CEBU ROOSEVELT MEMORIAL COLLEGES

PRELIMINARY EXAMINATION (TRANSFER AND BUSINESS TAXATION)

1 SEMESTERY SY 2020-2021
ST

NAME:

Put a mark on the letter of your choice.

1. The object of estate tax is the:

a. Right to transmit
b. Decedent
c. Properties of the decedent
d. Beneficiaries

2. Mortis causa transfer of property is effected:

a. When the property is received by the heir.
b. When the court awarded the ownership of property to a particular heir.
c. Upon the death of the decedent.
d. Upon payment of estate tax.

3. Statement 1:   Cancellation of existing debt as payment for services rendered by the debtor to the
creditor is a gratuitous transfer.

Statement 2:   A sale is a form of transfer transaction that requires payment of transfer tax.
a. Statement 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 & 2 are true

4. Statement 1:   A sale on installment basis is considered as an onerous transfer.

Statement 2:   A gift out of love to former girlfriend is an onerous transfer.

a. Statement 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 & 2 are true

5. Statement 1:   Inheritance refers to all the property, rights, and obligations of a person which are
not extinguished by death and all which have accrued thereto since the opening of succession.

Statement 2:   Rights which are purely personal are not transmissible for they are extinguished by
death.
a. Statement 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 & 2 are true
6. Which is not true about inheritance?
a. Inheritance includes property, rights, and obligations of a person that have accrued since the
opening of the succession.
b. Inheritance includes devise and legacy.
b. Inheritance includes property, rights, and obligations extinguished by a person’s death.
b. Inheritance includes property, rights, and obligations of a person existing at the time of death.

7. Which of the following is not a compulsory heir?

a. Legitimate children and descendants, with respect to their legitimate parents or ascendants
b. In default or letter a, legitimate parents or ascendants, with respect to their legitimate children or
descendants
c. Widow or widower
d. Relative by affinity

8. Which of the following could legally effect transfer of properties through succession?
a. By virtue of a will
b. By operations of law
c. By onerous transfer
d. By both “a” and “b”

9. Which of the following is regarded as an intestate succession?

a. The will is designating the State as beneficiary of the free portion.
b. The will was subsequently rendered void by circumstances.
c. The will designate a part of free portion to a stranger.
d. The will disposed the legitime to its rightful heir.

10. The personal property of a non-resident, not citizen of the Philippines, would not be included in
the gross estate if:
a. The intangible personal property is in the Philippines.
b. The intangible property is in the Philippines and the reciprocity clause of the estate tax law
applies.
c. The tangible property is in the Philippines.
d. The personal property is shares of stocks of a domestic corporation 90% of whose business is in
the Philippines.

11.Which of the following is subject to the rule of reciprocity?

a. Car in the Philippines owned by a non-resident alien decedent.
b. Investment in stock in a US Corporation owned by a non-resident alien decedent.
c. Investment in bonds in a US Corporation that has acquired business situs in the Philippines, and
is owned by a resident alien.
d. Shares owned by a non-resident alien in a partnership established in the Philippines.

12. Which is not a test of situs?

a. Residence of the debtor in case of accounts receivable.
b. Place of storage in case of certificates of stocks.
c. Location of depository bank in case of bank deposit.
d. Place of exercise in case of copyright.
13. As a rule, the basis of valuation of property in the gross estate is fair market value prevailing at
the time of decedent’s death. In the case of domestic shares of stock not traded thru the stock
exchange, the fair market value is
a. The value appearing in the schedule of fixed values from the assessor’s office.
b. Net realizable value
c. Acquisition cost
d. Issuer’s book value

14. Which of the following value is not used when valuing gross estate?
a. Fair market value at the time of death
b. Fair market value at the time the estate return is filed
c. Zonal value when higher than the assessed value in case of real property
d. Book value in case of shares not traded in the stock exchange

15. The following are deemed transfers in contemplation of death, except

a. While still alive, the decedent donated property where the donation will take effect at the time of
his death.
b. The decedent transferred a property in the regular course of the business operation.
c. The decedent donated a property with the condition that he/she will enjoy the fruits of such while
he/she is still alive.
d. The decedent transferred a property to take effect after his/her death.

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

a. Revocable transfer where the consideration is not sufficient
b. Revocable transfer where the power of revocation was not exercised
c. Transfer passing under general power of appointment
d. Transfer for sufficient consideration

17. Which of the following is not true regarding a claim against insolvent persons?
a. The decedent’s claim is deductible in full because the debtor’s liabilities exceed his remaining
assets.
b. The decedent’s claim must be included in full in the gross estate.
c. The decedent’s claim which cannot be collected is deductible according to the ratio of the
debtor’s assets to his liabilities.
d. Claim against insolvent person is a claim against person whose assets are not sufficient to pay his
liabilities.

18. Following are exclusion from gross estate, except:

a. Transfer in contemplation of death
b. Transfer as a result of which there is merger of usufruct in the owner of the naked title
c. Amount received from SSS and GSIS
d. All of the above

19. Which of the following statements is true?

a. Deductions from gross estate are highly disfavored in law; he who claims deductions must be
able to justify his claim or right.
b. Receipts or invoices or other evidence to show that the expense was really incurred, if applicable,
must duly support deductions against the gross estate.
c. Both “a” and “b”
d. Neither “a” nor “b”
 20. Which is false?
a. The estate tax is computed based on the net estate or taxable estate.
b. The net estate is determined by subtracting from the gross estate the deductions authorized by
law.
c. Both “a” and “b”
d. Neither “a” nor “b”
e.
Determine whether the following is included or excluded from the gross estate.

21. Transfer with reservation of certain rights

21. Transfer for insufficient consideration
21. Transfer for an adequate and full consideration in money’s worth
21. Transfer in contemplation of death
21. Insurance proceeds from SSS and GSIS
21. Proceeds of group insurance taken out by a company for its employees
21. Transfer from the first heir to the second heir designated by the predecessor
21. Donation to the national government
21. Merger of usufruct in the owner of the naked title
21. Legacy to a charitable institutions whose administrative expenses did not exceed 30% of the
legacy

31. The following are properties in the gross estate with their fair market values:
House & lot, family home in 
Quezon City         1,500,000
Bank deposit in the foreign branch
of a domestic bank           500,000
Bank deposit in Makati branch of a
foreign bank           300,000
Shares of stock issued by a domestic
corporation (certificate kept in
Canada         1,000,000
Franchise exercised in Manila           800,000
Receivable, debtor from Mindanao           200,000

If the decedent was non-resident alien and there is reciprocity, property excluded from gross estate is
valued at
a. P2,800,000
b. P2,600,000
c. P2,300,000
d. P2,000,000

32. If the decedent was non-resident alien and there is no reciprocity, the gross estate is valued at
a. P4,300,000
b. P3,800,000
c. P3,500,000
d. P3,200,000

33. Juan, a Filipino residing in Davao died on December 10, 2018, leaving a gross estate of
P4,500,000 including a parcel of land valued at P1,125,000, which he inherited from his father
 who died on October 5, 2015; that the land was previously taxed with a fair value of P937,500 for
estate tax purposes in the estate of his father; that the land was subjected to a mortgage of
P468,750 at the time it was inherited by the present decedent, which amount was deducted from
the net estate of the father; that the present decedent paid P187,500 of the mortgage indebtedness
and that the total deductions claimed for losses, indebtedness, taxes & etc. including that unpaid
mortgage of P281,250 was P562,500.

Required:   Determine the correct amount of vanishing deduction, if any.