Collector vs.
Campos Rueda Further, the Supreme Court noted that there is already an existing jurisprudence
In January 1955, Maria Cerdeira died in Tangier, Morocco (an international zone
[foreign country] in North Africa). At the time of her death, she was a Spanish citizen
and was a resident of Tangier. She however left some personal properties (shares of
stocks and other intangibles) in the Philippines. The designated administrator of her
estate here is Antonio Campos Rueda.
In the same year, the Collector of Internal Revenue (CIR) assessed the estate for
deficiency tax amounting to about P161k. Campos Rueda refused to pay the assessed
tax as he claimed that the estate is exempt from the payment of said taxes pursuant to
section 122 of the Tax Code which provides:
That no tax shall be collected under this Title in respect of intangible personal property
(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 tax or death tax of any character in
respect of intangible person property of the Philippines not residing in that foreign
country, or (b) 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 property owned by citizens of the
Philippines not residing in that foreign country.
Campos Rueda was able to prove that there is reciprocity between Tangier and the
Philippines.
However, the CIR still denied any tax exemption in favor of the estate as it averred that
Tangier is not a “state” as contemplated by Section 22 of the Tax Code and that the
Philippines does not recognize Tangier as a foreign country.
ISSUE: Whether or not Tangier is a state.
HELD: Yes. For purposes of the Tax Code, Tangier is a foreign country.
A foreign country to be identified as a state must 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. The stress is on its being a nation, its people occupying a definite territory,
politically organized, exercising by means of its government its sovereign will over the
individuals within it and maintaining its separate international personality.
(Collector vs De Lara) which provides that even a tiny principality, that of Liechtenstein,
hardly an international personality in the sense, did fall under the exempt category
provided for in Section 22 of the Tax Code. Thus, recognition is not necessary. Hence,
since it was proven that Tangier provides such exemption to personal properties of
Filipinos found therein so must the Philippines honor the exemption as provided for by
our tax law with respect to the doctrine of reciprocity.
Vidal De Roces v. Posadas
Facts:
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. Posadas.
Issue: 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.
Dizon vs. Posadas
Dison v. Posadas Digest
Dison v. Posadas
G.R. No. 36770 November 4, 1932
Butte, J.:
Facts:
1. Plaintiff Luis Dison filed a suit against CIR to recover inheritance tax paid under
protest amounting to P2,808.73. Felix Dison, plaintiff's father executed a deed of gift
which transferred 22 tracts of land, reserving to himself during his lifetime the usufruct
of 3 tracts. The donation was formally accepted by plaintiff.
2. The plaintiff (herein petitioner) alleged in his complaint that the tax is illegal since he
received the property by a deed of gift inter vivos duly accepted and registered before
the death of his father. He also contended that Act 2601 being an inheritance tax
statute, does not tax gifts. The defendant answered in general denial with a
countermand. The court dismissed the countermand. Both sides appealed, but the CIR
appeal was dismissed.
Issue: Whether or not the gifts inter vivos are taxable (inheritance tax)
YES.
Inheritance tax is imposed upon the gift inter vivos that plaintiff received from his father
as this was really an advancement upon the inheritance to which he would be entitled
upon the death of the latter. Sec. 1540 of the Administrative Code did not tax gifts per
se but only those which are made to those who shall prove to be heirs, devisees,
legatees and donees mortis causa of the donor. The term 'heirs' include those given
the status of heirs irrespective of the quantity of property they may receive as such.
BPI vs. Posadas
BPI vs Posadas
BPI vs. Posadas
GR No. 34583, October 22, 1931
FACTS:
BPI, as administrator of the estate of deceased Adolphe Schuetze, appealed to CFI
Manila absolving defendant, Collector of Internal Revenue, from the complaint filed
against him in recovering the inheritance tax amounting to P1209 paid by the plaintiff,
Rosario Gelano Vda de Schuetze, under protest, and sum of P20,150 representing
the proceeds of the insurance policy of the deceased.
Rosario and Adolphe were married in January 1914. The wife was actually residing
and living in Germany when Adolphe died in December 1927. The latter while in
Germany, executed a will in March 1926, pursuant with its law wherein plaintiff was
named his universal heir. The deceased possessed not only real property situated in
the Philippines but also personal property consisting of shares of stocks in 19 domestic
corporations. Included in the personal property is a life insurance policy issued at
Manila on January 1913 for the sum of $10,000 by the Sun Life Assurance Company
of Canada, Manila Branch. In the insurance policy, the estate of the deceased was
named the beneficiary without any qualification. Rosario is the sole and only heir of
the deceased. BPI, as administrator of the decedent’s estate and attorney in fact of
the plaintiff, having been demanded by Posadas to pay the inheritance tax, paid under
protest. Notwithstanding various demands made by plaintiff, Posadas refused to
refund such amount.
ISSUE: WON the plaintiff is entitled to the proceeds of the insurance.
HELD:
SC ruled that(1)the proceeds of a life-insurance policy payable to the insured's estate,
on which the premiums were paid by the conjugal partnership, constitute community
property, and belong one-half to the husband and the other half to the wife, exclusively;
(2)if the premiums were paid partly with paraphernal and partly conjugal funds, the
proceeds are likewise in like proportion paraphernal in part and conjugal in part; and
(3)the proceeds of a life-insurance policy payable to the insured's estate as the
beneficiary, if delivered to the testamentary administrator of the former as part of the
assets of said estate under probate administration, are subject to the inheritance tax
according to the law on the matter, if they belong to the assured exclusively, and it is
immaterial that the insured was domiciled in these Islands or outside.
Hence, the defendant was ordered to return to the plaintiff one-half of the tax collected
upon the amount of P20,150, being the proceeds of the insurance policy on the life of
the late Adolphe Oscar Schuetze, after deducting the proportional part corresponding
to the first premium.
Lorenzo vs. Posadas
FACTS: Thomas Hanley died, leaving a will and a considerable amount of real and
personal properties. Proceedings for the probate of his will and the settlement and
distribution of his estate were begun in the CFI of Zamboanga. The will was admitted
to probate.
The CFI considered it proper for the best interests of the estate to appoint a trustee to
administer the real properties which, under the will, were to pass to nephew Matthew
ten years after the two executors named in the will was appointed trustee. Moore acted
as trustee until he resigned and the plaintiff Lorenzo herein was appointed in his stead.
During the incumbency of the plaintiff as trustee, the defendant Collector of Internal
Revenue (Posadas) assessed against the estate an inheritance tax, together with the
penalties for deliquency in payment. Lorenzo paid said amount under protest, notifying
Posadas at the same time that unless the amount was promptly refunded suit would
be brought for its recovery. Posadas overruled Lorenzo’s protest and refused to refund
the said amount. Plaintiff went to court. The CFI dismissed Lorenzo’s complaint and
Posadas’ counterclaim. Both parties appealed to this court.
ISSUE:
(e) Has there been delinquency in the payment of the inheritance tax?
HELD: The judgment of the lower court is accordingly modified, with costs against the
plaintiff in both instances
YES
The defendant maintains that it was the duty of the executor to pay the inheritance tax
before the delivery of the decedent’s property to the trustee. Stated otherwise, the
defendant contends that delivery to the trustee was delivery to the cestui que trust, the
beneficiary in this case, within the meaning of the first paragraph of subsection (b) of
section 1544 of the Revised Administrative Code. This contention is well taken and is
sustained. A trustee is but an instrument or agent for the cestui que trust
The appointment of Moore as trustee was made by the trial court in conformity with the
wishes of the testator as expressed in his will. It is true that the word “trust” is not
mentioned or used in the will but the intention to create one is clear. No particular or
technical words are required to create a testamentary trust. The words “trust” and
“trustee”, though apt for the purpose, are not necessary. In fact, the use of these two
words is not conclusive on the question that a trust is created. ” To constitute a valid
testamentary trust there must be a concurrence of three circumstances:
(1) Sufficient words to raise a trust;
(2) a definite subject;
(3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect so
providing.”
There is no doubt that the testator intended to create a trust. He ordered in his will that
certain of his properties be kept together undisposed during a fixed period, for a stated
purpose. The probate court certainly exercised sound judgment in appointmening a
trustee to carry into effect the provisions of the will
As the existence of the trust was already proven, it results that the estate which plaintiff
represents has been delinquent in the payment of inheritance tax and, therefore, liable
for the payment of interest and surcharge provided by law in such cases.
The delinquency in payment occurred on March 10, 1924, the date when Moore
became trustee. On that date trust estate vested in him. The interest due should be
computed from that date.
NOTES: Other issues:
(a) When does the inheritance tax accrue and when must it be satisfied?
The accrual of the inheritance tax is distinct from the obligation to pay the same.
Acording to article 657 of the Civil Code, “the rights to the succession of a person are
transmitted from the moment of his death.” “In other words”, said Arellano, C. J., “. . .
the heirs succeed immediately to all of the property of the deceased ancestor. The
property belongs to the heirs at the moment of the death of the ancestor as completely
as if the ancestor had executed and delivered to them a deed for the same before his
death.”
Whatever may be the time when actual transmission of the inheritance 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 inheritance may differ from the time when the
heirs actually receive such inheritance. ” Thomas Hanley having died on May 27, 1922,
the inheritance tax accrued as of the date.
From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow
that the obligation to pay the tax arose as of the date. The time for the payment on
inheritance tax is clearly fixed by section 1544 of the Revised Administrative Code as
amended by Act No. 3031, in relation to section 1543 of the same Code. The two
sections follow:
SEC. 1543. Exemption of certain acquisitions and transmissions. — The following shall
not be taxed:
(a) The merger of the usufruct in the owner of the naked title.
(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or
legatee to the trustees.
(c) The transmission from the first heir, legatee, or donee in favor of another
beneficiary, in accordance with the desire of the predecessor. xx
SEC. 1544. When tax to be paid. — The tax fixed in this article shall be paid:
(a) In the second and third cases of the next preceding section, before entrance into
possession of the property.
(b) In other cases, within the six months subsequent to the death of the predecessor;
but if judicial testamentary or intestate proceedings shall be instituted prior to the
expiration of said period, the payment shall be made by the executor or administrator
before delivering to each beneficiary his share.
The instant case does[not] fall under subsection (a), but under subsection (b), of
section 1544 above-quoted, as there is here no fiduciary heirs, first heirs, legatee or
donee. Under the subsection, the tax should have been paid before the delivery of the
properties in question to Moore as trustee.
(b) Should the inheritance tax be computed on the basis of the value of the estate at
the time of the testator’s death, or on its value ten years later?
If death is the generating source from which the power of the estate to impose
inheritance taxes takes its being and if, upon the death of the decedent, succession
takes place and the right of the estate to tax vests instantly, the tax should be
measured by the value of the estate as it stood at the time of the decedent’s death,
regardless of any subsequent contingency value of any subsequent increase or
decrease in value
(c) In determining the net value of the estate subject to tax, is it proper to deduct the
compensation due to trustees?
A trustee, no doubt, is entitled to receive a fair compensation for his services. But from
this it does not follow that the compensation due him may lawfully be deducted in
arriving at the net value of the estate subject to tax. There is no statute in the
Philippines which requires trustees’ commissions to be deducted in determining the net
value of the estate subject to inheritance tax
(d) What law governs the case at bar? Should the provisions of Act No. 3606 favorable
to the tax-payer be given retroactive effect?
A statute should be considered as prospective in its operation, whether it enacts,
amends, or repeals an inheritance tax, unless the language of the statute clearly
demands or expresses that it shall have a retroactive effect, . . . .” Act No. 3606 itself
contains no provisions indicating legislative intent to give it retroactive effect. No such
effect can be given the statute by this court.
Collector of Internal Revenue vs. Fisher GR. No. L-11622
 exemption from the payment of taxes for the Mines shares of stock.
January 28, 1961
DOCTRINE:
“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.”
FACTS:
Walter G. Stevenson was born in the Philippines of British parents, married in Manila
to another British subject, Beatrice. He died in 1951 in California where he and his wife
moved to.
In his will, he instituted Beatrice as his sole heiress to certain real and personal
properties, among which are 210,000 shares of stocks in Mindanao Mother Lode
Mines (Mines).
Ian Murray Statt (Statt), the appointed ancillary administrator of his estate led an estate
and inheritance tax return. He made a preliminary return to secure the waiver of the
CIR on the inheritance of the Mines shares of stock.
In 1952, Beatrice assigned all her rights and interests in the estate to the spouses
Fisher.
Statt led an amended estate and inheritance tax return claiming ADDITIOANL
EXEMPTIONS, one of which is the estate and inheritance tax on the Mines’ 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 led in the CFI of Manila
for the said amount.
CFI ruled that (a) the 1⁄2 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 NIRC.
ISSUE/S:
Whether or not the estate can avail itself of the reciprocity proviso in the NIRC granting
RULING: NO.
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.
SPECIFICALLY:
Section122 of the NIRC provides that “No tax shall be collected under this Title in
respect of intangible personal property
(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 any character
in respect of intangible personal property of citizens of the Philippines not
residing in that foreign country, or
(b) 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 property owned by citizens of the
Philippines not residing in that foreign country."
On the other hand, Section 13851 of the California Inheritance Tax Law provides that
intangible personal property is exempt from tax if the decedent at the time of his death
was a resident of a territory or another State of the United States or of a foreign state
or country which then imposed a legacy, succession, or death tax in respect to
intangible personal property of its own residents, but either:.
Did not impose a legacy, succession, or death tax of any character in respect to
intangible personal property of residents of this State, or
Had in its laws a reciprocal provision under which intangible personal property of a
non-resident was exempt from legacy, succession, or death taxes of every character if
the Territory or other State of the United States or foreign state or country in which the
nonresident resided allowed a similar exemption in respect to intangible personal
property of residents of the Territory or State of the United States or foreign state or
country of residence of the decedent."
Dizon v CTA G.R. No. 140944 April 30, 2008
FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the
probate of his will was filed with Branch 51 of the Regional Trial Court (RTC) of Manila
(probate court). The probate court then appointed retired Supreme Court Justice
Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon
(petitioner) as Special and Assistant Special Administrator, respectively, of the Estate
of Jose (Estate). Petitioner alleged that several requests for extension of the period to
file the required estate tax return were granted by the BIR since the assets of the
estate, as well as the claims against it, had yet to be collated, determined and
identified.
ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing the admission of the
pieces of evidence which were not formally offered by the BIR; and
2. Whether the actual claims of the aforementioned creditors may be fully allowed as
deductions from the gross estate of Jose despite the fact that the said claims were
reduced or condoned through compromise agreements entered into by the Estate with
its creditors Or Whether or not the CA erred in affirming the CTA in the latter's
determination of the deficiency estate tax imposed against the Estate.
RULING:
1. Yes. While the CTA is not governed strictly by technical rules of evidence, as rules of
procedure are not ends in themselves and are primarily intended as tools in the
administration of justice, the presentation of the BIR's evidence is not a mere
procedural technicality which may be disregarded considering that it is the only means
by which the CTA may ascertain and verify the truth of BIR's claims against the Estate.
The BIR's failure to formally offer these pieces of evidence, despite CTA's directives, is
fatal to its cause
2. Yes. The claims existing at the time of death are significant to, and should be made
the basis of, the determination of allowable deductions. Also, as held in Propstra v.
U.S., where a lien claimed against the estate was certain and enforceable on the date
of the decedent's death, the fact that the claimant subsequently settled for lesser
amount did not preclude the estate from deducting the entire amount of the claim for
estate tax purposes. This is called the date-of-death valuation rule.
CIR vs. Gonzales
In November 1966, the Supreme Court issued a decision declaring Lilia Gonzales to
be liable for the entire tax deficiency due on an estate left by her father. Gonzales
seeks reconsideration for her not to be adjudged as liable for the whole tax since she
administers only 1/3 of the estate. And that the other 2/3 is now administered by his
deceased brother’s widow, Florencia Yusay.
ISSUE: Whether or not Gonzales is only liable for 1/3.
HELD: No. In the first place, Florencia cannot be adjudged liable because she is not a
party to this case. Gonzales appealed the tax assessments to the Court of Tax Appeals
hoping for a favorable judgment. The adverse judgment shall be borne by her. Under
the tax code, failure to pay the estate and inheritance taxes before distribution of the
estate would subject the executor or administrator to criminal liability. The Supreme
Court also clarified, it is immaterial that Gonzales administers only one-third of the
estate and will receive as her share only said portion, for her right to the estate comes
after taxes. As an administratrix, she is liable for the entire estate tax. As an heir, she is
liable for the entire inheritance tax although her liability would not exceed the amount
of her share in the estate. Besides, the tax payment shall come from the estate before
actual distribution.
Vera vs. Navarro
Vera v Navarro (Taxation)
Vera v Navarro
G.R. No. L-27745 October 18, 1977
FACTS:
Elsie M. Gaches died on March 9, 1966 without a child. The deceased, however, left a
last will and testament giving properties to several persons.
Judge Tan was appointed as executor of the testate estate of Elsie M. Gaches without
a bond.
In a letter, dated June 3, 1966, Judge Tan informed the Commissioner that the testate
estate was worth about ten million (P10 million) pesos and that the estate and
inheritance taxes due thereon were about P9.5 million.
After several reassessments, the case ultimately came to the Supreme Court.
ISSUES:
(1) Should the herein respondent heirs 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?
(2) Are the respondent heirs herein who are citizens and residents of the Philippines
liable for the payment of the Philippine inheritance tax corresponding to the hereditary
share of another heir who is a citizen and resident of the United States of America.
said share of the latter consisting of personal (cash deposits and, shares) properties
located in the mentioned court
(3) Does the assignment of a certificate of time deposit to the comissioner of Internal
Revenue for the purpose of paying t I hereby the estate tax constitute payment of such
tax?
(4) Should the herein respondent heirs be held liable for the payment of surcharge and
interest on the amount (P700,000.00) representing the face value of time deposit
certificates assigned to the Commissioner which could not be converted into cash?
RULING:
(1) No. 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; etc. This was not
complied with
(2) No. 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. the payment of the inheritance tax should be taken as'the individual
responsibility, to the extent of the benefits received, of each heir.
3. No. a time deposit certificate is a mercantile document and is essentially a
promissory note. 5 By the express terms of Article 1249 of the Civil Code of the
Philippines, the use of this medium to clear an obligation will "produce the effect of
payment only when they have been cashed, or when through the fault of the creditor
they have been impaired." Consequently, the value of the said certificates
(P700,000.00) should still be considered outstanding.
4. Yes. The Interest charge for 1% per month imposed under Section 101 (a) (1) of the
Tax Code is essentially a commotion to the State for delay in the payment of the tax
due thereto
RULING:
Yes. As a holder of property belonging to the estate, Pineda is liable for the tax up to
the amount of the property in his possession. The BIR is given the discretion to avail of
the most expeditious way to collect the tax. This is, of course, without prejudice to
Pineda’s right of contribution for his co-heirs. Put simply, the Supreme Court held that
the rule on solidarity applies to taxes because it is not an ordinary contract. Two
persons liable for payment of estate tax:
Executor or administrator;

Heirs up to the extent of their inheritance.

The estate cannot likewise be exempted from the payment of the 5% surcharge
imposed by Section 101 (c) of the Tax Code

CIR v Pineda (1967)

FACTS:

BIR investigated the income tax liability of Anastacio Pineda’s estate for the years
1945, 1946, 1947, and 1948 and it found that the corresponding income tax return
were not filed. This resulted to a P760.28 deficiency income tax for 1945 and 1946 and
real estate dealer’s fixed tax for the 4th quarter of 1946 and for the whole year 1947.
Manuel Pineda, eldest son of Anastacio, received the assessment. He contested the
same alleging that only a proportionate part should be his liability. CTA ruled that
Pineda is liable only for taxes corresponding to his share in the estate. Hence, the
present petition.

ISSUE:

Whether the Government can require Manuel Pineda to pay the full amount of the tax
assessed