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POSADAS Article 657 of the Civil Code provides "the rights to the succession of a person
June 28, 1934 | J. Laurel are transmitted from the moment of his death." The heirs succeed immediately
to all of the property of the deceased ancestor. The property belongs to the heirs
DOCTRINE(S): at the moment of the death of the ancestor as completely as if the ancestor had
1. Succession takes place in any event at the moment of the decedent's death. executed and delivered to them a deed for the same before his death." While
The time when the heirs legally succeed to the inheritance may differ from article 657 of the Civil Code is applicable to testate and intestate succession, it
the time when the heirs actually receive such inheritance. operates only in so far as forced heirs are concerned. (WRONG)
2. The right of the state to an inheritance tax accrues at the moment of death,
and hence is ordinarily measured as to any beneficiary by the value at that 1. The accrual of the inheritance tax is distinct from the obligation to pay the
time of such property as passes to him. Subsequent appreciation or same. Section 1536 of the Administrative Code, imposes the tax upon
depreciation is immaterial. "every transmission by virtue of inheritance, devise, bequest, gift mortis
3. The general rule is that inheritance taxation is governed by the statute in causa, or advance in anticipation of inheritance, devise, or bequest." The
force at the time of the death of the decedent. tax is upon transmission or the transfer or devolution of property of a
4. If payment of the tax could be postponed or delayed by the period of the decedent, made effective by his death.
creation of a trust, the result would be disastrous, as it would leave the 2. The language of article 657 of the Civil Code is broad and makes no
collection of the taxes to the will of a private individual. distinction between different classes of heirs. It does not speak of forced
heirs; it does not even use the word "heir". It speaks of the rights of
FACTS: Thomas Hanley died in Zamboanga, leaving a will and properties. The succession and the transmission from the moment of death.
will, which was admitted to probate, provided that 3. Whatever may be the time when actual transmission of the inheritance
4. I direct that any money left by me be given to my nephew Matthew Hanley. takes place, succession takes place in any event at the moment of the
decedent's death. The time when the heirs legally succeed to the
5. I direct that all real estate owned by me at the time of my death be not inheritance may differ from the time when the heirs actually receive such
sold or otherwise disposed of for a period of ten (10) years after my death, inheritance.
and that the same be handled and managed by the executors, and proceeds 4. Though Thomas Hanley died on May 27, 1922, it does not follow the
thereof to be given to my nephew, Matthew Hanley, at Castlemore, obligation to pay the tax arose as of the date. The time for the payment on
Ballaghaderine, County of Rosecommon, Ireland, and that he be directed that the inheritance tax is fixed by section 1544 of the Revised Administrative Code
same be used only for the education of my brother's children and their as amended by Act No. 3031, in relation to section 1543 of the same Code.
descendants. The instant case does fall under subsection (a), but under subsection (b),
of section 1544, as there are no fiduciary heirs, first heirs, legatee or donee.
6. I direct that ten (10) years after my death my property be given to the The tax should have been paid before the delivery of the properties in
above mentioned Matthew Hanley to be disposed of in the way he thinks question to Moore as trustee on March 10, 1924.
most advantageous.
Should the inheritance tax be computed on the basis of the value of the
xxx xxx xxx estate at the time of the testator's death, or on its value ten years later?

8. I state at this time I have one brother living, named Malachi Hanley, and that Lorenzo: The estate of Thomas Hanley, in so far as the real properties are
my nephew, Matthew Hanley, is a son of my said brother, Malachi Hanley. concerned, did not and could not legally pass to the instituted heir, Matthew
The CFI appointed P.J. Moore as trustee and plaintiff Pablo Lorenzo took over as Hanley, until after the expiration of ten years from the death of the testator and
trustee upon the formers resignation. Defendant Juan Posadas Jr, as Collector of the inheritance tax should be based on the value of the estate 10 years after the
Internal Revenue assessed P2052.74 with penalties and surcharges. Plaintiff testator's death. (WRONG)
paid the amount under protest, which defendant denied.
1. The right of the state to an inheritance tax accrues at the moment of death,
ISSUE(S): and is ordinarily measured as to any beneficiary by the value at that time of
When does inheritance tax accrue and when is it satisfied? such property passes to him. Subsequent appreciation or depreciation is
In determining the net value of the estate subject to tax, is it proper to of the laws. Delivery of the estate to the trustee was in esse delivery of the
deduct the compensation due to trustees? same estate to the cestui que trust, the beneficiary in this case.
2. If payment of the tax could be postponed or delayed by the creation of a
Lorenzo: The compensation and fees of the trustees should be deducted under trust of the type at hand, the result would be plainly disastrous. Testators
section 1539 of the Revised Administrative Code which provides, in part, as may provide, as Thomas Hanley has provided, that their estates be not
follows: "In order to determine the net sum which must bear the tax, when an delivered to their beneficiaries until after the lapse of a certain period of
inheritance is concerned, there shall be deducted, in case of a resident, . . . the time. Here the period is ten years. In other cases, the trust may last for fifty
judicial expenses of the testamentary or intestate proceedings, . . . ." (WRONG) years, or for a longer period which does not offend the rule against
petuities. The collection of the tax would be left to the will of a private
1. There is no statute in the Philippines which requires trustees' commissions individual.
to be deducted in determining the net value of the estate subject to
inheritance tax.
2. Though a testamentary trust has been created, it does not appear Thomas
Hanley intended the duties of his executors and trustees should be

What law governs the case at bar? Should the provisions of Act No. 3606
favorable to the tax-payer be given retroactive effect?

Posadas: Certain provisions of Act No. 3606 are more favorable to the taxpayer
than those of Act No. 3031. The provisions are penal in nature and should
operate retroactively in conformity with the provisions of article 22 of the RPC.

1. The general rule is that inheritance taxation is governed by the statute in

force at the time of the death of the decedent. The taxpayer can not foresee
and ought not to be required to guess the outcome of pending measures. A
tax statute may be made retroactive in its operation but legislative intent
that a tax statute should operate retroactively should be perfectly clear.
2. Revenue laws, generally, which impose taxes collected by the means
ordinarily resorted to for the collection of taxes are not classed as penal

Has there been deliquency in the payment of the inheritance tax? If so,
should the additional interest claimed by the defendant in his appeal be
paid by the estate?

Posadas: Delivery to the trustee was delivery to the cestui que trust, the
beneficiary, within the meaning of the first paragraph of subsection (b) of
section 1544 of the Revised Administrative Code. (CORRECT)

1. Moore became trustee on March 10, 1924 and on that date trust estate
vested in him. The mere fact the estate of the deceased was placed in trust
did not remove it from the operation of inheritance tax laws or exempt it
from the payment of the inheritance tax. The corresponding inheritance tax
should have been paid on or before March 10, 1924, to escape the penalties
Collector of Internal Revenue vs. Fisher Section122 of the NIRC provides that No tax shall be collected under this Title
GR. No. L-11622 in respect of intangible personal property
January 28, 1961 (a) if the decedent at the time of his death was a resident of a foreign country
which at the time of his death did not impose a transfer of tax or death tax of
DOCTRINE: any character in respect of intangible personal property of citizens of the
Reciprocity must be total. If any of the two states collects or imposes or does not Philippines not residing in that foreign country, or
exempt any transfer, death, legacy or succession tax of any character, the (b) if the laws of the foreign country of which the decedent was a resident at the
reciprocity does not work. time of his death allow a similar exemption from transfer taxes or death taxes of
every character in respect of intangible personal property owned by citizens of
FACTS: the Philippines not residing in that foreign country."
Walter G. Stevenson was born in the Philippines of British parents, married in On the other hand, Section 13851 of the California Inheritance Tax Law provides
Manila to another British subject, Beatrice. He died in 1951 in California where that intangible personal property is exempt from tax if the decedent at the time
he and his wife moved to. of his death was a resident of a territory or another State of the United States or
In his will, he instituted Beatrice as his sole heiress to certain real and personal of a foreign state or country which then imposed a legacy, succession, or death
properties, among which are 210,000 shares of stocks in Mindanao Mother Lode tax in respect to intangible personal property of its own residents, but either:.
Mines (Mines). Did not impose a legacy, succession, or death tax of any character in respect to
Ian Murray Statt (Statt), the appointed ancillary administrator of his estate filed intangible personal property of residents of this State, or
an estate and inheritance tax return. He made a preliminary return to secure the Had in its laws a reciprocal provision under which intangible personal property
waiver of the CIR on the inheritance of the Mines shares of stock. of a non-resident was exempt from legacy, succession, or death taxes of every
In 1952, Beatrice assigned all her rights and interests in the estate to the character if the Territory or other State of the United States or foreign state or
spouses Fisher. country in which the nonresident resided allowed a similar exemption in
Statt filed an amended estate and inheritance tax return claiming ADDITIOANL respect to intangible personal property of residents of the Territory or State of
EXEMPTIONS, one of which is the estate and inheritance tax on the Mines the United States or foreign state or country of residence of the decedent."
shares of stock pursuant to a reciprocity proviso in the NIRC, hence, warranting
a refund from what he initially paid. The collector denied the claim. He then filed
in the CFI of Manila for the said amount.
CFI ruled that (a) the share of Beatrice should be deducted from the net
estate of Walter, (b) the intangible personal property belonging to the estate of
Walter is exempt from inheritance tax pursuant to the reciprocity proviso in
Whether or not the estate can avail itself of the reciprocity proviso in the NIRC
granting exemption from the payment of taxes for the Mines shares of stock.
Reciprocity must be total. If any of the two states collects or imposes or does not
exempt any transfer, death, legacy or succession tax of any character, the
reciprocity does not work.
In the Philippines, upon the death of any citizen or resident, or non-resident
with properties, there are imposed upon his estate, both an estate and an
inheritance tax.
But, under the laws of California, only inheritance tax is imposed. Also,
although the Federal Internal Revenue Code imposes an estate tax, it does not
grant exemption on the basis of reciprocity. Thus, a Filipino citizen shall always
be at a disadvantage. This is not what the legislators intended.
Roces v Posadas Also, it does not violate uniformity. There would be a repugnant and arbitrary
GR No. L-34937 / 13 Mar 1933 / J. Imperial exception if the provisions of the law were not applicable to all donees of the
same kind.
Esperanza Tuazon donated lands in Manila to plaintiffs spouses Roces and
Richards who accepted them in the public documents used as instrument of
donation, on March 10 and 12, 1925. On Jan 5, 1926, Esperanza died without
copulsory heir, and left P5,000 pesos each to the plaintiff spouses.

Plaintiffs paid under protest, and filed a complaint with the Manila CFI. Appellee
CIR demurred stating lack of cause of action, which the court granted. Hence
appeal by the plaintiffs.

Appellee CIR wanted plaintiffs to pay inheritance taxes on both the donations
and the legacy of P5,000. Under Sec. 1540 of the Admin Code, it says:

SEC. 1540. Additions of gifts and advances. After the aforementioned

deductions have been made, there shall be added to the resulting amount the
value of all gifts or advances made by the predecessor to any those who, after his
death, shall prove to be his heirs, devisees, legatees, or donees mortis causa.

CIR says this covers all gifts, even donations inter vivos.

Plaintiffs says:,
1. It violates Sec. 3 of the Jones Law which provides that no law should
embrace more than one subject, and that subject should be expressed in
the title thereof;
2. The Legislature has no authority to impose inheritance tax on
donations inter vivos;
3. A legal provision of this character contravenes the fundamental rule of
uniformity of taxation.

W/N donations inter vivos in this case are covered. YES.

This is a transfer inter vivos in contemplation of death. If it was not made in
contemplation of death, then it cannot be included in Sec. 1540. The expression
all gifts refers to gifts inter vivos inasmuch as the law considers them as
advances on inheritance, in the sense that they are gifts inter vivos made in
contemplation or in consideration of death. This is because the donees were
later instituted as legatees.

It does not violate Sec. 3 of the Jones Law because the title of Art. IX is Tax on
Inheritance, etc.
DISON v POSADAS notion that the transaction between him and his father was a consummated
G.R. No. L-36770 November 4, 1932 gift with no relation to the inheritance, we hold that there is not merit in
this attack upon the constitutionality of section 1540 under our view of the
Facts: facts. No other constitutional questions were raised in this case.
The petitioner alleged in his complaint that the inheritance tax imposed is
illegal because he received the property, which is the basis of the tax, from
his father before his death by a deed of gift inter vivos which was duly
accepted and registered before the death of his father.
This deed of gift transferred twenty-two tracts of land to the donee,
reserving to the donor for his life the usufruct of three tracts. This deed
was acknowledged by the donor before a notary public on April 16, 1928.
The theory of the plaintiff-appellant is that he received and holds the
property mentioned by a consummated gift and that Act No. 2601 (Chapter
40 of the Administrative Code) being the inheritance tax statute, does not
tax gifts. The provision directly here involved is section 1540 of the
Administrative Code which reads as follows:
Additions of Gifts and Advances. After the aforementioned deductions
have been made, there shall be added to the resulting amount the value
of all gifts or advances made by the predecessor to any of those who,
after his death, shall prove to be his heirs, devises, legatees, or
donees mortis causa.
Does section 1540 of the Administrative Code subject the plaintiff-
appellant to the payment of an inheritance tax?
Ratio and Ruling:
The facts warrant the inference that the transfer was an advancement upon
the inheritance which the donee, as the sole and forced heir of the donor,
would be entitled to receive upon the death of the donor.
The argument advanced by the appellant that he is not an heir of his
deceased father within the meaning of section 1540 of the
Administrative Code because his father in his lifetime had given the
appellant all his property and left no property to be inherited, is so
fallacious that the urging of it here casts a suspicion upon the appellants
reason for completing the legal formalities of the transfer on the eve of the
latter's death.
Section 1540 "any of those who, after his death, shall prove to be his heirs",
to include intestate heirs. As an advance made by Felix Dison to his only
child, we hold section 1540 to be applicable and the tax to have been
properly assessed by the Collector of Internal Revenue.
Section (1540) the law presumes that such gifts have been made in
anticipation of inheritance, devise, bequest, or gift mortis causa, when the
donee, after the death of the donor proves to be his heir, devisee or
donee mortis causa, for the purpose of evading the tax, and it is to prevent
this that it provides that they shall be added to the resulting amount."
However much appellant's argument on this point may fit his preconceived
Estate of Hilario Ruiz v CA OZAETA v PALANCA

G.R. No. 118671. January 29, 1996 G.R. No. L-9776 July 31, 1957

Hilario M. Ruiz executed a holographic will naming as his heirs his only son, On May 5, 1955, the special administrator filed a petition in court for authority
Edmond Ruiz, his adopted daughter, private respondent Maria Pilar Ruiz to pay the accounting firm of Sycip, Gorres, Velayo & Co. the sum of P3,650, for
Montes, and his three granddaughters, services rendered in taking inventory of assets in 1950, tax consultations in
1950 to 1954, and preparation of income tax returns for 1953 and 1954. The
On April 12, 1988, Hilario Ruiz died. court below denied this motion, on the ground that the services covered by the
fees of the accounting firm were rendered to the former special administrator
On June 29, 1992, four years after the testators death, it was private respondent Philippine Trust Company
Maria Pilar Ruiz Montes who filed before the Regional Trial Court, Branch 156,
Pasig, a petition for the probate and approval of Hilario Ruizs will and for the ISSUE:
issuance of letters testamentary to Edmond Ruiz whether the services rendered to the special administrator named in the will,
previous to his actual appointment as such and at his instance, are chargeable
ISSUE: against the estate.
whether the probate court, after admitting the will to probate but before
payment of the estates debts and obligations, has the authority: (1) to grant an
Whoever may have contracted the services of the accountants, whether it was
allowance from the funds of the estate for the support of the testators
Mr. Ozaeta before his appointment or the Philippine Trust, such services were
grandchildren; (2) to order the release of the titles to certain heirs; and (3) to
for the benefit of the estate and have redounded to the estate's benefit.
grant possession of all properties of the estate to the executor of the will.
The general rule is that acts done by an executor in the interest of his trust, prior
RULING: to his qualification as such, become binding on the estate upon his qualification.

1. No. Be that as it may, grandchildren are not entitled to provisional support There is no question that the services rendered were for the benefit of the
from the funds of the decedents estate. The law clearly limits the allowance to estate. The Rules require that the administrator should submit an inventory of
widow and children and does not extend it to the deceaseds grandchildren, the properties of the estate within three months from his appointment
regardless of their minority or incapacity.

2. No. No distribution shall be allowed until the payment of the obligations

above-mentioned has been made or provided for, unless the distributees, or any
of them, give a bond, in a sum to be fixed by the court, conditioned for the
payment of said obligations within such time as the court directs.

3. No. The right of an executor or administrator to the possession and

management of the real and personal properties of the deceased is not absolute
and can only be exercised so long as it is necessary for the payment of the debts
and expenses of administration, He cannot unilaterally assign to himself and
possess all his parents properties and the fruits thereof without first submitting
an inventory and appraisal of all real and personal properties of the deceased,
rendering a true account of his administration, the expenses of administration,
the amount of the obligations and estate tax, all of which are subject to a
determination by the court as to their veracity, propriety and justness.
Sison v. Teodoro
In the matter of the testate estate of the late DA. MARGARITA DAVID. FACTS: Elsie M. Gaches died on March 9, 1966 without a child. The deceased,
CARLOS MORAN SISON, Judicial Administrator, petitioner-appellant, however, left a last will and testament giving properties to several persons.
vs. Judge Tan was appointed as executor of the testate estate of Elsie M. Gaches
NARCISA F. TEODORO, heiress, oppositor-appellee. without a bond.
EN BANC | G.R. No. L-9271 | March 29, 1957 | BAUTISTA ANGELO, J. In a letter, dated June 3, 1966, Judge Tan informed the Commissioner that the
FACTS: testate estate was worth about ten million (P10 million) pesos and that the
CFI Manila (re: the estate of the late Margarita David) issued an order estate and inheritance taxes due thereon were about P9.5 million.
appointing Carlos Moran Sison as judicial administrator, without After several reassessments, the case ultimately came to the Supreme Court.
compensation, after filing a bond. ISSUES:
The next day, he took his oath of office and put up the requisite bond (1) Should the herein respondent heirs be required to pay first the inheritance
which was duly approved by the court. Letters of administration were tax before the probate court may authorize the delivery of the hereditary share
issued to him. pertaining to each of them?
He filed an accounting of his administration which contains, among (2) Are the respondent heirs herein who are citizens and residents of the
others, disbursement items paid to Visayan Surety & Insurance Philippines liable for the payment of the Philippine inheritance tax
Corporation, as renewal premiums on his Administrator's bond. corresponding to the hereditary share of another heir who is a citizen and
Narcisa F. Teodoro, one of the heirs, objected to the approval on the resident of the United States of America. said share of the latter consisting of
grounds that they are not necessary expenses of administration and personal (cash deposits and, shares) properties located in the mentioned court
should not be charged against the estate. (3) Does the assignment of a certificate of time deposit to the comissioner of
The court approved the report of the administrator but disallowed the Internal Revenue for the purpose of paying t I hereby the estate tax constitute
items objected to on the ground that they cannot be considered as payment of such tax?
expenses of administration. (4) Should the herein respondent heirs be held liable for the payment of
ISSUE and HOLDING: surcharge and interest on the amount (P700,000.00) representing the face value
Whether a judicial administrator, serving without compensation, is entitled to of time deposit certificates assigned to the Commissioner which could not be
charge as an expense of administration the premiums paid on his bond? No, it is converted into cash?
not a necessary expense. . RULING: (1) No. the distribution of a decedent's assets may only be ordered
RATIO: under any of the following three circumstances, namely, (1) when the
The position of an executor or administrator is one of trust: that it is proper for inheritance tax, among others, is paid; (2) who bond a suffered bond is given to
the law to safeguard the estates of deceased persons by requiring the meet the payment of the tax and all the other options of the nature enumerated
administrator to give a suitable bond, and that the ability to give this bond is in in the above-cited provision; etc. This was not complied with
the nature of a qualification for the office. It is also intimated therein that "If an (2) No. An analysis of our tax statutes supplies no sufficient indication that the
individual does not desire to assume the position of executor or administrator, inheritance tax, as a rule, was meant to be the joint and solidary liability of the
he may refuse to do so," and it is far-fetched to conclude that the giving of a bond heirs of a decedent. the payment of the inheritance tax should be taken as'the
by an administrator is an necessary expense in the care, management and individual responsibility, to the extent of the benefits received, of each heir.
settlement of the estate within the meaning of the law, because these expenses 3. No. a time deposit certificate is a mercantile document and is essentially a
are incurred "after the executor or administrator has met the requirement of the promissory note. 5 By the express terms of Article 1249 of the Civil Code of the
law and has entered upon the performance of his duties." Of course, a person Philippines, the use of this medium to clear an obligation will "produce the
may accept the position of executor or administrator with all the incident effect of payment only when they have been cashed, or when through the fault of
appertaining thereto having in mind the compensation which the law allows for the creditor they have been impaired." Consequently, the value of the said
the purpose, but he may waive this compensation in the same manner as he may certificates (P700,000.00) should still be considered outstanding.
refuse to serve without it. Appellant having waived compensation, he cannot 4. Yes. The Interest charge for 1% per month imposed under Section 101 (a) (1)
now be heard to complain of the expenses incident to his qualification. of the Tax Code is essentially a commotion to the State for delay in the payment
of the tax due thereto
The estate cannot likewise be exempted from the payment of the 5% surcharge
Vera v Navarro G.R. No. L-27745 October 18, 1977 imposed by Section 101 (c) of the Tax Code
CIR v. CA and Pajonar the guardian over his person, while his property was placed under the
G.R. No. 123206 guardianship of the Philippine National Bank (PNB) by RTC of Dumaguete.
March 22, 2000 After his death, PNB filed an accounting of his property under guardianship
valued at P3,037,672.09 in a Special Proceeding. However, PNB did NOT file
Doctrine: [Judicial Expenses] Expenses on extrajudicial settlement of the estate an estate tax return, instead it advised Pedro's heirs to execute an
are allowed as deductions. They come within the meaning of administration extrajudicial settlement and to pay the taxes on his estate.
expenses. Pursuant to the assessment by the BIR, the estate of Pedro paid taxes in the
amount of P2,557.
Petitioner: Commissioner of Internal Revenue Josefina then filed a petition with RTC of Dumaguete for the issuance in her
Respondents: Court Of Appeals, Court Of Tax Appeals & Josefina P. Pajonar (as favor of letters of administration of the estate of her brother. This was
Administratrix Of The Estate Of Pedro P. Pajonar) granted and she was appointed as the regular administratrix of Pedros
Ponente: J. Gonzaga-Reyes estate.
The BIR then made a second assessment for deficiency estate tax which
Nature of the Case: Petition for Review on Certiorari on the Decision of the Josefina, in her capacity as administratrix and heir of Pedros estate, paid
Court of Appeals affirming the Resolution of the Court of Tax Appeals granting under protest. And without waiting for her protest to be resolved by the
Josefina P. Pajonar, as administratrix of the estate of Pedro P. Pajonar, a tax BIR, she filed a petition for review with the Court of Tax Appeals (CTA),
refund in the amount of P76,502.42, representing erroneously paid estate taxes praying for the refund of P1,527,790.98, or in the alternative, P840,202.06,
for the year 1988. as erroneously paid estate tax.
The CTA ordered the Commissioner of Internal Revenue to refund Josefina
Summary: P252,585.59, representing erroneously paid estate tax for the year 1988.
By reason of the Bataan Death March during World War II, Pedro Pajonar Among the deductions from the gross estate allowed by the CTA were
became insane. His property was placed under the guardianship of PNB, while P60,753 representing the notarial fee for the Extrajudicial Settlement and
his sister Josefina became the guardian over his person, and eventually the the amount of P50,000 as the attorney's fees for guardianship proceedings.
administratrix of his estate when he died. After his death, his heirs executed an CIR filed a MR which the CTA denied. It then filed with the CA a petition for
extrajudicial settlement and paid the estate tax. Thereafter, BIR assessed the review which was also denied Hence, the present appeal.
estate of Pedro deficiency taxes. The estate paid under protest and filed a case
with the CTA, which in turn allowed P60,753 representing the notarial fee for ISSUE: WON the notarial fee paid for the extrajudicial settlement of P60,753 and
the Extrajudicial Settlement and P50,000 attorney's fees for guardianship the attorney's fees in the guardianship proceedings of P50,000 may be allowed
proceedings as among the allowed deductions from the gross estate. as deductions from the gross estate of decedent in order to arrive at the value of
the net estate. YES.
Issue is WON the notarial fee and attorney's fees allowed as deductions from the
gross estate. YES. RATIO

The notarial fee paid for the extrajudicial settlement is a deductible expense Judicial expenses are expenses of administration.
since such settlement effected a distribution of Pedros estate to his lawful heirs. o Administration expenses, as an allowable deduction from the
Similarly, attorney's fees paid to PNB for acting as the guardian of Pedros gross estate of the decedent for purposes of arriving at the value of the
property during his lifetime should also be considered as a deductible net estate, have been construed by the federal and state courts of the
administration expense. This is because PNB provided a detailed accounting of United States to include all expenses "essential to the collection of
decedent's property and gave advice as to the proper settlement of the latter's the assets, payment of debts or the distribution of the property to
estate, acts which contributed towards the collection of decedent's assets and the persons entitled to it." In other words, the expenses must be
the subsequent settlement of the estate. essential to the proper settlement of the estate.
This Court adopts the view under American jurisprudence that expenses
incurred in the extrajudicial settlement of the estate should be allowed as a
Pedro Pajonar was a member of the Philippine Scout, Bataan Contingent, deduction from the gross estate. There is no requirement of formal
during World War II and was a part of the infamous Death March by reason
of which he suffered shock and became insane. His sister Josefina became
administration. It is sufficient that the expense be a necessary
contribution toward the settlement of the case. DECISION: WHEREFORE, the December 21, 1995 Decision of the Court of
Although the Tax Code specifies "judicial expenses of the testamentary or Appeals is AFFIRMED.
intestate proceedings," there is no reason why expenses incurred in the
administration and settlement of an estate in extrajudicial proceedings
should not be allowed.
o However, deduction is limited to such administration expenses as are
actually and necessarily incurred in the collection of the assets of the
estate, payment of the debts, and distribution of the remainder among
those entitled thereto.
Such expenses may include executor's or administrator's fees,
attorney's fees, court fees and charges, appraiser's fees, clerk hire,
costs of preserving and distributing the estate and storing or
maintaining it, brokerage fees or commissions for selling or
disposing of the estate, and the like.
Deductible attorney's fees are those incurred by the executor or
administrator in the settlement of the estate or in defending or
prosecuting claims against or due the estate.
It is clear then that the extrajudicial settlement was for the purpose of
payment of taxes and the distribution of the estate to the heirs.
The execution of the extrajudicial settlement necessitated the
notarization of the same. Hence the Contract of Legal Services entered
into between Josefina and counsel was presented in evidence for the
purpose of showing that the amount of P60,753.00 was for the notarization
of the Extrajudicial Settlement.
o The notarial fee of P60,753.00 was incurred primarily to settle the
estate of Pedro. Said amount should then be considered an
administration expenses actually and necessarily incurred in the
collection of the assets of the estate, payment of debts and distribution
of the remainder among those entitled thereto.
Attorney's fees, on the other hand, in order to be deductible from the gross
estate must be essential to the collection of assets, payment of debts or the
distribution of the property to the persons entitled to it. The services for
which the fees are charged must relate to the proper settlement of the
o The amount of P50,000.00 was incurred as attorney's fees in the
guardianship proceedings.
o The guardianship proceeding in this case was necessary for the
distribution of the property of the deceased Pedro. PNB was appointed
guardian over the assets of the deceased, and that necessarily the assets
of the deceased formed part of his gross estate.
PNB provided a detailed accounting of decedent's property and
gave advice as to the proper settlement of the latter's estate, acts
which contributed towards the collection of decedent's assets and
the subsequent settlement of the estate.
Vera v. Fernandez and Tongoy Even assuming that the claim for taxes must be filed within the time prescribed
FACTS: in ROC 86.2, the claim in question may be filed even after the expiration of the
- A Motion for Allowance of Claim and Payment of Taxes was filed by time originally fixed therein based on the last sentence.
Vera, the Commissioner of Internal Revenue, in the Intestate Section 2. Time within which claims shall be filed. - In the notice
Proceedings of the late Luis Tongoy, covering deficiency taxes for the provided in the preceding section, the court shall state the time for the
years 1963 and 1964 filing of claims against the estate, which shall not be more than twelve
- Francis Tongoy, the Administrator, opposed the motion on the ground (12) nor less than six (6) months after the date of the first publication
that the claim was barred of the notice. However, at any time before an order of distribution is
o by ROC 86.5 for not having been mentioned as an allowed claim entered, on application of a creditor who has failed to file his claim within
in estate proceedings and the time previously limited the court may, for cause shown and on such
o by ROC 86.2 for having been filed beyond the period within terms as are equitable, allow such claim to be filed within a time not
which to file exceeding one (1) month.
- The CFI dismissed the Motion Here, Commissioner Vera filed the Motion before an order of the distribution is
ISSUE(s): entered, even though it was after the expiration of the time previously limited.
w/n the statute of non-claims (ROC 86.5 in relation to) bars the claim of the
government for unpaid taxes Others:
HOLDING AND RATIO: Recall taxes as lifeblood; SC said claim for taxes due from the estate, x x x in
No. ROC 86.5 makes no mention of claims for monetary obligations of a effect represents a claim of the people at large.
decedent which are created by law such as taxes. The claim of the Commissioner
is of a different character from the enumeration in the Rules of Court, to wit:
a. All claims for money against the decedent arising from contract,
express or implied, whether the same be due, not due or contingent;
b. All claims for funeral expenses and expenses for the last sickness of the
decedent; and
c. Judgment for money against the decedent.
Under the rule of expressio unius est exclusio alterius, anything not mentioned is
excluded from its operation and effect.
Moreover, the assessment, collection and recovery of taxes, as well as the matter
of prescription thereof are governed by the provisions of the National Internal
revenue Code, particularly Sections 331 and 332 thereof, and not by other
provisions of law. In Pineda v. CFI of Tayabas, it was even held that taxes
assessed against the estate of a deceased person ... need not be submitted to the
committee on claims in the ordinary course of administration. In the exercise of
its control over the administrator, the court may direct the payment of such
taxes upon motion showing that the taxes have been assessed against the
Also, under the NIRC 315, payment of income tax shall be a lien in favor of the
Government of the Philippines from the time the assessment was made by the
Commissioner of Internal Revenue until paid with interests, penalties, etc. By
virtue of such lien, this court held that the property of the estate already in the
hands of an heir or transferee may be subject to the payment of the tax due the
estate. A fortiori before the inheritance has passed to the heirs, the unpaid taxes
due the decedent may be collected, even without its having been presented as a
claim in estate proceedings.
De Guzman v. De Guzman-Carillo (MR) I. expenses for the renovation and improvement of the family home
GR No. L.-29276 | May 18, 1978 includes repair of terrace and interior, bathroom, fence
according the oppositors theyre not necessary expenses of
Facts administration, as clarified in the Lizarraga case: administration
Deceased testator was survived by 8 children and his will was probated expenses should be those which are necessary for the management of the
Letter of administration were issued to his son Doc Victorino pursuant estate, for protecting it against destruction or deterioration, and,
to an order of the court in a special proceeding possibly, for the production of fruits. They are expenses entailed for the
One of the properties left was a residential house, adjudicated to the 8 preservation and productivity of the estate and its management for
children pro-indiviso, each being given a 1/8 share purposes of liquidation, payment of debts, and distribution of the residue
The project of partition was signed by all children and approved by among the persons entitled thereto.
court order dated April 14, 1967, but subject to the outcome of the SC: the partition was pro-indiviso; 5 of the 8 consented to the expenses;
instant accounting incident: they obviously redounded to the benefit of the ownerspreservation of
o Administrator (Victorino) submitted 4 accounting reports for June home and social standing. Thus, probate court did not err
1974-September 1967
o 3 heirs interposed objections to his disbursements, which breakdown II. expenses incurred by Librada de Guzman as occupant of the house without
consists of: expenses for the improvement and renovation of the paying rent
house, living expenses of Librada de Guzman while occupying the Includes house help, light and water bill, gas, oil etc.
home without paying rent and other expenses (which will be Probate court allowed the use of estate income for this simply because
mentioned more specifically in the ratio) the occupany of that heir did not prevent the others from themselves
o the probate court instructed the administrator not to make these occupying also
expenses without first seeking authority of court such was obtained SC: these were personal expenses, inuring only to her benefit and
by order. It is from that order that the oppositors now appeal to the should not be charged against the estate. She should shoulder these.
SC Trial court erred in approving these
WON the expenses made by the administrator were necessary expenses in the III. other expenses
care, management and settlement of the estateYES to some, NO to others, Includes Steno notes, representation expenses, expenses in celebration
discusses in the ratio. The outline topic is IV of the ratio of the first death anniversary
SC: all disallowed because they have nothing to do with care,
Ratio management and settlement of estate. Only expenses for lawyers
Preliminaries subsistence and gift to the physician attending to the deceased when he
court cited important provisions. The one cited below is the only was still alive should be allowed
important one for the ratio. But if you wanna check the others: sec. 1(c)
rule 81, sec. 8,9,10 rule 85 IV. irrigation fee (TAX OUTLINE TOPIC)
An executor or administrator is allowed the necessary expenses in Oppositors: should not be a deductible expense on the ground that it
the care, management, and settlement of the estate entitled to seems to be a duplication of the item of P1,320 as irrigation fee for the
possess and manage the decedents real and personal estate as long as same 1966-67 crop year
it is necessary for the payment of the debts and the expenses of Administrator explained that the P1,320 represented allotments for
administration accountable for the whole decedents estate which irrigation fees to the 8 tenants who cultivated Intan crop and were
has come into his possession, with all the interest, profit, and income treated as assumed expenses deducting from farming expenses from
thereof, and with the proceeds of so much of such estate as is sold by the value of the net harvests
him, at the price at which it was sold (Sec. 3, Rule 84; Secs. 1 and 7, SC: the explanation was not clear but it was not disputed by the
Rule 85, Rules of Court) oppositors. The sum of P1,049.58 was paid to Penaranda Irrigation
But actually, none of the provisions are important to the outline topic. System as shown by an OR. It was included in the administrators
Haha accounting as part of farming expenses and properly allowed as
legitimate expense of administration
G.R. No. 46242 October 20, 1939 On July 16, 1927, the said Court of First Instance of Negros Oriental ordered in
In re estate of the deceased DIEGO DE LA VIA. the present case the payment to Dr. Jose de la Vin a of the amount of 146.025
JOSE MA. DE LA VIA Y DE LA ROSA, ex-administrator-appellant, piculs of sugar belonging to him, which product was applied to the payment of
vs. the administration expenses of the estate of Diego de la Vin a. The price of said
THE COLLECTOR OF INTERNAL REVENUE, creditor-appellee. sugar was fixed at P20 per picul by a subsequent order. Adding the sum of
P2,925, the value of said 146.025 piculs of sugar, to the sum of P25,387.83, the
DOCTRINE: result is a total of P28,312.83. As the amount of P9,228.65 has been paid on
(1) That the income tax which an estate owes to the insular government for account, there remains a balance of P19,048.18 in favor of the appellant.
profits obtained in the sale of properties belonging to it, after the death of the It also appears that on February 23, 1932, this Court rendered judgment in G.R.
testator, does not partake of the nature of necessary expenses of administration; No. 33870, entitled "The Collector of Internal Revenue vs. Espiridion Villegas, as
(2) that the lien created by section 1588 of the Revised Administrative Code for administrator of the estate of Diego de la Vin a", ordering the said administrator
internal revenue tax on properties subject to it, being general in character, yields to pay the Insular Government, by way of income tax for the year 1925, the sum
to the preference established by section 735 of the Code of Civil Procedure, as of P18,420.93, with interest from August 20, 1939 until fully paid, and the costs.
amended by Act No. 3960, in favor of the necessary expenses of administration The estate of Diego de la Vin a does not have sufficient funds or property to pay
of the estate of a deceased person; and, fully both judgments. When the Insular Government attempted to collect the
(3) that the claim of an administrator for the necessary expenses of amount of the said judgment in its favor, Dr. Jose de la Vin a objected on the
administration enjoys preference over the claim for payment of income tax ground that the judgments obtained by him are preferred under section 735 of
Act No. 190, and should first be paid. After the corresponding trial, the trial
On April 8, 1920, after the death of Diego de la Vin a, his brother, the herein court overruled the opposition and entered the above-quoted order.
appellant Dr. Jose Ma. de la Vin a, was appointed by the Court of First Instance of The first question to be decided in this appeal, which is raised by the first
Negros Oriental as special administrator of the estate of the deceased; and on assignments of error, is whether or not the trial court erred in holding that the
the 20th of the same month and year he was appointed executor. income tax claimed by the Collector of Internal Revenue, should be paid before
On January 23, 1926, this Court issued in civil case G.R. No. 23747, entitled "In the administration expenses claimed by the ex-executor, Dr. Jose Ma. de la Vin a y
re estate of Diego de la Vin a, deceased, Jose de la Vin a v. Narcisa Geopano et al.," de la Rosa.
an order approving the accounts of the said Dr. Jose de la Vin a, as outgoing Section 735 of the Code of Civil Procedure, as amended by Act No. 3960,
administrator of the estate of Diego de la Vin a. It appears from the decision of provides as follows:
this Court rendered in said Civil Case G.R. No. 23747 that the following items SEC. 735. Order of payment if estate insolvent. If the assets which can
were approved: be appropriated for the payment of debts are not sufficient for that
Special per diems of Jose de la Vin a as purpose, the executor or administrator shall, after pay the debts against
former adminstrator .............................. P12,552.00 the estate in the following order:
1. The necessary funeral expenses;
Legal Commission ............................... 4,141.33 2. The expenses of the last sickness;
3. What is owing to the laborer for salaries and wages earned and for
indemnities due to him, for the last year;
Total ............................................................ 16,693.33 4. Debts due to the United States;
In the bill of exceptions in said case it also appears that the following expenses 5. Taxes and assessments due to the Government, or any branch or
of Jose de la Vin a were approved: subdivision thereof;
Balance in his favor as 6. Debts due to the province;
executor .................... P1,165.86 7. Debts due to other creditors.
In view of the legal provision just quoted, the question is whether the income
Balance on his tax which an estate owes the Insular Government partakes of the nature of
aparceria ................................ 7,528.64 administration expenses for purposes of the order of payment established by
section 735 of Act No. 190 above quoted. Section 680 of the same code of Civil
Total .....................................................................
Procedure provides as follows:
. 8,694.50
SEC. 680. How allowed for services. The executor or administrator
shall be allowed necessary expenses in the care, management, and
settlement of the estate, and for his services, two dollars per day for the premiums expended for the protection of the property and it has even been
time actually and necessarily employed, and a commission of three per considered that expenditures in carrying on decedent's business may be
cent upon all sums disbursed in the payment of debts, expenses, and regarded as expenses of administration."
distributive shares, if the amount of such disbursements does not The mere fact, therefore, that the income tax claimed by the Collector of Internal
exceed one thousand dollars. If the amount exceeds one thousand Revenue had been imposed upon the profits obtained by the administrator of
dollars and does not exceed five thousand dollars and one-half per cent the estate in the sale of certain properties of the deceased Diego de la Vin a, after
upon the excess, if the whole amount does not exceed five thousand the latter's death, does not make the said tax a necessary expense of
dollars, then the percentage as above provided, and one per cent on the administration, unless the administrator had paid it either from his own pocket
excess above five thousand dollars. But in any special case, where the or out of the funds of the estate: in the first case the tax paid is converted into an
estate is large, and the settlement has been attended with great expense of administration which the administrator may fully recover, plus his
difficulty, and has required a high degree of capacity on the part of the commission; in the second case, he may only collect his commission, which
executor or administrator, a greater sum may be allowed. But if partakes of the nature of an expense of administration.
objection to the fees allowed be taken, the allowance may be re- SC held: (1) that the income tax which an estate owes to the insular government
examined by the Supreme Court on appeal. for profits obtained in the sale of properties belonging to it, after the death of
When the administrator or executor is a lawyer, he shall not be allowed the testator, does not partake of the nature of necessary expenses of
to charge against the estate any professional fees, as such, for services administration; (2) that the lien created by section 1588 of the Revised
rendered by himself. When the deceased by will makes some other Administrative Code for internal revenue tax on properties subject to it, being
provision for compensation to his executor, the provision shall be full general in character, yields to the preference established by section 735 of the
satisfaction for his services, unless by a written instrument filed in the Code of Civil Procedure, as amended by Act No. 3960, in favor of the necessary
court he renounces all claim to the compensation provided by the will. expenses of administration of the estate of a deceased person; and, (3) that the
The legal provision just quoted enumerates the services for which the claim of an administrator for the necessary expenses of administration enjoys
administrator should be paid and the commission to which he is entitled for preference over the claim for payment of income tax.
collections and disbursement made by him. Among these payments, which (2) the claim of the appellant, Dr. Jose Ma. de la Vin a y de la Rosa, as ex-
constitutes the expenses of administration, are not included pending debts of administrator of the estate of the deceased Diego de la Vin a has preference over
the estate, whatever may be their nature. According to the said legal provision, that of the Collector of Internal Revenue for income tax
only payments which the executor or administration may have made in the
discharge of his office and the commissions to which he may be entitled,
partakes of the nature of administration expenses. the expenses of
administration are due only to the executor or administrator, and he alone, and
no other, may collect them.
The Collector of internal Revenue contends that the tax of P18,420.93 which he
seeks to collect, having been laid on the profits realized in the sale of the
properties of the deceased Diego de la Vin a, effected on September 29, 1925 by
the judicial administrator of the estate, the said tax partake of the nature of
administration expenses. As we have said, the necessary expenses of
administration whose payment is given preference in the said section 735 of the
Code of Civil Procedure are those which the administrator may have incurred in
the care, administration and liquidation of the properties of the estate and the
commissions due to him for collections and disbursements which he may have
made, and not those which he cold or might have wished to make out of his own
pocket or but of the funds of the estate. "Administration expenses," says Corpus
Juris, volume 24, page 424, "include expenditures in discovering and preserving
assets, attorneys fees incurred in connection with the administration of the
estate, incurred in connection with the administration of the estate, cost
recovered against the representative in an action to recover assets, to
established a claim against the estate, to try title to land, and insurance
Commissioner v. Cu Unyieng Ildefonso Elegado vs Court of Tax Appeals

On December 2, 1957, Dominga Ayala Vda. de Cu Unjieng died, leaving 173 SCRA 285 Civil Law Preliminary Title Applicability of Laws
properties on which state and inheritance taxes became due and collectible on On March 14, 1976, Warren Taylor Graham, an American national, formerly
September 2, 1958 and December 2, 1958, respectively. The heirs paid the resident of the Philippines, died in Oregon, USA. As certain shares of stock are
estate tax on May 19, 1958, and the inheritance taxes on October 13, 1958. On left in the Philippines, his son Ward Graham filed an estate tax return.
March 24, 1959, the Commissioner advised the heirs in writing that a deficiency [Meanwhile, W. Graham designated executor, appointed Ildefonso Elegado as his
estate tax and inheritance taxes were due from them and payable on or before attorney-in-fact for the allowance of the will in the Philippines.]
April 23, 1959. On March 31, 1959, the heirs requested a five-year grace period,
but the Commissioner gave them only two years from April 15, 1959, informing On the basis of such return, the Commission of Internal Revenue (CIR) assessed
them that the payment should be made in 24 equal monthly installment, and the descendants estate in the amount of P96,509.35. The assessment was
requiring them to pay a 5% surcharge. The heirs protested the imposition of 5% protested by the law firm of Bump, Yang, and Walker on behalf of the estate
surcharge contending that it was uncalled for considering that they had been which was denied by the CIR.
granted an extension within which to settle their tax liabilities. The Elegado as an ancillary administrator filed a second estate tax return. The
Commissioner turned down the protest. The heirs appealed to the Court of Tax Commissioner imposed an assessment on the estate in the amount of
Appeals. Although the heirs appeal was limited solely to the question of the P72,948.87 based on the SEC return, which was protested by the Agrava Law
validity of the surcharge imposition, the Commissioner, however, as one of his Office on behalf of the estate. While the protest was pending, the petitioner filed
affirmative defenses, alleged that the heirs are liable to 1% instead of 1/2% a motion for the allowance of the basic estate tax of P96,509.35. He said that this
interest on unpaid amounts from April 24, 1959. liability had not yet been paid although the assessment had long become final
and executory. Petitioner was denied contending that the first assessment is not
The Tax Court relieved the Cu Unjieng heirs from payment of the 5% surcharge. binding on him because it was based on a return filed for by lawyers.
On the matter of the interest charges, the Tax Court held that 1/2% monthly
interest on the assessed deficiency taxes should be computed "on the unpaid ISSUE: Whether or not the first assessment is binding being filed for by lawyers.
balances of the deficiency estate and inheritance taxes remaining after the
HELD: The Supreme Court held that Elegados contention is flimsy.
monthly installment payments which were made from April 15, 1959 through
Elegado cannot be serious when he argues that the first assessment was invalid
October 18, 1960."
because the foreign lawyers who filed the return on which it was based were not
familiar with our tax laws and procedure. If our own lawyers and taxpayers
The Supreme Court held that the tax court erred in invalidating the imposition
cannot claim similar preferences, it follows that foreigners cannot be any less
by the Commissioner of the questioned surcharge. Upon the jurisdictional
bound by laws in our country.
dispute over the matter of interest, it held that the Tax Court properly took
cognizance of the issue because the Commissioner himself raised the same
before the Tax Court for resolution. On the matter of the interest charges that
the heirs should pay, it held that the computation of 1/2% monthly interest
should be reckoned from the original due dates of the assessed deficiency taxes,
and approved the Tax Court's adoption of declining balance principle in
computing the interest due form the heirs for the period covered by the
extension of time given.
CIR vs. PINEDA LILIA YUSAY GONZALES, as Judicial Co-Administratrix of the Intestate
G.R. No. L-22734, September 15, 1967 Estate of the late MATIAS YUSAY vs. THE COURT OF TAX APPEALS and THE
Estate proceedings were had to settle the estate of Atanasio Pineda. After the G.R. No. L-28821. December 19, 1980 | CONCEPCION, JR., J:
estate proceedings were closed, the BIR found out that the income tax liability of
the estate during the pendency of the estate proceedings were not paid. The Facts:
Court of Tax Appeals rendered judgment holding Manuel B. Pineda, the eldest On April 18, 1980, petitioner filed before the CTA a petition for review of the
son of the deceased, liable for the payment corresponding to his share of the assessment of CIR of the estate and in ground of prescription. After hearing,
estate. The Commissioner of Internal Revenue has appealed to SC and has respondent CTA rendered judgment on January 11, 1962, holding that the
proposed to hold Manuel B. Pineda liable for the payment of all the taxes found assessment had prescribed, and reversing the decision of the CIR,
by the Tax Court to be due from the estate instead of only for the amount of whereupon CIR appealed to the Supreme Court. In a decision dated
taxes corresponding to his share in the estate. November 24, 1966, SC upheld the CIR and CTA affirming the assessment of
the CIR that Gonzales, as administratrix of the intestate estate of Matias
ISSUE: Can the Government require Pineda to pay the full amount of the taxes Yusay should pay the sum of P16,246.04 and P39,178.12 as estate and
assessed? Yes. inheritance taxes plus interest and surcharge for delinquent in accordance
with Section 101 of the NIRC, without prejudice to reimbursement from her
RULING: Pineda is liable for the assessment as an heir and as a holder- co-administratrix, Florencia Piccio Vda. de Yusay for the latter's
transferee of property belonging to the estate/taxpayer. As a holder of property corresponding tax liability.
belonging to the estate, Pineda is liable for the tax up to the amount of the Gonzales filed an MR dated December 27, 1966 of the decision in G.R. No. L-
property in his possession. The reason is that the Government has a lien 19495, praying that said decision be amended so that the liability for the
on what he received from the estate as his share in the inheritance for unpaid estate and inheritance taxes to be paid be alloted as 1/3 to petitioner and
income taxes for which said estate is liable. 2/3 to administratrix Florencia P. Vda. de Yusay.
SC, on April 24, 1967, in an extended resolution ruled that when petitioner
By virtue of such lien, the Government has the right to subject the property in represented her co-administratrix and the whole estate of Matias Yusay, she
Pineda's possession, i.e., the P2,500.00, to satisfy the income tax assessment in risked being ordered to pay the whole assessment, should the assessment
the sum of P760.28. After such payment, Pineda will have a right of contribution be sustained. Petitioner was estopped from denying liability for the whole
from his co-heirs, to achieve an adjustment of the proper share of each heir in tax. As administratrix, petitioner is liable for the entire inheritance tax
the distributable estate. although her liability would not exceed the amount of her share in the
estate. The entire inheritance tax which amounts to P39,178.12 excluding
The Government has two ways of collecting the tax in question. One, by going penalties is obviously much less than her distributive share. 6
after all the heirs and collecting from each one of them the amount of the tax After the decision in G.R. No. L-19495 became final, CIR filed a Motion for
proportionate to the inheritance received. The reason why a case suit is filed Execution on August 1, 1967 before CTA. Petitioner filed an opposition on
against all the heirs for the tax due from the estate is to achieve thereby August 11, 1967, contending that it should be the CFI-Iloilo before which
two results: first, payment of the tax; and second, adjustment of the shares Special Proceedings No. 459 (Intestate Estate of the late Matias Yusay) was
of each heir in the distributed estate as lessened by the tax. pending that should enforce the decision in G.R. No. L-19495, and not the
Court of Tax Appeals.
Another remedy is by subjecting said property of the estate which is in the On September 11, 1967, Court of Tax Appeals granted the writ of execution.
hands of an heir or transferee to the payment of the tax due. This second On October 26, 1967, petitioner filed a motion for reconsideration which
remedy is the very avenue the Government took in this case to collect the tax. the respondent Court of Tax Appeals denied on January 18, 1968.
The BIR should be given the necessary discretion to avail itself of the most
expeditious way to collect the tax because taxes are the lifeblood of government Issue: Whether or not respondent Court of Tax Appeals committed a grave
and their prompt and certain availability is an imperious need. The adjustment abuse of discretion tantamount to lack of jurisdiction when it ordered the
of the respective shares due to the heirs from the inheritance, as lessened by the execution of the decision of this Court in G.R. No. L-19495.
tax, is left to await the suit for contribution by the heir from whom the
Government recovered said tax.
There is no question that respondent Court of Tax Appeals acquired
jurisdiction to review the assessment of respondent Commissioner of
Internal Revenue when petitioner, herself, initiated CTA Case No. 777. The
said respondent Court rendered a decision favorable to petitioner which
respondent Commissioner of Internal Revenue appealed to this Court in G.R.
No. L-19495. The decision of this Court reversed and set aside the decision
of the respondent Court of Tax Appeals and entered a new one affirming the
assessment of the Commissioner of Internal Revenue. 7
It is crystal clear that what is ordered executed by respondent Court in its
controverted resolution dated September 11, 1967, 8 is the judgment of this
Court in G.R. No. L-19495. It is but proper that when the record of CTA Case
No. 777 was returned to the respondent Court of Tax Appeals, it must in a
ministerial manner enforce the judgment as rendered by this Court in G.R.
No. L-19495. Under Section 8 of Rule 39 of the Rules of Court, the writ of
execution must issue in the name of the Republic of the Philippines from the
court in which the judgment or order is entered.
When this Court ordered petitioner Lilia Yusay Gonzales in G.R. No. L-19495
to pay the estate and inheritance taxes of the estate of Matias Yusay without
prejudice to reimbursement from her co-administratrix Florencia P. Vda. de
Yusay, for the latter's corresponding tax liability, it did so, realizing that the
properties of the estate have already been distributed to the heirs (1/3 to
petitioner and 2/3 to Florencia P. Vda. de Yusay) as the amended project of
partition in the intestate case was affirmed by this Court in G.R. No. L-
11378, promulgated August 21, 1959. 9 Petitioner, herself, filed a motion to
declare Special Proceedings No. 459 in the Court of First Instance of Iloilo,
regarding the intestate estate of Matias Yusay, closed.
This Court in the resolution dated April 24, 1967, in G.R. No. L-19495,
declared that petitioner is liable personally for the taxes imposed limited
only by the value of the properties she received from the estate.
For Us now to rule that the proper procedure would be for the decision of
this Court in G.R. No. L-19495 to be filed in Special Proceedings No. 459 of
the Court of First Instance of Iloilo as a money claim is not only too late, but
also impractical, circuitous, and a cumbersome procedure that would lead
to further delay in the enforcement of the judgment in this case which is for
tax liability. We cannot ignore that there has been a delay of about 29 years
in the payment of these taxes.
Respondent Court of Tax Appeals did not commit an error, much less abuse
of discretion, in ordering the execution of the decision of this Court in G.R.
No. L-19495. Obviously, this petition is merely intended to delay payment of
taxes due the government.

Petition dismissed.
MARCOS II v. Court of Appeals the established procedure for the enforcement of taxes due upon the estate
June 5, 1997 | Torres, Jr. J. | Rule 75 | Settlement of Estate of Deceased Persons of the deceased which was for the claimant to present the claim before the
probate court so that the court may order the administrator to pay.
SUMMARY: The BIR issued several tax deficiency assessments against the estate (2) "the numerous pending court cases questioning the late president's
of Marcos and then levied on several properties to satisfy said tax deficiencies. ownership or interests in several properties (both real and personal) make
Marcos seeks to nullify the assessments and levy saying that the same was done the total value of his estate, and the consequent estate tax due, incapable of
without the cognition of the probate court. He further alleges that any claim against exact pecuniary determination at this time. Thus, respondents' assessment
the estate should be brought to the probate court who should order the payment of of the estate tax and their issuance of the Notices of Levy and sale are
the taxes to the administrator. premature and oppressive."
DOCTRINE: The approval of the court, sitting in probate or as a settlement tribunal Argument of BIR:
over the deceased is not a mandatory requirement in the collection of estate taxes (1) The states authority to collect internal revenue taxes is paramount. Thus,
the pendency of probate proceedings over the estate of the deceased does
FACTS: not preclude the assessment and collection, through summary remedies, of
Marcos died on September 1989. In June 1990, a special tax audit team was created estate taxes over the same.
for the purpose of conducting investigations and examinations of tax liabilities of Issues:
former president Marcos. Upon the conclusion of their investigation, they issued a 1. Whether or not the BIR has authority to collect by the summary remedy of
memorandum in 1991 stating that the Marcoses failed to file several tax returns from levying upon, and sale of real properties of the decedent, estate tax
1982-86 and a written notice of death in violation of the National Internal Revenue deficiencies, without the cognition and authority of the court sitting in
Code. probate over the supposed will of the deceased. YES.

Criminal charges were filed against Imelda Marcos and the Commission on Internal RATIO:
Revenue (CIR) caused the preparation of the Income Tax Return of the Marcoses. The approval of the court, sitting in probate, or as a settlement tribunal over the
The BIR then issued several deficiency tax assessments. The CIR claimed that these deceased is not a mandatory requirement in the collection of estate taxes. There is
were personally and constructively received delivered to the Marcoses but these that nothing in the tax code, and in the pertinent remedial laws that implies the necessity
the deficiency tax assessments were not protested administratively within the 30 days of the probate or estate settlement courts approval of the states claim for the estate
following receipt of assessments. taxes, before the same can be enforced and collected. If there is any issue as to the
o validity of the BIRs decision to assess the estate taxes, this should have been
From February to May 19993, the BIR issued numerous notices of levy on real pursued through the proper administrative and judicial avenues provided for by law.
properties of the Marcoses.
Even an assessment based on the estimate is prima facie valid and lawful where it
Ferdinand Marcos II, eldest son of former President Marcos filed a petition for does not appear to have been arrived at arbitrarily or capriciously. The burden of
certiorari and prohibition with an application for writ of preliminary injunction, proof is upon the complaining party to show clearly that the assessment is erroneous.
questioning the actuations of the Commission on Internal Revenue in assessing and
collecting through the summary remedy of Levy on Real Properties, estate and Moreover, the payment and assessment of inheritance tax does not directly involve
income tax delinquencies upon the estate and properties of former President Marcos the administration of the decedents estate although it may be viewed as an incident
despite the pendency of the probate proceedings on the will of the formers father. to the complete settlement of an estate, and under some statutes, it is made the duty
He prayed for the (1) annulment and setting aside of notices on levy of real property of the probate court to make the amount of the inheritance tax a part of the final
(2) enjoining the Head Revenue Executive Assistant from proceeding with the decree of distribution of the estate. It is not against the property of decedent, nor it is
auction of the real properties covered by the said notices. a claim against the estate as much, but it is against the interest or property right
which the heir has in the property formerly held by decedent.
CA: Denied the petition as the deficiency assessments on the sale have become final
and unappealable, therefore enforceable by the summary remedy of levy. Petition denied and CA decision is affirmed.

Arguments of the Petitioner (Marcos II):

(1) The notices of levy, notices of sale, and subsequent sale of properties of the
late President Marcos effected by the BIR are null and void for disregarding
Govt. of the Philippines vs. Pamintuan

Florentino Pamintuan filed an income tax return for the year 1919 and paid an
amount on the basis of said return. When Florentino died in 1925, intestate
proceedings were instituted where the court appointed commissioners for the
appraisal of the value of the property left by Florentino. The court then ordered the
delivery to the heirs of their respective shares of the inheritance after paying the
corresponding inheritance taxes which were duly paid. During the pendency of the
intestate proceedings, the administrator Jose Ramirez filed income tax returns for the
estate of the deceased corresponding to the years 1925 and 1926. The intestate
proceedings were then closed in 1926.
In 1927, subsequent to the distribution of Florentinos estate, the government
discovered that Florentino had not paid P462 as additional income for 1919 on
account of the sale of his house, from which he realized an income of P11,000.00
which was not included in his income tax return filed in 1919.The government
demanded payment of the income tax but the heirs refused to pay. The lower court
ruled that the government was barred from collecting the income tax due to its
failure to file its claim with the committee on claims and appraisals.

W/n the government can still collect the income tax despite its failure to file its claim
with the committee on claims and appraisals

Ruling: The administration proceedings of the late Florentino Pamintuan having been
closed,and his estate distributed among his heirs, the defendants herein, the latter are
responsible for the payment of the income tax here in question in proportion to the
share of each in said estate, in accordance with section 731 of the Code of


Heirs are not required to respond with their own property for the debts of their
deceased ancestors. But even after the partition of an estate, heirs and distributees are
liable individually for the payment of all lawful outstanding claims against the estate
in proportion to the amount or value of the property they have respectively received
from the estate. The hereditary property consists only of that part which remains after
the settlement of all lawful claims against the estate, for the settlement of which the
entire estate is first liable. The heirs cannot, by any act of their own or by agreement
among themselves, reduce the creditors' security for the payment of their claims. For
the reasons stated, we are of opinion and so hold that claims for income taxes need
not be filed with the committee on claims and appraisals appointed in the course of
testate proceedings and may be collected even after the distribution of the decedents
estate among his heirs, who shall be liable therefor in proportion to their share in the
Ona v. Commissioner instrument were executed, for the purpose, for tax purposes, at least, an unregistered
GR No. L -19342 | May 25, 1972 | J. Barredo partnership is formed.
For purposes of the tax on corporations, our National Internal Revenue Code
Facts: includes these partnerships
Julia Buales died leaving as heirs her surviving spouse, Lorenzo Oa and her
five children. A civil case was instituted for the settlement of her state, in which The term partnership includes a syndicate, group, pool, joint venture or other
Oa was appointed administrator and later on the guardian of the three heirs unincorporated organization, through or by means of which any business, financial
who were still minors when the project for partition was approved. This shows operation, or venture is carried on (8 Mertens Law of Federal Income Taxation,
that the heirs have undivided interest in 10 parcels of land, 6 houses and p. 562 Note 63; emphasis ours.)
money from the War Damage Commission. with the exception only of duly registered general copartnerships within the
Although the project of partition was approved by the Court, no attempt was purview of the term corporation. It is, therefore, clear to our mind that petitioners
made to divide the properties and they remained under the management of Oa herein constitute a partnership, insofar as said Code is concerned, and are subject to
who used said properties in business by leasing or selling them and investing the the income tax for corporations. Judgment affirmed.
income derived therefrom and the proceeds from the sales thereof in real
properties and securities. As a result, petitioners properties and investments
gradually increased. Petitioners returned for income tax purposes their shares in
the net income but they did not actually receive their shares because this left
with Oa who invested them.
Based on these facts, CIR decided that petitioners formed an unregistered
partnership and therefore, subject to the corporate income tax, particularly for
years 1955 and 1956. Petitioners asked for reconsideration, which was denied
hence this petition for review from CTAs decision.
W/N there was a co-ownership or an unregistered partnership
W/N the petitioners are liable for the deficiency corporate income tax

Unregistered partnership. The Tax Court found that instead of actually distributing
the estate of the deceased among themselves pursuant to the project of partition, the
heirs allowed their properties to remain under the management of Oa and let him
use their shares as part of the common fund for their ventures, even as they paid
corresponding income taxes on their respective shares.
Yes. For tax purposes, the co-ownership of inherited properties is automatically
converted into an unregistered partnership the moment the said common properties
and/or the incomes derived therefrom are used as a common fund with intent to
produce profits for the heirs in proportion to their respective shares in the inheritance
as determined in a project partition either duly executed in an extrajudicial settlement
or approved by the court in the corresponding testate or intestate proceeding. The
reason is simple. From the moment of such partition, the heirs are entitled already to
their respective definite shares of the estate and the incomes thereof, for each of them
to manage and dispose of as exclusively his own without the intervention of the other
heirs, and, accordingly, he becomes liable individually for all taxes in connection
therewith. If after such partition, he allows his share to be held in common with his
co-heirs under a single management to be used with the intent of making profit
thereby in proportion to his share, there can be no doubt that, even if no document or
LLADOC v CIR (1965)

FACTS: MB Estate, Inc donated P10,000 cash to Rev Fr Crispin Ruiz, then parish
priest of Victorias, Negros Occidental, for construction of a new Catholic church
therein. Amount was actually spent as intended.

MB Estate filed donors gift tax return. CIR issued an assessment for donees gift tax
against the Catholic Parish of Victorias, Negros Occidental. At that time, Rev Fr
Casimiro Lladoc already replaced Fr Ruiz. Tax amounted to P1,370 including
surcharges, 1% monthly interest, and compromise for late filing of return.

Fr Lladoc filed protest and MR with CIR. Denied. CTA affirmed.


1) WON the donees tax is covered by the constitutional exemption granted to
churches (NO)
Section 22 (3), Art. VI of the 1935 Constitution exempts from taxation
cemeteries, churches and parsonages or convents, appurtenant thereto, and
all lands, buildings, and improvements used exclusively for religious purposes.
The exemption is only from the payment of taxes assessed on such properties
enumerated, as property taxes, as contra distinguished from excise taxes.
In the present case, what the Collector assessed was a donee's gift tax; the
assessment was not on the properties themselves. It did not rest upon general
ownership; it was an excise upon the use made of the properties, upon the
exercise of the privilege of receiving the properties. Manifestly, gift tax is not
within the exempting provisions of the section just mentioned. A gift tax is not a
property tax, but an excise tax imposed on the transfer of property by way of
gift inter vivos, the imposition of which on property used exclusively for
religious purposes, does not constitute an impairment of the Constitution.
The phrase "exempt from taxation," as employed in the Constitution should not
be interpreted to mean exemption from all kinds of taxes. And there being no
clear, positive or express grant of such privilege by law, in favor of Fr Lladoc,
the exemption herein must be denied.

2) WON Fr Lladoc is liable to pay the donees tax (NO)

Fr Lladoc is not liable, because he was not the parish priest of Victorias at the
time of the donation. It is the Bishop of Bacolod, the Head of Diocese to which
the Parish of Victorias pertains, who is liable for the payment of the tax.
Prior to this decision, Ct issued a show cause order as to why the Bacolod
Bishop should not be substituted in lieu of Fr Lladoc. Neither CIR nor counsel
for Fr Lladoc interposed objection to substitution. Eventually, the Bishop
submitted to the Cts jurisdiction.

DISPOSITIVE: CTA decision modified. Instead of Fr Lladoc, Bacolod Bishop is

liable for donees tax.
Tuason v CIR
In this case, Tuason Inc, a mere holding company for the corporation did not
The importance of liability is the purpose behind the accumulation of the income and involve itself in the development of subdivisions but merely subdivided its own lots
not the consequences of the accumulation. Thus, if the failure to pay dividends were and sold them for bigger profits. It derived its income mostly from interest,
for the purpose of using the undistributed earnings & profits for the reasonable dividends, and rentals realized from the sale of realty.
needs of the business, that purpose would not fall to overcome the presumption and
correctness of CIR. Tuason Inc is also owned by Antonio himself. While these profits were actually
made, the commissioner points out that the corp. did not use up its surplus profits.
FACTS: Antonio claims that he spent the money to build an apartment in urdaneta but theres
CTA set aside petitioners revenue commissioners assessment of 1.1 M as the 25% a large discrepancy bet. The market value and the alleged investment cost.
surtax on private respondents unreasonable accumulation of surplus for the year
1975-1978. The importance of liability is the purpose behind the accumulation of the income
Private respondent protested the assessment on the ground that the accumulation of and not the consequences of the accumulation. Thus, if the failure to pay dividends
surplus profits during the years in question was solely for the purpose of expanding were for the purpose of using the undistributed earnings & profits for the reasonable
its business operations as a real estate broker. needs of the business, that purpose would not fall to overcome the presumption and
Private res. Filed a petition that pending determination of the case, an order be correctness of CIR.
issued restraining the commissioner and/or his reps from enforcing the warrants of
distraint and levy. Writ of injunction was issued by tax court.
Due to the reversal of CTA of the commissioners decision, CIR appeals to the SC.

1. Whether or not private respondent is a holding company and/or investment
2. Whether or not Antonio accumulated surplus for years 75-78
3. Whether or not Tuason Inc. is liable for the 25% surtax on undue accumulation of
surplus for 75-78

HELD: Yes to all. Antionio is liable for the 25% surtax assessed.
Sec. 25. Additional tax on corporation improperly accumulating profits or surplus.
(a) Imposition of tax. If any corporation, except banks, insurance companies, or
personal holding companies, whether domestic or foreign, is formed or availed of for
the purpose of preventing the imposition of the tax upon its shareholders or members
or the shareholders or members of another corporation, through the medium of
permitting its gains and profits to accumulate instead of being divided or distributed,
there is levied and assessed against such corporation, for each taxable year, a tax
equal to twenty-five per centum of the undistributed portion of its accumulated
profits or surplus which shall be in addition to the tax imposed by section
twentyfour, and shall be computed, collected and paid in the same manner and
subject to the same provisions of law, including penalties, as that tax.

(b) Prima facie evidence. The fact that any corporation is a mere holding
company shall be prima facie evidence of a purpose to avoid the tax upon its
shareholders or members. Similar presumption will lie in the case of an investment
company where at any time during the taxable year more than fifty per centum in
value of its outstanding stock is owned, directly or indirectly, by one person.
Maria Carla Pirovano v. CIR promisor) to be a nudum pactum, i.e., one that is unenforceable in view of the
(GR L-19865 July 31, 1965) common law rule that consideration must consist in a legal benefit to the
promisee or some legal detriment to the promisor
Facts: It is of course perfectly possible that a donation or gift should at the same time
impose a burden or condition on the donee involving some economic liability
(1) Maria Carla is the heir of Enrico Pirovano, the latter being the former general
for him. This, in fact, is contemplated by Article 619 of the Civil Code of 1889
manager of De La Rama Steamship.
(Art. 726 of the Tax Code) when it provides that there is also a donation "when
(2) During his tenure with the company, De La Rama Steamship insured the life of
the gift imposes upon the donee a burden which is less than the value of the
Enrico Pirovano, paid the premiums, and designated itself as the beneficiary.
thing given." Section 111 of the Tax Code has in view situations of this kind,
(3) Pirovano died during the Japanese occupation. The Board of Directors of the
since it also prescribes that "the amount by which the value of the property
company voted to renounce the companys right to the proceeds in favor of the
exceeded the value of the consideration" shall be deemed a gift for the
heirs of Enrico Pirovano. A portion was given outright and another portion was
retained as a loan with the heirs as creditors. purpose of the tax
(4) However, in a later vote, a majority of shareholders rescinded the donation
which prompted the heirs to file suit. They won and the judgment became final.
(5) THIS CASE: The CIR levied a donors tax on De La Rama (which was
declared void by the CTA and ordered refunded) and a donees tax which was
declared valid by the CTA.

ISSUE: WON there was consideration given, either total or partial, for the donation
such that it cannot properly be taxed by the CIR. (NO)

(1) The donations were in the nature of a remuneratory donation for which
adequate and complete consideration was given in the form of services
rendered by their late father to the Company.
(2) Should the services rendered be less than the total value of the donation,
then only the excess portion should be subject to taxation.

SC: Donation is taxable (whether it is remuneratory of simple donation). Petitioners

are confused as to the definition of consideration.

Past services, rendered without relying on a coetaneous promise, express or

implied, that such services would be paid for in the future, constituted cause or
consideration that would make a conveyance of property anything else but a gift
or donation. (See NCC 726)
Board resolution contained the phrase out of gratitude which meant true
consideration for the donation was company's gratitude for his services, and not
the services themselves. Like "love and affection," gratitude has no economic
value and is not "consideration" in the sense that the word is used in this section
of the Tax Code.
No evidence to show that Enrico Pirovano was not fully compensated for his
Anglo-American law treats a subsequent promise to pay for past services (like
one to pay for improvements already made without prior request from the
Tang Ho vs. Board of Tax Appeals That the transferor Li Seng Giap had in fact conveyed shares to stock to his 13
En Banc | G.R. No. L-5949 | November 19, 1955 | Reyes, J.B.L., J. children.
That none of the transferees appeared to possess adequate independent means to buy
Tang Ho, William Lee, Henri Lee, Sofia Lee Teehankee, Thomas Lee, Anthony Lee, Julia the shares, so much so that they claim now to have purchased the shares with the
cash donations made to them from time to time.
Lee Kaw, Charles Lee, Valeriana Lee Yu, Victor Lee, Silvino Lee, Mary Lee, John Lee,
That the total of the alleged cash donations to each child is practically identical to
and Peter Lee, for themselves and as heirs of Li Seng Giap, deceased vs. The Board of
the value of the shares supposedly purchased by each donee.
Tax Appeals and CIR That there is no evidence other than the belated sworn gift tax returns of the spouses
Li Seng Giap and Ang Tang Ho, and their children, appellants herein, to support their
FACTS: contention that the shares were acquired by purchase. No contracts of sale or other
Li Seng Giap and his wife, Tang Ho and their 13 children appear to be the documents were presented, nor any witnesses introduced; not even the claimants
stockholder of two close family corporations named Li Seng Giap & Sons, Inc. and themselves have testified.
Li Seng Giap & Co. The claim that the shares were acquired by the children by purchase was first
Examiners of BIR examined the books of the 2 corporations and found that each of advanced only after the assessment of gift taxes and penalties due had been made,
Li Seng Giap's 13 children had a total investment therein of approximately and after the appellants had paid and had filed a bond to guarantee the balance.
P63,195.00, in shares issued to them by their father who was the manager and That for the parent to donate cash to enable the donee to buy from him shares of
controlling stockholder of the two corporations. equivalent value is, for all intents and purposes, a donation of such shares to the
The Collector regarded these transfers as undeclared gifts and assessed against them purchaser donee.
donor's and donee's taxes.
The petitioners requested the Collector of Internal Revenue for a revision of their tax (2) YES. In the original claim for tax refund, the father, Li Seng Giap, describes himself
assessments, and submitted donor's and donee's gift tax returns. as "the undersigned donor" and speaks of "cash donations made by the undersigned",
The Collector refused to revise his original assessments; and the petitioners appealed without in any way mentioning his wife as a co-participant in the donation. The
to the then Board of Tax Appeals insisting that the entries in the books of the determinative rule is that of Arts. 1409 and 1415. In effect, these Articles clearly refute
corporation do not prove donations; that the true amount and date of the donation the appellants' theory that because the property donated is community property, the
were those appearing in their tax returns; and that the donees merely bought stocks
donations should be viewed as made by both spouses. First, because the law clearly
in the corporation out of savings made from the money received from their parents.
The Board of Tax Appeals upheld the decision of the Collector. differentiates the donations of such property "by the husband" from the "donations by
both spouses by common consent". Next, the wording of Arts. 1409 and 1415 indicates
ISSUES and HOLDING: that the lawful donations by the husband to the common children are valid and are
(1) WON the dates and amounts of the donations taxable against petitioners were as chargeable to the community property, irrespective of whether the wife agrees or objects
found by the Collector of Internal Revenue from the books of the corporations Li Seng thereof. Obviously, should the wife object to the donation, she cannot be regarded as a
Giap & Sons, Inc. and Li Seng Giap & Co.? YES. The finding of the Board of Tax donor at all.
Appeals is supported by adequate evidence. (3) YES. The consequence of the husband's legal power to donate community property is
(2) WON the donations made by petitioner Li Seng Giap to his children from the that, where made by the husband alone, the donation is taxable as his own exclusive act.
conjugal property should be taxed against the husband alone? YES. Under the old Civil Hence, only one exemption or deduction can be claimed for every such gift, and not two,
Code, donation by the husband alone does not become in law a donation by both as claimed by appellants herein. In thus holding, the Board of Tax Appeals committed no
spouses merely because it involves property of the conjugal partnership. error.
(3) WON petitioners should be allowed the tax deduction claimed by them? YES. Such a
donation of property belonging to the conjugal partnership, made during its Art. 1409. The conjugal partnership shall also be chargeable with anything which may have been given or
existence, by the husband alone in favor of the common children, is taxable to him promised by the husband to the children born of the marriage solely in order to obtain employment for
exclusively as sole donor. them or give them a profession, or by both spouses by common consent, should they not have stipulated
that such expenditures should be borne in whole or in part by the separate property of one of them. ART.
RATIO: 1415, p. 1. The husband may dispone of the property of the conjugal partnership for the purposes
(1) YES. The appealed findings of the Board of Tax Appeals appear supported by the mentioned in Art. 1409.
following circumstances:
CIR v. ACCRA (1998) There was thereby no retention of control over the disposition of the
CA G.R. SP No. 27134 contributions. There was simply an indication of the purpose for which they were
to be used. For as long as the contributions were used for the purpose for which
During the 1987 national elections, petitioners, who are partners in the they were intended, Sen. Angara had complete and absolute power to dispose of
Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm, the contributions. He was fully entitled to the economic benefits of the
contributed P882,661.31 each to the campaign funds of Senator Edgardo contributions.
Angara, then running for the Senate. In letters dated April 21, 1988, the
Bureau of Internal Revenue (BIR) assessed each of the Section 91 of the Tax Code is very clear. A donors or gift tax is imposed on the
petitioners P263,032.66 for their contributions. On August 2, 1988, transfer of property by gift.
petitioners questioned the assessment through a letter to the BIR. They
claimed that political or electoral contributions are not considered gifts under The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988, which
the National Internal Revenue Code (NIRC), and that, therefore, they are not reads:
liable for donors tax. The claim for exemption was denied by the Political Contributions. For internal revenue purposes, political contributions in
Commissioner. the Philippines are considered taxable gift rather than taxable income. This is so,
On September 12, 1988, petitioners filed a petition for review with the CTA, because a political contribution is indubitably not intended by the giver or
which was decided on October 7, 1991 in favor of the petitioners. As contributor as a return of value or made because of any intent to repay another
aforestated, the CTA ordered the Commissioner to desist from collecting what is his due, but bestowed only because of motives of philanthropy or charity.
donors taxes from the petitioners. His purpose is to give and to bolster the morals, the winning chance of the
candidate and/or his party, and not to employ or buy. On the other hand, the
On appeal, the Court of Appeals reversed and set aside the CTA decision on April recipient-donee does not regard himself as exchanging his services or his
20, 1994. The appellate Court ordered the petitioners to pay donors tax product for the money contributed. But more importantly he receives financial
amounting to P263,032.66 each, reasoning as follows: advantages gratuitously.

The National Internal Revenue Code, as amended, provides: When the U.S. gift tax law was adopted in the Philippines (before May 7, 1974),
Sec. 91. Imposition of Tax. (a) There shall be levied, assessed, collected, and the taxability of political contributions was, admittedly, an unsettled issue; hence,
paid upon the transfer by any person, resident, or non-resident, of the property it cannot be presumed that the Philippine Congress then had intended to
by gift, a tax, computed as provided in Section 92. (b) The tax shall apply consider or treat political contributions as non-taxable gifts when it adopted the
whether the transfer is in trust or otherwise, whether the gift is direct or indirect, said gift tax law. Moreover, well-settled is the rule that the Philippines need not
and whether the property is real or personal, tangible or intangible. necessarily adopt the present rule or construction in the United States on the
matter. Generally, statutes of different states relating to the same class of
Pursuant to the above-quoted provisions of law, the transfer of property by gift, persons or things or having the same purposes are not considered to be in pari
whether the transfer is in trust or otherwise, whether the gift is direct or indirect, materia because it cannot be justifiably presumed that the legislature had them
and whether the property is real or personal, tangible or intangible, is subject to in mind when enacting the provision being construed. (5206, Sutherland,
donors or gift tax. Statutory Construction, p. 546.) Accordingly, in the absence of an express
A gift is generally defined as a voluntary transfer of property by one to another exempting provision of law, political contributions in the Philippines are subject
without any consideration or compensation therefor (28 C.J. 620; Santos vs. to the donors gift tax. (cited in National Internal Revenue Code Annotated by
Robledo, 28 Phil. 250). Hector S. de Leon, 1991 ed., p. 290).

In the instant case, the contributions are voluntary transfers of property in the In the light of the above BIR Ruling, it is clear that the political contributions of
form of money from private respondents to Sen. Angara, without considerations the private respondents to Sen. Edgardo Angara are taxable gifts. The vagueness
therefor. Hence, they squarely fall under the definition of donation or gift. of the law as to what comprise the gift subject to tax was made concrete by the
above-quoted BIR ruling. Hence, there is no doubt that political contributions are
As correctly pointed out by the Solicitor General: taxable gifts.
The fact that the contributions were given to be used as campaign funds of Sen.
Angara does not affect the character of the fund transfers as donation or gift.
ACCRA v. CIR Since animus donandi or the intention to do an act of liberality is an essential
G.R. No. 120721 | February 23, 2005 element of a donation, petitioners argue that it is important to look into the
intention of the giver to determine if a political contribution is a gift.
Petitioners argument is not tenable. First of all, donative intent is a creature
Topics: gift not defined in the Tax Code Civil Code definition on donation of the mind. It cannot be perceived except by the material and tangible acts
applies; election contributions are subject to gift tax they are not exempt which manifest its presence. This being the case, donative intent is
even if such transfers are with intentions, motives or purpose presumed present when one gives a part of ones patrimony to another
without consideration. Second, donative intent is not negated when the
Facts: During the 1987 national elections, petitioners, who are partners in person donating has other intentions, motives or purposes which do not
the Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm, contradict donative intent. This Court is not convinced that since the purpose
contributed P882,661.31 each to the campaign funds of Senator Edgardo of the contribution was to help elect a candidate, there was no donative
Angara, then running for the Senate. BIR assessed each of the petitioners intent. Petitioners contribution of money without any material consideration
P263,032.66 for their contributions. Petitioners questioned the assessment to evinces animus donandi.
the BIR, claiming that political or electoral contributions are not considered
gifts under the NIRC so they are not liable for donors tax. The claim for
Petitioners claim that since the purpose of electoral contributions is to
exemption was denied by the Commissioner. The CTA ruled in favor of the
influence the results of the elections, donative intent is not present. They
petitioners, but such ruling was overturned by the CA, thus this petition for
claim that the purpose of electoral contributions is brought on by the desire
of the giver to influence the result of an election by supporting candidates
Issue: Whether or not electoral contributions are subject to donors tax. who would influence the shaping of government policies that would promote
the general welfare and economic well-being of the electorate, including the
giver himself. Petitioners attempt to place the barrier of mutual exclusivity
Held: Yes, they are. The NIRC does not define transfer of property by gift.
between donative intent and the purpose of political contributions. This Court
However, Article 18 of the Civil Code, states: In matters which are governed
reiterates that donative intent is not negated by the presence of other
by the Code of Commerce and special laws, their deficiency shall be supplied
intentions, motives or purposes which do not contradict donative intent.
by the provisions of this Code. Thus, reference may be made to the
Petitioners attempt is strained. The fact that petitioners will somehow in the
definition of a donation in the Civil Code. Article 725 of said Code defines
future benefit from the election of the candidate to whom they contribute, in
donation as: . . . an act of liberality whereby a person disposes gratuitously
no way amounts to a valuable material consideration so as to remove
of a thing or right in favor of another, who accepts it.
political contributions from the purview of a donation. Senator Angara was
under no obligation to benefit the petitioners. The proper performance of his
Donation has the following elements: (a) the reduction of the patrimony of duties as a legislator is his obligation as an elected public servant of the
the donor; (b) the increase in the patrimony of the donee; and, (c) the intent Filipino people and not a consideration for the political contributions he
to do an act of liberality or animus donandi. received. In fact, as a public servant, he may even be called to enact laws
that are contrary to the interests of his benefactors, for the benefit of the
The present case falls squarely within the definition of a donation. Petitioners greater good.
each gave P882,661.31 to the campaign funds of Senator Edgardo Angara,
without any material consideration. All three elements of a donation are
present. The patrimony of the four petitioners were reduced by P882,661.31
each. Senator Angaras patrimony correspondingly increased by
P3,530,645.24. There was intent to do an act of liberality or animus donandi
was present since each of the petitioners gave their contributions without
any consideration. Taken together with the Civil Code definition of donation,
Section 91 of the NIRC is clear and unambiguous, thereby leaving no room
for construction.