TEST I- MCQ1. An act of liberty whereby one disposes gratuitous of a thing or right in favorof another who accepts it-a. Succession c. Donationb. Occupation d. Tradition2. A tax iposed on the gratuitous transfer of property between two or oreperson who are living at the tie the transfer is adea. !state tax c. "ncoe taxb. #ift tax d. Transfer tax$. A donation ade by a stoc%holder to a corporation is sub&ect to donor's taxbecause of the following principles( excepta. !ntity theory c.)ene*t received principleb. +ifeblood theory d.Tax bene*t rule,. -hat is the tax iplication if a corporation condones the debt of astoc%holder because of a good thing done by the latter to the corporation.a. The condonation is based on the liberality of the corporation/ therefore( itis sub&ect to donor's tax.b. The condonation is sub&ect to donor's tax on the corporation because it isbased on its liberality.0oreover( it is e1uivalent to a payent of dividendto the stoc%holder which is( therefore( sub&ect to a dividend tax of 123.c. "t is tantaount to a declaration of dividend. Therefore( it is an incoewhich is sub&ect to 123 dividend tax on the stoc%holder. 4owever( it isnot sub&ect to donor's tax on the corporation.d. "t is &ust a siple case of extinguishent of an obligation which is neithersub&ect to incoe tax on the stoc%holder not sub&ect to donor's tax on thecorporation.5. A)DO6 went to A+A0)7A 7!SO7T and was given a pri8e of 952( 222.22 bytheresortforbeingits1(222thguest. "sthepri8esub&ecttodonor'stax."ncoe Tax.Donors Tax "ncoe taxa.:es:esb.6o :esc. :es6od. 6o6o;. The following are the re1uisites of a donation for purposes of the donor's tax(except/a.