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CIR vs Campos Rueda (42 SCRA 238)

The Collector Of Internal Revenue vs Campos Rueda

42 SCRA 238 [GR No. L-13250 October 29, 1971]


This is an appeal interposed by herein respondent Antonio Campos Rueda as administrator of the estate of the
deceased Doña Maria de la Estrella Soriano Vda de Cedeira, from the decision of the petitioner, collector of internal
revenue, assessing against and demanding from the former the sum of Php161,874.95 as deficiency estate and
inheritance taxes, including interest therein and penalties, on the transfer of intangible personal properties situated in the
Philippines and belonging to said Maria Cedeira. She is a spanish national, by reason of her marriage to a spanish citizen
and was a resident of Tangier, Morocco from 1931 up to her death on January 2, 1955. At the time of her demise, she left
among others, intangible personal properties in the Philippines. On September 29, 1955, respondent filed a provisional
estate and inheritance tax return on all the properties of Maria Cedeira. On the same date, petitioner, pending
investigation issued an assessment for estate and inheritance tax in the respective amounts of Php111,592.48 and Php
157,791.48 or a total of Php369,383.96 which tax liabilities were paid by respondent. On November 27, 1955, an amended
return was filed wherein intangible personal properties with the value of Php396,308.90 were claimed as exempt from
taxes. On November 23, 1955, petitioner issued another assessment for estate and inheritance taxes in the amounts of
Php 202,262.40 and Php267,402.84 respectively or a total of Php469,665.24. In a letter dated January 11, 1956,
respondent denied the request for the exemption on the ground that the law of Tangier is not reciprocal with section 122
of the National Internal Revenue Code. Hence, respondent demanded the payment of the sums of Php239,439.79
representing the deficiency estate and inheritance taxes including ad valorem penalties, surcharges, interest and
compromise penalties. In a letter dated February 8, 1956, respondent requested for the reconsideration of the decision
denying the claim for the tax exemption. However, the same was denied. The denial was premise on the ground that
there was no reciprocity with Tangier, which was moreover a mere principality, not a foreign country.


Whether or not the intangible personal properties of Maria Cedeira are exempt from estate and inheritance tax.


Yes. The controlling legal provision as noted is a proviso in section 122 of the NIRC. It reads thus:

that no tax shall be collected under this title in respect of intangible personal properties

1. 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 tax or death tax of any character in respect of intangible personal
properties of the Philippines not residing in that foreign country; or
2. if the laws of the foreign country of which the decedent was a resident at the time of his death allow
a similar exemption from transfer taxes or death taxes of every character in respect of intangible
personal properties owned by citizens of the Philippines not residing in that foreign country.

It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line with Pound's
formulation that it be a politically organized sovereign community independent of outside control bound by penalties of
nationhood, legally supreme within its territory, acting through a government functioning under a regime of law.

This court commit itself to the doctrine that even a tiny principality, hardly an international personality in the sense did fall
under the exempt category.

Even on the assumption then that Tangier is bereft of international personality, petitioner has not successfully made out a
case. It bears repeating that four days after the filing of this petition on January 6, 1958 in Collector of Internal Revenue v.
De Lara, 16 it was specifically held by us: "Considering the State of California as a foreign country in relation to section
122 of our Tax Code we believe and hold, as did the Tax Court, that the Ancilliary Administrator is entitled the exemption
from the inheritance tax on the intangible personal property found in the Philippines." 17 There can be no doubt that
California as a state in the American Union was in the alleged requisite of international personality. Nonetheless, it was
held to be a foreign country within the meaning of Section 122 of the National Internal Revenue Code.

The expression “foreign country,” was used in the last proviso of section 122 of NIRC refers to a government of that
foreign power which although not an international person in the sense of international law does not impose transfer or
death upon intangible person properties of our citizens not residing therein whose law allow a similar exemption from
such taxes. It is therefore not necessary that Tangier should have been recognized by our government in order to entitle
the respondent to the exemption benefits of the proviso of said section 122 of our tax code.
G.R. No. L-34937 March 13, 1933


MARCOS ROCES, and ELVIRA VIDAL DE RICHARDS, plaintiff-appellants,


JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellee.Imperial, J.:


1. Sometime in 1925, plaintiffs Concepcion Vidal de Roces and her husband, as well as one Elvira Richards, received as
donation several parcels of land from Esperanza Tuazon. They took possession of the lands thereafter and likewise
obtained the respective transfer certificates.

2.The donor died a year after without leaving any forced heir. In her will, which was admitted to probate, she
bequeathed to each of the donees the sum of P5,000. After the distribution of the estate but before the delivery of their
shares, the CIR (appellee) ruled that plaintiffs as donees and legatees should pay inheritance taxes. The plaintiffs paid
the taxes under protest.

3. CIR filed a demurrer on ground that the facts alleged were not sufficient to constitute a cause of action. The court
sustained the demurrer and ordered the amendment of the complaint but the appellants failed to do so. Hence, the
trial court dismissed the action on ground that plaintiffs, herein appellants, did not really have a right of action.

4. Plaintiffs (appellant) contend that Sec. 1540 of the Administrative Code does not include donation inter vivos and if it
does, it is unconstitutional, null and void for violating SEC. 3 of the Jones Law (providing that no law shall embrace more
than one subject and that the subject should be expressed in its titles ; that the Legislature has no authority to tax
donation inter vivos; finally, that said provision violates the rule on uniformity of taxation.

5. CIR however contends that the word 'all gifts' refer clearly to donation inter vivos and cited the doctrine in Tuason v.


Whether or not the donations should be subjected to inheritance tax


YES. Sec. 1540 of the Administrative Code clearly refers to those donation inter vivos that take effect immediately or
during the lifetime of the donor, but made in consideration of the death of the decedent. Those donations not made in
contemplation of the decedent's death are not included as it would be equivalent to imposing a direct tax on property
and not on its transmission.

The phrase 'all gifts' as held in Tuason v. Posadas refers to gifts inter vivos as they are considered as advances in
anticipation of inheritance since they are made in consideration of death.
G.R. No. L-36770 November 4, 1932

LUIS W. DISON, plaintiff-appellant,


JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellant.


Don Felix Dizon died on April 21, 1928. Before his death, he made a gift inter vivos in favor of the plaintiff Luis W. Dizon of
all his property according to a deed of a gift of which includes all the property of Don Felix Dizon. The plaintiff did not
receive the property of any kind of Don Felix upon the death of the latter. Don Luis is the legitimate and only son of Don
Felix. The defendant, collector of internal revenue assess an inheritance tax of Php2,808.73 which Don Luis paid under
protest and later filed an action to recover sum of money thus paid. Plaintiff alleged that the inheritance tax 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.


Whether or not the gift inter vivos is subject to inheritance tax.


Yes. Section 1540 of the administrative code plainly does not tax gifts per se but only when those gifts are made to those
who shall prove to be the heirs, devisees, legatees or donees mortis cause of the donor.

In this case, the scanty facts before us may not warrant the inference that the conveyance, acknowledged by the
donor 5 days before his death and accepted by the donee one day before the donor’s death, was fraudulently made
for the purpose of evading the inheritance tax. But the facts, in our opinion, do not 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.
G.R. No. L-27745 October 18, 1977

MISAEL P. VERA, as Commissioner of Internal Revenue, petitioner,


Hon. Judge PEDRO C. NAVARRO, in his capacity as Judge of the Court of First Instance of Pasig, Rizal (Branch V
MAGDALENA ABANTO and CAMILO ERIBAL, as voluntary residual heirs of the Estate of the deceased ELSIE M. GACHES;
DELIA P. MEDINA, as attorney-in-fact of said heirs; BIENVENIDO A. TAN, SR., as Executor of the Estate of ELSIE M. GACHES;


Elsie M. Gaches died without a child. However, she left a last will and testament in which he distributed her
properties. Judge Tan filed a petition for the probate of the will, he was appointed as the executor of the estate. Judge
Tan informed the Commissioner that the testate estate was about 10 million and that the estate and inheritance taxes
dues were about 9.5 million.

Tan preliminarily submitted a motion for advance payment of allowances, inheritance, etc. pending the finality
of probate of the will. He maintained that there are sufficient assets to cover whatever liability to the government for
taxes and other charges. The Commissioner opposed this motion and showed some proof of claims for estate taxes and
inheritance taxes. The court then disapproved the motion of Tan. On a later date, Tan paid the taxes due but there was
deficiency in payment of the inheritance taxes. Upon payment, he moved again that he be allowed to pay advance
inheritance, allowances, etc. This time, the court allowed him to do so. The Commissioner tried to oppose this but to no
avail. He then tried to garnish the bank accounts of the estate but wasn't able to do so due to the quick thinking of Tan
to have the writ of garnishment discharged.


Whether or not the herein respondent heirs can be required to pay first the inheritance tax before the probate court may
authorize the delivery of the hereditary share pertaining to each of them.


1. On the matter of the authority of a probate court to allow distribution of an estate prior to the complete
Nuidation of the inheritance tax, the Tax Code apparently lacks any provision substantially Identical to the
mentioned Section 103 thereof. There are provisions of the Tax Code, e.g., Section 104, which makes it the duty
of registers of deeds not to register the transfer to any new owner of a hereditary estate unless payment of the
death taxes sham be shown; Section 106, which imposes a similar obligation on business establishments; and
Section 107, which penalizes the executor who delivers to an heir or devise, and the officers and employees of
business establishments who transfer in their books to any new owner, any property forming part of a hereditary
estate without the payment of the death taxes first being shown; but those provisions by themselves do not
clearly establish that the purchase and object of the statute is to make the payment of the inheritance tax a
pre-condition to an order for the distribution and delivery of the decedent's estate to the lawful heirs there. The
cloud of vagueness in the statute, however, is not entirely unreachable. Section 1, Rule 90 of the Rules of Court
erases this hiatus in the statute by providing thus: ñé+.£ªwph!1

Section 1. When order for distribution of residue made. — When the debts, funeral charges, and expenses of
administration, the allowance to the widow, and inheritance tax, if any, chargeable to the estate in accordance with
law, have been paid, the court, on the application of the executor or administrator, or of a person interested in the
estate, and after hearing upon notice, shall assign the residue of the estate to the persons entitled to the same, naming
them and the proportions, or parts, to which each is entitled, and such persons may demand and recover their
respective shares from the executor or administrator, or any person having the same in his possession. If there is a
controversy before the court as to who are the lawful heirs of the deceased person or as to the distributive shares to
which each person is entitled under the law, the controversy shall be beard and decided as in ordinary cases.

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.
Under the provisions Of the aforequoted Rule, the distribution of a decedent's assets may only be ordered under any of
the following three circumstances, namely, (1) when the inheritance tax, among others, is paid; (2) who bond a suffered
bond is given to meet the payment of the tax and all the other options of the nature enumerated in the above-cited
provision; or (3) when the payment of the said tax and at the other obligations mentioned in the said Rule has been
provided for one of these thru camar as the satisfaction of the when tax due from the festate is were present when the
question orders were issued in the case at bar. Although the respondent Judo did make a condition in its order of June 5,
1967 that the distribution of the estate of Elsie M. Gaches (except the cash deposits of more than P2 million) shall be
trusted to Atty. Medina for the payment of whatever taxes may be due to the government from the estate and the heirs
them to, this Court cannot subscribe to the proposition that the payment of the tax due was thereby adequately
provided for. In the first place, the order of June 5, l967 was, for all intents and , a complete distribution of the estate to
the heirs for, the executor who is supposed to take care of the estate was absolutely discharged the attorney's fees for
the of a lawyer who presumably acted as legal counsel for the estate in the court below were ordered paid as were also
the fees for the executor's the cash funds of the estate were red paid to the cash and the non-cash (real property and
shares of stock) properties were likewise ordered delivered to Atty. Medina whose participation in the said proceedings
was in the capacity of an attorney-in-fact of the herein respondent Eribal and Abanto. In short, the probate court
virtually withdrew its custodial jurisdiction over the estate which is the subject of settlement before it. In the second place
the respondent Judge, in the distribution of the properties of the estate in question, relief solely upon the mere
mandestation of the counsel for the heirs Eribal and Abanto that them were affiant of the estate with which to pay the
taxes due to the government. There is no evidence on record that would show that the probate court ever made a
serious attempt to de what the values of the different assets the correctness of that such properties shall be preserved for
the satisfaction of those case In the third place that main of pesos taxes were being called by the Bureau of Inc.
Revenue, the least reasonable thing that the probate court should have done was to require the heirs to deposit the
amount of inheritance tax being claimed in a suitable institution or to authorize the sale of non-cash assets under the
court's control and supervision.

The record is likewise bereft of any evidence to show that sufficient bond has been filed to meet this particular
outstanding obligation.

2. The liability of the herein respondents Eribal and Abanto to pay the inheritance tax corresponding to the share
of Bess Lauer in the inheritance must be negated, The inheritance tax is an imposition created by law on the
privilege to receive property. 4 Consequently, the scope and subjects of this tax and other related matters in
which it is involved must be traced and sought in the law itself. An analysis of our tax statutes supplies no
sufficient indication that the inheritance tax, as a rule, was meant to be the joint and solidary liability of the heirs
of a decedent. Section 95(c) of the Tax Code, in fact, indicates that the general presumption must be
otherwise. The said subsection reads thus: ñé+.£ªwph!1

(c) xxx xxx xxx

The inheritance tax imposed by Section 86 shall, in the absence of contrary disposition by the predecessor, be charged
to the account of each beneficiary, in proportion to the value of the benefit received, and in accordance with the
scale fixed for the class or group to which is pertains: Provided, That in cases where the heirs divide extrajudicially the
property left to them by their predecessor or otherwise convey, sell, transfer, mortgage, or encumber the same without
being the estate or inheritance taxes within the period prescribed in the preceding subsections (a) and (b), they shall be
solidarity liable for the payment of the said taxes to the extent of the estate they have received.

The statute's enumeration of the specific cases when the heirs may be held solidarity liable for the payment of the
inheritance tax is, in the opinion of this Court, a clear indication that beyond those cases, the payment of the inheritance
tax should be taken as'the individual responsibility, to the extent of the benefits received, of each heir.
G.R. No. L-29276 May 18, 1978

Testate Estate of the Late Felix J. de Guzman. VICTORINO G. DE GUZMAN, administrator-appellee,




The late Felix J. de Guzman was survived by 8 children. Letters of administration were issued to his son, Doctor
Victorino G. de Guzman. One of the properties left by the decedent was a residential house located in the poblacion of
which 8 children were given a 1/8 proindiviso share in the project of partition. 3 heirs Crispina de Guzmans-Carillo
Honorata de Guzman-Mendiola and Arsenio de Guzman interposed objections to the administrator's disbursements in
the total sum of P13,610.48.

o Expense for the improvement and renovation of the decedent's residential house

o Living expenses of Librada de Guzman while occupying the family home without paying rent

o Other expenses: Lawyer's subsistence, Gratuity pay in lieu of medical fee, stenographic notes, decedent's first death
anniversary, representation expenses

o Irrigation fee

Lower court: allowed the expenses


W/N they were allowable administration expenses


An executor or administrator is allowed the necessary expenses in the care, management, and settlement of the estate.
He is entitled to possess and manage the decedent's real and personal estate as long as it is necessary for the payment
of the debts and the expenses of administration. He is accountable for the whole decedent's estate which has come
into his possession, with all the interest, profit, and income thereof, and with the proceeds of so much of such estate as is
sold by him, at the price at which it was sold (Sec. 3, Rule 84; Secs. 1 and 7, Rule 85, Rules of Court).

One of the Conditions of the administrator's bond is that he should render a true and just account of his administration
to the court

A hearing is usually held before an administrator's account is approved, especially if an interested Party raises
objections to certain items in the accounting report


o Expense for the improvement and renovation of the decedent's residential house – allowable

§ 5 out of 8 co-owners consented to the use of the funds of the estate for repair and improvement of the family home. It
is obvious that the expenses in question were incurred to preserve the family home and to maintain the family's social
standing in the community.

o Living expenses of Librada de Guzman while occupying the family home without paying rent – disallowed

o Other expenses:

§ Lawyer's subsistence – allowable

§ Gratuity pay in lieu of medical fee – allowable

§ stenographic notes – disallowed

§ decedent's first death anniversary - disallowed

§ representation expenses - unexplained = disallowed

Irrigation fee – allowable since unquestioned though duplicate

As clarified in the Lizarraga case, administration expenses should be those which are necessary for the management of
the estate, for protecting it against destruction or deterioration, and, possibly, for the production of fruits. They are
expenses entailed for the preservation and productivity of the estate and its management for purposes of liquidation,
payment of debts, and distribution of the residue among the persons entitled thereto.

It should be noted that the family residence was partitioned proindiviso among the decedent's eight children. Each one
of them was given a one-eighth share in conformity with the testator's will. Five of the eight co-owners consented to the
use of the funds of the estate for repair and improvement of the family home. It is obvious that the expenses in question
were incurred to preserve the family home and to maintain the family's social standing in the community.

Obviously, those expenses redounded to the benefit of the co- owners. They were necessary for the preservation and
use of the family residence. As a result of those expenses, the co-owners, including the three oppositors, would be able
to use the family home in comfort, convenience and security.

We hold that the probate court did not err in approving the use of the income of the estate to defray those expenses

II. Expenses incurred by Librada de Guzman as occupant of the family residence without paying rent — P1 603.11
— The probate court allowed the income of the estate to be used for those expenses on the theory that the occupancy
of the house by one heir did not deprive the other seven heirs from living in it. Those expenses consist of the salaries of the
house helper, light and water bills, and the cost of gas, oil floor wax and switch nail

We are of the opinion that those expenses were personal expenses of Librada de Guzman, inuring y to her benefit. Those
expenses, not being reasonable administration expenses incurred by the administrator, should not be charged against
the income of the estate.

Librada de Guzman, as an heir, is entitled to share in the net income of the estate. She occupied the house without
paying rent. She should use her income for her living expenses while occupying the family residence.

The trial court erred in approving those expenses in the administrator's accounts.
[G.R. No. 123206. March 22, 2000]

PAJONAR, as Administratrix of the Estate of Pedro P. Pajonar, respondents.

Facts: Pedro Pajonar, a member of the Philippine Scout of Bataan during the second world war, was a part of the
infamous death march by reason of which he suffered shock and became insane. His sister Josefina Pajonar became
the guardian over his person, while his property was placed under the guardianship of the Philippine National Bank by
the Regional Trial Court (RTC) of Dumaguete City Branch 31 in special proceedings no. 1254. He died on January 10,
1988. He was survived by his two brothers Isidro Pajonar and Gregorio Pajonar, his sister Josefina, nephews Concordio
Jandog and Marco Jandog and niece Conchita Jandog. On May 11, 1988, PNB filed an accounting of the decedent’s
property under guardianship but did not file an estate tax return, it advised Pedro Pajonar’s heirs to execute an
extrajudicial settlement and to pay the taxes on his estate. On April 5, 1988, pursuant to the assessment by the Bureau of
Internal Revenue (BIR), the estate of Pedro Pajonar paid taxes in the amount of Php2,557. On December 19, 1988,
pursuant to a second assessment by the BIR for defeciency estate tax, the estate of Pedro Pajonar paid estate tax in the
amount of Php1,527,790.98. Josefina Pajonar, in her capacity as administatrix and heir of Pedro Pajonar’s estate filed a
protest on January 11, 1989 with the BIR praying that the estate tax payment in the amount of Php1,527,790.98, or at
least some portion of it be returned to the heirs for the alleged erroneously paid taxes.


Whether or not the notarial fee paid for the extrajudicial settlement in the amount of Php60,753 and the attorney’s fees
in the guardianship proceedings in the amount of Php 50,000 may be allowed as deductions from the gross estate of
decedent in order to arrive at the value of net estate.


Yes. The notarial fee for the extrajudicial settlement and the attorney’s fees in the guardianship proceedings are
allowable deductions from the gross estate of Pedro Pajonar.

Although the tax code specifies “judicial expenses of the testamentary or intestate proceedings” there is no reason why
expenses incurred in the administration and settlement of an estate in extrajudicial proceedings should not be allowed.
However, deduction is limited to such administration expenses as are actually and necessarily incurred in the collection
of assets of the estate, payment of 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, cost
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.

Attorney’s fees on the other hand, in order to be deductible from the gross estate must be essential to the settlement of
the estate.
G.R. No. L-9271 March 29, 1957

In the matter of the testate estate of the late DA. MARGARITA DAVID. CARLOS MORAN SISON, Judicial Administrator,


NARCISA F. TEODORO, heiress, oppositor-appellee.Bautista Angelo, J.:


1. The CFI of Manila which had jurisdiction over the estate of Margarita David, issued an order appointing
appellantCarlos Moran Sison as judicial administrator without compensation after filing a bond. After entering into his
duties as administrator, he filed an accounting of his administration which included items as an expense of administration
the premiums he paid on his bond.

2. One of the heirs, herein appellee Narcisa Teodoro, objected to the approval of the items. The court approved the
report but disallowed the items objected to on the ground that these cannot be considered as expenses of
administration. Moran Sison filed a motion for reconsideration but was denied hence this appeal.


Whether or not an executor or judicial administrator can validly charge the premiums on his bond as an expense of
administration against the estate



The premiums paid by an executor or administrator serving without a compensation for his bond cannot be charged
against the estate. Further Sec. 7 of Rule 86 of the Rules of Court does not authorize the executor or administrator to
charge to the estate the money spent for the bond. As held in the case of Sulit v. Santos (56 Phil 626), the position of an
executor or administrator is one of trust. The law safeguards the estates of deceased persons by making as a
requirement for qualification the ability to give a suitable bond. The execution of said bond is therefore a condition

Further, the giving of the bond is not a necessary expense in the care, management, and settlement of the estate within
the meaning of Sec. 680 of the Civil Code of Procedure, since such are the requirements after the executor or
administrator has already qualified for the office and has entered the performance of his duties.