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April 30, 2008 reduced or condoned through compromise agreements entered into by the

Estate with its creditors


G.R. No. 140944
Decision
RAFAEL ARSENIO S. DIZON, IN HIS CAPACITY AS THE JUDICIAL
ADMINISTRATOR OF THE ESTATE OF THE DECEASED JOSE P. FERNANDEZ v. YES.
COURT OF TAX APPEALS AND COMMISSIONER OF INTERNAL REVENUE
Ratio
Ponente
Following the US Supreme Court’s ruling in Ithaca Trust Co. v. United States,
Justice Nachura the Court held that post-death developments are not material in
determining the amount of deduction. This is because estate tax is a tax
Subject imposed on the act of transferring property by will or intestacy and,
because the act on which the tax is levied occurs at a discrete time, i.e., the
Estate Taxation – Allowable Deductions, Date-of-Death Valuation Principle instance of death, the net value of the property transferred should be
ascertained, as nearly as possible, as of the that time. This is the date-of-
Facts death valuation rule.

Jose P. Fernandez died in November 7, 1987. Thereafter, a petition for the The Court, in adopting the date-of-death valuation principle, explained
probate of his will was filed. The probate court appointed Atty. Rafael that:
Arsenio P. Dizon as administrator of the Estate of Jose Fernandez.
 First. There is no law, nor do we discern any legislative intent in
An estate tax return was filed later on which showed ZERO estate tax our tax laws, which disregards the date-of-death valuation
liability. BIR thereafter issued a deficiency estate tax assessment, principle and particularly provides that post-death developments
demanding payment of Php 66.97 million as deficiency estate tax. This was must be considered in determining the net value of the estate. It
subsequently reduced by CTA to Php 37.42 million. The CA affirmed the bears emphasis that tax burdens are not to be imposed, nor
CTA’s ruling, hence, the instant petition. presumed to be imposed, beyond what the statute expressly and
clearly imports, tax statutes being construed strictissimi juris
The petitioner claims that in as much as the valid claims of creditors against against the government.
the Estate are in excess of the gross estate, no estate tax was due. On the  Second. Such construction finds relevance and consistency in our
other hand, respondents argue that since the claims of the Estate’s Rules on Special Proceedings wherein the term "claims" required
creditors have been condoned, such claims may no longer be deducted to be presented against a decedent's estate is generally construed
from the gross estate of the decedent. to mean debts or demands of a pecuniary nature which could
have been enforced against the deceased in his lifetime, or liability
Issue contracted by the deceased before his death. Therefore, the
claims existing at the time of death are significant to, and should
Whether the actual claims of creditors may be fully allowed as deductions be made the basis of, the determination of allowable deductions.
from the gross estate of Jose despite the fact that the said claims were