CHAPTER 3 & 4

Question 1

It arises when two or more heirs or beneficiaries inherit an undivided property from a decedent, or when a donor makes a gift of an undivided property in favor of two or more donees

Partnership
Trust
Joint account
Co-ownership

Answer 1

Co-ownership

Question 2

Which of the following shall qualify as co-ownership?
I. Succession by several heroes to an undivided state, the estate is not under administration.
II. Donation of property two or more beneficiaries

Both I and II
Neither I nor II
I only
II only

Answer 2

Both I and II

Question 3

Ana, Lorna, and Fe, are the heirs of Pedro who died on Nov. 1, 2022. The properties of Pedro consisted solely of real property valued at P50,000,000 at the time of his death. The property is primarily deriving rental income. In 2023, the property remained undivided and it derived a net rental income of P15,000,000.
3. For income tax purposes, the heirs will be tax on net rental income from the inherent property for the year 2023 as:
Partners in a commercial partnership
Partners in a general professional partnership
Partners in an unregistered co-partnership
Co-owners

Answer 3

Co-owners

Question 4

Ana, Lorna, and Fe, are the heirs of Pedro who died on Nov. 1, 2022. The properties of Pedro consisted solely of real property valued at P50,000,000 at the time of his death. The property is primarily deriving rental income. In 2023, the property remained undivided and it derived a net rental income of P15,000,000.
What amount should be reported as taxable income of the co-ownership?
P50,000,000
P15,000,000
P14,980,000
nil

Answer 4

nil

Question 5

Ana, Lorna, and Fe, are the heirs of Pedro who died on Nov. 1, 2022. The properties of Pedro consisted solely of real property valued at P50,000,000 at the time of his death. The property is primarily deriving rental income. In 2023, the property remained undivided and it derived a net rental income of P15,000,000.
What amount should each heir report in their individual returns as their share in the net rental income of the property they inherited?
P50,000,000
P15,000,000
P10,000,000
P5,000,000

Answer 5

P5,000,000

Question 6

. Question 1: Is a co-ownership taxable?
Question 2: Is the share of the co-owner taxable?
Answer to Question 1: No, because the activities of the co-owners are limited to the preservation of the property and the collection of income therefrom.
Answer to Question 2: Yes, because each co-owner is taxed individually on their distributive share in the income of the co- ownership.

Answers to both questions are correct.
Only the answer for Question 1 is wrong.
Only the answer for Question 2 is wrong.
Answers to both questions are wrong.

Answer 6

Answers to both questions are correct.

Question 7

tatement 1: Co-owners are taxed individually on their distributive share in the income of the co-ownership.
Statement 2: If co-owners invest the income in a co-ownership in business for profit, they would constitute themselves into a partnership and as such shall be taxable as corporation.

Statements 1 and 2 are false
Statement 1 is true but statement 2 is false
Statement 1 is false but statement 2 is true
Statements 1 and 2 are true

Answer 7

Statements 1 and 2 are true

Question 8

When will an inherited property be considered as owned by an unregistered partnership?
When the property remained undivided for more than ten (10) years.
When no attempt was ever made to divide the same among the co-heirs, nor was the property under administration proceedings nor held in trust
Only condition I is required.
Only condition II is required
Conditions I and II are required
None of the above

Answer 8

Conditions I and II are required

Question 9

t is composed of all the property, rights, and obligations of a deceased person which are not extinguished by his death, including those which have accrued thereto since the opening of succession.
Estate
Devisee
Legatee
Testator

Answer 9

Estate

Question 10

Income received by the estate during the period of administration or settlement of the estate, for tax purposes is known as
Income of the estate
Income of the heirs
Income of the trustee
Income of the testator

Answer 10

Income of the estate

Question 11

Statement 1: For taxation purposes, the taxable income of the estate shall be determined in the same manner and basis as in the case of individual taxpayers.
Statement 2: Income of the estate distributed to a beneficiary is allowable deduction from the gross income of the estate.
Statements 1 and 2 are false.
Statement 1 is true but statement 2 is false
Statement 1 is false but statement 2 is true
Statements 1 and 2 are true

Answer 11

Statements 1 and 2 are true

Question 12

The following statements refer to the rules in determining the taxable income and the applicable income tax liability of an estate. Which of the statements is correct?
I. The items of gross income of the estate are the same items as the items of gross income of individual taxpayers.
II. Deductions from the gross income of the estate are the same as the items of deductions allowed to an individual taxpayer.
III. In addition to the allowable deductions under Section 34 of the Tax Code, the estate is allowed to deduct the amount of income of the estate during the taxable year that is paid or credited to the legatee, heir or beneficiary.
IV. The amount of income of the estate during the year that is paid or credited to the legatee, heir or beneficiary is subject to final withholding tax of 15%.
I and II only
I, II and III only
I, II, III and IV
None of the above

Answer 12

I, II and III only

Question 13

Which of the following is included in the income of the estate of a decedent?
Income received by the estate of a deceased person during the period of administration or settlement of the estate.
Excess of selling price over the appraised value placed upon the property at the time of death, where the property was sold after the settlement of the estate.
Appreciation in the value of property passed to the executor or administrator upon death of decedent.
Delivery of property in kind to legatee or devisee.

Answer 13

Income received by the estate of a deceased person during the period of administration or settlement of the estate.

Question 14

Statement 1: Where the estate is under judicial administration, the income of the estate shall be taxable to the fiduciary or trustee.
Statement 2: Where the estate is not under judicial administration, the income of the estate shall be taxable to the heirs and beneficiaries.
Statements 1 and 2 are false
Statement 1 is true but statement 2 is false
Statement 1 is false but statement 2 is true
Statements 1 and 2 are true

Answer 14

Statements 1 and 2 are true

Question 15

.When an individual taxpayer dies, future income on his property will be taxed to
Those who inherit the property after they receive the property.
The estate itself, after the heirs have received the property.
The individual himself.
None of the above.

Answer 15

Those who inherit the property after they receive the property.

Question 16

Statement 1: The amount of income of the estate for the taxable year, which is properly paid or credited during such year to any legatee, heir, or beneficiary, is a special item of deduction from the gross income of the estate.
Statement 2: An allowance paid to a widow or heir out of the corpus of the estate, is not deductible from the gross income of the estate.
Statements 1 and 2 are false
Statement 1 is true but statement 2 is false
Statement 1 is false but statement 2 is true
Statements 1 and 2 are true

Answer 16

Statements 1 and 2 are true

Question 17

Statement 1: When an estate, under administration, has income- producing properties, the annual income of the estate becomes part of the taxable gross estate.
Statement 2: When an estate, under administration, has income- producing properties and its income during the year is distributed to the heirs, the income so distributed is taxable to the heirs as part of their gross income for the year.
Statements 1 and 2 are false
Statement 1 is true but statement 2 is false
Statement 1 is false but statement 2 is true
Statements 1 and 2 are true

Answer 17

Statement 1 is false but statement 2 is true

Question 18

Statement 1: The income of the estate distributed to the beneficiary during the year is subject to final withholding tax of 15%.
Statement 2: The withholding tax on the income distributed to the beneficiary is creditable against the total tax liability of the beneficiary.
Statements 1 and 2 are false
Statement 1 is true but statement 2 is false
Statement 1 is false but statement 2 is true
Statements 1 and 2 are true

Answer 18

Statement 1 is false but statement 2 is true

Question 19

Statement 1: Where prior to the settlement of the estate, the executor or administrator sells property of a decedent’s estate for more than the appraised value place upon it at the decedent’s death, the excess is income taxable to the estate.
Statement 2: Where the devisee, legatee, or heir sells the property after the settlement, the devisee, legatee, or heir is taxable individually on any profit derived.
Statements 1 and 2 are false
Statement 1 is true but statement 2 is false
Statement 1 is false but statement 2 is true
Statements 1 and 2 are true

Answer 19

Statements 1 and 2 are true

Question 20

Namahinga Nha died lin 2022 leaving an estate worth P10,000,000. The estate is under administration. In 2023, the properties in the estate earned a gross income of P600,000 and the estate incurred expenses of P150,000.- Francis, one of the heirs, received P120,000 from the income of the estate.

20. The taxable income of the estate is
    P480,000
    P450,000
    P310,000
    P330,000

Answer 20

P330,000

Question 21

Namahinga Nha died lin 2022 leaving an estate worth P10,000,000. The estate is under administration. In 2023, the properties in the estate earned a gross income of P600,000 and the estate incurred expenses of P150,000.- Francis, one of the heirs, received P120,000 from the income of the estate.
Assume that Francis, head of the family, also earned net income of P500,000 from his trading business. What amount should Francis report as his taxable income for 2023?
P620,000
P570,000
P500,000
P450,000

Answer 21

P570,000

Question 22

An agreement created by will or an agreement under which title to property is passed to another for conservation or investment with the income therefrom and ultimately the corpus to be distributed in accordance with the directives of the creator as expressed in the governing Instrument.
Estate
Trust
Fiduciary
Beneficiary

Answer 22

Trust

Question 23

Which of the following is correct pertaining to estates and trusts?
Estates and trusts are treated as separate taxable entities.
The tabular rates or graduated rate of tax prescribed under Section 24A for individuals shall be used in computing the income tax of trusts and estates.
The taxable income of estates and trusts shall be determined in the same manner and basis as in the case of individual taxpayers.
All of the above

Answer 23

All of the above

Question 24

Which of the following statements regarding trust agreement(s) is correct?
I. A trust is a right of property, real or personal, held by one party for the benefit of another.
II. The creation of trusts may either be express or implied.
III. Trusts are treated as separate taxable entities.
I, II and III
I and II only
I and III only
I only

Answer 24

I and III only

Question 25

The following are the classifications of Trusts, except Ordinary trust Revocable trust Irrevocable trust Employer's trust

Answer 25

Employer's trust

Question 26

The following statement(s) refer to a Testamentary Trust, except: I. It is created under a Last Will and Testament. II. It exists in the Will only until the death of the Testator. III. This type of trust is amendable and revocable at any time during the Testator's lifetime, but becomes irrevocable upon the Testator's death. IV. A Testamentary Trust is considered its own legal entity, so it is taxed separately from the individual Beneficiaries even before the death of the testator. I only II only IV only III and IV only

Answer 26

IV only

Question 27

Which of the following statement(s) is/are correct description(s) of an "Ordinary Trust"? I. A trust where the income is accumulated or held for future distribution under the terms of a testamentary trust. II.A trust where the income is to be distributed currently by the fiduciary to the beneficiaries. III. A trust where the income is accumulated for the benefit of unborn or unascertained person or persons with contingent interest. IV. A trust where the income collected by a guardian of an infant is held or distributed as the court may direct. V. A trust where the income, is at the discretion of the fiduciary, may be either distributed to the beneficiaries or accumulated. I and II only I, II and III only I, II, III and IV only I, II, III, IV and V

Answer 27

I, II, III, IV and V

Question 28

Statement 1: Revocable Trust is a trust in which the power to revest in the grantor title to any part of the corpus of the trust is vested in the grantor himself or in any person not having any substantial adverse interest in the trust corpus on its income. Statement 2: The income of a trust will be taxed against grantor if the income of the trust that may be held or distributed for the benefit of the grantor. Statements 1 and 2 are false Statement 1 is true but statement 2 is false Statement 1 is false but statement 2 is true. Statements 1 and 2 are true

Answer 28

Statements 1 and 2 are true

Question 29

Statement 1: Income tax shall not apply to employee's trust which forms part of pension, stock bonus, or profit-sharing plan of an employer for the benefit of some or all of the employees. Statement 2: Any amount actually distributed to any employee or distributee shall be taxable to him in the year of distribution to the extent that it exceeds the amount contributed by such employee or distributee. Statements 1 and 2 are false Statement 1 is true but statement 2 is false Statement 1 is false but statement 2 is true Statements 1 and 2 are true

Answer 29

Statements 1 and 2 are true

Question 30

Statement 1: For taxation purposes, the taxable income of a trust shall be determined in the same manner and basis as in the case of individual taxpayers. Statement 2: Income of a trust distributed to a beneficiary is allowable deduction from the gross income of the trust. Statements 1 and 2 are false Statement 1 is true but statement 2 is false Statement 1 is false but statement 2 is true Statements 1 and 2 are true

Answer 30

Statements 1 and 2 are true

Question 31

A fringe benefit is any goods, service or other benefits furnished or granted by an employer in cash or in kind, including basic salaries to individual employees. T/F

Answer 31

F

Question 32

A fringe benefit which is subject to the fringe benefit tax is taxable income of the employee. T/F

Answer 32

F

Question 33

A fringe benefit which is not subject to the fringe benefit tax is taxable income of the employee. T/F

Answer 33

T

Question 34

Fringe benefits subject to fringe benefit tax cover only those fringe benefits given or furnished to a managerial or supervisory employee. T/F

Answer 34

T

Question 35

Fringe benefit tax shall be treated as a final income tax on the employee withheld and paid by the employer on a quarterly basis. T/F

Answer 35

T

Question 36

The grossed-up monetary value of the fringe benefit is the actual amount received by the employee. T/F

Answer 36

F

Question 37

The grossed-up monetary value of the fringe benefit shall be determined by dividing the monetary value of fringe benefit by the grossed up monetary value factor. T/F

Answer 37

T

Question 38

he person liable for fringe benefit tax is the employer, whether he is an individual, professional partnership or a corporation regardless of whether the corporation is taxable or not or the government and its instrumentalities T/F

Answer 38

T

Question 39

A managerial employee is one who is vested with powers of prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall discharge, assign or discipline employees, or to effectively recommend such managerial actions. T/F

Answer 39

T

Question 40

The grant of fringe benefits to the employee is exempt from tax if such grant is required by the nature of, or necessary to the trade, business or profession of the employer. T/F

Answer 40

T

Question 41

The amount on which the fringe benefit tax rate is applied is the monetary value of the fringe benefit. T/F

Answer 41

F

Question 42

The amount on which the fringe benefit tax rate is applied is the amount deductible by the employer from its gross income. T/F

Answer 42

T

Question 43

Grossed-up monetary value is reflected in the books of accounts as fringe benefit expense and fringe benefit tax expense. T/F

Answer 43

T

Question 44

Failure to withhold the required tax on salary is collectible from the employer. T/F

Answer 44

T

Question 45

Failure to withhold the correct amount due to false information supplied by the employee shall be the liability of the employee. T/F

Answer 45

T

Question 46

Fringe benefit required by the nature of or necessary to trade or business of the employer. subject to fringe benefit tax/not

Answer 46

not

Question 47

Fringe benefit for the convenience or advantage of the employer. subject to fringe benefit tax/not

Answer 47

not

Question 48

Car plan for managerial employees subject to fringe benefit tax/not

Answer 48

subject to fringe benefit tax

Question 49

Daily meal allowance for managerial employees subject to fringe benefit tax/not

Answer 49

not

Question 50

Monetized unused vacation leave credits of private employees not exceeding 10 days. subject to fringe benefit tax/not

Answer 50

not

Question 51

Monetized unused vacation leave credits of government employees in excess of 10 days. subject to fringe benefit tax/not

Answer 51

subject to fringe benefit tax

Question 52

Monetized value of sick leave credits not exceeding 10 days. subject to fringe benefit tax/not

Answer 52

not

Question 53

Monetized value of sick leave credits of private employees in excess of 10 Days subject to fringe benefit tax/not

Answer 53

not

Question 54

Compensation income of supervisory and managerial employees. subject to fringe benefit tax/not

Answer 54

not

Question 55

Housing units situated inside or adjacent to business or factory (located within 50 meters from the perimeter of business). subject to fringe benefit tax/not

Answer 55

subject to fringe benefit tax

Question 56

House benefits to the Chief Finance Officer of the company subject to fringe benefit tax/not

Answer 56

subject to fringe benefit tax

Question 57

Allowances received by supervisory and managerial employees not subject to liquidation. subject to fringe benefit tax/not

Answer 57

subject to fringe benefit tax

Question 58

Used by employee of aircraft (including helicopters) owned/maintained by the employer. subject to fringe benefit tax/not

Answer 58

not

Question 59

Cost of 1st class or business class airplane ticket for business travel or convention abroad in excess of 70% subject to fringe benefit tax

Answer 59

subject to fringe benefit tax

Question 60

De minimis benefits received by an executive of a company. subject to fringe benefit tax/not

Answer 60

not

Question 61

Educational assistance (Master of Science in Accountancy) granted to Fe, the Finance Manager of ABC Company. No written contract was executed by Fe and ABC. subject to fringe benefit tax/not

Answer 61

subject to fringe benefit tax

Question 62

Premiums borne by the employer for the group insurance of its employees subject to fringe benefit tax/not

Answer 62

not

Question 63

Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans. subject to fringe benefit tax/not

Answer 63

not

Question 64

Reimbursement of transportation expenses paid to a messenger of the company subject to fringe benefit tax/not

Answer 64

not

Question 65

Contributions made by an employer to SSS, GSIS and similar contributions under existing laws in excess of what the law requires as contributions subject to fringe benefit tax/not

Answer 65

not