89 05 Estate and Trust Taxation PDF Free

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CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
ESTATES AND TRUSTS Dela Cruz / De Vera / Llamado
1. The property, rights and obligations of a person which are not extinguished by his death and those
which accrued thereto since the opening of succession.
a. Assets b. Capital c. Estate d. Income
2. The term applied to the person whose property is transmitted through succession, whether or not he
left a will
a. Decedent b. Transferor c. Transferee d. Grantor
3. The term applied to the answer in No. 2 if he left a will

a. Transferor b. Grantor c. Donor d. Testator
4. The person called to the succession either by the provision of a will or by operation of law
a. Heir b. Devisee c. Legatee d. Trustor
5. The person to whom a gift of real property is given by virtue of a will

6. The person to whom a gift of personal property is given by virtue of a will

7. The person who establishes a trust

8. The person in whom confidence is reposed as regards property for the benefit of another person
a. Devisee b. Trustee c. Legatee d. Heir
9. The person for whose benefit a trust has been created

a. Legatee b. Heir c. Beneficiary d. Trustee
10. For income tax purposes, any person or corporation that holds in trust an estate (or property) of
another person or persons
a. Beneficiary
b. Fiduciary
c. Legatee
d. Devisee
11. Which of the following statements is correct?

a. Estates and trusts are allowed a personal exemption of P50,000 if the executor or trustee is
married.
b. The income tax rates for corporate taxpayers apply to taxable estates and trusts.
c. The taxable year of estates and trusts may be calendar or fiscal year.
d. For a trust to be taxable, it must be irrevocable, both as to corpus (principal) and income.
12. Amark Pineda died on January 2, 2019, survived by his wife and four dependent children. He left a
net estate of ₱80,000,000 which is in the hands of an executor. In 2019, the estate had gross receipts
of ₱6,000,000, cost of sales of ₱2,500,000, business expenses of P200,000, and non-operating income
of ₱350,000. The net taxable income of the estate in 2019 is:
a. ₱800,000 c. ₱3,650,000
b. ₱650,000 d. None of the above.
Tax 89-05
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13. Lola Lilia died on January 2, 2019 leaving a net estate of ₱40,000,000. The estate is in the hands of an
executor. Benji (nephew of Lilia) and Grapes (niece of Lilia) were designated as heirs in Lola Lilia’s
will.
In 2019, the estate had a gross income of ₱2,500,000 and expenses of ₱750,000 on the properties in
the estate. In the same year, the executor distributed the following:
From the properties of the estate ₱250,000

From the estate’s income, to Benji (net of 15% CWT) 187,000
From the estate’s income, to Grapes (net of 15% CWT) 221,000
Benji, a CPA, earned professional fees in 2019 in the amount of ₱760,000, and incurred cost of
services and operating expenses of ₱100,000 and ₱12,000 respectively.
Compute the income tax payable/(refundable) of the estate, Benji (who chose OSD), and Grapes (who
chose to be taxed under the 8% tax regime) in 2019.
a) ₱271,000; ₱44,000; ₱(38,200)

b) ₱199,000; ₱44,000; ₱(38,200)
c) ₱271,000; ₱77,000; ₱8,000
d) None of the above.
14. In 2018, Don Juan created a trust for his daughter Bella, and appointed Atty. Chris as the trustee. In
2019, the property Don Juan transferred to the trust, a 10-door apartment, earned rental income of
P237,500 per month, net of 5% withholding tax. Annual cost of revenues of P500,000, and deductible
expenses of P380,000 were incurred in the same year. 30% of the net income of the trust was given
to Bella in 2019.
Determine the income tax still due or income tax payable from the trust in 2019.
a) ₱161,200
b) ₱335,200
c) ₱185,200
15. Don Ybarra cut relations with his son for disobeying his wishes. However, since he wanted to
continue taking care of his 2 grandchildren, he decided to establish a trust for the benefit of the two.
In 2018, he established such a trust, appointed Atty. Damaso as trustee, and donated thereto the
following income-producing properties:
(1) A vacant lot with rentals of ₱200,000 monthly, gross of withholding tax of 5%; and
(2) An office building with a monthly rental income of ₱95,000, net of withholding tax of 5%.
In 2019, ordinary trust expenses totaled ₱1.3 Million, of which ₱300,000 was non-deductible for tax
purposes. Atty. Damaso distributed to each of the beneficiaries ₱212,500 each, net of the 15% CWT.
Compute income tax payable of the trust in taxable year 2019.
a) ₱267,000
b) ₱522,000
c) ₱342,000
Tax 89-05
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16. Almira created two trusts, Trust 1 and Trust 2 with different trustees but with a common beneficiary.
The following data pertain to the trusts and the beneficiary’s own account:
Trust 1 Trust 2 Beneficiary

Gross Income P450,000 P1,090,000 P250,000
Allowable Deductions 75,000 125,000 100,000
Income distributed to beneficiary
(gross of CWT) 150,000 175,000
If the BIR decides to consolidate the taxable income of the 2 trusts, how much income tax shall be
paid by Trust 1 and Trust 2, respectively?
(a) ₱43,116 ; ₱151,384

(b) ₱0 ; ₱127,500
(c) ₱127,500; ₱194,500
(d) None of the above
The End!!!
Tax 89-05

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CPA REVIEW SCHOOL OF THE PHILIPPINES

ESTATES AND TRUSTS Dela Cruz / De Vera / Llamado

3. The term applied to the answer in No. 2 if he left a will

5. The person to whom a gift of real property is given by virtue of a will

6. The person to whom a gift of personal property is given by virtue of a will

7. The person who establishes a trust

9. The person for whose benefit a trust has been created

11. Which of the following statements is correct?

From the properties of the estate ₱250,000

a) ₱271,000; ₱44,000; ₱(38,200)

Compute income tax payable of the trust in taxable year 2019.

d) None of the above.

Trust 1 Trust 2 Beneficiary

(a) ₱43,116 ; ₱151,384

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