Shobe_CEO » BIR Ruling No. 095-98 (June 19, 1998)

BIR Ruling No. 095-98 (June 19, 1998)

June 5th, 2009

77 & 81(b)-000-00-095-98

Mr. Tony Briones

8-E Brooklyn Street

Cubao, Quezon City

S i r :

This refers to your letter dated April 12, 1997 requesting, on behalf of the heirs of the late Paciencia M. Sto Domingo, for a ruling as to the taxability, bases of valuation and penalties, if any, of the estate of the deceased Paciencia M. Sto. Domingo consisting of the following properties:

1. A parcel of residential land, including improvements thereon, containing an area of 601.9 square meters covered by TCT No. 170929 and Tax Declaration Nos. 2-139 and 2-139-A (1979); and cdasia

2. A parcel of residential land containing an area of 617.6 square meters covered by TCT No. 170930 and Tax Declaration No. 2-140 (1979).

It is represented that the late Paciencia M. Sto. Domingo died intestate on May 19, 1978; that the above-mentioned properties are adjacent to each other and situated at 88 Kapiligan St., Araneta Subd., Brgy. Imelda, Quezon City; that the current zonal value of the said properties is P7,500.00 per square meter; and that the approved market value of the aforesaid properties per Tax Declaration are as follows:

Kind TCT No. Tax Decl. No. Market Value

Land 170929 2-139 P132,420

Land 170930 2-140 135,870

Improvement 2-139-A 124,220

with remarks that the same are sunken and flooded; and that because the heirs are all living in different places and it is only now that they have the chance to settle the estate, they are now voluntarily filing the return and pay the corresponding estate tax due.

In reply, please be informed that “Estate Tax” has been defined as the tax levied on the transmission of the properties of the decedent at death and is based on the value of the net estate regardless of the number of heirs or their relationship to the decedent. Under then Section 99 of the Tax Code (now Section 88 of the Tax Code of 1997), there shall be levied, assessed, collected and paid upon the transfer of the net estate as determined in accordance with then Sections 100 and 101 of the same Code (now Sections 86 of the Tax Code of 1997), of every decedent, whether resident or non-resident of the Philippines, a tax based on the value of such net estate, as computed in accordance with the schedule found in said then Section 99. cda

In this connection, under then Section 103 of the Tax Code (now Sec. 88 of the Tax Code of 1997), the estate shall be appraised at its fair market value as of the time of death, or as of six (6) months thereafter, at the election of the executor or administrator. However, the appraised value of real property as of the time of death, or at the election of the executor or administrator, as of six (6) months after death shall either be (a) the current and fair market value as shown in the schedule of values fixed by the Provincial and City Assessor or (b) the fair market value as determined by the Commissioner of Internal Revenue, whichever is higher, and shall be binding upon all concerned for purposes of computing any internal revenue tax based on the value of the property.

From the foregoing, the estate of the late Paciencia M. Sto. Domingo is liable to pay the estate tax imposed under then Section 99 of the Tax Code, the law then enforced at the time of her death on May 19, 1978, based on the fair market value at the time of the death of the decedent as determined by the City Assessor (and not on the zonal valuation since the tentative valuation of real properties as determined by the Commissioner started only in 1986 under RAMO No. 1-86) of the above-mentioned realties comprising the net estate of the decedent which is arrived at in accordance with the following formula:

Gross Estate (then Sec. 100) xxx

Less: Statutory Deductions

(then Sec. 101) xxx

——

Gross Conjugal Estate xxx

Less: Share of the Surviving Spouse

(Sec. 101(c) xxx

––––

Net Estate xxx

====

Furthermore, under then Section 104 of the same Code (now Sec. 89 of the Tax Code of 1997), in all cases of transfers subject to tax, or where, though exempt from tax, the gross value of the estate exceeds three thousand pesos (P3,000.00), the executor, administrator, or any of the legal heirs, as the case may be, within two months after the decedent’s death, or within a like period after qualifying as executor or administrator, shall give a written notice to the Commissioner of Internal Revenue. cdlex

Likewise, under then Section 105(b) of the same Code [now Sec. 90(B) of the Tax Code of 1997], the return required under Section 105(a) [now Sec. 90(A) of the Tax Code of 1997] shall be filed within six (6) months after the decedent’s death; but if judicial testamentary or intestate proceedings shall be instituted for the settlement of the decedent estate prior to the expiration of said period, the same must be filed within twelve (12) months after the decedent’s death.

Finally, pursuant to then Section 107(a)(1) and (2) of the Tax Code, the estate tax imposed under then Section 99 of the same Code shall be due and payable within nine (9) months after the decedent’s death and shall be paid by the executor, administrator, or the heirs to the Commissioner of Internal Revenue or to the Regional Director, Revenue District Officer or Collection Agent of the city or municipality where the decedent was domiciled at the time of death. In case judicial testamentary or intestate proceedings shall be instituted for the settlement of the decedent’s estate prior to the expiration of six months after his death, the estate tax shall be due and payable within twenty-one (21) months after the decedent’s death. [Sec. 91 of the Tax Code of 1997]

In this connection, then Section 113(a)(1) provides that where the amount of the tax imposed is not paid on the due date, there shall be collected as part of the tax, interest upon such unpaid amount at the rate of fourteen per centum (14%) per annum, from the due date until it is paid, but in no case shall it exceed the amount corresponding to a period of three years. Furthermore, pursuant to then Section 119(a) of the same Code, in addition to the aforesaid delinquency interest, for failure to pay the tax, make such return or supply such information, there shall also be imposed a penalty of not more than Two Thousand Pesos (P2,000.00) or imprisonment for not more than six months, or both. [Sections 113(a)(1) and 119(a) of the Tax Code of 1977 have been repealed by P.D. No. 1994 dated November 5, 1985].

However, since the heirs of the late Paciencia M. Sto. Domingo are now voluntarily paying the estate tax without notice and demand from the Commissioner of Internal Revenue and that the delay is for a justifiable reason, no ad valorem penalties prescribed under then Section 114 of the Tax Code shall be imposed for failure to make and file the return required to be filed therefor. prcd

Accordingly, the estate of the late Paciencia M. Sto. Domingo is liable to pay the estate tax due plus penalties consisting of delinquency interest in the maximum rate of forty two percent (42%) computed at 14% per annum for three years and a compromise penalty in the amount of Two Thousand Pesos (P2,000.00) in lieu of the criminal liability resulting from failure to pay the tax, make the return or supply such information. You are, therefore, advised to pay this amount within ten (10) days from your receipt of this letter.

Very truly yours,

(SGD.) LIWAYWAY VINZONS-CHATO

Commissioner of Internal Revenue

Entry Filed under: Taxation