COLLECTOR V.

FISHER
J. Barrera | January 28, 1961
Estate Tax; Gross Estate; Decedent; Non-resident Aliens; Reciprocity
Petition for review on certiorari

PARTIES:
G.R. No. L-11622
 Petitioner – Collector of Internal Revenue
 Respondents – Douglas Fisher and Bettina Fisher, and the Court of Tax Appeals
G.R. No. L-11668
 Petitioners – Douglas Fisher and Bettina Fisher
 Respondent – Collector of Internal Revenue, and the Court of Tax Appeals

SYNOPSIS:
Walter Stevenson, a British national born in Manila and residing in San Francisco, California, died. He
executed a will in San Francisco where he instituted his British wife as his sole heiress to the properties
the spouses acquired while residing in the Philippines. Following the probate of the will in the SC of
California, ancillary proceedings were instituted in CFI Manila to settle the estate in the Philippines.
The ancillary administrator filed a preliminary estate and inheritance return and claimed for additional
exemption and deduction:
 Exemption from the imposition of estate and inheritance taxes on the 210,000 shares of stock in
the Mindanao Mother Lode Mines, Inc. also pursuant to the reciprocity proviso of Section 122
of the NIRC.
 Deduction in the amount of P4,000.00 from the gross estate of the decedent as provided for in
Section 861 (4) of the U.S. Federal Internal Revenue Code which the ancillary administrator
averred was allowable by way of the reciprocity granted by Section 122 of the NIRC.

CFI assessed the estate for estate tax and inheritance tax. It denied the additional exemption and
deduction. CTA reversed and held that the intangible personal property is exempt from inheritance tax,
pursuant to the provision of section 122 of the NIRC in relation to the California Inheritance Tax Law
but his estate is not entitled to an exemption of P4,000.00 in the computation of the estate tax. (Note:
Beatrice Stevenson has assigned all her rights to the property to Douglas and Bettina Fisher.)

W/N the estate can avail itself of the reciprocity proviso embodied in Section 122 of the NIRC granting
exemption from the payment of estate and inheritance taxes on the 210,000 shares of stock in the
Mindanao Mother Lode Mines Inc. – NO
 While the Philippines imposes estate and inheritance tax, California law only imposes
inheritance tax. The Federal Internal Revenue Code, on the other hand, imposes the estate tax,
but does not provide any exemptions as to non-residents not citizens of US.
 For the doctrine of reciprocity to work, the reciprocity should be total, not partial. Following
this, the doctrine of reciprocity will not apply since the exemption given by California law is
only to inheritance tax, while the exemption given by Philippine law is both to estate tax and
inheritance tax.

W/N the estate is entitled to the deduction of P4,000.00 allowed by Section 861, U.S. Internal Revenue
Code in relation to section 122 of the NIRC – NO
 The nature of the $2,000 allowed under the Federal Estate Tax Law is in the nature of a
deduction and is not an exemption. Thus, the doctrine of reciprocity under Section 122 of the
NIRC will not apply.
  Besides, there is no reciprocity under the Federal Law of US.

DOCTRINE: Under the principle of reciprocity, the residents of a country which implemented a policy
of exempting from taxation the residents of another country, shall also enjoy the same exemption in that
another country.

FACTS:
 Walter Stevenson, a British national born in Manila and residing in San Francisco, California,
died. He executed a will in San Francisco where he instituted his wife, Beatrice Mauricia
Stevenson (also a British subject) as his sole heiress to the properties the spouses acquired while
residing in the Philippines (a total of P130,792.85)
 Following the probate of the will in the Supreme Court of California, ancillary proceedings were
instituted in CFI Manila to settle the estate in the Philippines.
 Ian Murray Statt, ancillary administrator, filed a preliminary estate and inheritance return with a
reservation that the properties will be appraised at their values six months after the death of
Stevenson.
o The preliminary return was made in order to secure the CIR’s waiver on 0 the inheritance
tax due on the shares of stock in the mine until a final assessment of their value has been
made (especially since the estate is planning to dispose of the property in the US)
o It stated claims for additional exemption and deduction:
 Exemption from the imposition of estate and inheritance taxes on the
210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. also
pursuant to the reciprocity proviso of Section 122 of the NIRC.
 Deduction in the amount of P4,000.00 from the gross estate of the decedent
as provided for in Section 861 (4) of the U.S. Federal Internal Revenue Code
which the ancillary administrator averred was allowable by way of the
reciprocity granted by Section 122 of the NIRC.
 CFI assessed the estate the amount of P5,417.98 for estate tax and P10,875.26 for inheritance tax.
o It approved the request, but increased the appraisal of the parcels of land located in
Baguio City by basing them on their fair market value of P52,200
o The deductions allowed were only funeral expenses (P2,000) and judicial and
administration expenses (P5,500) (excluding the above additional exemption and
deduction)
 The assessment was paid, however, pursuant to the preliminary return it was granted, the
ancillary administrator filed two amended estate and inheritance tax returns and argued that the
estate has overpaid its taxes.
 The estate then requested a refund of P15,259.83 plus interest.
 Meanwhile, Beatrice Stevenson has assigned all her rights to the property to Douglas and Bettina
Fisher.
 CTA reversed and held that the intangible personal property is exempt from inheritance tax,
pursuant to the provision of section 122 of the NIRC in relation to the California Inheritance Tax
Law but his estate is not entitled to an exemption of P4,000.00 in the computation of the estate
tax.

ISSUES/HELD:
W/N in determining the taxable net estate of the decedent, the share of the surviving spouse should
be deducted pursuant to our law on conjugal partnership in relation to the NIRC – YES
  Petitioners: Pursuant to Art. 124 of the NCC, the property relations of the Stevensons are to be
determined by the national law of the husband. In this case, since the national law of Walter does
not recognize conjugal partnership, all the properties acquired during the marriage belong
exclusively to the husband, therefore taxable.
 SC: Since the marriage of the Stevensons in the Philippines took place in 1909, the supposed
applicable law is not Art. 124 of the NCC but Art. 1325 of the Old Civil Code. However, both
articles pertain to mixed marriages, i.e. marriage between a foreigner and a Filipino.
o Since both spouses are foreigners who married in the Philippines, the applicable law,
according to Manresa, is the nationality of the husband.
o However, English law has not been proven by the petitioner. In absence of proof, it is
presumed that English Law is the same as that of Philippine Law (doctrine of processual
presumption).
o Under our law, in absence of any pre-nuptial agreement, the contracting parties are
presumed to have adopted the system of conjugal partnership. Thus, the living spouse’s ½
share should be deducted from the taxable estate of the deceased.

Relevant: W/N the estate can avail itself of the reciprocity proviso embodied in Section 122 of the
NIRC granting exemption from the payment of estate and inheritance taxes on the 210,000 shares
of stock in the Mindanao Mother Lode Mines Inc. – NO
 Under the principle of reciprocity, the residents of a country which implemented a policy of
exempting from taxation the residents of another country, shall also enjoy the same
exemption in that another country.
 In this case, Sec. 122 of the NIRC exempts intangible personal property of residents of foreign
country from transfer or death taxes of any and every character, while Sec. 13851 of the
California Inheritance Tax Law exempts intangible personal property of residents of foreign
country from legacy, succession, or death taxes of any and every character.
 However, it should be noted that while the Philippines imposes estate and inheritance tax,
California law only imposes inheritance tax. The Federal Internal Revenue Code, on the other
hand, imposes the estate tax, but does not provide any exemptions as to non-residents not citizens
of US.
o It should be noted that for the doctrine of reciprocity to work, the reciprocity should be
total, not partial. Following this, the doctrine of reciprocity will not apply since the
exemption given by California law is only to inheritance tax, while the exemption given
by Philippine law is both to estate tax and inheritance tax.
o The ruling in CIR v Lara, where a nonresident alien residing in California was exempted
from paying inheritance taxes, does not apply, since the issue in the said case is not about
the tax provisions of Philippine law and California law.
o Therefore, in this case, it cannot be said the estate of Stevenson is exempted from paying
inheritance taxes by virtue of the doctrine of reciprocity.

Relevant: W/N the estate is entitled to the deduction of P4,000.00 allowed by Section 861, U.S.
Internal Revenue Code in relation to section 122 of the NIRC – NO
 The nature of the $2,000 allowed under the Federal Estate Tax Law is in the nature of a deduction
and is not an exemption. Thus, the doctrine of reciprocity under Section 122 of the NIRC will not
apply.
 Besides, there is no reciprocity under the Federal Law of US.

W/N the real properties in Baguio City and the 210,000 shares of stock in Mindanao Mines were
correctly appraised by the lower court – YES for the real property (52,500); NO for shares of stock
(0.325 per stock)
  Contrary to respondent’s assertion that they made a reservation that the value of the properties
will be their value six months after Stevenson’s death, the proper rule is that the properties, for
purposes of taxation, should be appraised at their fair market value; if there is evidence presented
to the contrary, then only then will the assessed value be considered.
 In this case, with regard to the real property, the valuation of P52,200 by the CIR is fair and
reasonable.
o The court takes judicial notice that assessments for real estate taxation purposes are very
much lower than the true and fair market value of the properties at a given time and
place.
o Since the properties were sold for a price of P72,000. It would be unreasonable to assess
the value of property at P43,500 given the said fair market value.
 As to the shares of stock, their valuation cannot be based on the quotation of the San Francisco
Stock Exchange. The situs of the shares of stock are in the Philippines, thus their value should be
based on their fair market value prevailing in the contry.
o Since six months after the death of Stevenson, the value of the said shares were for P.325,
the said value should be followed for purposes of taxation.

W/N all the deductions stated by the ancillary administrator in the amended returns are justified –
NO
 The basis of considering the proposed deductions is whether or not the probate court has
approved them. It is to be supposed that the probate court would not have approved said items
were they not supported by evidence presented by the estate.
 As to the realty estate taxes, the record disclosed that the same was already included in the
judicial and administration expenses that was deducted by the court.
 As to the alleged claim against the estate, this represents Stevenson’s loan with the Bank of
California National Association, secured by pledge on 140,000 of his shares of stock in Mindanao
mines. The same should be disallowed for the following reasons:
o It was not proved as a valid claim during the settlement of the estate in the Philippines.
While there is only ancillary administration in the Philippines, the distinction between
domiciliary or principal administration and ancillary administration serves only to
distinguish one administration from the other, for the two proceedings are separate and
independent.
o Thus, while the claim has been admitted and proved during the will’s probate in
California, the effect of such is only within the limits of the country in which it was
granted; before a will duly probated outside of the Philippines can have effect here, it
must first be proved and allowed before our courts, in much the same manner as wills
originally presented for allowance therein.
 Moreover, Sec. 89(d)(1) of the NIRC requires the filing of the statement of the gross estate of the
non-resident alien that is not situated in the Philippines. In this case, no such statement was
included in the three returns filed by the ancillary administrator.

W/N the estate is entitled to the payment of interest on the amount it claims to have overpaid and to
be refundable to it – NO
 CIR v St. Paul’s Hospital: In the absence of a statutory provision clearly or expressly directing or
authorizing the payment of interest on overpaid taxes, the Government cannot be required to pay
interests.

DISPOSITIVE:
WHEREFORE, as modified in the manner heretofore indicated, the judgment of the lower court is hereby
affirmed in all other respects not inconsistent herewith. No costs. So ordered.
HELPFUL INFORMATION:

ANNEX:

Section 122, NIRC:

... And, provided, further, 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."

Section 13851, California Inheritance Tax Law:

"SEC. 13851, Intangibles of nonresident: Conditions. Intangible personal property is exempt from the tax
imposed by this part 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:

(a) Did not impose a legacy, succession, or death tax of any character in respect to intangible personal property of
residents of this State, or

(b) 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.