This is tabag income taxation for co-ownership, estate and trust.

Chapter Exercises - Co-ownership, Estates and Trust. 6. Question 1: Is a co-ownership taxable? Question 2: Is the share of 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. a. Answers to both questions are correct. Only the answer for Question 1 is wrong. C. Only the answer for Question 2 is wrong. d. Answers to both questions are wrong. 7. Statement 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. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false C. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true 8. When will an inherited property be considered as owned by an unregistered partnership? I. When the property remained undivided for more than ten (10) years. II. 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 a. Only condition I is required. b. Only condition II is required C. Conditions I and II are required d. None of the above 9. It composed of all the property, rights, and obligations of a deceased person which are not extinguished by his death, including those which Estate have accrued thereto since the opening of succession. b. Devisee C. Legatee d. Testator 214Chapter Exercises - Co-ownership, Estates and Trust. Use the following data for the next two (2) questions: In 2020, Mr. Nag-aalangan created a trust naming his eldest son Kadudaduda as revocable beneficiary who will receive the income of the trust' If the eldest son could not abide with the terms provided in the trust instrument, Mr. Nag-aalangan could change anytime the terms of the trust For the current taxable year, the trust earned a net income of P1,000,090 On the other hand, the grantor earned a compensation income of p P1,500,000 and business income of P1,000,000. No part of the income of the trust were distributed to the revocable beneficiary during the year. Determine the following: 39. The taxable income of the trust a. P1,000,000 C. P950,000 b. P980,000 d. nil 40. The taxable income of the grantor a. P1,000,000 C. P3,000,000 b. P2,500,000 d. P3,500,000 Use the following data for the next two (2) questions: On January 1, 2020, Francis established a trust fund for the benefit of his daughter, Princess. Francis appointed Atty. Lo Yer as the trustee. The property transferred to the trust is a piece of lot with a dormitory earning rental income. During the year, the trust earned P10,000,000 revenues and incurred expenses of P2,000,000. Out of the trust's income, Atty. Lo Yer gave Princess P1,500,000. In the same year, Princess earned compensation income of P1,850,000, net of withholding tax of P650,000. Determine the following: 41. Taxable income of the trust a. P5,000,000 b. P6,500,000 C. P8,000,000 d. P10,000,000 42. Taxable income of Princess a. P1,500,000 b. P1,850,000 C. P2,500,000 d. P4,000,000Trusts Chapter Exercises - Co-ownership, Estates and Trusts III. A trust where the income is accumulated for the benefit of interest. unborn or unascertained person or persons with contingent usts or 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, a. I and II only may be either distributed to the beneficiaries or accumulated. b. I, II and III only c., I, II, III and IV only d. I, II, III, IV and V 8. Statement 1: Revocable Trust is a trust in which the power to revest in party 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. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false C . Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true 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 ring that it exceeds the amount contributed by such employee or distributee. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true the d. Statements 1 and 2 are true 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: Prior to 2018, the income of the trust is allowed with a personal exemption of P20,000. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false C. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are trueChapter raises Co-ownership, Estates and Trusts yd 0,000 Required: Determine the following: 05,000 1. Income tax payable of the trust 2. Income tax payable of Pedro 220 , 0U.0 0,000 8,250 113,475 7,500 8,000 MULTIPLE CHOICE. Choose the letter of the correct answer. single 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 a. Partnership b. Trust C. Joint account Co-ownership 2. Which of the following shall qualify as co-ownership? I. Succession by several heirs to an undivided estate, the estate is not under administration; II. Donation of property to two or more beneficiaries. Ca. Both I and II was c. I only b. Neither I nor II or of d. II only Use the following data for the next three (3) questions: Ana, Lorna, and Fe, are the heirs of Pedro who died on Nov. 1, 2019. The properties of Pedro comprised solely of real property valued at P50,000,000 at the time of his death. The property is primarily deriving rental income. In 2020, 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 inherited property for the year 2020 as: a. Partners in a commercial partnership b. Partners in a general professional partnership c. Partners in an unregistered co-partnership d. Co-owners 4. What amount should be reported as taxable income of the co-ownership? C. P14,980,000 a. P50,000,000 nil b. P.15,000,000 5. What amount should each heir report in their individual returns as their share in the net rental income of the property they inherited? C. P10,000,000 a. P50,000,000 a P5,000,000 b. P15,000,000 213Chapter Exercises - Co-ownership, Estates and Trusts Use the following data for the next two (3) questions: In 2020, Mr. Mapagbigay created two (2) trusts for his minor son, Lucky. During the year, the two trusts earned net income as follows: Trust 1 Trust 2 P4,000,000 6,000,000 Each trust filed their own income tax return and paid the corresponding income tax due as computed in their separate returns. Determine the following: 43. Consolidated tax due of the Trust a. P1,1130,000 c. P3,1110,000 b. P1,770,000 d. nil 44. Additional income tax payable of Trust 1 a. P96,000 c. P1,130,000 b. P114,000 d. P1,770,000 45. Additional income tax payable of Trust 2 a. P96,000 c. P1,130,000 b. P114,000 d. P1,770,000Chapter Exercises - Co-ownership, Estates and Trug Personal Income/Expenses of the heirs: Louie P 325,000 Floyd Gross Income 117,000 P 380,000 Deductible expenses Dividend from domestic corporation 25,000 105,000 Dividend from foreign corporation 12,000 30,000 Prize, supermarket raffle 15,000 8,250 Royalty, books 10,000 7,500 18,000 Additional Information: MUL Louie is married with 2 dependent children while Floyd is single 1. If without dependent children. Required: Determine the following: 1. Income tax payable of the estate 3: 0, 010 2. Income tax payable of Louie 41070 3. Income tax payable of Floyd 2 . 18, 150 P4.3. (Trust) Mr. Masigasig created a trust in favor of Pedro. A large sum of money was entrusted to BDO (Trustee), the income of which is accumulated in favor of Pedro. The following data were provided: Gross income of the trust P3,000,000 Use Deductible business expenses of the trust 1,800,000 Ana Income distributed to Pedro during the year 200,000 prop Dividend income from domestic corporation 100,000 at th Dividend income from resident foreign corporation 100,000 202 Interest income from U.S. $ deposits 200,000 P15 Interest income from peso deposits 100,000 3 . Personal Income and Expenses of Pedro Compensation income 800,000 Rental income (net) 475,000 Rental expenses 80,000 Royalty income, books 300,000 Other royalty income 120,000 4. Dividend from domestic corporation 30,000 Dividend from foreign corporation 8,250 Prize, S&R raffle 15,000 Lotto winnings 10,000,000 5 . Tax payments (Quarter 1-3) 120,000 - 25,060rusts Chapter Exercises - Co-ownership, Estates and Trusts a. I only . The income of the revocable trust is taxable against the grantor. b. II only C. Both I and II d. Neither I nor II the 35. Which statement is true? Pre-tax income by a trust a. Is taxed to d to the beneficiary if such income is retained by the trust. as b. Is taxed to the trust if such income is distributed. income. c. Is taxed depending on who is in current possession of the e d. All of the above. e of 36. Statement 1: The income tax of irrevocable trust is taxable in the same manner as the income of the estate. 1 or Statement 2: In the case of two or more trusts created by the same person for the same beneficiary, the taxable income of all trusts shall be consolidated and the tax shall be based on the consolidated income a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false C . Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true 37. The income distributed to the beneficiaries of estates and trusts, except income subject to final withholding tax and income exempt from tax, is subject to a. Creditable withholding tax of 10% b. Creditable withholding tax of 15% c. Final withholding tax of 20% d. Neither final nor creditable withholding tax 38. Statement 1: Estates and trust can deduct from the gross income the same items of deductions authorized under the Tax Code as those allowed to individual taxpayers. Statement 2: The scheduler tax rates under Section 24(A), which are prescribed for individuals, will be used in computing the income tax of estates and trusts. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false C. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are truerust Chapter 31. The following statements refer to the rules in determining the taxable income and the applicable income tax liability of a trust. Which of the following statements is/are correct? I. The items of gross income of the trust are the same items as the items of gross income of individual taxpayers. II. Deductions from the gross income of the trust 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 trust is allowed to deduct the amount of income of the trust during the taxable year that is paid or credited to the legatee, heir or beneficiary. IV. The amount of income of the trust during the year that is paid or credited to the legatee, heir or beneficiary is subject to final withholding tax of 15%. a. I and II only c. I, II, III and IV b. I, II and III only d. None of the above 32. Which of the following statements is not correct? a. An irrevocable trust is subject to income tax. b. An irrevocable trust is taxed in the same manner as an individual taxpayer. C. Prior to 2018, a taxable trust is allowed to claim personal exemption of P20,000. d. An irrevocable trust is taxed at a rate of 30% of net taxable income 33. Which of the following income of the trust is not taxable to the trust? a. Income of a trust which is to be accumulated or held for future distribution consisting of ordinary income or gain from the sale of assets included in the corpus of the trust. b. Income of a trust, whether created by will or deed, for accumulation of income, whether for an unascertained person or persons with contingent interest or otherwise. C. Income of a trust, where under the terms of a will or deed, the trustee may, in his discretion, distribute the income and accumulate it. d. Income of a trust, which in full in part, is subject to revocation anytime. 34. Which of the following statements is correct regarding revocable trusts? I. A revocable trust exists when the grantor reserves the right to revoke his power to change at any time any part of the terms of the trust. 220trusts Chapter Leraises - Co-ownership, Estates and Trusts ion, the 18. Statement 1: The income of the estate distributed to the beneficiary during the year is subject to fina final withholding tax of 15%. tion, the Statement 2: The withholding tax on the income distributed to the beneficiary is creditable against the total tax liability of the beneficiary. a! Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false d . Statement 1 is false but statement 2 is true Statements 1 and 2 are true ill be 19. Statement 1: Where prior to the settlement of the estate, the executor erty. 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 ear, profit derived. heir, or a. Statements 1 & 2 are false the b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true s of Use the following data for the next two questions: Namahinga Nha died lin 2019 eaving an estate worth P10,000,000. The estate is under administration. In 2020, 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 a. P480,000 C. P310,000 d. P330,000 of b. P450,000 21. Assume that Francis, head of the family, also earned net income of P500,000 from his trading business. What amount should Francis report the as his taxable income for 2020? c. P500,000 a. P620,000 d. P450,000 b. P570,000 22. An agreement created by will or an agreement under which title to y 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. c. Fiduciary a. Estate d. Beneficiary b. Trust 217PROBLEMS p4.1. (Estate) pedro died two (2) years ago leaving an undivided property deriving income from rentals. His heirs were Louie and Floyd. The property is under administration through the decedent's executor. The following data were provided during the taxable year: Rental income of the estate (gross of 5% tax) Deductible operating expenses - estate P800,000 420,000 Personal Income/Expenses of the heirs: Gross business income Louie Floyd P 325,000 Deductible business expenses P 380,000 117,000 Dividend from domestic corporation 105,000 25,000 Dividend from foreign corporation 30,000 12,000 8,250 Prize, supermarket raffle 15,000 7,500 Royalty, books 10,000 18,000 Additional Information: Louie is married with 2 dependent children while Floyd is single without dependent children. Required: Determine the following: 1. Income tax payable of the estate 24 , 0 2. Income tax payable of Louie 3. Income tax payable of Floyd 8 150 P4.2. (Estate) Pedro died two (2) years ago leaving an undivided property deriving income from rentals. His heirs were Louie and Floyd. The property is under administration through the decedent's executor. The following data were provided during the taxable year: Rental income of the estate P1,000,000 Deductible operating expenses (estate) 500,000 Income distributed to Louie 50,000 Income distributed to Floyd 50,000 Dividend income from domestic corporation 100,000 Interest income from U.S. $ deposits 200,000 Interest income from peso deposits 100,000rusts Chapter Exercises - Co-vinership, Estates and Trusts 10. Income received by the estate during the period of administration of settlement of the estate, for tax purposes is known as Ca. Income of the estate b. Income of the heirs ers C. Income of the trustee d. Income of the testator of 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. ed Statement 2: The income from the estate is no longer allowed to deduct personal exemption of P20,000 upon effectivity of RA10963. a. Statements 1 & 2 are false C . b. Statement 1 is true but statement 2 is false d. Statement 1 is false but statement 2 is true Statements 1 and 2 are true 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%. a. I and II only c. I, II, III and IV b I, II and III only d. None of the above 13. Which of the following is included in the income of the estate of a decedent? a. Income received by the estate of a deceased person during the period of administration or settlement of the estate. b. 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. C. Appreciation in the value of property passed to the executor or administrator upon death of decedent. d. Delivery of property in kind to legatee or devisee.Chapter Exercises - Co-ownership, Estates and Trust. 23. Estates and trust are a. Treated as separate taxable entities. b. The tabular rates of tax prescribed under Section 24A for individuals shall be used in computing the income tax of trusts or estates. Personal exemption is no longer allowed to be deducted C. beginning January 1, 2018 d. All of the above 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. a. I, II and III c. I and III only b. I and II only d. I only 25. The following are the classifications of Trusts, except a. Ordinary trust b. Revocable trust Irrevocable trust d. Employer's trust 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. a. I only b. II only c. IV only d. III and IV only 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 II. distribution under the terms of a testamentary trust. A trust where the income is to be distributed currently by the fiduciary to the beneficiaries.Chapter Exercises crust 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 a. Statements 1 & 2 are false . Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true 15. When an individual taxpayer dies, future income on his property will be taxed to a Those who inherit the property after they receive the property. . The estate itself, after the heirs have received the property. c. The individual himself. d. None of the above. 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. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false C. Statement 1 is false but statement 2 is true Statements 1 and 2 are true 17. Statement 1: When an estate, under administration, has income- producing properties, the annualincome 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. a. Statements 1 & 2 are false C. b. Statement 1 is true but statement 2 is false Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true