date of sale
Fair value at death of the seller
P 1,500,000
4,000,000
5,000,000
Assuming that title to the property is transferred on the date of sale, what is
the amount of donation and the type of transfer tax to apply?
a.
b.
P0; none
P1,000,000; estate tax
c.P 2,500,000; donor'stax
d. P 3,500,000; donor's tax
373
A
Chapter 11- Introduction to Transfer Taxation
effect
the
that title to the property was agreed upon to take
D3. Assuming
date of death, what is the amount of donation and the type of transfer tax to
apply?
A
4
c. P2,500,000; donor's tax
d. P3,500,000; estate tax
a.
b.
P0;none
The
following relate to the disposition of property made by a
P1,000,000; estate tax
on
seller:
P 4,200,000
Selling price
Fair value of property on date of sale
Fair value at death of the seller
4,000,000
5,000,000
What is the amount subject to donor's tax?
a.
b.
A
5.
Assuming that the transfer is revocable until the death of the decedentseller, what is the amount subject to estate tax?
a.
b.
B6.
7.
V8.
PO
c. P 800,000
P 200,000
d. P4,000,000
A donor transferred
subject to
a.
income tax.
b.
donor's tax.
properties to save on income taxes. The donation is
c.estate tax.
d. both income tax and donor's tax.
revocable donation of a property valued at P1,000,000. Which
is a correct statement regarding the taxation of the donation?
Mr. B made
a
a.
The donation shall be subject to donor's tax.
b.
The donation shall be subject to estate tax.
C.
The donation is subject to income tax.
d.
The donation shall neither be subject to donor's tax nor estate tax.
Kumar made
an
irrevocable donation of real property during his lifetime in
favor of his wife. Which is true?
The donation shall be subject to donor's tax.
a.
b. The donation shall be subject to estate tax.
C.
d.
9.
c.P800,000
d.P4,000,000
P0
P 200,000
The donation is subject to either donor's tax or estate tax.
The donation is void and is not subject to transfer tax.
Which of these is not considered within the Philippines?
a. Franchise of a foreign franchisor which is exercised in the Philippines
b.
C.
d.
Stocks of a domestic corporation with 60% of business in the
Philippines
Foreign shares which are traded in the Philippine stock market
Stocks of a foreign corporation with 75% of business in the Philippines
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Chapter 11- Introduction to Transfer Taxation
10. Mr. Ku Loth, transferred a stock portfolio with a fair value of P2,000,000 for
P1,990,000. Ownership shall not transfer until full payment is made by the
transferee within 10 days. On the 10th
day, the buyer paid the price in full
when the portfolio was worth P
2,100,000. Subsequently, the transferor
died when the stocks were worth
P3,400,00.
What is the amount subject to transfer tax and the transfer tax that
would
apply?
a.
b.
C.
d.
P0; None
P50,000; Donor's tax
P100,000; Donor's tax
P1,400,000; Estate tax
A 11. Anton donated stock securities to his daughter, Mary, as reward to the
latter for services rendered to Anton. The
property was worth P1,100,000
when Anton wrote the deed of donation. The same had a value of
P1,050,000 when the donation was accepted by Mary.
What is the amount of gratuity and the applicable transfer tax?
a. P1,050,000; donor's tax
b. P1,050,000; estate tax
C. P1,100,000; donor's tax
d. P1,100,000; estate tax
12. Mr. Erick received in trust a property worth P1,400,000. Erick was
entrusted to be the fiduciary heir to the property left by his mother,
Marciana. While still living, Erick transferred the same property to his
younger brother, Erwin, in accordance with the will of their mother,
Marciana. The property was worth P1,500,000 at the date of transfer.
The property is
a.
b.
C.
d.
P1,500,000.
subject to estate tax at P1,500,000.
subject to donor's tax at P1,400,000.
exempt from transfer tax.
subject to donor's
tax at
C13. Raymund was indebted to Zeus with a P 50,000 interest-bearing loan.
Raymund rendered services worth P51,500 to Zeus. Zeus cancelled
Raymund's indebtedness when it was worth P51,500 including interest.
The cancellation of indebtedness is
a subject to donor's tax.
b.
subject to estate tax.
C.
exempt from transfer tax.
d.
subject to both donor's tax and estate tax.
375