Chapter 2

1.TRUE Estate tax is an excise tax.

2. TRUE Adopted children, for all intents and purposes are

considered as legitimate
Children.

3. FALSE If zonal value is available at date of death, and this is

higher than the fair market value per assessor’s listings of values,
then the amount to be reported in the gross estate is the zonal
value.

4.FALSE A person has unlimited right to make donations in his

last will and testament

5. FALSE A special power of appointment authorizes the donee of

the power to appoint only from among a designated class or group
of persons other than himself.

6.TRUE Devisees and legatees are persons to whom gifts of real

or personal property are respectively given by virtue of a will.

7.FALSE An heir who inherits a specific personal property by will

is known as devisee.

8.A surviving spouse is a compulsory heir classified under

a) Primary heir
b) Secondary heir
c) Concurring heir
d) Voluntary heir

9.One of the following donations is not included in the computation

of the gross estate
a) Revocable transfers
b) Transfers with reservation of certain rights
c) Transfers under special power of appointment
d) Transfers in contemplation of death

10. Justification for the imposition of transfer tax is.

a) Redistribution of wealth theory
b) Benefit received theory
c) State partnership theory
d) All of the above


2 points each

1. The executor of the decedent identified the following losses of

properties:

Reported losses:
Losses incurred w/n 6 mos. P 60,000
since death
Losses incurred beyond 6 mos. P 30,000
since death

Unreported Losses:
Losses incurred w/n 3 mos. P 10,000
Since death
Losses incurred beyond 6 mos. P 20,000
since death

What is the deductible amount of losses?

ANSWER: 60,000
Only the reported losses can be claimed as a deduction form
the gross estate.Losses incurred beyond 6 months can be
deducted as long as they will not go beyond 1 year from the time
of death. Since it is unclear in this problem up to what month the
losses of 30,000 occurred, it is wiser not to include it in the
deductible loses

2. Mr. Gamora donated the following properties in his last will and
testament:

Cash - to Mayami, a social P 500,000

welfare institution
Land -to Romblon State P 1,000,000
University at purchase cost

Additional information:
1. The donation mortis causa to Mayami was restricted for
program expenses. None of it would be used for administrative
purposes.

2. The lot devised to RSU had a fair value of P1,600,000 at the

decedent's death.

Compute the deductible amount of deductible transfer for

public purpose:

ANSWER: 1,600,000

Only the transfer to RSU qualifies as transfer for public

use and must be recorded at FV at time of death.

3. The following data pertains to the estate of a decedent:

Separate Common
Gross estate P 2,000,000 P 3,000,000

Deductions:
Funeral expense P 180,000
Judicial expense 110,000
Indebtedness and 200,000 300,000
taxes
Losses 50,000 150,000
Transfer for pubic 100,000
use

Compute the deduction for the share of the surviving

spouse:

ANSWER: 1,275,000

Common (3,000,000 - 300,000 -150,000) Funeral and judicial

expenses are no longer allowed as deductions form the gross
estate.

4 points
4. A Japanese citizen residing in Japan had the following
properties and deductions:

Properties in the Philippines P 3,000,000

Properties in Japan 6,000,000
Properties in Hong Kong 1,000,000
Total World Estate P 10,000,000

Loses and Indebtedness P 3,000,000

Medical Expense 450,000
Transfer for public use of 500,000
properties located in Japan

Compute the total deductions allowable:

ANSWER: 1,400,000

Losses & indebtedness (3,000,000 x 3M/10M) 900,000 Standard

deduction 500,000 Total allowed deduction 1,400,000 Transfer for
public use of NRA can only be allowed as a deduction if the
property is situated in the Philippines at time of transfer.

D 21. According to Accounting Standards it is an identifiable

nonmonetary asset without physical substance.
A. Property
B. Tangible Asset
C. Gross Estate
D. Intangible Asset

B 22. The situs of intangible Asset is the domicile of the owner,

also known as..
A. Mobile section persona
B. Mobilia sequntur personam
C. Situs of franchise
D. None of the above

B 23. As a rule, the situs of intagible personal property is not the

domicile of the owner.
A. True
B. False
C. None of the above
D. Maybe
A 24. The situs of franchise should not be based on the domicile of
the owner but the place where such franchise is exercised.
A. True
B. False
C. None of the above
D. Maybe

A 25. It is the book value per share of the issuing corporation.

A. Unlisted Common Share
B. Unlisted Preference Share
C. Listed Share
D. None of the above

B 26. It is the par value per share

A. Unlisted Common Share
B. Unlisted Preference Share
C. Listed Share
D. None of the above

C 27. FMV shall be the arithmetic mean between the highest and
lowest quotation at a date nearest the date of death if non
available in the date of death itself.
A. Unlisted Common Share
B. Unlisted Preference Share
C. Listed Share
D. None of the above

A 28. It is a place of taxtion

A. Situs
B. Property
C. Intangible
D. Tangible

C 29.t is the location of the depository bank.

A. Receivables
B. Shares
C. Bank deposit
D. Real property

A 30. It is the residence of the debtor.

A. Receivables
B. Shares
C. Bank deposit
D. Real property

A 31. An insolvent is a person whose properties are not sufficient

to satisfy, whether fully or partially, his debts.
A. True
B. False

C 32. Claims against the estate (CAE) or indebtedness in respect

of property may arise our of the following EXCEPT.
A. Contract
B. Tort
C. Sales
D. Operation of law

A 33. It is generally constructed to mean debts or demands of a

pecuniary nature.
A. Claims
B. Rewards
C. Debt
D. None of the above

A 34. Liability represents a ________

A. Personal Obligation
B. Real Obligation
C. Law
D. Contract

C 35. The following expenses are no longer allowed as deduction

from the gross estate of a decent EXCEPT.
A. Funeral Expenses
B Medical Experienses
C. Juridical Expenses
D. Judicial Expenses

A 36. Claims again the estate are "receivables due or owing from
person who are not financially capable of meeting their obligations"
A. True
B. False

C 37. The following are not allowed as a deduction EXCEPT.

A. Income tax on income received after death
B. Property taxes accrued after death
C. Income tax on income received before death
D. Estate Tax

B 38. Claims arising before death are not allowed as deductions

from gross estate.
A. True
B. False

A 39. Where the loan proceeds went to another person.

A. Accomodation Loan
B. Bank Loan
C. Payable Loan
D. House Loan

B. 40. These are the deductions allowed when a decent leaves

property.
- Unpaid Mortgage
- Indebtedness on Property
A. True & False
B. True & True
C. False & True
D. False & False

C 41. The following are exclusions under special laws EXCEPT:

a. Proceeds of life insurance and benefits received by members

of the GSIS

b. Retirement benefits of officials/employees of a private firm

(RA4917).

c. Amounts given to the deceased provided by the Personal

Equity and Retirement Account (PERA).

d. Payments from the Philippines of US government to the legal

heirs of deceased of WWII Veterans and deceased civilian for
supplies/services furnished to the US and the Philippine Army
(RA136).

B 42. Exclusive property of the surviving spouse [Sec. 85(H)]

The gross estate in case of married decedents, is composed of:

I. Exclusive properties of the decedent.

II. Intangible property of the decedent included in the gross

estate taxable income.

III. Common properties of the decedent and the surviving

spouse.

IV. Exclusive properties of the prior decedent known as

“paraphernal” properties.

a. I, II, and IV.

b. I and III.

c. II and III

d. All of the above.

D 43. The _______ provides that for non-resident alien decedents,

only his properties situated or with situs within the Philippines shall
be included in his gross estate.

a. Reciprocity Law

b. Civil Code

c. Reciprocity Estate Code

d. Tax Code

B 44. _______ expressly provides that “intangible” personal

property in the Philippines of a non-resident alien decedent shall
be excluded from the gross estate if there is reciprocity.

a. Reciprocity Law

b. Tax Code

c. Civil Code

d. Reciprocity Estate Code

D 45. The following shall be taxed:

 I. The merger of usufruct in the owner of the naked title

II. The transmission or delivery of the inheritance or legacy by

the fiduciary heir or legatee to the fideicommissary.

III. The transmission from the first heir, legatee, or donee in

favor of another beneficiary, in accordance with the desire of the
predecessor.

IV. All bequests, devises, legacies or transfers to social

welfare cultural or charitable institutions, no part of the net income
of which insures to the benefit of any individual, provided that not
more than 30% of said bequests, devises, legacies or transfers
shall be used for administration purposes.

a. I, II, III and IV.

b. II, III, and IV

c. I, II, and IV

d. None of the above.

A 46. The government agency which is empowered to determine

the exemption.

a. Bureau of Internal Revenue

b. Supreme Court

c. Bureau of Customs

d. Bureau of Treasury

A 47. Exclusive properties of the surviving spouse should be

_______ in the gross estate.

a. excluded

b. included

c. settled
d. divided

C 48. . What is the deduction rate if the period from receipt to

death of the decedent is More than 3 years up to 4 years?

a. 12%

b. 20%

c. 40%

d. 80%

A 49. Exclusive properties of the husband are known as:

a. capital

b. paraphernal

c. usufruct

d. legatee

A 50. What is the deduction rate if the period from receipt to death
of the decedent is More than 1 year up to 2 years?

a. 80%

b. 20%

c. 40%

d. 12%

D 51. These are dispositions in a last will and testament or

transfers to take effect after the death in favor of the government of
the Philippines or any of its political subdivisions thereof (e.g.
barangay, province, city/municipality) for exclusively public
purposes,

a. Transfer of Public Deductibility

b. Transfer of Vanishing Deductions

c. Legacies to the Philippine Red Cross (PRC)

d. Transfers for Public Use (TFPU)

A 52. This deduction is also referred to as deduction for “property

previously taxed”.

a. Vanishing Deductions

b. Gross Estate Deductibility

c. Special Deductions

d. Judicial and Funeral Deductibility.

C 53. Pertains only to the right or privilege to enjoy the use and
advantages of another’s property.

a. Legacies

b. Naked Title

c. Usufruct

d. Special Power of Appointment

B 54. Exclusive properties of the wife are known as:

a. capital

b. paraphernal

c. usufruct

d. legatee

A 55. What is the deduction rate if the period from receipt to death
of the decedent is within one year?

a. 100%

b. 20%

c. 40%
d. 12%

B 56. What is the deduction rate if the period from receipt to death
of the decedent is More than 4 years up to 5 years?

a. 100%

b. 20%

c. 40%

d. 12%

B 57. No such deduction on the property, or the property given in

exchange therefore, was allowed in determining the value of the
net estate of the prior decedent.

a. No previous vanishing deduction on the property.

b. Inclusion of the property.

c. Identity of the property.

d. Previous taxation of the property.

A 58. Vanishing deduction is being allowed to lessen the impact of

successive taxation of the same property within a very short period
due to the death of the decedent-transferor.

a. True

b. False

B 59. The benefit of vanishing deduction may only be applied

once.

a. False

b. True

A 60. Vanishing deduction is allowed for property received from

donation if part of the gross estate.
a. True

b. False

61 A. TRAIN law took effect on ______

A January 1, 2018
BJanuary 1, 2019
C January 7, 2019
D January 7, 2018

62 B .Beginning upon the effectivity of RA 10963, otherwise known

as the TRAIN LAW, the net estate of every decedent, whether
resident or non-resident of the Philippines, shall be subject to an
estate tax rate of_______.
A Five percent
B Six percent
C Seven percent
D Eight percent

63 A Can the estate tax be paid in installment?

A Yes, in case the available cash of the estate is not sufficient to
pay its estate tax liability.
B Yes, at the option of the heirs with corresponding interest
charges
CNo, tax is the life blood of the state, hence, collection cannot be
delayed under any circumstance.
D None of the above

64 D Lola Trining died in 2019 leaving a gross estate amounting to

P150,000 only. No estate tax is due of a second-hand car worth
P80,000, shares of stocks value at P50,000 and P20,000 time
deposit. The administrator believes that only notice of death should
be filed since the value of the gross estate is exempt from tax.
What will you tell him?
A Notice of death and estate tax return have to be filed because
the gross estate exceeds P20,000 and when the gross estate
consists of registered or registrable properties, estate tax is
required to be filed regardless of the value of the gross estate.
B Only notice of death is required to be filed because the gross
estate exceeds P20,000. Estate tax return is required to be filed
only when the gross estate exceeds P200,000 and/or there is
estate tax due.
C Neither notice of death nor estate tax return need to be filed in
this particular case.
D Only estate tax return has to be filed

65 D Which of the following is not correct?

A When a compulsory heir is given by will less than his legitime,
the provisions of the will should be modified in such a way that he
will receive his legitime.
B The CIR 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.
C The sharing of heirs in testamentary succession must satisfy the
rules on legitime.
D If am extension to pay the estate tax is granted the
commissioner or his duly authorized representative may require
the administrator, or executor, or beneficiary, to funish a bond in
such amount exceeding double the amount of the tax and with
such sureties as the commissioner deems necessary, conditioned
upon the payment of said tax in accordance with the terms of the
extension.

66 C Statement 1: If a bank has knowledge of the death of a

person, who maintained a bank account alone, or jointly with
another, it shall allow the withdrawal from said deposit account,
subject to a final withholding tax of 6% of the amount to be
withdrawn, provided that the withdrawal shall only be made within
one year from the date of said decedent.
Statement 2: In all case, the final tax withheld shall not be
refunded, or credited on the tax due, on the net taxable estate of
the decedent
A Only statement 1 is correct
B Only statement 2 is correct
C Both statements are correct
D Both statements are incorrect

67 D Which of the following statements is correct?

A There shall not be transferred to any new owner in the books of
any corporation, Sociedad anonima, partnership, business, or
industry organized or established in the Philippines any share,
obligation, bonds or right by way gift inter-vivos or mortis causa,
legacy or inheritance, unless an eCAR is issued by the
commissioner or his duly authorized
B In instances where the deposit accounts have been duly
included in the gross estate of the estate tax due thereon paid, the
executor, administrator, or any of the legal heirs hall present the
eCAR issued for the said estate prior to withdrawing from the bank
deposit account.
C The withdrawing from the bank deposing describe in letter b
shall no longer be subject to the 6% withholding tax by the bank.
D All of the above

68 C In case of a resident decedent, the administrator of executor

shall register the estate of the decent and secure new TIN from the
A Office of the commissioner
B RDO where the administrator or executor is registered
C RDO where the decent was domiciled at the time
D Duty authorized treasurer of the city or municipality where the
decedent is domiciled at the time of his death

69 C Statement 1: The estate tax return shall be filed within one

year from the date of the decedent’s death
Statement 2: In case of lapse of two years without the payment of
entire tax due, the remaining balance thereof shall be due and
demandable subject to applicable penalties and interest reckoned
from the prescribed deadline for filing he return and payment of
estate tax.

A Only statement 1 is correct

B Only statement 2 is correct
C Both statements are correct
D Both statements are incorrect

70 B In filing the estate tax return under the TRAIN LAW, a CPA
certified is required when:

A Gross estate exceeds P2,000,000

B Gross estate exceeds P5,000,000
C Gross estate exceeds P10,000,000
D Gross estate reaches P2,000,000
71. D These are deductions allowed when a decedent leaves
property encumbered by a mortgage or indebtedness contracted in
good faith and for adequate and full consideration.

A unpaid mortgaged or paid property

B mortgage payable
C indebtedness or obligation
D unpaid mortgaged or indebtedness on property

72 D Which of the following is NOT under in Special Deductions?

A Standard Deduction
B Family home
C RA 4917
D Vanishing Deduction

73 B One of the following cannot be claimed as deduction from the

gross estate of a non-resident alien decedent:

A Vanishing deduction
B Family home allowance
C Share of surviving spouse
D Transfer for public use

74 B In computing the estate tax , which of the following shall not

be allowed to claim tax credit for taxes paid abroad?

A Resident alien decedent

B Non-resident decedent
C Resident citizen decedent
D Non-resident citizen decedent

75 D Which of the following is not include in Ordinary Deductions?

A LITe
B Vanishing Deduction
C Transfer for public use
D Family home

76 D Which of the following is not deductible from the gross estate

of a decedent?
I. Income taxes on income received after death
II. Property taxes not accrued before death
III. Estate Tax

A I and II only
B II and III only
C I and III only
D All of the above

77 D The following are requisites for vanishing deduction to be

allowable, except one.

A The estate tax of the prior succession must have been finally
determined and paid.
B The present decedent died within five years from date of death
the prior decedent
C The property with respect to which deduction is soughtcan be
identified as having been received by the present decedent from
the prior decedent.
D None of the above

78 A First statement: The estate tax return should be filed with the
authorized agent bank, Revenue District Officer, Collection Agent
or duly authorized treasurer of the municipality in which the
decedent was domiciled at the time of his death.
Second statement: If the decedent was a non-resident, not a
citizen of the Philippines, the estate tax return may be filed with the
Commissioner of Internal Revenue

A Both statements are true

B Both statements are false
C The first statement is true, but the second statement is false
D The first statement is false, but the second statement is true

79 D Which statement is wrong? An estate tax return is required to

be filed:

A When the estate is subject to estate tax

B When the estate is not subject to estate tax but the gross estate
exceeds P200,000
C Where the gross estate includes registered real property
D In all cases where there is a gross estate
80 A Which statement is wrong? For a non-resident, not citizen of
the Philippines:

A There are no special deductions from the gross estate

B There can be no deduction for funeral expenses entirely incurred
outside the Philippines
C There can be a vanishing deduction
D There can a be a deduction for transfer for public use