Shobe_CEO » BIR Ruling No. 046-98 (April 14, 1998)

BIR Ruling No. 046-98 (April 14, 1998)

June 5th, 2009

83(b) & (c)-000-00-46-98

M.M. Lazaro & Associates

19th Floor, Chatham Building

Valero Cor. Herrera Streets

Salcedo Village, Makati City

Attention : Attys. Lorna Patajo-Kapunan &

Manuel M . Lazaro

Gentlemen :

This refers to your letter dated May 28, 1997 requesting for the waiver of surcharge and interest on the estate tax liability of the Estate of Benigno P. Toda, Jr. LLphil

It is represented that Benigno P. Toda, Jr. (the “Decedent”) died on January 16, 1994 leaving properties, both real and personal, in the Philippines and in the United States: that the Decedent is survived by his children from his first marriage to Rosemarie T. De Toda, namely Benigno Toda III and Rosemarie Toda-Delgado, and his surviving spouse. Conchita Simo Toda: that the Decedent left two wills, one which purportedly applies to the properties he left in the United States, and one for the properties he left in the Philippines; that the co-administrators are ready to file the estate tax return and to pay the basic amount of the estate tax by the end of July 1997; that they, however, request that the time for the payment of the estate tax be deemed to have been extended to such date; and that no surcharge and interest be due thereon, for the reasons stated in their letter, viz:

“(1) The preparation of the estate tax return was beset with difficulties.

“First, the executor (Atty. Antonio R. Bautista) and the successor-executor (Atty. Leonardo Siguion Reyna) nominated in the will governing the Decedent’s Philippine properties both declined to serve. For several months after the Decedent’s death, no one was attending to the administration of the estate. Then the Decedent’s children and surviving spouse contested the validity of the wills and the purported distribution of the properties of the Decedent. The court hearing the special proceedings in the matter of the Estate of Benigno Toda, Jr. (SP No. M-3792, Branch 33, RTC Makati) finally appointed as co-administrators, Atty. Lorna Patajo Kapunan (counsel for the surviving spouse) and Atty. Mario L. Bautista (counsel for the children). After the latter resigned as co-administrator, Justice Manuel M. Lazaro was appointed in his place. LLcd

“Second, the properties to be included in the estate of the Decedent could not readily be determined accurately as some of the properties also belonged to the estate of Rosemarie T. De Toda, who died on March 4, 1991 (approximately three years before the Decedent died). In the letter of the Commissioner of Internal Revenue dated March 24, 1997 addressed to the Revenue District Officer of Revenue District No. 50, South Makati, she recognized that a property located in Banaba Street, Forbes Park (the “Banaba Property”) which was supposed to have been inherited by the Decedent from his first wife was sold in order to raise money to settle the estate tax due from the estate of Rosemarie T. De Toda, as well as to pay the mortgage on the said Banaba Property. [A copy of the letter was attached to their request.]

“Third, even with the best efforts of the co-administrators, the preparation of an inventory of the properties left by the Decedent could not readily be done. Aside from ascertaining the Decedent’s ownership of the properties, the co-administrators also had to ascertain the fair market value of these properties as of the date of the Decedent’s death, which proved to be an arduous task considering that the properties include shares of stock of relatively obscure companies that were not listed in the stock exchange (so that audited financial statements had to be obtained to establish the book value of the shares as of the date of the Decedent’s death) and disputed leasehold rights.

“(2) The estate was not in a financial position to pay the estate tax due, after the inventory was completed and the fair market values of the properties, determined. cdrep

“In fact, in order to settle the estate tax due on the estate of the Decedent’s first wife, the Banaba Property had to be sold, but only after the probate Court’s authority was secured pursuant to Sections 1 and 2, Rule 89, Rules of Court.”

that their request has been filed because the heirs have already reached a Compromise Agreement which has been approved by the probate court; and that a copy of the Order approving the Compromise Agreement was likewise submitted to this Office.

In reply, please be informed that under Section 83(b) and (c) of the Tax Code, as amended, estate tax return is required to be filed within six (6) months from the decedent’s death, and in meritorious cases, a reasonable extension not exceeding thirty (30) days for filing the return may be granted by the Commissioner of Internal Revenue. The payment of the estate tax or any part thereof shall be made upon the filing of the return or on such date as fixed if an extension is granted by the Commissioner as when payment of the same would impose undue hardship on the estate or any of the heirs, but in no case to exceed five years if the estate is settled through the courts, or two years in case the estate is settled extrajudicially pursuant to Section 84 of the same Code. (BIR Ruling No. 106-96 dated October 15, 1996) cdlex

In view thereof, considering that the preparation of the estate tax return was beset with difficulties after which payment cannot be effected due to financial constraints, your request for waiver of the surcharge on the estate tax due on the transmission of the estate of the late Benigno P. Toda, Jr. is hereby granted. However, it is reasonable that the interest must be paid to compensate for the concomitant use of the funds by the estate when it is supposed to have been paid. In this regard, you are requested to advise your client to pay the basic estate tax and the corresponding interest accruing thereon, if the same has not yet been paid on the date above requested or if the basic estate tax has been paid without the corresponding interest, to pay the interest which has accrued thereon.

This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, and/or any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. LLphil

Very truly yours,

(SGD.) LIWAYWAY VINZONS-CHATO

Commissioner of Internal Revenue

Entry Filed under: Taxation