Notes By: CABALUNA, Corina D.
(JD2A)
TRANSFER TAX
Q: What is a Transfer Tax?
A: A transfer tax is a charge levied on the transfer of
ownership or title to property from one individual or entity
to another.
Q: What are the kinds of Transfer Tax?
A: Estate Tax & Donor’s Tax
Q: Differentiate between Estate Tax and Donor’s Tax?
A: Estate tax is the tax on the right to transmit property at
death and on certain transfers by the decedent during his
lifetime which is made by the law equivalent of
testamentary dispositions. On the other hand, Donor’s Tax
is a tax on the privilege of transmitting one‘s property or
property rights to another or others without adequate and
full valuable consideration.
Q: How are Transfer Taxes distinguish from Business
Taxes?
A: Transfer Tax is a charge imposed on the transferor of a
particular asset, including real estate or other revenue-
generating assets, at the time of transfer of such asset to a
transferee. Business tax is imposed on the seller or persons
or entities that sell or lease goods, properties or services in
the course of trade or business.
Q: What is Business Tax?
A: Business Tax is a charge imposed that businesses must
pay as a normal part of trade or business operations.
ESTATE TAX
Sec. 84. Rate of Estate Tax. - There shall be levied,
assessed, collected and paid upon the transfer of the net
estate as determined in accordance with Sections 85 and
86 of every decedent, whether resident or nonresident of
the Philippines, a tax at the rate of six percent (6%) based
on the value of such net estate.
Q: What is Estate Tax?
A: Estate tax is the tax on the right to transmit property at
death and on certain transfers by the decedent during his
lifetime which is made by the law equivalent of
testamentary dispositions.
Q: What are the factors considered in computing Estate
Tax?
A: (1) Nationality and Domicile; (2) Location of Asset
Gross Estate (Sec. 85)
Less: (1) Deductions (Sec. 86)
(2)Net share of the SS in the CPP
Net Taxable Estate
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Sec. 85. Gross Estate. — The value of the gross estate of
the decedent shall be determined by including the value at
the time of his death of all property, real or personal,
tangible or intangible, wherever situated: Provided,
however, That in the case of a nonresident decedent who
at the time of his death was not a citizen of the Philippines,
only that part of the entire gross estate which is situated in
the Philippines shall be included in his taxable estate.
Q: What kind of asset interest should be part of Gross
Estate?
A: For residents and citizens, gross estate includes ALL
properties, real or personal, tangible or intangible,
wherever situated. For nonresident aliens, gross estate
includes only properties situated in the Philippines. Except
with respect to INTANGIBLE PERSONAL PROPERTY (IPP), its
inclusion to the gross estate is subject to the rule of
reciprocity.
(1) If the foreign country of the nonresident alien does
not impose a transfer tax of any character on the
IPP of Filipinos not residents of that foreign
country; or
(2) If the foreign country of the nonresident alien
allows a similar exemption from transfer tax in
respect of IPP owned by Filipinos not residents of
that foreign country,
Then IPPs of the nonresident alien here are exempt from
the estate tax.
REPROCITY - the practice of exchanging things with others
for mutual benefit, especially privileges granted by one
country or organization to another.
Q: What are the specific rules to follow for Citizens and
Non-citizens?
A: For residents and citizens, gross estate includes ALL
properties, real or personal, tangible or intangible,
wherever situated. For nonresident aliens, gross estate
includes only properties situated in the Philippines. Except
with respect to INTANGIBLE PERSONAL PROPERTY (IPP), its
inclusion to the gross estate is subject to the rule of
reciprocity.
Q: Define Real/Immovable Property and Personal
Property
A: Article 415 of NCC. The following are immovable
property:
(1) Land, buildings, roads and constructions of all kinds
adhered to the soil;
(2) Trees, plants, and growing fruits, while they are
attached to the land or form an integral part of an
immovable;
(3) Everything attached to an immovable in a fixed manner,
in such a way that it cannot be separated therefrom
without breaking the material or deterioration of the
object;
Notes By: CABALUNA, Corina D. (JD2A)
(4) Statues, reliefs, paintings or other objects for use or
ornamentation, placed in buildings or on lands by the
owner of the immovable in such a manner that it reveals
the intention to attach them permanently to the
tenements;
(5) Machinery, receptacles, instruments or implements
intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece
of land, and which tend directly to meet the needs of the
said industry or works;
(6) Animal houses, pigeon-houses, beehives, fish ponds or
breeding places of similar nature, in case their owner has
placed them or preserves them with the intention to have
them permanently attached to the land, and forming a
permanent part of it; the animals in these places are
included;
(7) Fertilizer actually used on a piece of land;
(8) Mines, quarries, and slag dumps, while the matter
thereof forms part of the bed, and waters either running or
stagnant;
(9) Docks and structures which, though floating, are
intended by their nature and object to remain at a fixed
place on a river, lake, or coast;
(10) Contracts for public works, and servitudes and other
real rights over immovable property.
Article 416 of NCC. The following things are deemed to be
personal property:
(1) Those movables susceptible of appropriation which are
not included in the preceding article;
(2) Real property which by any special provision of law is
considered as personal property;
(3) Forces of nature which are brought under control by
science; and
(4) In general, all things which can be transported from
place to place without impairment of the real property to
which they are fixed. (335a)
Q: Intangible properties wherever situated.
A: (1) franchise which must be exercised in the Philippines;
(2) shares, obligations or bonds issued by any corporation
or sociedad anonima organized or constituted in the
Philippines in accordance with its laws; (3) shares,
obligations or bonds by any foreign corporation eighty-five
percent (85%) of the business of which is located in the
Philippines; (4) shares, obligations or bonds issued by any
foreign corporation if such shares, obligations or bonds
have acquired a business situs in the Philippines; (5) shares
or rights in any partnership, business or industry
established in the Philippines, shall be considered as
situated in the Philippines.
Q: Explain “death rule”
A: There shall be an imposed rate of six percent (6%) based
on the value of such NET ESTATE determined as of the time
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of death of decedent composed of all properties, real or
personal, tangible or intangible less allowable deductions.
Q: What are those interests which may be included as
part of the transfer of the decedent?
A: Gross estate includes any interest or right in the nature
of property, but less than title, having value or capable of
having value, like: (1) Dividends declared, but paid after the
death; (2) Partnership profits; and (3) Right of usufruct
(A) Decedent's Interest. - To the extent of the interest
therein of the decedent at the time of his death;
Q: What are covered by the decedent’s interest?
A: Those interests to the extent of the interest therein of
the decedent at the time of his death
(B) Transfer in Contemplation of Death. - To the extent of
any interest therein of which the decedent has at any time
made a transfer, by trust or otherwise, in contemplation of
or intended to take effect in possession or enjoyment at or
after death, or of which he has at any time made a
transfer, by trust or otherwise, under which he has
retained for his life or for any period which does not in fact
end before his death (1) the possession or enjoyment of, or
the right to the income from the property, or (2) the right,
either alone or in conjunction with any person, to
designate the person who shall possess or enjoy the
property or the income therefrom; except in case of a bona
fide sale for an adequate and full consideration in money
or money's worth.
Q: What are the two kinds of transfer in contemplation of
death?
A: (1) Transfers, by trust or otherwise, in contemplation or
intended to take effect (in possession or enjoyment) at or
after death; (2) Transfers, by trust or otherwise, under
which the decedent has retained for his life (or for any
period which does not in fact end before his death) the
possession or enjoyment of, or the right to the income
from the property, or the right to designate the person
who shall possess or enjoy the property or the income
therefrom.
Q: Differentiate between Donation Inter Vivos and Mortis
Causa
A: Donation inter vivos differs from donation mortis causa
in that in the former, the act is immediately operative even
if the actual execution may be deferred until the death of
the donor, while in the latter, nothing is conveyed to or
acquired by the donee until the death of the donor-
testator.
HEIRS OF BONSATO v CA
G.R. No. L-6600, July 30, 1954
Facts: The case was initiated in the Court of First Instance
of Pangasinan, by respondents Josefa Utea and other heirs
Notes By: CABALUNA, Corina D. (JD2A)
of Domingo Bonsato and his wife Andrea Nacario, both
deceased. Their complaint (for annulment and damages)
charged that on the first day of December, 1949, Domingo
Bonsato, then already a widower, had been induced and
deceived into signing two notarial deeds of donations in
favor of his brother Juan Bonsato and of his nephew Felipe
Bonsato, respectively, transferring to them several parcels
of land situated in the municipalities of Mabini and Burgos,
Province of Pangasinan, both donations having been duly
accepted in the same act and documents. Plaintiffs likewise
charged that the donations were mortis causa and void for
lack of the requisite formalities. The defendants, Juan
Bonsato and Felipe Bonsato, answered averring that the
donations made in their favor were voluntarily executed in
consideration of past services rendered by them to the late
Domingo Bonsato; that the same were executed freely
without the use of force and violence, misrepresentation
or intimidation; and prayed for the dismissal of the case.
After trial, the CFI rendered its decision finding that the
deeds of donation were executed by the donor while the
latter was of sound mind, without pressure or intimidation;
that the deeds were of donation inter vivos without any
condition making their validity or efficacy dependent upon
the death of the donor; but as the properties donated were
presumptively conjugal, having been acquired during the
coverture of Domingo Bonsato and his wife Andrea
Nacario, the donations were only valid as to an undivided
one-half share in the three parcels of land described
therein.
Issue: WON the donation was a donation mortis causa or a
donation inter vivos?
Ruling: Donation inter vivos. If it was a donation mortis
causa, then the documents should reveal any or all of the
following characteristics:
(1) Convey no title or ownership to the transferee before
the death of the transferor; or, what amounts to the same
thing, that the transferor should retain the ownership (full
or naked) and control of the property while alive (Vidal vs.
Posadas, 58 Phil., 108; Guzman vs. Ibea, 67 Phil., 633);
(2) That before his death, the transfer should be revocable
by the transferor at will, ad nutum; but revocability may be
provided for indirectly by means of a reserved power in the
donor to dispose of the properties conveyed (Bautista vs.
Sabiniano, G. R. L-4326, November 18, 1952);
(3) That the transfer should be void if the transferor should
survive the transferee.
None of these characteristics is discernible in the deeds of
donation executed by the late Domingo Bonsato. The
donor only reserved for himself, during his lifetime, the
owner’s share of the fruits or, a reservation that would be
unnecessary if the ownership of the donated property
remained with the donor. Most significant is the absence of
stipulation that the donor could revoke the donations; on
the contrary, the deeds expressly declare them to be
«irrevocable», a quality absolutely incompatible with the
idea of conveyances mortis causa where revocability is of
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the essence of the act, to the extent that a testator cannot
lawfully waive or restrict his right of revocation (Old Civil
Code, Art. 737; New Civil Code, Art. 828).
It is true that the last paragraph in each donation contains
the phrase «that after the death of the donor the aforesaid
donation shall become effective. However, said expression
must be construed together with the rest of the paragraph,
and thus taken, its meaning clearly appears to be that after
the donor’s death, the donation will take effect so as to
make the donees the absolute owners of the donated
property, free from all liens and encumbrances; for it must
be remembered that the donor reserved for himself a
share of the fruits of the land donated. Such reservation
constituted a charge or encumbrance that would disappear
upon the donor’s death, when full title would become
vested in the donees.
SPS. GESTOPA v CA
G.R. No. 111904, October 5, 2000
Facts: In 1965 and 1966, three deeds of donation mortis
causa were executed in favor of Mercedes Danlag by
spouses Diego and Catalina Danlag. The deeds pertained to
several parcels of unregistered land. In January 1973,
Diego, with the consent of Catalina, executed a deed of
donation inter vivos over the same parcels of land in favor
of Mercedes.
The donation included a condition that the Danlag spouses
would continue to enjoy the fruits of the land during their
lifetime and that Mercedes could not sell the land without
their consent.The Danlag spouses later sold some of the
land to the Gestopa spouses. Mercedes filed a petition for
quieting of title with the Regional Trial Court, arguing that
she was the rightful owner of the land.
Issue: WON donation executed in favor of Mercedes is a
Donation Inter Vivos or Mortis Causa.
Ruling: Donation Inter vivos. he intention of the donor is
crucial in determining whether a donation is inter vivos or
mortis causa. The granting clause of the deed of donation
showed that Diego donated the properties out of love and
affection for Mercedes, indicating an inter vivos donation.
The reservation of lifetime usufruct also indicated that the
donor intended to transfer the naked ownership of the
properties. The donor reserved sufficient properties for his
maintenance, demonstrating his intent to part with the
donated land.
The donee accepted the donation, which is a requirement
for inter vivos donations. A valid donation, once accepted,
becomes irrevocable, except for specific reasons such as
officiousness, failure to comply with the charges imposed
in the donation, or ingratitude. The donor did not invoke
any of these reasons in the deed of revocation. The
donation inter vivos is valid and still in effect. The deeds of
sale executed by the Danlag spouses in favor of the
Gestopa spouses are null and void.
Notes By: CABALUNA, Corina D. (JD2A)
(C) Revocable Transfer. —
(1) To the extent of any interest therein, of which the
decedent has at any time made a transfer (except In case
of a bona fide sale for an adequate and full consideration in
money or money's worth) by trust or otherwise, where the
enjoyment thereof was subject at the date of his death to
any change through the exercise of a power (in whatever
capacity exercisable) by the decedent alone or by the
decedent in conjunction with any other person (without
regard to when or from what source the decedent acquired
such power), to alter, amend, revoke, or terminate, or
where any such power is relinquished in contemplation of
the decedent's death.
(2) For the purpose of this Subsection, the power to alter,
amend or revoke shall be considered to exist on the date of
the decedent's death even though the exercise of the
power is subject to a precedent giving of notice or even
though the alteration, amendment or revocation takes
effect only on the expiration of a stated period after the
exercise of the power, whether or not on or before the
date of the decedent's death notice has been given or the
power has been exercised. In such cases, proper
adjustment shall be made representing the interests which
would have been excluded from the power if the decedent
had lived, and for such purpose if the notice has not been
given or the power has not been exercised on or before the
date of his death, such notice shall be considered to have
been given, or the power exercised, on the date of his
death.
Q: What are considered as revocable transfers?
A: Any interest therein, of which the decedent has at any
time made a transfer (except In case of a bona fide sale for
an adequate and full consideration in money or money's
worth) by trust or otherwise, where the enjoyment thereof
was subject at the date of his death to any change through
the exercise of a power (in whatever capacity exercisable)
by the decedent alone or by the decedent in conjunction
with any other person (without regard to when or from
what source the decedent acquired such power);
(D) Property Passing Under General Power of
Appointment. — To the extent of any property passing
under a general power of appointment exercised by the
decedent: (1) by will, or (2) by deed executed in
contemplation of, or intended to take effect in possession
or enjoyment at, or after his death, or (3) by deed under
which he has retained for his life or any period not
ascertainable without reference to his death or for any
period which does not in fact end before his death (a) the
possession or enjoyment of, or the right to the income
from, the property, or (b) the right, either alone or In
conjunction with any person, to designate the persons who
shall possess or enjoy the property or the income
therefrom; except in case of a bona fide sale for an
adequate and full consideration in money or money's
worth.
(E) Proceeds of Life Insurance. — To the extent of the
amount receivable by the estate of the deceased, his
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executor, or administrator, as insurance under policies
taken out by the decedent upon his own life, irrespective
of whether or not the insured retained the power of
revocation, or to the extent of the amount receivable by
any beneficiary designated in the policy of insurance,
except when it is expressly stipulated that the designation
of the beneficiary is irrevocable.
Q: What are life insurances proceeds included in the
computation of Gross Estate?
A: Proceeds of insurance under policies taken out by the
decedent upon his life shall constitute part of the gross
estate if the beneficiary is:
(1) The estate of the decedent, his executor or
administrator AS SUCH;
 It doesn't matter if revocable or not. As long as
the beneficiary is the estate of the decedent,
or his executor or administrator as such, then
you include that in the gross estate.
(2) A third person (not those in #1), and the
designation of the beneficiary is revocable
 Life insurance proceeds are excluded,
provided: (a) Irrevocable, and (b) Payable to
beneficiary other than estate, executor,
administrator
(F) Prior Interests. — Except as otherwise specifically
provided therein, Subsections (B), (C) and (E) of this Section
shall apply to the transfers, trusts, estates, interests, rights,
powers and relinquishment of powers, as severally
enumerated and described therein, whether made,
created, arising, existing, exercised or relinquished before
or after the affectivity of this Code.
(G) Transfers of Insufficient Consideration. — If any one of
the transfers, trusts, interests, rights or powers
enumerated and described in Subsections (B), (C) and (D)
of this Section is made, created, exercised or relinquished
for a consideration in money or money's worth, but Is not a
bona fide sale for an adequate and full consideration in
money or money's worth, there shall be included in the
gross estate only the excess of the fair market value, at the
time of death, of the property otherwise to be included on
account of such transaction, over the value of the
consideration received therefor by the decedent.
(H) Capital of the Surviving Spouse. — The capital of the
surviving spouse of a decedent shall not, for the purpose of
this Chapter, be deemed a part of his or her gross estate.
Sec. 86 Computation of Net Estate. — For the purpose of
the tax imposed in this Chapter, the value of the net estate
shall be determined:
(A) Deductions Allowed to the Estate of a Citizen or a
Resident. — In the case of a citizen or resident of the
Philippines, by deducting from the value of the gross estate
—
(1) Standard Deduction. — An amount equivalent to Five
Notes By: CABALUNA, Corina D. (JD2A)
million pesos (P5,000,000).
(2) For claims against the estate: Provided, That at the time
the indebtedness was incurred the debt instrument was
duly notarized and, if the loan was contracted within three
(3) years before the death of the decedent, the
administrator or executor shall submit a statement
showing the disposition of the proceeds of the loan.
Q: What are the requisites for deductibility for claims
against the estate?
A: Requisites for claims against state are as follows:
(1) The liability must represent a personal obligation
of the deceased at the time of his death,
(2) The liability was contracted in good faith and for
adequate and full consideration,
(3) The claim must be a debt or claim which is valid in
law and enforceable in court, and
(4) The indebtedness must not have been condoned
by the creditor during the lifetime of the decedent,
or the actions to collect must not have prescribed.
Q: What are the requirements to substantiate claims
against the estate?
A: R.R. 12-2018 has outlined the documentary
requirements for different kinds of unpaid obligations:
For loans
(1) Debt instrument must be notarized at the time the
indebtedness was incurred. EXCEPT for loans
granted by financial institutions where notarization
is not part of the business practice.
(2) Duly notarized certification from the creditor as to
the unpaid balance of the debt, including interest
as of the time of death;
(3) Proof of financial capacity of the creditor to lend
the amount at the time the loan was granted; and
(4) Statement under oath by the administrator or
executor of the estate reflecting the disposition of
the proceeds of the loan if said loan was
contracted within three years prior to the death of
the decedent.
For unpaid obligations from purchase of goods or services
(1) Documents evidencing purchase of goods or
service (like official receipts, etc.) or contracts of
service;
(2) Duly notarized certification from the creditor as to
the unpaid balance of the debt, including interest
as of the time of death; and
(3) Certified true copy of the latest audited balance
sheet of the creditor with a detailed schedule of tis
receivable showing the unpaid balance.
For settlements made through court, the documents filed
in court and the court order approving such claims, in
addition to the documents above.
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NOTE: There is no requirement to add the amount to the
gross estate (as compared to claims against insolvent
persons/mortgage). This is a DIRECT DEDUCTION.
Q: What are claims against the estate? How are they
filed?
A: Claims against the estate are debts or demands of a
pecuniary nature enforceable against the decedent loan
when he was alive, the obligations will be claims against his
estate when he dies.
They are filed by the administrator or executor which shall
submit a statement showing the disposition of the
proceeds of the loan.
PDIC v BIR
GR No. 158261, December 18, 2006
Facts: The case involves the liquidation of the Rural Bank of
Bokod (Benguet), Inc. (RBBI). The Philippine Deposit
Insurance Corporation (PDIC) is the liquidator of RBBI. PDIC
filed a motion for the approval of the Project of
Distribution. The Regional Trial Court (RTC) held in
abeyance the motion until PDIC secures a tax clearance
from the Bureau of Internal Revenue (BIR). PDIC filed a
Petition for Review on Certiorari, arguing that a tax
clearance is not necessary for the approval of the Project of
Distribution.
Issue: WON RBBI, through PDIC as its liquidator, needs to
secure a tax clearance from the BIR before the RTC can
approve the Project of Distribution.
Ruling: No. A tax clearance certificate is not necessary for
the approval of the Project of Distribution. The Court
emphasized the need for hearings and evidence in
liquidation proceedings. The requirement of a tax
clearance under Section 52(C) of the National Internal
Revenue Code and the BIR-SEC Regulations No. 1 only
applies to voluntary dissolution or liquidation of
corporations, and not to the liquidation of closed banks
ordered by the Bangko Sentral ng Pilipinas (BSP). The BIR
can still determine the tax liabilities of RBBI through the
filing of a final tax return by PDIC. Any outstanding tax
liabilities can be addressed during the liquidation
proceedings.
DIZON v CTA
GR No. 140944, April 30, 2008
Facts: The case involves the nullification of the Bureau of
Internal Revenue's deficiency estate tax assessment against
the Estate of Jose P. Fernandez. The petitioner, Rafael
Arsenio S. Dizon, is the Judicial Administrator of the Estate
of Jose P. Fernandez.The respondents are the Court of Tax
Appeals and the Commissioner of Internal Revenue.
Jose P. Fernandez died on November 7, 1987, and a
petition for the probate of his will was filed with the
Regional Trial Court (RTC) of Manila. Retired Supreme
Notes By: CABALUNA, Corina D. (JD2A)
Court Justice Arsenio P. Dizon and petitioner Rafael Arsenio
P. Dizon were appointed as Special and Assistant Special
Administrators, respectively, of the Estate. Justice Dizon
informed the Bureau of Internal Revenue (BIR) of the
special proceedings for the Estate.
The petitioner alleged that several requests for extension
of the period to file the required estate tax return were
granted by the BIR. The estate tax return was eventually
filed, showing a NIL estate tax liability. The BIR issued
certifications stating that the taxes due on the transfer of
properties had been fully paid. However, the BIR later
issued a deficiency estate tax assessment against the
Estate, demanding payment of a significant amount.
The petitioner filed a motion for reconsideration, but it was
denied.The Court of Tax Appeals (CTA) upheld the BIR's
assessment but made its own computation of the
deficiency estate tax.The petitioner appealed to the Court
of Appeals (CA), arguing that the BIR's evidence was
inadmissible since it was not formally offered.
The CA affirmed the CTA's ruling, stating that the filing of
the estate tax return and the issuance of BIR certifications
did not deprive the BIR of its authority to re-examine the
return and assess the estate tax.
Issue: WON the valid claims of creditors against the Estate
should be allowed as deductions.
Ruling: Yes. The Court ruled that the valid claims of
creditors against the Estate should be allowed as
deductions. The claims of the Estate's creditors had been
condoned, and therefore, should be considered as valid
deductions in determining the deficiency estate tax.
(3) For claims of the deceased against insolvent persons
where the value of decedent's interest therein is included
in the value of the gross estate.
(4) For unpaid mortgages upon, or any indebtedness in
respect to, property where the value of decedent's interest
therein, undiminished by such mortgage or indebtedness,
is included in the value of the gross estate, but not
including any income tax upon income received after the
death of the decedent, or property taxes not accrued
before his death, or any estate tax. The deduction herein
allowed in the case of claims against the estate, unpaid
mortgages or any indebtedness shall, when founded upon
a promise or agreement, be limited to the extent that they
were contracted bona fide and for an adequate and full
consideration in money or money's worth.
(5) Property Previously Taxed. — An amount equal to the
value specified below of any property forming a part of the
gross estate situated in the Philippines of any person who
died within five (5) years prior to the death of the
decedent, or transferred to the decedent by gift within five
(5) years prior to his death, where such property can be
identified as having been received by the decedent from
the donor by gift, or from such prior decedent by gift,
bequest, devise or inheritance, or which can be identified
as having been acquired in exchange for property so
Pa ge |6
received:
One hundred percent (100%) of the value, if the prior
decedent died within one (1) year prior to the death of the
decedent, or if the property was transferred to him by gift
within the same period prior to his death;
Eighty percent (80%) of the value, if the prior decedent
died more than one (1) year but not more than two (2)
years prior to the death of the decedent, or if the property
was transferred to him by gift within the same period prior
to his death;
Sixty percent (60%) of the value, if the prior decedent died
more than two (2) years but not more than three (3) years
prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to
his death;
Forty percent (40%) of the value, if the prior decedent died
more than three (3) years but not more than four (4) years
prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to
his death;
Twenty percent (20%) of the value, if the prior decedent
died more than four (4) years but not more than five (5)
years prior to the death of the decedent, or if the property
was transferred to him by gift within the same period prior
to his death;
These deductions shall be allowed only where a donor's tax
or estate tax imposed under this Title was finally
determined and paid by or on behalf of such donor, or the
estate of such prior decedent, as the case may be, and only
in the amount finally determined as the value of such
property in determining the value of the gift, or the gross
estate of such prior decedent, and only to the extent that
the value of such property is included in the decedent's
gross estate, and only if in determining the value of the
estate of the prior decedent, no deduction was allowable
under paragraph (2) In respect of the property or
properties given in exchange therefor. Where a deduction
was allowed of any mortgage or other lien in determining
the donor's tax, or the estate tax of the prior decedent,
which was paid in whole or in part prior to the decedent's
death, then the deduction allowable under said Subsection
shall be reduced by the amount so paid. Such deduction
allowable shall be reduced by an amount which bears the
same ratio to the amounts allowed as deductions under
paragraphs (1) and (3) of this Subsection as the amount
otherwise deductible under said paragraph (2) bears to the
value of the decedent's estate. Where the property
referred to consists of two or more items, the aggregate
value of such items shall be used for the purpose of
computing the deduction.
Q: Explain the concept of vanishing deductions?
A: Property may change hands within a very short period of
time by reason of the early death of the owner who
received it by inheritance or by donation (gift). To provide
relief to the burdened taxpayer, vanishing deductions are
Notes By: CABALUNA, Corina D. (JD2A)
allowed to reduce the gross estate.
Vanishing deductions are allowed when:
1. The present decedent died within five years from
receipt of the property from a prior decedent or
donor;
2. The property on which the vanishing deduction is
being claimed must be located in the Philippines;
3. The property must have formed part of the
taxable estate of the prior decedent, or of the
taxable gift of the donor;
4. The estate tax on the prior succession or the
donor's tax on the gift must have been finally
determined and paid;
5. The property must be identified as the one
received from the prior decedent or donor, or
something acquired in exchange. therefore;
6. No vanishing deduction on the property was
allowable to the estate of the prior decedent.
(6) Transfers for Public Use. - The amount of all the
bequests, legacies, devises or transfers to or for the use of
the Government of the Republic of the Philippines, or any
political subdivision thereof, for exclusively public
purposes.
(7) The Family Home. - An amount equivalent to the
current fair market value of the decedent's family home:
Provided, however, That if the said current fair market
value exceeds Ten million pesos (P10, 000,000),[72] the
excess shall be subject to estate tax.
Q: What are the conditions of a family home from the
deduction of estate?
A: Must be the actual home of the decedent and his family
at the time of his death, as certified by the Barangay
Captain of the locality; Total value of the family home must
be included as part of the gross estate; and Deduction
equivalent to current FMV, or the extent of the decedent's
Interest (whether conjugal/community or exclusive
property), whichever is lower, but not exceeding
P10,000,000. (R.R. 12-2018)
(8) Amount Received by Heirs under Republic Act 4917 –
Any amount received by the heirs from the decedent’s
employee as a consequence of the death of the decedent-
employee in accordance with RA 4917; Provided, that such
amount is included in the gross estate of the decedent.
(B) Deductions Allowed to Nonresident Estates. - In the
case of a nonresident not a citizen of the Philippines, by
deducting from the value of that part of his gross estate
which at the time of his death is situated in the Philippines:
(1) Standard Deduction. – An amount equivalent to Five
hundred thousand pesos (P500,000.00); [73]
(2) That proportion of the deductions specified in
Pa ge |7
paragraphs (2), (3), (4) of Subsection (A) of this Section
which the value of such part bears to the value of his entire
gross estate wherever situated;[74]
(3) Property Previously Taxed.- An amount equal to the
value specified below of any property forming part of the
gross estate situated in the Philippines of any person who
died within five (5) years prior to the death of the
decedent, or transferred to the decedent by gift within five
(5) years prior to his death, where such property can be
identified as having been received by the decedent from
the donor by gift, or from such prior decedent by gift,
bequest, devise or inheritance, or which can be identified
as having been acquired in exchange for property so
received:
One hundred percent (100%) of the value if the prior
decedent died within one (1) year prior to the death of the
decedent, or if the property was transferred to him by gift,
within the same period prior to his death;
Eighty percent (80%) of the value, if the prior decedent
died more than one (1) year but not more than two (2)
years prior to the death of the decedent, or if the property
was transferred to him by gift within the same period prior
to his death;
Sixty percent (60%) of the value, if the prior decedent died
more than two (2) years but not more than three (3) years
prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to
his death;
Forty percent (40%) of the value, if the prior decedent died
more than three (3) years but not more than four (4) years
prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to
his death; and
Twenty percent (20%) of the value, if the prior decedent
died more than four (4) years but not more than five (5)
years prior to the death of the decedent, or if the property
was transferred to him by gift within the same period prior
to his death.
These deductions shall be allowed only where a donor's
tax, or estate tax imposed under this Title is finally
determined and paid by or on behalf of such donor, or the
estate of such prior decedent, as the case may be, and only
in the amount finally determined as the value of such
property in determining the value of the gift, or the gross
estate of such prior decedent, and only to the extent that
the value of such property is included in that part of the
decedent's gross estate which at the time of his death is
situated in the Philippines; and only if, in determining the
value of the net estate of the prior decedent, no deduction
is allowable under paragraph (2) of Subsection (B) of this
Section, in respect of the property or properties given in
exchange therefore. Where a deduction was allowed of
any mortgage or other lien in determining the donor's tax,
or the estate tax of the prior decedent, which was paid in
whole or in part prior to the decedent's death, then the
deduction allowable under said paragraph shall be reduced
Notes By: CABALUNA, Corina D. (JD2A)
by the amount so paid. Such deduction allowable shall be
reduced by an amount which bears the same ratio to the
amounts allowed as deductions under paragraphs (1) and
(3) of this Subsection as the amount otherwise deductible
under paragraph (2) bears to the value of that part of the
decedent's gross estate which at the time of his death is
situated in the Philippines. Where the property referred to
consists of two (2) or more items, the aggregate value of
such items shall be used for the purpose of computing the
deduction.
(4) Transfers for Public Use. - The amount of all bequests,
legacies, devises or transfers to or for the use of the
Government of the Republic of the Philippines or any
political subdivision thereof, for exclusively public
purposes.
Sec. 86 (C) Share in the Conjugal Property. - The net share
of the surviving spouse in the conjugal partnership
property as diminished by the obligations properly
chargeable to such property shall, for the purpose of this
Section, be deducted from the net estate of the decedent.
Sec. 86 (D) Tax Credit for Estate Taxes paid to a Foreign
Country. -
(1) In General. - The tax imposed by this Title shall be
credited with the amounts of any estate tax imposed by
the authority of a foreign country.
(2) Limitations on Credit. - The amount of the credit taken
under this Section shall be subject to each of the following
limitations:
(a) The amount of the credit in respect to the tax paid to
any country shall not exceed the same proportion of the
tax against which such credit is taken, which the decedent's
net estate situated within such country taxable under this
Title bears to his entire net estate; and
(b) The total amount of the credit shall not exceed the
same proportion of the tax against which such credit is
taken, which the decedent's net estate situated outside the
Philippines taxable under this Title bears to his entire net
estate.
SEC. 87 Exemption of Certain Acquisitions and
Transmissions. – The following shall not be taxed:
(A) The merger of 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
fideicommissary;
(C) The transmission from the first heir, legatee or donee in
favor of another beneficiary, in accordance with the desire
of the predecessor; and
(D) All bequests, devises, legacies or transfers to social
welfare, cultural and charitable institutions, no part of the
net income of which inures to the benefit of any individual:
Provided, however, That not more than thirty percent
Pa ge |8
(30%) of the said bequests, devises, legacies or transfers
shall be used by such institutions for administration
purposes.
Q: What is the concept of usufruct?
A: Usufruct is a right to use (jus utendi) and enjoy (jus
fruendi) another's property.
Q: What are the requisites for tax exemption of bequests,
devises, legacies or transfers to social welfare, cultural
and charitable institutions, no part of the net income of
which insures to the benefit of any individual?
A: It must not more than thirty percent (30%) of the said
bequests, devises, legacies or transfers shall be used by
such institutions for administration purposes.
SEC. 88. Determination of the Value of the Estate. -
(A) Usufruct. - To determine the value of the right of
usufruct, use or habitation, as well as that of annuity, there
shall be taken into account the probable life of the
beneficiary in accordance with the latest Basic Standard
Mortality Table, to be approved by the Secretary of
Finance, upon recommendation of the Insurance
Commissioner.
(B) Properties. - The estate shall be appraised at its fair
market value as of the time of death. However, the
appraised value of real property as of the time of death
shall be, whichever is higher of - (1) The fair market value
as determined by the Commissioner; or (2) The fair market
value as shown in the schedule of values fixed by the
Provincial and City Assessors.
Sec. 89. – Repealed by Train Law
Sec. 90. Estate Tax Returns.
(A) Requirements. - In all cases of transfers subject to the
tax imposed herein, or regardless of the gross value of the
estate, where the said estate consists of registered or
registrable property such as real property, motor vehicle,
shares of stock or other similar property for which a
clearance from the Bureau of Internal Revenue is required
as a condition precedent for the transfer of ownership
thereof in the name of the transferee, the executor, or the
administrator, or any of the legal heirs, as the case may be,
shall file a return under oath in duplicate, setting forth:
(1) The value of the gross estate of the decedent at the
time of his death, or in case of a nonresident, not a citizen
of the Philippines, of that part of his gross estate situated
in the Philippines;
(2) The deductions allowed from gross estate in
determining the estate as defined in Section 86; and
(3) Such part of such information as may at the time be
ascertainable and such supplemental data as may be
necessary to establish the correct taxes.
Notes By: CABALUNA, Corina D. (JD2A)
Provided, however, That estate tax returns showing a gross
value exceeding Five million pesos (P5,000,000) shall be
supported with a statement duly certified to by a Certified
Public Accountant containing the following:
(a) Itemized assets of the decedent with their
corresponding gross value at the time of his death, or in
the case of a nonresident, not a citizen of the Philippines,
of that part of his gross estate situated in the Philippines;
(b) Itemized deductions from gross estate allowed in
Section 86; and
(c) The amount of tax due whether paid or still due and
outstanding.
(B) Time for Filing. - For the purpose of determining the
estate tax provided for in Section 84 of this Code, the
estate tax return required under the preceding Subsection
(A) shall be filed within one (1) year from the decedent's
death.
A certified copy of the schedule of partition and the order
of the court approving the same shall be furnished the
Commissioner within thirty (30) days after the
promulgation of such order.
(C) Extension of Time. - The Commissioner shall have
authority to grant, in meritorious cases, a reasonable
extension not exceeding thirty (30) days for filing the
return.
(D) Place of Filing. - Except in cases where the
Commissioner otherwise permits, the return required
under Subsection (A) shall be filed, either electronically or
manually, with any authorized agent bank, Revenue District
Office through Revenue Collection Officer or authorized tax
software provider.
Q: When are estate taxes required to be filed?
A: Shall be filed within one (1) year from the decedent's
death.
Q: When are estate tax returns be filed?
A: Shall be filed within thirty (30) days after the
promulgation of such order return.
Q: Where must estate tax returns is filed?
A: Shall be filed to any authorized agent bank, Revenue
District Office through Revenue Collection Officer or
authorized tax software provider.
Q: How is estate tax returns filed?
A: Except in cases where the Commissioner otherwise
permits, the return required under Subsection (A) shall be
filed, either electronically or manually.
Q: What is the consequence for non-filling of Estate Tax
Return?
A: “x x x in case of failure to file a return, the tax may be
assessed at any time within ten years after the omission,
Pa ge |9
and any tax so assessed may be collected by levy upon real
property within three years following the assessment of
the tax. Since the estate tax assessment had become final
and unappealable by the petitioner's default as regards
protesting the validity of the said assessment, there is now
no reason why the BIR cannot continue with the collection
of the said tax.” (Marcos v. CA, GR No. 120880, June 5,
1997)
SEC. 91. Payment of Tax. -
(A) Time of Payment. - The estate tax imposed by Section
84 shall be paid, either electronically or manually, at the
time the return is filed by the executor, administrator or
the heirs.
(B) Extension of Time. - When the Commissioner finds that
the payment on the due date of the estate tax or of any
part thereof would impose undue hardship upon the estate
or any of the heirs, he may extend the time for payment of
such tax or any part thereof not to exceed five (5) years, in
case the estate is settled through the courts, or two (2)
years in case the estate is settled extrajudicially.
In such case, the amount in respect of which the extension
is granted shall be paid on or before the date of the
expiration of the period of the extension, and the running
of the Statute of Limitations for assessment as provided in
Section 203 of this Code shall be suspended for the period
of any such extension.
Where the taxes are assessed by reason of negligence,
intentional disregard of rules and regulations, or fraud on
the part of the taxpayer, no extension will be granted by
the Commissioner.
If an extension is granted, the Commissioner may require
the executor, or administrator, or beneficiary, as the case
may be, to furnish a bond in such amount, not exceeding
double the amount of the tax and with such sureties as the
Commissioner deems necessary, conditioned upon the
payment of the said tax in accordance with the terms of
the extension.
(C) Payment by Installment. – In case the available cash of
the estate is insufficient to pay the total estate tax due,
payment by installments shall be allowed within two (2)
years from the statutory date for its payment without civil
penalty and interest. [79]
(D) Liability for Payment - The estate tax imposed by
Section 84 shall be paid, either electronically or manually,
by the executor or administrator before delivery to any
beneficiary of his distributive share of the estate. Such
beneficiary shall to the extent of his distributive share of
the estate, be subsidiarily liable for the payment of such
portion of the estate tax as his distributive share bears to
the value of the total net estate.
For the purpose of this Chapter, the term 'executor' or
'administrator' means the executor or administrator of the
decedent, or if there is no executor or administrator
Notes By: CABALUNA, Corina D. (JD2A)
appointed, qualified, and acting within the Philippines,
then any person in actual or constructive possession of any
property of the decedent.
Q: Describe the process of estate tax collection
A: The government, in collecting unpaid taxes accruing
before the death of the decedent, has two ways of
collecting the said taxes:
(1) By going after all the heirs and collecting from each
one of them the amount of the tax proportionate
to the inheritance received, or
(2) By subjecting said property of the estate which is in
the hands of an heir or transferee to the payment
of the tax due the estate, (or, go against one heir
for the entire tax, subject to the heirs right of
contribution from his co-heirs.) (CIR v. Pineda, G.R.
No. L-22734, September 15, 1967)
(D) Liability for Payment - The estate tax imposed by
Section 84 shall be paid, either electronically or manually,
by the executor or administrator before delivery to any
beneficiary of his distributive share of the estate. Such
beneficiary shall to the extent of his distributive share of
the estate, be subsidiarily liable for the payment of such
portion of the estate tax as his distributive share bears to
the value of the total net estate.
For the purpose of this Chapter, the term 'executor' or
'administrator' means the executor or administrator of the
decedent, or if there is no executor or administrator
appointed, qualified, and acting within the Philippines,
then any person in actual or constructive possession of any
property of the decedent.
Q: May estate tax collected even to the distribution to the
heirs?
A: Yes, by subjecting said property of the estate which is in
the hands of an heir or transferee to the payment of the
tax due the estate, (or, go against one heir for the entire
tax, subject to the heirs right of contribution from his co-
heirs.) (CIR v. Pineda, G.R. No. L-22734, September 15,
1967)
PASTOR v CA
GR No. 56340, June 24, 1983
Facts: Alvaro Pastor, Sr. died in June 1966. In October
1966, his wife died. Pastor Sr. had three children. Two were
legitimate (now referred to as marital) and one was
illegitimate (non-marital). The legitimate children were
Alvaro Pastor, Jr. and Sofia Bossio. The illegitimate child
was Lewellyn Quemada.
In 1970, Quemada filed a petition for the admission of a
holographic will left by Pastor Sr. The only disposition
made in the will was that Pastor Sr. was giving 30% of his
42% share in Atlas Mining Corporation.
Pending the determination of the extrinsic validity, the
P a g e | 10
probate court appointed Quemada as special administrator
over the entire estate of Pastor Sr. Quemada, as special
administrator, then filed a recovery suit against Pastor Jr.
as he alleged that he was in possession of several
properties of the estate.
In 1972, after determining the extrinsic validity, the will
was allowed. The allowance was questioned by Pastor Jr.
all the way to the Supreme Court. When it reached the
Supreme Court, the case was remanded to the probate
court.
In March 1980, the probate court set a hearing on the
intrinsic validity of the will. The setting of the hearing was
objected to by Pastor Jr. on the ground that the same is
premature because the recovery suit filed by Quemada was
still pending. It was Pastor Jr.’s argument that the
ownership issues in that suit must first be resolved before
the intrinsic validity of the will may be resolved.
In August 1980, the probate court directed Atlas Mining to
pay accumulated royalties to Quemada. Quemada
immediately requested for a writ of garnishment since the
order was immediately executory. The writ was granted.
Pastor Jr. then filed a petition for certiorari before the
Court of Appeals questioning the order of the probate
court. The Court of Appeals denied the petition. It also
denied Pastor Jr.’s motion for reconsideration.
Issue: Whether or not the order of the probate court is
valid.
Ruling: No. There is no basis for the order of the probate
court to adjudge that Quemada was the owner of the
shares disposed by the will to him (and the royalties
thereto).
In a special proceeding for the probate of a will, the issue
by and large is restricted to the extrinsic validity of the will,
i.e., whether the testator, being of sound mind, freely
executed the will in accordance with the formalities
prescribed by law. As a rule, the question of ownership is
an extraneous matter which the Probate Court cannot
resolve with finality. However, for the purpose of
determining whether a certain property should or should
not be included in the inventory of estate properties, the
Probate Court may pass upon the title thereto, but such
determination is provisional, not conclusive, and is subject
to the final decision in a separate action to resolve title.
In this case, the probate court did not, as it cannot, make
any determination as to the ownership of those disputed
shares. In fact, the determination of the ownership thereof
(as well as the other portions of the estate) is being heard
in another court.
VERA v FERNANDEZ
GR No. L-31364 March 30, 1979
Facts: The BIR filed on July 29, 1969 a motion for allowance
of claim and for payment of taxes representing the estate's
tax deficiencies in 1963 to 1964 in the intestate
Notes By: CABALUNA, Corina D. (JD2A)
proceedings of Luis Tongoy. The administrator opposed
arguing that the claim was already barred by the statute of
limitation, Section 2 and Section 5 of Rule 86 of the Rules
of Court which provides that all claims for money against
the decedent, arising from contracts, express or implied,
whether the same be due, not due, or contingent, all
claims for funeral expenses and expenses for the last
sickness of the decedent, and judgment for money against
the decedent, must be filed within the time limited in the
notice; otherwise they are barred forever.
Issue: WON the statute of non-claims of the Rules of Court
bar the claim of the government for unpaid taxes?
Ruling: No. The reason for the more liberal treatment of
claims for taxes against a decedent's estate in the form of
exception from the application of the statute of non-
claims, is not hard to find. Taxes are the lifeblood of the
Government and their prompt and certain availability are
imperious need. (CIR vs. Pineda, 21 SCRA 105). Upon
taxation depends the Government ability to serve the
people for whose benefit taxes are collected. To safeguard
such interest, neglect or omission of government officials
entrusted with the collection of taxes should not be
allowed to bring harm or detriment to the people, in the
same manner as private persons may be made to suffer
individually on account of his own negligence, the
presumption being that they take good care of their
personal affairs. This should not hold true to government
officials with respect to matters not of their own personal
concern. This is the philosophy behind the government's
exception, as a general rule, from the operation of the
principle of estoppel.
Q: Event of death of individual
A: Filling of Notice of Death (w/I 60 days from death);
Filling of Estate Tax Return (w/I 1 year from death);
Payment of Estate Tax Due (w/I 1 year from death)
Sec. 92. Discharge of Executor orAdministrator from
Persona Liability. — If the executor or administrator makes
a written application to the Commissioner for
determination of the amount of the estate tax and
discharge from personal liability therefore, the
Commissioner (as soon as possible, and in any event within
one (1) year after the making of such application, or if the
application is made before the return is filed, then within
one (1) year after the return is filed, but not after the
expiration of the period prescribed for the assessment of
the tax in Section 203 shall not notify the executor or
administrator of the amount of the tax. The executor or
administrator, upon payment of the amount of which he is
notified, shall be discharged from personal liability for any
deficiency in the tax thereafter found to be due and shall
be entitled to a receipt or writing showing such discharge.
Sec. 93. Definition of Deficiency. — As used in this Chapter,
the term "deficiency" means:
(a) The amount by which the tax imposed by this Chapter
exceeds the amount shown as the tax by the executor,
administrator or any of the heirs upon his return; but the
P a g e | 11
amounts so shown on the return shall first be increased by
the amounts previously assessed (or collected without
assessment) as a deficiency and decreased by the amount
previously abated, refunded or otherwise repaid in respect
of such tax; or
(b) If no amount is shown as the tax by the executor,
administrator or any of the heirs upon his return, or if no
return is made by the executor, administrator, or any heir,
then the amount by which the tax exceeds the amounts
previously assessed (or collected without assessment) as a
deficiency; but such amounts previously assessed or
collected without assessment shall first be decreased by
the amounts previously abated, refunded or otherwise
repaid in respect of such tax.
Sec. 94. Payment Before Delivery by Executor or
Administrator. — No judge shall authorize the executor or
judicial administrator to deliver a distributive share to any
party interested in the estate unless a certification from
the Commissioner that the estate tax has been paid is
shown.
Q: Who was in control over the collection of Estate Tax?
(CIR or Probate Court)
A: It is the Commission of Internal Revenue (CIR) is in
control over the collection of Estate Tax.
“On the contrary, under Section 87 of the NIRC, it is the
probate or settlement court which is bidden not to
authorize the executor or judicial administrator of the
decedent's estate to deliver any distributive share to any
party interested in the estate, unless it is shown a
Certification by the Commissioner of Internal Revenue that
the estate taxes have been paid. This provision disproves
the petitioner's contention that it is the probate court
which approves the assessment and collection of the estate
tax.” (Marcos v CA)
Sec. 95. Duties of Certain Officers and Debtors. —
Registers of Deeds shall not register in the Registry of
Property any document transferring real property or real
rights therein or any chattel mortgage, by way of gifts inter
vivos or mortis causa, legacy or inheritance, unless a
certification from the Commissioner that the tax fixed in
this Title and actually due thereon had been paid is show,
and they shall immediately notify the Commissioner,
Regional Director, Revenue District Officer, or Revenue
Collection Officer or Treasurer of the city or municipality
where their offices are located, of the non-payment of the
tax discovered by them. Any lawyer, notary public, or any
government officer who, by reason of his official duties,
intervenes in the preparation or acknowledgment of
documents regarding partition or disposal of donation inter
vivos or mortis causa, legacy or inheritance, shall have the
duty of furnishing the Commissioner, Regional Director,
Revenue District Officer or Revenue Collection Officer of
the place where he may have his principal office, with
copies of such documents and any information whatsoever
which may facilitate the collection of the aforementioned
Notes By: CABALUNA, Corina D. (JD2A)
tax. Neither shall a debtor of the deceased pay his debts to
the heirs, legatee, executor or administrator of his creditor,
unless the certification of the Commissioner that the tax
fixed in this Chapter had been paid is shown; but he may
pay the executor or judicial administrator without said
certification if the credit is included in the inventory of the
estate of the deceased.
Sec. 96. Restitution of Tax Upon Satisfaction of
Outstanding Obligations. — If after the payment of the
estate tax, new obligations of the decedent shall appear,
and the persons interested shall have satisfied them by
order of the court, they shall have a right to the restitution
of the proportional part of the tax paid.
Sec. 97. Payment of Tax Antecedent to the Transfer of
Shares, Bonds or Rights. — There shall not be transferred
to any new owner in the books of any corporation,
sociedad anonima, partnership, business, or industry
organized or established in the Philippines any share,
obligation, bond or right by way of gift inter vivos or mortis
causa, legacy or inheritance, unless a certification from the
Commissioner that the taxes fixed in this Title and due
thereon have been paid is shown.
If a bank has knowledge of the death of a person, who
maintained a bank deposit account alone or jointly with
another, it shall allow any withdrawal from the said deposit
account, subject to a final withholding tax of six percent
(6%). For this purpose, all withdrawal slips shall contain a
statement to the effect that all of the joint depositors are
still living at the time of withdrawal by any one of the joint
depositors and such statement shall be under oath by the
said depositors. (As amended by TRAIN)
Q: What is the rule regarding withdrawal from bank
deposit accounts?
A: TRAIN now allows the withdrawal of bank deposits of
dead folks, subject to a final withholding tax of 6%,
provided that the withdrawal shall only be made within 1
year from the death of the decedent. (R.R. 12-2018)
POLIDO v CA
GR No. 170632, July 10, 2007
Facts: Eugenia D. Polido (petitioner) and Mariano P. Gasat
(respondent) are involved in a legal battle over inheritance
and adoption. After the death of her husband, Jacinto
Polido, petitioner tried to withdraw their joint savings
deposit at the Philippine National Bank. Gasat, who
claimed to be the couple's adopted child, objected to the
withdrawal. Petitioner filed a complaint before the
Regional Trial Court of Tarlac, seeking a writ of preliminary
injunction to prevent Gasat from preventing the release of
the money. Gasat argued that he was the adopted child of
the couple and that petitioner should follow legal
procedures for the settlement of the estate.
Issue: WON Gasat is the adopted child of the petitioner
and her late husband
P a g e | 12
Ruling: The Supreme Court ruled in favor of the petitioner
and reversed the trial court's ruling. The Court held that
Gasat's withdrawal of his claim of being an adopted child
did not automatically admit the material allegations in the
complaint. Gasat raised other issues in his answer that
were independent of his claim of adoptive filiation and
could defeat petitioner's main cause of action. The trial
court erred in granting the petitioner's motion for
judgment on the pleadings.
DONOR’S TAX
Q: What is Donor’s Tax?
A: Donor’s Tax is a tax on the privilege of transmitting one‘s
property or property rights to another or others without
adequate and full valuable consideration.
PIROVANO v CIR
GR No. 1865, July 31, 1965
Facts: De la Rama Steamship Co. made a donation to the
heirs of Enrico Pirovano, a deceased officer of the
company. The donation was made as a gesture of gratitude
for Pirovano's past services to the company. The donation
consisted of the proceeds of life insurance policies taken
on Pirovano's life, amounting to P643,000. Initially,
P400,000 was set aside to be divided equally among
Pirovano's four minor children, with the remaining amount
to be retained by the company as a loan.
The company later modified the resolution and agreed to
pay the proceeds of the insurance policies to the heirs of
Pirovano, with the annual interests accruing on the
principal to be paid to the heirs when the company is able
to meet the obligation.The donation was accepted by
Pirovano's wife, acting as the guardian of the children.
The company later revoked the donation and refused to
pay the balance of the donation amounting to
P564,980.90. The heirs filed a lawsuit to recover the
amount.
Issue: WON the donation made by the company to the
heirs of Pirovano is subject to gift tax.
Ruling: The donation is subject to gift tax. A donation made
out of gratitude for past services is not subject to
deduction for the value of the services, as they do not
constitute a recoverable debt. Gratitude has no economic
value and is not considered "consideration" under the Tax
Code.
Q: Differentiate between Donation Inter vivos and Mortis
Causa
A: Donation inter vivos differs from donation mortis causa
in that in the former, the act is immediately operative even
if the actual execution may be deferred until the death of
the donor, while in the latter, nothing is conveyed to or
acquired by the donee until the death of the donor-
testator.
Notes By: CABALUNA, Corina D. (JD2A)
HEIRS OF BONSATO v CA
G.R. No. L-6600, July 30, 1954
Facts: The case was initiated in the Court of First Instance
of Pangasinan, by respondents Josefa Utea and other heirs
of Domingo Bonsato and his wife Andrea Nacario, both
deceased. Their complaint (for annulment and damages)
charged that on the first day of December, 1949, Domingo
Bonsato, then already a widower, had been induced and
deceived into signing two notarial deeds of donations in
favor of his brother Juan Bonsato and of his nephew Felipe
Bonsato, respectively, transferring to them several parcels
of land situated in the municipalities of Mabini and Burgos,
Province of Pangasinan, both donations having been duly
accepted in the same act and documents. Plaintiffs likewise
charged that the donations were mortis causa and void for
lack of the requisite formalities. The defendants, Juan
Bonsato and Felipe Bonsato, answered averring that the
donations made in their favor were voluntarily executed in
consideration of past services rendered by them to the late
Domingo Bonsato; that the same were executed freely
without the use of force and violence, misrepresentation
or intimidation; and prayed for the dismissal of the case.
After trial, the CFI rendered its decision finding that the
deeds of donation were executed by the donor while the
latter was of sound mind, without pressure or intimidation;
that the deeds were of donation inter vivos without any
condition making their validity or efficacy dependent upon
the death of the donor; but as the properties donated were
presumptively conjugal, having been acquired during the
coverture of Domingo Bonsato and his wife Andrea
Nacario, the donations were only valid as to an undivided
one-half share in the three parcels of land described
therein.
Issue: WON the donation was a donation mortis causa or a
donation inter vivos?
Ruling: Donation inter vivos. If it was a donation mortis
causa, then the documents should reveal any or all of the
following characteristics:
(1) Convey no title or ownership to the transferee before
the death of the transferor; or, what amounts to the same
thing, that the transferor should retain the ownership (full
or naked) and control of the property while alive (Vidal vs.
Posadas, 58 Phil., 108; Guzman vs. Ibea, 67 Phil., 633);
(2) That before his death, the transfer should be revocable
by the transferor at will, ad nutum; but revocability may be
provided for indirectly by means of a reserved power in the
donor to dispose of the properties conveyed (Bautista vs.
Sabiniano, G. R. L-4326, November 18, 1952);
(3) That the transfer should be void if the transferor should
survive the transferee.
None of these characteristics is discernible in the deeds of
donation executed by the late Domingo Bonsato. The
donor only reserved for himself, during his lifetime, the
owner’s share of the fruits or, a reservation that would be
unnecessary if the ownership of the donated property
P a g e | 13
remained with the donor. Most significant is the absence of
stipulation that the donor could revoke the donations; on
the contrary, the deeds expressly declare them to be
«irrevocable», a quality absolutely incompatible with the
idea of conveyances mortis causa where revocability is of
the essence of the act, to the extent that a testator cannot
lawfully waive or restrict his right of revocation (Old Civil
Code, Art. 737; New Civil Code, Art. 828).
It is true that the last paragraph in each donation contains
the phrase «that after the death of the donor the aforesaid
donation shall become effective. However, said expression
must be construed together with the rest of the paragraph,
and thus taken, its meaning clearly appears to be that after
the donor’s death, the donation will take effect so as to
make the donees the absolute owners of the donated
property, free from all liens and encumbrances; for it must
be remembered that the donor reserved for himself a
share of the fruits of the land donated. Such reservation
constituted a charge or encumbrance that would disappear
upon the donor’s death, when full title would become
vested in the donees.
CASTRO v CA
GR no. L-20122, April 28, 1969
Facts: Alejandra Austria filed an application for registration
and confirmation of title for 10 parcels of land in
Mangatarem, Pangasinan. Socorro A. Castro opposed the
application, claiming that the lands had been donated to
her by Alejandra Austria in 1939.The Court rendered a
judgment in 1950, ordering the registration of the lands in
the name of Socorro A. Castro, subject to the usufruct
reserved by Alejandra Austria.
Heirs of Antonio Ventenilla, the deceased husband of
Alejandra Austria, filed a petition to set aside the decision
and have their opposition admitted.The case was set for
trial anew, but Alejandra Austria died and Socorro A. Castro
was substituted in her place.
Issue: WON the donation made by Alejandra Austria to
Socorro A. Castro is valid
Ruling: Yes. The Court finds that Alejandra Austria had
sufficient proof of title for registration purposes and that
the donation made by her to Socorro A. Castro is valid.
The Supreme Court refers to a previous decision in a
related case which established that Alejandra Austria was
the residuary legatee of Antonio Ventenilla's estate, and
therefore the owner of the properties.
There is an agreement between the parties that the four
parcels passed into the possession of Alejandra Austria by
virtue of the will of Antonio Ventenilla, and there is
testimonial evidence of her continuous possession as
owner. This is deemed sufficient proof of title for
registration purposes.
The Court disagrees with the Court of Appeals' ruling that
the donation was mortis causa and therefore void because
it did not follow the formalities required of a will.
The terms of the donation indicate that Alejandra Austria
intended to dispose of her properties irrevocably in favor
of Socorro A. Castro, subject to certain conditions.
Notes By: CABALUNA, Corina D. (JD2A)
The Court concludes that the donation is valid and that
Socorro A. Castro succeeded to the properties applied for.
ALEJANDRO v GERALDEZ
G.R. No. L-33849 & L-33968, August 18, 1977
Facts: Spouses Gabino Diaz and Severa Mendoza, along
with their daughter-in-law and three children, executed a
deed of donation on January 20, 1949. The deed covered
eight lots of the Lolomboy Friar Lands Estate in Bulacan.
The deed stated that the donation was made inter vivos, or
during the donors' lifetime. However, the deed also
contained provisions that suggested it was a mortis causa
donation, or one that takes effect upon the donor's death.
Issue: WON the deed of donation is a valid donation inter
vivos or mortis causa.
Ruling: The donation is a valid donation inter vivos. The
deed of donation clearly transferred ownership of the
properties to the donees during the donors' lifetime. The
provisions in the deed that suggest a mortis causa donation
can be interpreted as referring to the beneficial ownership
or dominium utile, rather than the naked title. The court
provides a detailed explanation of the differences between
donations inter vivos and mortis causa.
The time of effectivity is the key factor in distinguishing
between the two types of donations. In an inter vivos
donation, the ownership of the property is transferred to
the donee during the donor's lifetime. In a mortis causa
donation, the ownership is transferred only upon the
donor's death.
SPS. GESTOPA v CA
G.R. No. 111904, October 5, 2000
Facts: In 1965 and 1966, three deeds of donation mortis
causa were executed in favor of Mercedes Danlag by
spouses Diego and Catalina Danlag. The deeds pertained to
several parcels of unregistered land. In January 1973,
Diego, with the consent of Catalina, executed a deed of
donation inter vivos over the same parcels of land in favor
of Mercedes.
The donation included a condition that the Danlag spouses
would continue to enjoy the fruits of the land during their
lifetime and that Mercedes could not sell the land without
their consent.The Danlag spouses later sold some of the
land to the Gestopa spouses. Mercedes filed a petition for
quieting of title with the Regional Trial Court, arguing that
she was the rightful owner of the land.
Issue: WON donation executed in favor of Mercedes is a
Donation Inter Vivos or Mortis Causa.
Ruling: Donation Inter vivos. he intention of the donor is
crucial in determining whether a donation is inter vivos or
mortis causa. The granting clause of the deed of donation
showed that Diego donated the properties out of love and
affection for Mercedes, indicating an inter vivos donation.
The reservation of lifetime usufruct also indicated that the
P a g e | 14
donor intended to transfer the naked ownership of the
properties. The donor reserved sufficient properties for his
maintenance, demonstrating his intent to part with the
donated land.
The donee accepted the donation, which is a requirement
for inter vivos donations. A valid donation, once accepted,
becomes irrevocable, except for specific reasons such as
officiousness, failure to comply with the charges imposed
in the donation, or ingratitude. The donor did not invoke
any of these reasons in the deed of revocation. The
donation inter vivos is valid and still in effect. The deeds of
sale executed by the Danlag spouses in favor of the
Gestopa spouses are null and void.
AUSTRIA-MAGAT v CA
GR No. 106755, February 1, 2002
Facts: Basilisa Comerciante executed a deed of donation
over a residential land and its improvements in favor of her
four children. The donation had an express irrevocability
clause and a prohibition on alienation of the property.
Basilisa later executed a Deed of Absolute Sale of the
property in favor of the petitioner, Apolinaria Austria-
Magat. Transfer Certificate of Title was issued in the
petitioner's name.
Issue: WON the donation is inter vivos or mortis causa
Ruling: The donation is Inter vivos. The express
irrevocability of the donation is the distinctive standard
that identifies it as inter vivos. Other provisions in the deed
of donation, which seemingly make it mortis causa, do not
go against its irrevocable character. The prohibition on the
donor to alienate the property during her lifetime is proof
that naked ownership over the property has been
transferred to the donees. The prohibition on the donees
only means that they may not mortgage or dispose of the
property while the donor is still alive. The acceptance
clause in the deed of donation further supports the
conclusion that it is inter vivos.
DEL ROSARIO v FERER
GR No. 187056, Spetember 20, 2010
Facts: Spouses Leopoldo and Guadalupe Gonzales
executed a document entitled "Donation Mortis Causa" in
favor of their two children, Asuncion and Emiliano, and
their granddaughter, Jarabini. The donation covered a 126-
square meter lot and the house on it in Pandacan, Manila,
to be divided equally among the three donees. The
document stated that the donation was irrevocable and
would be respected by the surviving spouse. It also stated
that the donation would not affect any other distribution
of the donors' properties and that it would be effective
upon the death of the donors.
Although denominated as a donation mortis causa, the
document had no attestation clause and was witnessed by
only two persons. The named donees signified their
acceptance of the donation on the face of the document.
Guadalupe, the donor wife, died in September 1968.
Notes By: CABALUNA, Corina D. (JD2A)
Leopoldo, the donor husband, executed a deed of
assignment of his rights and interests in the property to
their daughter Asuncion a few months later.
Leopoldo died in June 1972. In 1998, Jarabini filed a
petition for the probate of the deed of donation mortis
causa before the Regional Trial Court (RTC) of Manila.
Asuncion opposed the petition, claiming that Leopoldo's
assignment of his rights and interests in the property to her
rendered the donation void.
Issue: WON the donation made by the spouses Leopoldo
and Guadalupe was a donation mortis causa or a donation
inter vivos.
Ruling: The Supreme Court ruled that the donation made
by the spouses Leopoldo and Guadalupe was a donation
inter vivos. The court held that the document's caption as a
"Donation Mortis Causa" was not controlling. The court
explained that if a donation by its terms is inter vivos, this
character is not altered by the fact that the donor styles it
mortis causa. An irrevocable donation is a distinctive
standard that identifies the document as a donation inter
vivos.
In this case, the donors explicitly stated that the donation
was irrevocable and would be respected by the surviving
spouse, indicating that it was a donation inter vivos. The
acceptance clause in the document also indicated that the
donation was inter vivos, as acceptance is a requirement
only for such kind of donations. Donations mortis causa,
being in the form of a will, do not require acceptance by
the donee during the donor's lifetime.
The court concluded that the donation in this case was one
made inter vivos, immediately operative, and final.
Leopoldo's subsequent assignment of his rights and
interests in the property to Asuncion was regarded as void
because he had no more rights to assign. The court held
that the trial court did not err in deciding the case the way
it did, as the rule on probate is not inflexible and absolute.
Asuncion or her heirs could not claim that the trial court
improperly allowed a collateral attack on the assignment,
as they had put the validity of the deed of assignment in
issue by opposing the petition for probate. The Supreme
Court upheld the decision of the trial court and set aside
the decision of the Court of Appeals.
Q: What is the law that governs the imposition of donor’s
tax?
A: National Internal Revenue Code (NIRC) and other
pertinent regulations.
Q: What transfer may be considered as donation?
A: A gratuitous transfer of property between two or more
persons who are living at the time of the transfer.
Sec. 98. Imposition of Tax. —
(A) There shall be levied, assessed, collected and paid upon
the transfer by any person, resident or nonresident, of the
property by gift, a tax, computed as provided in Section 99.
P a g e | 15
(B) The tax shall apply whether the transfer is in trust or
otherwise, whether the gift is direct or indirect, and
whether the property is real or personal, tangible or
intangible.
Q: What are the factors that affect the determination of
gross gift?
A: (1) nationality and domicile, (2) nature of the property,
(3) deductions, (4) tax rate
Q: How does one arrive at the valuation of donation?
A: The donor's tax shall not apply unless and until there is a
completed gift. The transfer of property by gift is perfected
from the moment the donor knows of the acceptance by
the donee; it is completed by the delivery, either actually
or constructively, of the donated property to the donee
Sec. 99. Rates of Tax Payable by Donor. -
(A) In General. - The tax for each calendar year shall be six
percent (6%) computed on the basis of the total gifts in
excess of Two hundred fifty thousand pesos (P250,000)
exempt gift made during the calendar year.
(B) Any contribution in cash or in kind to any candidate,
political party or coalition of parties for campaign purposes
shall be governed by the Election Code, as amended.
Q: Are political contributions considered gift and
therefore subject to donors tax?
A: No. Section 13 of RA 71667 states that any contribution
in cash or in kind to any candidate, political party, or
coalition of parties for campaign purposes, duly reported
to the Commission on Election (COMELEC), shall not be
subject to the payment of any gift tax.
Sec. 100. Transfer for Less Than Adequate and Full
Consideration. — Where property, other than real
property referred to in Section 24(D), is transferred for less
than an adequate and full consideration in money or
money's worth, then the amount by which the fair market
value of the property exceeded the value of the
consideration shall, for the purpose of the tax imposed by
this Chapter, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar
year: Provided, however, that a sale, exchange, or other
transfer of property made in the ordinary course of
business (a transaction which is a bona fide, at arm's
length, and free from any donative intent), will be
considered as made for an adequate and full consideration
in money or money's worth. (As amended by TRAIN)
Q: Site an example for less than adequate and full
consideration?
A: For example, X sold her car to Y for P500, 000. It had an
FMV of P880, 000. The P380, 000k will be considered a
donation and thus subject to tax.
Notes By: CABALUNA, Corina D. (JD2A)
CIR v BF GOODRICH
GR No. 104171, February 24, 2019
Facts: Private respondent BF Goodrich Philippines Inc. was
an American corporation prior to July 3, 1974. As a
condition for approving the manufacture of tires and other
rubber products, private respondent was required by the
Central Bank to develop a rubber plantation. In compliance
therewith, private respondent bought from the
government certain parcels of land in Tumajubong Basilan,
in 1961 under the Public Land Act and the Parity
Amendment to the 1935 constitution, and there developed
a rubber plantation.
On August 2, 1973, the Justice Secretary rendered an
opinion that ownership rights of Americans over Public
agricultural lands, including the right to dispose or sell their
real estate, would be lost upon expiration on July 3, 1974
of the Parity Amendment. Thus, private respondent sold its
Basilan land holding to Siltown Realty Phil. Inc., (Siltown)
for P500,000 on January 21, 1974. Under the terms of the
sale, Siltown would lease the property to private
respondent for 25 years with an extension of 25 years at
the option of private respondent.
Private respondent books of accounts were examined by
BIR for purposes of determining its tax liability for 1974.
This examination resulted in the April 23, 1975 assessment
of private respondent for deficiency income tax which it
duly paid. Siltown’s books of accounts were also examined,
and on the basis thereof, on October 10, 1980, the
Collector of Internal Revenue assessed deficiency donor’s
tax of P1,020,850 in relation to said sale of the Basilan
landholdings.
Private respondent contested this assessment on
November 24, 1980. Another assessment dated March 16,
1981, increasing the amount demanded for the alleged
deficiency donor’s tax, surcharge, interest and compromise
penalty and was received by private respondent on April 9,
1981. On appeal, CTA upheld the assessment. On review,
CA reversed the decision of the court finding that the
assessment was made beyond the 5-year prescriptive
period in Section 331 of the Tax Code.
Issue: WON petitioner’s right to assess has prescribed
Ruling: Applying then Sec. 331, NIRC (now Sec. 203, 1997
NIRC which provides a 3-year prescriptive period for
making assessments), it is clean that the October 16, 1980
and March 16, 1981 assessments were issued by the BIR
beyond the 5-year statute of limitations. The court
thoroughly studied the records of this case and found no
basis to disregard the 5-year period of prescription,
expressly set under Sec. 331 of the Tax Code, the law then
in force.
For the purpose of safeguarding taxpayers from any
unreasonable examination, investigation or assessment,
our tax law provides a statute of limitations in the
collection of taxes. Thus, the law or prescription, being a
remedial measure, should be liberally construed in order to
afford such protection. As a corollary, the exceptions to the
P a g e | 16
law on prescription should perforce be strictly construed.
Sec. 101. Exemption of Certain Gifts. - The following gifts
or donations shall be exempt from the tax provided for in
this Chapter:
(A) In the Case of Gifts Made by a Resident. –
(1) Gifts made to or for the use of the National
Government or any entity created by any of its agencies
which is not conducted for profit, or to any political
subdivision of the said Government; and
(2) Gifts in favor of an educational and/or charitable,
religious, cultural or social welfare corporation, institution,
accredited nongovernment organization, trust or
philanthropic organization or research institution or
organization: Provided, however, that not more than thirty
percent (30%) of said gifts shall be used by such donee for
administration purposes. For the purpose of this
exemption, a 'non-profit educational and/or charitable
corporation, institution, accredited nongovernment
organization, trust or philanthropic organization and/or
research institution or organization' is a school, college or
university and/or charitable corporation, accredited
nongovernment organization, trust or philanthropic
organization and/or research institution or organization,
incorporated as a non-stock entity, paying no dividends,
governed by trustees who receive no compensation, and
devoting all its income, whether students' fees or gifts,
donation, subsidies or other forms of philanthropy, to the
accomplishment and promotion of the purposes
enumerated in its Articles of Incorporation.
Q: What are the tax implications of the donation in favor
of an educational and/or charitable, religious, cultural or
social welfare corporation, institution, accredited non-
government organization, trust or philanthropic
organization or research institution or organization?
A: Shall be exempt from tax proved that not more than
thirty percent (30%) of said gifts shall be used by such
donee for administration purposes.
Q: What is the benefit derived by a donor in case the
donee is accredited by the PCNC? What are the
requirements?
A: The certificate of accreditation entitles the donee for
endorsement to BIR for “donee institution status” and in
some instances, qualifies them for funding from several
grant-making institutions in the country. The PCNC
certification also improves reputation of the NGO in the
eyes of the CSO and government sectors.
The entity must be:
(1) Non-stock;
(2) Paying no dividends;
(3) Governed by trustees who receive NO
compensation; and
(4) Devoting ALL its income to the accomplishment of
the purpose enumerated in its AOI.
(B) In the Case of Gifts Made by a Nonresident not a
Notes By: CABALUNA, Corina D. (JD2A)
Citizen of the Philippines. –
(1) Gifts made to or for the use of the National
Government or any entity created by any of its agencies
which is not conducted for profit, or to any political
subdivision of the said Government.
(2) Gifts in favor of an educational and/or charitable,
religious, cultural or social welfare corporation, institution,
foundation, trust or philanthropic organization or research
institution or organization: Provided, however, That not
more than thirty percent (30%) of said gifts shall be used
by such donee for administration purposes.
(C) Tax Credit for Donor's Taxes Paid to a Foreign
Country.–
(1) In General. - The tax imposed by this Title upon a donor
who was a citizen or a resident at the time of donation
shall be credited with the amount of any donor's tax of any
character and description imposed by the authority of a
foreign country.
(2) Limitations on Credit. - The amount of the credit taken
under this Section shall be subject to each
of the following limitations:
(a) The amount of the credit in respect to the tax paid to
any country shall not exceed the same proportion of the
tax against which such credit is taken, which the net gifts
situated within such country taxable under this Title bears
to his entire net gifts; and
(b) The total amount of the credit shall not exceed the
same proportion of the tax against which such credit is
taken, which the donor's net gifts situated outside the
Philippines taxable under this title bears to his entire net
gifts.
Sec. 102. Valuation of Gifts Made in Property. - If the gift
is made in property, the fair market value thereof at the
time of the gift shall be considered the amount of the gift.
In case of real property, the provisions of Section 88(B)
shall apply to the valuation thereof.
Sec. 103. Filing of Return and Payment of Tax. -
(A) Requirements. - any individual who makes any transfer
by gift (except those which, under Section 101, are exempt
from the tax provided for in this Chapter) shall, for the
purpose of the said tax, make a return under oath in
duplicate. The return shall set forth:
(1) Each gift made during the calendar year which is to be
included in computing net gifts;
(2) The deductions claimed and allowable;
(3) Any previous net gifts made during the same calendar
year;
(4) The name of the donee; and
(5) Such further information as may be required by rules
and regulations made pursuant to law.
(B)Time and Place of Filing and Payment -The return of the
P a g e | 17
donor required in this Section shall be filed, either
electronically or manually, within thirty (30) days after the
date the gift is made and the tax due thereon shall be paid,
either electronically or manually, at the time of filing.
Except in cases where the Commissioner otherwise
permits, the return shall be filed and the tax paid, either
electronically or manually, with any authorized agent bank,
Revenue District Office through Revenue Collection Officer
or authorized tax software provider.
Q: How and when the donor’s tax return filed?
A: Generally, Donor’s Tax Return shall be filed, either
electronically or manually, within thirty (30) days after the
date the gift is made and the tax due thereon shall be paid,
either electronically or manually, at the time of filing.
Except in cases where the Commissioner otherwise
permits, the return shall be filed and the tax paid, either
electronically or manually, with any authorized agent bank,
Revenue District Office through Revenue Collection Officer
or authorized tax software provider.
CIR v BF GOODRICH
GR No. 104171, February 24, 2019
Facts: Private respondent BF Goodrich Philippines Inc. was
an American corporation prior to July 3, 1974. As a
condition for approving the manufacture of tires and other
rubber products, private respondent was required by the
Central Bank to develop a rubber plantation. In compliance
therewith, private respondent bought from the
government certain parcels of land in Tumajubong Basilan,
in 1961 under the Public Land Act and the Parity
Amendment to the 1935 constitution, and there developed
a rubber plantation.
On August 2, 1973, the Justice Secretary rendered an
opinion that ownership rights of Americans over Public
agricultural lands, including the right to dispose or sell their
real estate, would be lost upon expiration on July 3, 1974
of the Parity Amendment. Thus, private respondent sold its
Basilan land holding to Siltown Realty Phil. Inc., (Siltown)
for P500,000 on January 21, 1974. Under the terms of the
sale, Siltown would lease the property to private
respondent for 25 years with an extension of 25 years at
the option of private respondent.
Private respondent books of accounts were examined by
BIR for purposes of determining its tax liability for 1974.
This examination resulted in the April 23, 1975 assessment
of private respondent for deficiency income tax which it
duly paid. Siltown’s books of accounts were also examined,
and on the basis thereof, on October 10, 1980, the
Collector of Internal Revenue assessed deficiency donor’s
tax of P1,020,850 in relation to said sale of the Basilan
landholdings.
Private respondent contested this assessment on
November 24, 1980. Another assessment dated March 16,
1981, increasing the amount demanded for the alleged
deficiency donor’s tax, surcharge, interest and compromise
penalty and was received by private respondent on April 9,
1981. On appeal, CTA upheld the assessment. On review,
CA reversed the decision of the court finding that the
Notes By: CABALUNA, Corina D. (JD2A)
assessment was made beyond the 5-year prescriptive
period in Section 331 of the Tax Code.
Issue: WON petitioner’s right to assess has prescribed
Ruling: Applying then Sec. 331, NIRC (now Sec. 203, 1997
NIRC which provides a 3-year prescriptive period for
making assessments), it is clean that the October 16, 1980
and March 16, 1981 assessments were issued by the BIR
beyond the 5-year statute of limitations. The court
thoroughly studied the records of this case and found no
basis to disregard the 5-year period of prescription,
expressly set under Sec. 331 of the Tax Code, the law then
in force.
For the purpose of safeguarding taxpayers from any
unreasonable examination, investigation or assessment,
our tax law provides a statute of limitations in the
collection of taxes. Thus, the law or prescription, being a
remedial measure, should be liberally construed in order to
afford such protection. As a corollary, the exceptions to the
law on prescription should perforce be strictly construed.
SUMIPAT v BANGA
GR No. 155810, August 13, 2004
Facts: On January 5, 1983, Lauro Sumipat executed a
document denominated "DEED OF ABSOLUTE TRANSFER
AND/OR QUIT-CLAIM OVER REAL PROPERTIES" (the
assailed document) in favor of his illegitimate children
(defendants-appellees) covering the three parcels of land
(the properties). On the document appears the signature of
his wife Placida which indicates that she gave her marital
consent thereto. That time, Lauro was already very sick and
bedridden; that upon defendant-appellee Lydia’s request,
their neighbor Benjamin Rivera lifted the body of Lauro
Sumipat whereupon Lydia guided his (Lauro Sumipat’s)
hand in affixing his signature on the assailed document
which she had brought; that Lydia thereafter left but later
returned on the same day and requested Lauro’s
unlettered wife Placida to sign on the assailed document,
as she did in haste, even without the latter getting a
responsive answer to her query on what it was all about.
After Lauro Sumipat’s death on January 30, 1984, his wife
Placida and defendants-appellees jointly administered the
properties 50% of the produce of which went to plaintiff-
appellant. As plaintiff-appellant’s share in the produce of
the properties dwindled until she no longer received any
and learning that the titles to the properties in question
were already transferred/made in favor of the defendants-
appellees, she filed a complaint for declaration of nullity of
titles, contracts, partition, recovery of ownership now the
subject of the present appeal.
Defendant-appellee Lydia disclaims participation in the
execution of the assailed document, she claiming to have
acquired knowledge of its existence only on January 10,
1983 or five days after its execution when Lauro Sumipat
gave the same to her.
The trial court ruled in favor of the defendant-appellees,
because it found that the subject properties are conjugal
P a g e | 18
having been acquired during the marriage of Lauro Sumipat
and Placida Tabotabo (Placida). However, because Placida
failed to question the genuineness and due execution of
the deed and even admitted having affixed her signature
thereon, the trial court declared that the entirety of the
subject properties, and not just Lauro Sumipat’s conjugal
share, were validly transferred to the defendants, the
petitioners herein.
On appeal, the appellate court held that since Placida was
unlettered, the appellees, the petitioners herein, as the
parties interested in enforcing the deed, have the burden
of proving that the terms thereof were fully explained to
her. This they failed to do.
Issue: WON the questioned deed by its terms or under the
surrounding circumstances has validly transferred title to
the disputed properties to the petitioners.
Ruling: Art. 749 of the Civil Code states that: "In order that
the donation of the immovable may be valid, it must be
made in a public document, specifying therein the property
donated and the value of the charges which the donee
must satisfy.
The acceptance may be made in the same deed of
donation or in a separate public document, but it shall not
take effect unless it is done during the lifetime of the
donor.
If the acceptance is made in a separate instrument, the
donor shall be notified thereof in an authentic form, and
this step shall be noted in both instruments."
Title to immovable property does not pass from the donor
to the donee by virtue of a deed of donation until and
unless it has been accepted in a public instrument and the
donor duly notified thereof. The acceptance may be made
in the very same instrument of donation. If the acceptance
does not appear in the same document, it must be made in
another. Where the deed of donation fails to show the
acceptance, or where the formal notice of the acceptance,
made in a separate instrument, is either not given to the
donor or else not noted in the deed of donation and in the
separate acceptance, the donation is null and void.20
In this case, the donees’ acceptance of the donation is not
manifested either in the deed itself or in a separate
document. Hence, the deed as an instrument of donation is
patently void.
Sec. 104. Definitions. - For purposes of this Title, the terms
'gross estate' and 'gifts' include real and personal property,
whether tangible or intangible, or mixed, wherever
situated: Provided, however, That where the decedent or
donor was a nonresident alien at the time of his death or
donation, as the case may be, his real and personal
property so transferred but which are situated outside the
Philippines shall not be included as part of his 'gross estate'
or 'gross gift’: Provided, further, That franchise which must
be exercised in the Philippines; shares, obligations or bonds
issued by any corporation or sociedad anonima organized
or constituted in the Philippines in accordance with its
laws; shares, obligations or bonds by any foreign
Notes By: CABALUNA, Corina D. (JD2A) P a g e | 19

corporation eighty-five percent (85%) of the business of

which is located in the Philippines; shares, obligations or
bonds issued by any foreign corporation if such shares,
obligations or bonds have acquired a business situs in the
Philippines; shares or rights in any partnership, business or
industry established in the Philippines, shall be considered
as situated in the Philippines: Provided, still 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 or the donor at

the time of the donation was a citizen and resident of a
foreign country which at the time of his death or donation
did not impose a transfer 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

or donor was a citizen and resident at the time of his death
or donation allows a similar exemption from transfer or
death taxes of every character or description in respect of
intangible personal property owned by citizens of the
Philippines not residing in that foreign country.

The term 'deficiency' means:

(a) the amount by which tax imposed by this Chapter

exceeds the amount shown as the tax by the donor upon
his return; but the amount so shown on the return shall
first be increased by the amount previously assessed (or
Collected without assessment) as a deficiency, and
decreased by the amounts previously abated, refunded or
otherwise repaid in respect of such tax, or

(b) if no amount is shown as the tax by the donor, then the

amount by which the tax exceeds the amounts previously
assessed, (or collected without assessment) as a deficiency,
but such amounts previously assessed, or collected without
assessment, shall first be decreased by the amount
previously abated, refunded or otherwise repaid in respect
of such tax.