The Professional CPA Review School

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INTEGRATED REVIEW MAY 2019 BATCH

QUIZ 1 TAXATION

INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one answer for
each item by SHADING corresponding letter of your choice on the answer sheet provided. STRICTLY NO
ERASURES ALLOWED. Use Pencil No. 2 only.

1. Estate tax is
A. A property tax because it is imposed on the property transmitted by the decedent to his heirs.
B. An indirect tax because the burden of paying the tax is shifted on the executor or any of the
heirs of the decedent.
C. An excise tax because the object of which is the shifting of economic benefits and enjoyment of
property from the dead to the living.
D. A poll tax because it is also imposed on residents of the Philippines whether Filipino citizens or
not.
2. An executor or administrator, after paying the estate tax, and to escape a future liability for a
deficiency estate tax, must secure a written discharge from personal liability from:
A. The heirs
B. The Commissioner of Internal Revenue
C. The court where the estate was being settled
D. Need not secure a written discharge as long as he has a receipt on payment of the estate tax.
3. Statement 1: The making of a will is strictly a personal act. It cannot be left in whole or in part of the
discretion of a third person, or accomplished through the instrumentality of an agent of attorney.
Statement 2: The burden of proof that the testator was not of sound mind at the time of making his
dispositions is on the person who opposes the probate of the will; but if the testator, one month, or
less, before making his will was publicly known to be insane, the person who maintains the validity of
the will must prove that the testator made it during a lucid interval.
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
4. Which of the following transfer is not included in the gross estate?
A. Transfer with reservation of certain rights.
B. Transfer for insufficient consideration.
C. Transfer for an adequate and full consideration in money or money’s worth.
D. Transfer in contemplation of death.
5. Pedro, decedent, owns a property valued at P1,500,000 at the time of his death. The said property was sold
by Pedro during his lifetime to Juan for P700,000 when its value was P1,200,000. It was agreed by Pedro and
Juan that the former will enjoy the income of the property as long as he lives. For Philippine estate tax
purposes, how much will be included in determining gross estate?
A. P0 B. P500,000 C. P800,000 D. P1,200,000
6. 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. Proceeds of life insurance where the beneficiary designated is the estate and the designation is
irrevocable.
D. Proceeds of life insurance where the beneficiary designated is the mother and the designation is
irrevocable.
7. Which is deductible from gross estate?
A. Interment fees unsupported by receipts or otherwise
B. Expenses incurred after interment
C. Interment expenses borne by the decedent’s best friend
D. Death and interment notice published and duly receipted
8. Judicial expenses may be deducted from the gross estate of a decedent who died before 2018.
However, expenses not essential in the proper settlement of the estate but incurred for the individual
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CRC-ACE/TAXATION: QUIZ 1 Page 2
benefit of the heirs, legatees, or devisees are not allowed as judicial expenses. Which of the
following is non-deductible under this category?
A. Attorney’s fees paid by the heirs to their respective lawyers arising from conflicting claims are
not deductible as judicial expenses. These expenses should be separately borne by them.
B. Premiums paid by a judicial administrator on his bond are not deductible because the ability of
the appointee to give bond is in the nature of a qualification.
C. Compensation of trustees such as expenses being for the account and benefit not of the estate
but of the beneficiaries.
D. All of the above.
9. Which of the following is not a requirement in claiming unpaid mortgage as deduction for estate tax
purposes?
A. The fair market value of the mortgaged property, net of the mortgage indebtedness, should be
included in the gross estate.
B. The fair market value of the mortgaged property undiminished by the mortgage indebtedness
should be included in the gross estate.
C. The loan must be contracted in good faith.
D. The loan must be for an adequate and full consideration.
10. Pedro, a citizen of the Philippines and resident of Makati City, died testate on May 10, 2018. Among his gross
estate were properties inherited from his deceased father who died on April 4, 2015. What percentage of the
deduction would be used in computing the amount of vanishing deduction?
A. 60% B. 40% C. 20% D. nil
11. A decedent died in 2016 leaving properties he inherited 2 ½ years ago which had fair market value of
P8,000,000 at the time of his death (P6,500,000 at the time of inheritance, and unpaid mortgage of
P500,000 paid by the present decedent). After inheritance, the decedent mortgages the property for
P500,000 and paid the same before his death. Other properties in his gross estate had fair market
value of P10,000,000. The total expenses, losses, indebtedness, taxes and transfer for public
purpose amounted to P3,000,000.
How much is the vanishing deduction?

A. P2,000,000 B. P2,750,000 C. P3,000,000 D. P3,120,000

12. One of the following statements is wrong. Claims against insolvent persons
A. Should always be included in the gross estate.
B. If entirely uncollectible, may be omitted in the computation for the net taxable estate.
C. Can give rise to reduction even if the debtor had some properties.
D. Can be a deduction even if secured by a mortgage.
13. The gross estate of Juan includes P80,000 receivables which is duly notarized from debtor Pedro
whose records show:
Assets P 100,000
Indebtedness to:
 Government (unpaid taxes) 40,000
 Juan 80,000
 Other creditors 20,000
The deductible claims against insolvent person is
A. P29,285 B. P32,000 C. P48,000 D. P80,000
14. The following statements are correct regarding standard deduction under the TRAIN LAW, except:
A. A deduction in the amount of P5,000,000 shall be allowed as an additional deduction without
need of substantiation.
B. The full amount of P5,000,000 shall be allowed as deduction for the benefit of the decedent.
C. Standard deduction is not allowed to decedents who are non-resident aliens.
D. None of the above.
15. If a decedent died prior to 2018, standard deduction from his gross estate is allowed for P1,000,000,
unless the decedent
A. Has a gross estate valued not more than P1,000,000
B. Has his estate opted for itemized deduction
C. Was a resident alien
D. Was a non-resident alien

16. Medical expense is allowed as a deduction from the gross estate of a decedent who died prior to the
effectivity of the TRAIN Law. Which of the following is correct?
I. If the actual amount of medical expenses incurred is P300,000, then only P300,000 shall be
allowed as deduction and not to the extent of the P500,000 threshold amount.

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CRC-ACE/TAXATION: QUIZ 1 Page 3
II. If the actual amount of medical expenses incurred within the year prior to decedent’s death is
P700,000, only the maximum amount of P500,000 shall be allowed as deduction. If in case the excess
of P200,000 (P700,000 – P500,000) is still unpaid, such amount shall be deducted from the gross
estate as “claims against the estate”

A. I only B. II only C. I and II D. None of the above

17. Which of the following statements is incorrect in connection with family home deduction prior to
TRAIN Law?
A. Family home deduction shall be allowed only if such family home is situated in the Philippines
B. The total value of the family home must be included as part of the gross estate of the decedent
C. For purposes of availing family home deduction, a person may constitute only one family home
D. Family home deduction may not be lower than P1,000,000
18. A decedent died on Nov. 1, 2017 leaving a family home composed of the following: Conjugal house worth
P800,000, and the land which he exclusively owned valued at P400,000. He also owns a vacation house in
Baguio worth P700,000. The deductible amount of family home is:
A. P800,000 B. P1,000,000 C. P1,200,000 D. P1,900,000
19. Prior to TRAIN Law, which of the following is deductible from the gross estate of a non-resident alien
decedent?
A. Funeral and judicial expenses C. Family home allowance
B. Death benefits under RA 4917 D. Standard deduction
20. Under TRAIN Law, all of the following, except one, are not deductible from the gross estate of a non-
resident alien:
A. Funeral and judicial expenses C. Family home allowance
B. Death benefits under RA 4917 D. Standard deduction
21. Bonifacio, head of family died on January 15, 2018, leaving the following properties and obligations:
Cash in bank, 50%, donated mortis causa to Natl Govt; 50-% to Q.C. govt P3,000,000
House and lot in Makati, F. Home 15,000,000
Personal properties 15,000,000
Farm lot 8,250,000
Claim against an insolvent debtor 2,250,000
Transfer in contemplation of death (gratuitous) 15,000,000
Transfer passing under special power of appointment 750,000
DEDUCTIONS CLAIMED:
Funeral expenses 5,750,000
Judicial expenses 675,000
Donation mortis causa to Quezon City government 1,500,000
Unpaid mortgage on the farm lot 750,000
Medical expenses (included in the funeral expenses incurred within the 1 year
period with receipts) 2,250,000
The farm lot was inherited 5 ½ years by the decedent before his death with a value then of
P5,750,000 and a mortgage indebtedness of P1,500,000.
The taxable net estate is:

A. P26,720,000 B. P37,500,000 C. P41,500,000 D. P50,500,000

22. In computing the estate tax, which of the following shall not be allowed tax credit for taxes paid
abroad?
A. Resident alien decedent
B. Non-resident alien decedent
C. Resident citizen decedent
D. Non-resident citizen decedent
23. Which of the following is not allowed with tax credit for payments of estate tax on foreign countries?
A. A resident alien
B. A non resident alien
C. An alien who was a resident of his own country at the date of death
D. An American residing in the Philippines at the date of death

24. Statement 1: If the decedent died before 2018, a notice of death is always required to be filed.

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CRC-ACE/TAXATION: QUIZ 1 Page 4
Statement 2: If the decedent died before 2018, the notice of death shall be filed by the executor,
administrator or any of the legal heirs within two (2) months after the decedent’s death, or within like
period after qualifying as such executor or administrator.
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
25. Lolo Sot died in 2017 leaving a gross estate amounting to P150,000 only. No estate tax is due based
on the tax code. The gross estate is composed of a second hand car worth P80,000, shares of
stocks valued 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 because the filing of the return also serves as the notice of
death.
26. A decedent died before the effectivity of the TRAIN Law, under which of the following situations an
estate tax return is not required to be filed?
A. Transfers which are subject to estate tax.
B. The gross value of the estate exceeds P200,000.
C. The estate consists of registered or registrable properties for which a clearance from the BIR is
required as a condition precedent for the transfer of ownership.
D. The gross value of the estate consisting of non-registrable properties does not exceed P200,000
and the deductions amount to P150,000.
27. A decedent died upon the effectivity of the TRAIN Law, under which of the following situations an
estate tax return is not required to be filed?
A. Transfers which are subject to estate tax.
B. The estate consists of registered or registrable properties for which a clearance from the BIR is
required as a condition precedent for the transfer of ownership
C. The gross value of the estate consisting of non-registrable properties does not exceed
P5,000,000.
D. None of the above
28. The Estate Tax Return shall be filed and payment made with
A. An Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over
the place of residence of the decedent at the time of his/her death.
B. If there is no AAB within the residence of the decedent, the Estate Tax Return must be filed and
the payment made with the Revenue Collection Officer of duly Authorized City or Municipal
Treasurer of the RDO having jurisdiction over the place of residence of the decedent.
C. If the required filer has no legal residence in the Philippines, the Estate Tax return will be filed
with the Office of the Commissioner or in the Philippine Embassy or Consulate in the country
where the decedent was residing at the time of his or her death.
D. All of the above.
29. Statement 1: Husband and wife are considered as separate and distinct taxpayers for purposes of
the donor’s tax.
Statement 2: If what was donated is a conjugal or community property and only the husband signed
the deed of donation, there is only one donor for donor’s tax purposes, without prejudice to the right
of the wife to question the validity of the donation without her consent pursuant to the pertinent
provisions of the Civil Code of the Philippines and the Family Code of the Philippines.
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

30. Which of the following political subdivisions of the government has no power of taxation?
A. Barrios.
B. Barangays, Municipalities, Provinces and Cities.

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CRC-ACE/TAXATION: QUIZ 1 Page 5
C. Autonomous Region in Muslim Mindanao (ARMM).
D. Cordilleras Autonomous Region (CAR).
31. Which one of the following statements is correct?
A tax reform (like the TRAIN under the Duterte administration) at any given time underscores the fact
that:
A. Taxation is essentially a legislative function.
B. Taxation is an inherent power of the State.
C. The State shall evolve a progressive system of taxation.
D. Taxation is a power that is very broad.
32. This is an inherent limitation on the power of taxation:
A. The rule of taxation shall be uniform and equitable.
B. No law impairing the obligations of contracts shall be enacted.
C. The tax laws cannot apply to the property of foreign governments.
D. Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and
non-profit cemeteries, and all kinds of lands, buildings and improvements actually, directly and
exclusively used for religious or charitable purposes shall be exempt from taxation.
33. TRAIN also simplifies the payment of donor’s taxes to a single tax rate of 6% of net donations is
imposed for gifts above P250,000 yearly given to
A. Direct Family members only
B. Members of the family up to fourth level of consanguinity
C. Regardless of relationship
D. None of the above
34. TRAIN reduces and restructures the estate tax to a low and single tax rate of 6% based on the net
value of the estate with a standard deduction of
A. P 1,000,000 C. P 10,000,000
B. P 5,000,000 D. None of the above
35. Which of the following statements is wrong? A donation by husband and wife out of conjugal
community property to a brother of the wife is:
A. one-half a donation to a non-stranger by the wife.
B. one-half a donation to stranger by the husband.
C. a donation on which the husband must pay a donor’s tax of 30%on his net gift.
D. a donation on which the husband must pay the graduated donor’s tax on his net gift.
36. Which of the following statements is not correct?
A. Taxes may be imposed to raise revenues or to regulate certain activities within the state
B. The state can have the power of taxation even if the Constitution does not expressly give it the
power to tax
C. For the exercise of the power of taxation, the state can tax anything at any time
D. The provisions of taxation in the Philippine Constitution are grants of power and not limitations
on taxing powers
37. As a basic principle of taxation, “taxes must be based on the taxpayer’s ability to pay” is called:
A. Equality in taxation C. Ability to pay theory
B. Theoretical justice D. Equity in taxation
38. Which of the following statements is not correct?
A. Taxes may be imposed to raise revenue or to provide incentives to certain activities within the
State.
B. The State can have the power of taxation even if the Constitution does not expressly give it the
power to tax.
C. For the exercise of the power of taxation, the state can tax anything at anytime.
D. The provisions of taxation in the Philippine Constitution are grants of power and not limitations
on the taxing power.
39. Which statement is wrong? A revenue bill:
A. Must originate from the House of Representatives and on which same bill the Senate may
propose amendments.
B. May originate from the Senate and on which same bill the House of Representatives may
propose amendments.
C. May have a House version and a Senate version approved separately.
D. May be recommended by the President to Congress.
40. A taxpayer who had gross receipts derived from business in the preceding year did not declare it
when he paid the poll tax. He paid only the basic tax and did not pay the additional poll tax based on
gross receipts. Will he be imprisoned?
A. No. No person shall be imprisoned for non-payment of poll tax.
B. Yes. This is a case of tax evasion. Tax evasion is now a criminal offense.

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CRC-ACE/TAXATION: QUIZ 1 Page 6
C. No. Paying the basic poll tax is enough. The additional poll tax is discretionary.
D. Yes. Non-payment of poll tax is punishable by imprisonment.

GRADUATED RATES OF INCOME TAX ON

INDIVIDUALS ON TAXABLE COMPENSATION, BUSINESS, PROFESSION AND OTHER INCOME
Rates
Taxable (January 1, 2018 to
Income December 31, 2022)
P250,000 or less 0%
Over P250,000 to
P400,000 20% in excess of P250,000
Over P400,000 to P30,000 + 25% in excess of
P800,000 P400,000
Over P800,000 to P130,000 + 30% in excess of
P2,000,000 P800,000
Over P2,000,000 to P490,000 + 32% in excess of
P8,000,000 P2,000,000
P2,410,000 + 35% in excess of
Over P8,000,000 P8,000,000

/CDE

SET A