TRANSFER TAXATION

FINAL EXAMINATIONS

I. Problem Solving (2 points each)

Problem 1

Arya Stark gave the following properties to various donees on December 25, 2012:

House and lot in London P3,500,000

Apartment house in Naga City 8,000,000

Car in Iriga City 520,000

Car in London 900,000

Savings deposit with BPI 50,000

Time deposit in a New York Bank 120,000

Accounts receivable, debtor residing in the Philippines 140,000

Accounts receivable, debtor residing in Hongkong 35,000

Franchise exercised in New York 225,000

Franchise exercised in Philippines 120,000

Investment in Good Time Co., partnership established in Hongkong 160,000

Investment in Lovers Company, partnership established in the Phil’s. 125,000

1. How much is the gross gift if Arya Stark is a resident or citizen

2. How much is the gross gift if Arya Stark is a resident and citizen of united states
(without reciprocity).

3. The gross gift if Arya Stark is a resident and citizen of the donor as diminution on the
property donated.
 Problem 2

Mr. and Mrs. Targaryen gave the following donations:

May 3, 2013 Conjugal property valued at P300,000
donated to Aegon, legitimate son who got
married January 1, 2013.
July 14, 2013 Capital property donated to Danarys,
legitimate daughter who got married June 1,
2013. Value –P500,000.
Dec. 30, 2013 Conjugal property donated to Danarys. The
dowry has fair market value of P800,000

4. The gift tax due of Mrs. Targaryen on May 3, 2013

5. The gift tax due of Mr. Targaryen on July 14, 2013.

6. The gift tax due of Mrs. Targaryen on December 30, 2013

Problem 3

Ned Stark gave the following donations to:

02-14-12 Sansa Stark, legitimate daughter on account
of marriage last December 31, 2010—P190
,000.
06-01-12 Benjamin Stark, brother on account of
marriage scheduled December 31, 2011—
P160,000.
10-13-12 Arya Stark, legitimate daughter, on account of
marriage on November 12, 2011—P180,000
05-15-13 Rickard Stark, father, on account of marriage,
land with a fair market value of P1,000,000
but mortgage for P100,000 which was
assumed by the donee.

7. The gift tax payable on February 14, 2012

8. The gift tax payable on June 1, 2012

9. The gift tax payable on October 13, 2012

10. The gift tax payable on May 15, 2013

Problem 4

Mr. and Mrs. Jaime and Cersei Lannister gave the following donations:

July 1, 2013 Community property was donated to Balaoing,

sister of Mr. Jaime Lannister. The fair market
value is P650,000.
Sept. 25, 2013 Cash of P300,000 to Theon, son of Mrs. Cersei
from her teen-age boyfriend Euron Greyjoy .

Nov.10, 2013 Cash of P250,000 was donated to Theon

11-12. The donor’s tax due on Mr. and Mrs. Jaime and Cersei Lannister on July 1, 2013 –

13. The donors tax due on Mr. Jaime Lannister on September 25, 2013 –

14-15. The donor’s tax due on Mr. and Mrs. Jaime and Cersei Lannister on November 10 2013,
2013 –

Problem 5

Topline Company sold to Bestbooks Enterprises goods worth P 10 000, exclusive of tax. Record
the accounting entries in the sales book and in the purchase book if:

16. The buyer and the seller are subject to VAT.

17. Seller is VAT registered, while buyer is not.
18. Seller is no VAT registered, while buyer is VAT registered.

Answer:

Sales book Purchase book

Problem 6

All amounts given are total invoice costs/prices:

A, non-VAT taxpayer, sells to B, VAT taxpayer P 67 200

B, VAT taxpayer, sells to C, VAT taxpayer 100 800

C, VAT taxpayer, sells to D, VAT taxpayer, an exporter 168 000

D, VAT taxpayer, exports 300 000

16. The value-added tax of B:

17. The value-added tax of C:
18. The value-added tax of D:
 Problem 7

H and W, husband and wife had the following gross sales (net of tax) during the year:

W- restaurant owner P 800 000

H-
a. Professional CPA P 350 000
b. Medium sized store:
Sale of office/school supplies P 1 120 000
Sale of books P 275 000

19. Which of the following statements is true?

A. For purposes of the threshold of P 1 919 500, the gross receipts of the husband and
wife shall be combined.
B. The gross receipts shall be subject to VAT even if she does not register voluntarily
under the VAT system.
C. For purposes of the threshold of P 1 919 500, the sale of office supplies and the
practice of profession are considered as separate taxpayers.

D. For purposes of the threshold of P 1 919 500, the aggregation rule for each
taxpayer shall apply. Thus, the gross receipts from the medium sized store
shall be added to the receipts from the practice of profession.

Problem 8

20. Winery is a manufacturer of wine. During a particular calendar quarter, it had the
following transactions (net of VAT):
Jan. 4, 2013 : Consigned wine to a retailer in Makati City amounting to P 200 000.
Feb. 14, 2013 : Exported P 1 000 000 worth of wine to Spain.
Feb. 27, 2013 : President of Winery celebrated his birthday, consuming P 50 000
worth of wine given to him by the company as a birthday gift.
Mar. 20, 2013 : Declared property dividend of one case of wine for every 10 shares,
amounting to P 150 000.

The output tax for the calendar quarter ended March 31, 2013 is:

Problem 9

Farmland Merchandising became subject to VAT effective January 1, 2013:

The following are its records:

Gross sales- January 1 to Dec. 31, 2012 P 2 900 000

January 2013 data:
January 1 inventory:
Purchased from VAT registered persons 48 000
Purchased from non-VAT registered persons 332 000
 Actual VAT paid 5 140
Sales (total invoice amount) 224 000
Purchases (exclusive of VAT) 60 000

21. The VAT payable on January 2013 is -

Problem 10

Azucarera de Papa is a processor of refined sugar. It purchases sugarcane from farmers for
processing into intermediate stages until it becomes refined sugar. In a month, it had the
following sales and purchases, no tax included:

Sales P 880 000

Purchases of sugarcane 220 000
Purchases of containers and paper labels 100 000

22. The value-added tax payable is:

Problem 11

23. In a month, total invoice prices/costs:

Domestic sales P 672 000
Export sales 1 500 000
Purchases from VAT-registered persons of:
Goods exported 560 000
Goods sold in the Philippines 224 000
Operating expenses 112 000

The input taxes attributable to export sales which may be refunded or credited against
other internal revenue taxes, including any value-added tax on domestic sales, is:

Problem 12

24. Bogart is an operator of parking lots. What business tax is due on his income from the
business?
A. Broker’s tax C. Caterer’s tax
B. Common carrier’s tax D. Value-added tax

Problem 13

Sale of services by a VAT-registered contractor:

Collections on total invoice price for contracts completed
(including P 448 000 for materials) P 1 120 000
Receivables on billings (VAT included) 336 000
Advances on contracts (VAT not included) 200 000
Retentions on contracts made by clients out of contract price already earned 90 000
Purchases of:
Materials (VAT included) 224 000
Services of sub-contractor (VAT not included) 448 000
Services of persons subject to percentage taxes 56 000
Salaries of employees 60 000

25. Output taxes are:

26. The input taxes are:
27. The value-added tax payable is:

II. Multiple Choice Questions

(40 points)

1. Which of the following statement is wrong? A distinction between a donation inter vivos and
a donation mortis causa is:

a. The first take effect during the lifetime of the grantor while the second takes effect
after the death of the grantor.

b. The first is subject to the donor’s tax while the second is subject to the estate tax.

c. The first always requires a public document while the second may not require a
public document.

d. The first is valued at 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.

2. The following are the requisites of a donation for purposes of the donor’s tax, except one:

a. capacity of the donor c. delivery of the subject matter of gift

b. capacity of the donee d. donative intent

3. 1st statement: A sold his car ( cost, P300,000 ) to B for P500,000. The car has a fair market
value of P900,000 at the time of sale. The difference of P400,000 in selling price and fair
market value constitutes a gift subject to donor’s tax.

2nd statement: C purchased a lot and cottage in Alaminos City (home of 100 islands) in 2009
for P1,000,000. It was used as summer vacation house by his family. In 2010, C decided to sell
the lot and cottage to D for P2,000,000 although its present market value is P2,500,000. The
P500,000 difference in selling price and market value is a gift but not subject to donor’s tax.

a. both statements are true

b. both statements are false

 c. The first statement is true and the second statement is false.

d. The first statement is false and the second statement is true.

4. Statement 1: The gross gifts of a donor who is a non-resident alien will include all properties
regardless of location.

Statement 2: The gross gifts of a donor who is a non-resident alien of the Philippines, will
include only property located in the Philippines.

a. both statements are correct

b. both statements are wrong

c. The first statement is correct and the second statement is wrong.

d. The first statement is wrong and the second statement is correct.

5. The reciprocity clause in the donor’s tax law applies to a:

a. Non-resident citizen c. Resident citizen

b. Resdient alien d. Non-resident alien

6. In the previous question, the reciprocity clause applies to:

a. Real property c. Intangible personal property

b. Tangible personal property d. All of these

7. If he is a resident alien his gross gift is:

a. P2,100,000 c. P2,950,000

b. P1,950,000 d. P3,000,000

8. If he is a non-resident Japanese, and there is reciprocity law, his gross gift is:

a. P850,000 c. P1,050,000

b. P650,000 d. P700,000

9. Which of the following statements is correct? A donation inter vivos by husband and wife,
jointly during the marriage

a. Is a donation of conjugal property that will require one computation of the donor’s
tax, if the spouses are under the system of conjugal partnership of gains.

b. Is a donation of community property that will require one computation of the donor’s
tax, if the spouses are under the system of absolute community of property.

c. Is a donation of exclusive property by the either spouse that will require one
computation of the donor’s tax, if the spouses are under the system of conjugal
partnership of gains.
 d. Is a donation of each spouse to the extent of one-half that will require separate
computation for two donor’s taxes, under whichever property relationship exists
between the spouses.

10. Situation 1: M, in trading business, had a receivable of P150,000 from N. Without exerting
utmost effort to collect, M canceled the indebtedness of N.

Situation 2: O sold to P personal property worth P200,000 for a consideration of P50,000,

to take effect immediately upon receipt of the consideration.

a. Situation 1 involves a donation of P150,000 and should be covered by a donor’s tax

return within thirty days from the date of cancellation of the indebtedness.

b. Situation 1 is bad debt expenses of the business and should not be treated as
involving a taxable donation.

c. Situation 2 shall be considered a bad bargain and not involving a taxable donation.

d. Situation 2 involves a donation of P200,000 and should be covered by a donor’s tax

return within thirty days from the date of the sale.

11. Q sold his land (capital asset) on September 5, 2012 to his best friend for P300,000 when
the market value was P500,000 He gave a commission of P20,000 to the broker and spent for
documentary stamp taxes and transfer fees the amount of P4,000. The internal revenue tax
payable is:

a. Final capital gain tax of P30,000

b. Final capital gain tax of P18,000

c. Donor’s tax of P60,000

d. None, as it is exempt from any internal revenue taxes

12. Which of the following statement is wrong? A donation by husband and wife out of conjugal
or community property to a brother of the wife.

a. Is one-half a donation to a non-stranger by the wife.

b. Is one-half a donation to a stranger by the husband.

c. Is a donation on which the husband must pay a donor’s tax of 30% on his net gift.

d. Is a donation on which the husband must pay the graduated donor’s tax on his net
gift.

13. A donation on account of marriage will gave a donor a deduction from the gross gifts made
if:

a. The donee is a legitimate child c. The donee is not a stranger

b. The donee is anybody d. None of these.

14. When the donee or beneficiary is a stranger, the tax payable by the donor shall be.

a. 30% of the gross profits.

b. 30% of the net profits.

c. Based on the graduated rates with the first P100,000 net gift exempt.

d. Based on the graduated rates with the first P100,000 net gift exempt or 30% of the
net gifts whichever is higher.

15. Which of the following statement is wrong? A donation by husband and wife out of conjugal
or community property to a brother of the wife.

a. Is one-half a donation to a non-stranger by the wife.

b. Is one-half a donation to a stranger by the husband.

c. Is a donation on which the husband must pay a donor’s tax of 30% on his net gift.

d. Is a donation on which the husband must pay the graduated donor’s tax on his net
gift.

16. Husband and wife made out of conjugal cash of P1,000,000, a donation on account of
marriage, to a legitimate child. Which of the following statements is not correct on deduction
for donation on account of marriage?

a. P10,000 to each spouse, on separate computation for donor’s tax.

b. P5,000 to each spouse, on separate computation for donor’s tax.

c. P10,000 on a separate computation for donor’s tax of the husband.

d. P10,000 on a separate computation for donor’s tax of the wife.

17. Which of the following donations is not entitled to deduction?

a. Donation to charitable institution

b. Donation to scientific organization

c. Donation to social welfare

d. Donation to a political party

18. All of the following except one are exempt from gift tax under special laws:

a. Donation to Integrated Bar of the Philippines

b. Donation to Development Academy of the Philippines

 c. Donation to Philippine Institute of Certified Public Accountants

d. Donation to International Rice Research Institute

19. First distinction: The rates for donor’s tax are lower than those for estate tax, in all cases.

Second distinction: In donor’s tax, the exemption is P200,000 while in estate tax it is
P100,000.

a. Both distinction are correct c. First is correct, second is wrong

b. Both distinction are wrong d. First is wrong, second is correct

20. Which statement is wrong? The donor’s tax:

a. Is computed on the basis of the net gifts of a calendar year.

b. Is computed and paid within 30 days from the date of donation.

c. Is computed separately for each spouse in case of a joint donation.

d. Become proportionately bigger on later donations.

21. Statement 1: All gifts made on the same date pay one donor’s tax only.

Statement 2: A donation to a legitimate child on account of marriage, when the property

donated was already delivered, will not pay the donor’s tax if the donee’s marriage did not
actually take place.

a. Both statements are true.

b. Both statements are false.

c. The first statement is true and the second statement is false.

d. The first statement is false and the second statement is true.

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

a. All prior net gifts during his lifetime.

b. All prior net gifts during the calendar year.

c. The present and the immediately preceding donation.

d. Only the present donation.

23. Who of the following is a stranger under the donor’s tax law?

a. A child of a brother c. A granduncle

b. A grandchild d. A second cousin

24. For donor’s tax purposes, one of the following is not stranger.

a. son by a natural adoption c. grandson

b. step-son d. son-in-law

25. One of the following is n`ot a relative by consanguinity n the collateral line within the
fourth degree of relationship.

a. daughter of the donor’s nephew c. niece of the donor

b. First cousin of the donor d. second cousin of the donor

26. The following are major internal revenue business taxes in the NIRC of 1997, except
one:

A. Income tax C. Value-added tax

B. Excise tax D. Percentage tax

27. Alamid imported cigarettes from Taiwan for sale. At a later date, he sold cigarettes in the
Philippines. He is subject to value-added tax. He is also subject to the business tax of:
A. Excise tax C. Percentage tax
B. Income tax D. None of these

28. Burgos is manufacturer of fermented liquors. In making sales, all taxes on the products
and transactions are passed on to the buyers. For purposes of the value-added tax, which
of these taxes listed below that he pays forms part of the gross selling price?
A. Excise tax C. Percentage tax
B. Value-added tax D. None of these

29. Cantor is a VAT-registered dealer of liquors. On his sales in the Philippines, his tax is:
A. Excise tax C. Percentage tax
B. Value-added tax D. None of these

30. Statement 1: A person subject to excise tax is also subject to value-added tax.
Statement 2: A person subject to percentage tax is also subject to value-added tax.
A. Both statements are correct
B. Statement 1 is correct while statement 2 is wrong
C. Both statements are wrong
D. Statement 1 is wrong while statement 2 is correct

31. Which statement is correct? The value-added tax on importation:

A. Should be paid by the tax-exempt importer, if he subsequently sells the goods to a
non-tax-exempt purchaser.
 B. Should be paid by the non-tax-exempt purchaser to whom the tax-exempt
importer sells it.
C. Is a liability either of the tax-exempt importer or the non-tax-exempt purchaser.
D. Shall not pay the value-added tax because the transaction was exempt at the point
of importation.

32. The value-added tax of Gencor Co., before any tax credits, is:
A. P 210 960 C. P 173 300
B. P 175 800 D. P 207 960

33. The business tax of Falcon Co., before any tax credits, is:
A. Value-added tax of P 3 960 C. Value-added tax of P0
B. Percentage tax of P 990 D. Percentage tax of P0

34. Which statement is wrong? Transactions considered “in the course of trade or business”
and, therefore, subject to the business taxes include:
A. Regular conduct or pursuit of a commercial or an economic activity by a stock
private organization.
B. Regular conduct or pursuit of a commercial or an economic activity by a non-stock,
non-profit private organization.
C. Isolated services in the Philippines by non-resident foreign persons.

D. Isolated sale of goods or services for a gross selling price or receipts of P 500
000.

35. First statement: Sales of drugs and medicines of pharmacy run by the hospital to
outpatients are subject to VAT.
Second statement: Pharmacy items used in the performance of medical procedures in
hospital units such as in the operating and delivery rooms and by other departments
are considered part of medical services rendered by the hospital, hence, not subject to
VAT.

A. Both statements are correct

B. Both statements are incorrect
C. Only the first statement is correct
D. Only the second statement is correct

36. To be exempt from value-added tax, the lease of residential units shall have:
I. Monthly rental per unit of P 12 500 or less.
II. Gross annual rentals exceeding P 1 919 500.
A. Both I and II are necessary
B. Both I and II are not necessary
C. Only I is necessary
D. Only II is necessary

37. Gross selling price includes all of the following, except one. Which one?
A. Total amount which the purchaser pays to the seller.
 B. Total amount which the purchaser is obligated to pay to the seller.
C. Excise tax.

D. Value-added tax.

38. Statement 1: The output value-added tax is computed by multiplying the gross selling price
by 12%; or multiplying the total amount indicated in the invoice by 12/112.
Statement 2: The output value-added tax is computed by multiplying the total amount
indicated in the invoice by 12%.
A. Both statements are correct
B. Both statements are wrong
C. The first statement is correct but the second statement is wrong
D. The first statement is wrong but the second statement is correct

39. Which statement is correct?

A. The sales invoice that shows a total, with an indication that it includes the value-
added tax even if it does not show the tax separately, is a correctly prepared invoice.

B. The invoice which shows the selling price and the value-added tax
separately, but with a total which is a correct amount is a properly prepared
invoice.

C. An invoice which shows the selling price and the value-added tax separately, which
is paid by the buyer, is violative of the revenue regulations on issuance of sales
invoice.
D. A sales invoice by a VAT taxpayer can be used only on a VAT sale.

40. S1: in the books of accounts of a VAT-registered taxpayer, sales are recorded net of output
taxes.
S2: in the books of accounts of a VAT-registered taxpayer, purchases are recorded net
of input taxes.

A. Both statements are correct

B. Both statements are wrong
C. The first statement is correct but the second statement is wrong
D. The first statement is wrong but the second statement is correct

Bonus Questions 3 points each

1. He was an unethical former maester who was thrown out of the order for conducting
illegal human experimentation. After coming into Cersei Lannister's service, he becomes
Varys's replacement as Master of Whisperers on the small council. Answer. Lord Hand
Qyburn
2. He is a skilled and dangerous sellsword who comes to prominence when he champions
for Tyrion Lannister in his trial by combat at the Eyrie. He subsequently enters Tyrion's
service as his personal bodyguard, assassin, and enforcer and in return was given
knighthood, power, and wealth. Answer. Bronn

3. He was the younger brother of King Joffrey and Princess Myrcella. Though legally the
son of the late King Robert Baratheon and Queen Cersei Lannister, his true father is
Ser Jaime Lannister, the Queen's twin brother, and is thus a bastard born of incest.
Answer. King Tommen Baratheon

4. He is popularly nicknamed the Hound, was the younger brother of Ser Gregor
Clegane and was the personal bodyguard of Prince Joffrey Baratheon. Answer. Sandor
Clegane

5. What is my whole name. Answer. Adrianne Ivory G. Noble

“What do we say to the Lord of Death?'

'Not today.”
― George R.R. Martin, A Game of Thrones