1. Which statement is wrong?

Transactions considered in the course of trade or

business and therefore subject to the business taxes include:
Regular conduct or pursuit of a commercial or an economic activity by
a stock private organization.
Regular conduct or pursuit of a commercial or an economic activity by
a non-stock, non-profit private organization.
Isolated sale of goods or services for a gross selling price or receipts of
P800,000.
Isolated services in the Philippines by non-resident foreign persons.

2. When a donation which paid a donors tax was actually a donation mortis
causa, as ascertained by the Bureau of Internal Revenue, which of the
following is true?
The donation shall be required to pay the estate tax so that the estate
tax computed shall be reduced by the donors tax already paid.
The donation shall be required to pay the estate tax on its proper
valuation at the time of death, and there can be a refund for the wrong
payment of the donors tax.
The donation has to pay the estate tax in addition to the donors tax
previously paid.
The donation shall not pay any transfer tax anymore.
3. Which statement is wrong?
The percentage taxes are paid monthly;
The percentage taxes are basically on sales of services;
An isolated transaction not in the course of business will not result in a
liability for a percentage tax.

The percentage taxes are not allowed by law to be shifted to the

customers or clients;
Solution:
The percentage taxes are basically on sale of services (although the 3%
percentage tax may be on sale of goods). One isolated transaction may be
subject to a kind of percentage tax. For example, a sale thru a local stock
exchange of shares of stock of a domestic corporation by a person other
than a dealer in securities, though an isolated transaction, and therefore,
does not constitute doing business, is subject to the stock transaction tax
of 1/2 of 1%, to be withheld by the stock broker. Tax on winnings may be on
an isolated occurrence.
4. Don Miguel, a widower, died in May, 2014. In his will, he left his estate of
P100 million to his four children. He named his compadre, Don James, to be
the administrator of the estate. When the BIR sent a demand letter to Don
James for the payment of the estate tax, he refused to pay claiming that he
did not benefit from the estate, he not being an heir. Forthwith, he resigned
as administrator. As a result of the resignation, who may be held liable for the
payment of the estate tax?
All the four children, the tax to be divided equally among them
The eldest child who would be reimbursed by the others
The person designated by the will as the one liable
Don James since the tax became due prior to his resignation
5. Charlie is an operator of parking lots. What business tax is due on his income
from the business?
Brokers tax.
Value-added tax.
Common carriers tax.
Caterers tax.

Solution:
Lease of property is sale of services subject to the value-added tax.

6.
I
I
I

For a vanishing deduction, there should always be

two deaths within five years from receipt of property.
For two acquisitions by lucrative title at different
dates, but both within five years from present death,
there may be one consolidated computation only for
the vanishing deduction.
True, true.
False, false.
True, false.
False, true.

Solution:
On statement 1, If the property subject of vanishing deduction was acquired by gift,
the donor need not be dead in order that there can be vanishing deduction. On
statement 2, if there is the same applicable percentage on the two sets of
properties, there can be a consolidated computation of vanishing deduction.
7. Which of the following statements is not correct?
No judge shall order a distribution of any part of the estate to an heir
without a certification from the Bureau of Internal Revenue that the tax has
been paid.
A bank shall not allow the co-depositor of a deceased to withdraw form
the joint bank account without a certification form the Bureau Of Internal
Revenue that the tax has been paid.
No Register of Deeds shall transfer to any heir the title of a decedent to
real property without a certification form the Bureau of Internal Revenue
that the tax has been paid.
None of the above.

8.
I

I
I

If the decedent was married, and under the system

of absolute community of property, the vanishing
deduction may be a deduction from the community
properties.
If a claim arises out of a debt instrument, a claim
for deduction must in all cases require that the
debt instrument be notarized.
The first statement is false, but the second statement is true.
Both statements are false.
Both statements are true.
The first statement is true, but the second statement is false.

Solution:
On statement 1, If the property subject of vanishing deduction is exclusive,
the vanishing deduction will be against the exclusive estate. On the other
hand, if the property is community, the deduction will be against the
community estate. On Statement 2, by revenue regulation, notarization is
not required when arising from a loan granted by a financial institution
where notarization is not part of the business practice or policy of the
financial institution.
9.
I

I
I

The Bureau of Internal Revenue can collect the

estate tax by the summary proceedings of distrait
and levy without first securing authority from the
court in which the settlement of the estate is
pending.
The Bureau of Internal Revenue cannot collect the
estate tax when the estate is still under
settlement in court because the property is in
custodia legis.
False, false.
False, true.
True, true.
True, false.

10.
I
I
I

The period within which the estate tax return may

be filed may be extended by the Bureau of Internal
Revenue for a period not exceeding thirty days.
The estate tax return may be signed by any one of
the heirs if the estate is not settled judicially.
True, true.
False, true.
True, false.
False, false.

11.Properties passing through a power of appointment is not includible in the

estate of the decedent:
when the decedent-grantor receives profits from the said properties
which will continue as long as the grantor is alive
when the decedent-grantor retains possession of the property with
transfer being effected only upon the death of the decedent-grantor.
when the decedent-grantor delegates to a 3rd person the right to
transfer or transmit the property, its possession and profits, at any point in
time with a clause excluding the designation by the 3rd person of the
decedent-grantor as a recipient of the property or it profits.
when the decedent grantor delegates to a 3rd person the right to
transfer or transmit the property, its possession and profits, at any point in
time.
12.Which of the following is not a deduction from the gross estate under the
National Internal Revenue Code?
Losses
Legacy to a charitable institution

Taxes
Legacy to the Government
13.Joanne married James, a person with no known relatives. Through James hard
work, he and his wife Joanne prospered. When James died, his estate alone
amounted to P100 million. If, in his will, James designates Joanne as his only
heir, what will be the free
portion of his estate?
Joanne gets all; estate has no free portion left
Joanne gets 1/2; the other half is free portion
Joanne gets 1/3; the remaining 2/3 is free portion
Joanne gets 1/4; the remaining 3/4 is free portion
14.Proceeds of life insurance to the extent of the amount receivable by the
estate of the deceased, his executor or administrator under policies taken out
by the decedent upon his own life shall be
I
Part of the gross estate irrespective of whether or not the
insured retained the power of revocation
II
Not part of the gross estate if the beneficiary is irrevocable
III
Part of the gross income if the designation of the beneficiary is
revocable
IV Not part of the gross income irrespective of whether or not the
insured retained the power of revocation
I and II
Only I
I and III
I and IV
15.Which of the following statements is not correct?
The P500,000 standard deduction for medical expenses for estate tax
purposes is a legal mechanism to further exempt the less privileged estate

and heirs from tax burden

When a compulsory heir is given by will less than his legitimate , the
provisions of the will should be modified in such a way that he will receive
his legitimate
The sharing of heirs in testamentary succession must satisfy the rules
on legitimate
The BIR may examine the bank deposit of a decedent for the purpose
of determining his gross estate even if the estate did not request for a
compromise on the ground of financial incapacity
16.Jane, a resident citizen, died on November 10, 2013. She died leaving three
condominium units in Quezon City valued at P5 million each. Rodolfo was her
only heir. He reported death on December 5, 2013 and filed the estate tax
return on March 30, 2014. Because he needed to sell one unit of the
condominium to pay for the estate tax, he asked the Commissioner of
Internal Revenue to give him one year to pay the estate tax due. The
Commissioner approved the request for extension of time provided that the
estate tax be computed on the basis of the value of the property at the time
of payment of the tax. Does the Commissioner of Internal Revenue have the
power to extend the payment of estate tax?
Yes, the Commissioner of Internal Revenue may extend the payment of
tax for 2 years in case of extra-judicial settlement and for 5 years in case
of judicial settlement
No, the Commissioner of Internal Revenue has no power to extend
payment of estate tax under all condition
No, the Commissioner of Internal Revenue has no power to extend
payment of estate tax otherwise it will be encroachment upon exclusive
legislative authority
Yes, the Commissioner of Internal Revenue may extend the payment of
estate tax for a maximum period of 30 days for meritorious cases
17.Which of the following statements is false? When an estate tax return had
been filed and the estate tax had been paid but subsequently, because of
errors in the return, a deficiency estate tax has to be paid:
The Bureau of Internal Revenue shall have a lien on the properties of
the estate once a demand for payment had been made.

The Bureau of Internal Revenue can still ask the executor or

administrator to pay,even if the heirs have dissipated the inheritance, if
the executor or administrator did not ask for a written discharge from
liability from the Bureau of Internal Revenue.
The Bureau of Internal Revenue can ask payment from the heirs to
whom the estate had been distributed.
The Bureau of Internal Revenue cannot ask the executor or
administrator to pay because he would have been discharged from liability
for the estate tax to the state, the estate and the heirs once an estate tax
had been paid on the estate that he administered.

18.A citizen and resident of the Philippines died leaving the following properties
and rights:
Cash on hand and in banks (of which 150,000 was provided
in the will to be given to a charitable institution)
1,000,000
Real property in the Philippines:
Assessed value per assessment rolls of the city
100,000
Zonal value per Bureau of Internal Revenue
500,000
Selling price of adjacent piece of land the day preceding the
date of
600,000
death
Real property in Malaysia, fair market value
450,000
Car in the Philippines, with a mortgage of 200,000
400,000
Receivables:
From a friend from whom there is no possibility of recovery
20,000
From a sister whose ratio of assets to liabilities is 1:3
15,000
Amounts under insurance contracts:
Receivable under life insurance, with the father as
250,000
revocable beneficiary
Receivable under life issuance, with the mother as
irrevocable
200,000
beneficiary
Receivable under accident insurance, for accident that
happened one
50,000
year ago
Receivable under property insurance, for damage caused to 12,000
his car
Revocable transfers:
To sister (fair market value at the time of transfer was
50,000
40,000 and
consideration received was 10,000

To father (fair market value at the time of transfer was

30,000 and
consideration received was 30,000)
To mother (fair market value was 40,000 and consideration
received
was 50,000)
The gross estate is:
2,807,000

60,000
70,000

2,627,000
1,350,000
2,737,000

19.In a transfer in contemplation of death, revocable transfer and transfer under

a general power of appointment, there are rules to observe to determine
what amount to include in the gross estate, which is not a rule to observe?
If there was no consideration received on the transfer as in donation
mortis causa, the value to include in the gross estate shall be the fair
market value of the property at the time of the decedents death
If the consideration received on the transfer was less than adequate
and full, the value to include in the gross estate shall be excess of the fair
market value of the property at the time of the decedents death over the
consideration received
If there was no consideration received on the transfer as in donation
inter-vivos, the value to include in the gross estate shall be the fair market
value of the property at the time of transfer
If transfer was in the nature of a bona fide sale for an adequate and full
consideration in money or moneys worth, no value shall be included in the
gross estate
20.
21. A died giving B power to appoint a person who will inherit As
house and lot. B however can only choose among C,D,E and F. B
decided to transfer the property to C, in Bs will when he was old
already. The transfer from B to C is subject to estate tax.

During As lifetime, he decided to give B as gift his car subject to

the condition that if B does not become a CPA within 3 years, A
shall revoke the transfer. In the 2nd year however, A died. The
car can no longer for part of As gross estate.
False, false
True, true
False, true
True, false