Estate Tax Quiz: Test Your Knowledge with Our Quizzer

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Questions and Answers

What is the key difference between donor's tax and estate tax?

Donor's tax has a higher tax rate compared to estate tax.

Donor's tax applies to inter-vivos transfers, while estate tax applies to transfers upon death. (correct)

Donor's tax has an annual filing requirement, while estate tax is a one-time tax.

Donor's tax is levied on the recipient, while estate tax is levied on the donor's estate.

Which of the following is a type of transfer that would be subject to estate tax?

A gift from a living donor to a living donee.

The transfer of a deceased person's assets to their heirs. (correct)

The sale of a property for fair market value.

The transfer of a business interest in exchange for shares in another company.

What is the key requirement for a transfer to be considered 'gratuitous' and subject to transfer taxes?

The transfer must be made between related parties, such as family members.

The transfer must be made in contemplation of the donor's death.

The transfer must be made in exchange for a specific consideration or undertaking from the recipient.

The transfer must be made out of generosity, with no expectation of anything in return. (correct)

What is the deadline for filing and paying the donor's tax?

Within 30 days from the date of the donation. (C) Signup and view all the answers

Which of the following transfers would be subject to estate tax?

A transfer of property by a deceased person to their heirs. (D) Signup and view all the answers

What is the tax base for the donor's tax?

The fair market value of the property transferred, less a $250,000 exemption. (C) Signup and view all the answers

What type of tax is levied on the net properties left by a decedent?

Estate tax (D) Signup and view all the answers

When is the estate tax due?

1 year from the date of death (D) Signup and view all the answers

What is a transfer in contemplation of death?

A donation motivated by the thought of death, even if made during the donor's lifetime (A) Signup and view all the answers

Which of the following transfers would be subject to estate tax?

A donation made in the decedent's will, to take effect upon their death (B) Signup and view all the answers

What is a complex transfer?

A transfer that is less than full and adequate consideration, where the sales price is lower than the fair value (B) Signup and view all the answers

If a donor donates property to their spouse while battling a terminal illness, would this transfer be subject to estate tax?

Yes, because the donation is made in contemplation of death (C) Signup and view all the answers

When does a donation become subject to donor's tax?

When Peter waives the condition (C) Signup and view all the answers

What type of tax is imposed on a donation that occurs after the donor's death, before the fulfillment of a condition?

Estate tax (C) Signup and view all the answers

Which theory suggests that the government should tax wealth transfers to redistribute wealth?

Wealth redistribution theory (A) Signup and view all the answers

According to the state-partnership theory, why should the government impose transfer taxes?

To take its fair share as an indirect partner in wealth accumulation (D) Signup and view all the answers

Which characteristic of transfer taxes is highlighted in the given information?

Transfer taxes are imposed on the privilege of transferring properties (A) Signup and view all the answers

According to the ability to pay theory, why should wealth transfers be taxed?

To tax the manifestation of a person's capability to pay tax (D) Signup and view all the answers

Study Notes

Transfer Taxation

Transfer taxation is the taxation of transfers, but strictly speaking, it only applies to gratuitous transfers.
Gratuitous transfers are unilateral transactions that do not require an equivalent undertaking from the counterparty.

Concept Structure of Transfers

Consideration is the key to distinguishing between gratuitous and onerous transactions.
Gratuitous transactions are characterized by the generosity of one party, with no expectation to receive something in return.
Examples of gratuitous transactions include succession and donation.
Onerous transactions involve the undertaking of the counterparty, with the expectation of receiving something in return.
Examples of onerous transactions include sales, barter, and other onerous dispositions.

Types of Transfer Taxes

Donor's Tax: a tax on inter-vivos transfers, where a living donor transfers property to a living donee.
The tax is imposed on the donor, with a net gift threshold of ₱250,000.
The deadline for filing and payment is 30 days from the date of donation.
Estate Tax: a tax on mortis-causa transfers, where property is transferred upon death.
The tax is imposed on the estate, with a net estate threshold of ₱5,000,000.
The deadline for filing and payment is 1 year from the date of death.

Special Scenarios in Transfer Taxation

Transfer in contemplation of death: a donation motivated by the thought of death is considered a donation mortis-causa, subject to estate tax.
Transfer to take effect upon death: a donation made on the decedent's last will and testament is a donation mortis-causa, subject to estate tax.
Complex transfer: a transfer that is less than full and adequate consideration, where the sales price is sufficiently lower than the fair value of the property.

Why Impose Transfer Taxes?

State-Partnership Theory: the government is an indirect partner in all forms of wealth accumulation, and should take its fair share by taxing the transfer of wealth.
Ability to Pay Theory: transferring properties is a manifestation of a person's capability to pay tax.
Wealth Redistribution Theory: taxation is a tool used to redistribute wealth from the rich to the poor.

Nature and Characteristics of Transfer Taxes

Privilege/Excise Tax: imposed on the exercise of the privilege to transfer properties through succession or donation.
Transfer taxes are not imposed to tax properties, but to tax the exercise of a person's right to transfer.

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Description

Test your knowledge on estate tax, net estate, heirs, beneficiaries, and special scenarios in transfer taxation like transfers in contemplation of death. Explore concepts related to one-time tax payment from the decedent's properties and the time limit for settling the net estate.