Collector of Internal Revenue vs.
Fisher
GR. No. L-11622
January 28, 1961
Doctrine:
“Reciprocity must be total. If any of the two states collects or imposes or does
not exempt any transfer, death, legacy or succession tax of any character, the
reciprocity does not work.”
Name of the parties: (and their respective role in the case):
Petitioner: Commissioner of Internal Revenue
Respondent:Douglas and Beatrice Fisher
Third person (Mortgagor, Assignor): if available
Law:
Section122 of the NIRC provides that “No tax shall be collected under this
Title in respect of intangible personal property
(a) if the decedent at the time of his death was a resident of a foreign country
which at the time of his death did not impose a transfer of tax or death tax of
any character in respect of intangible personal property of citizens of the Phil-
ippines not residing in that foreign country, or
(b) if the laws of the foreign country of which the decedent was a resident at
the time of his death allow a similar exemption from transfer taxes or death
taxes of every character in respect of intangible personal property owned by
citizens of the Philippines not residing in that foreign country."
Section 13851 of the California Inheritance Tax Law provides that intangible
personal property is exempt from tax if the decedent at the time of his death
was a resident of a territory or another State of the United States or of a for-
eign state or country which then imposed a legacy, succession, or death tax in
respect to intangible personal property of its own residents
Facts: (Instead of using respondent and petitioner use the name please :))
Walter G. Stevenson was born in the Philippines of British parents, married in
Manila to another British subject, Beatrice. He died in 1951 in California
where he and his wife moved to. In his will, he instituted Beatrice as his sole
heiress to certain real and personal properties, among which are 210,000
shares of stocks in Mindanao Mother Lode Mines (Mines).
Ian Murray Statt (Statt), the appointed ancillary administrator of his estate
filed an estate and inheritance tax return. He made a preliminary return to se-
cure the waiver of the CIR on the inheritance of the Mines shares of stock.
In 1952, Beatrice assigned all her rights and interests in the estate to the
spouses Fisher.
Statt filed an amended estate and inheritance tax return claiming additional
exemptions, one of which is the estate and inheritance tax on the Mines’
shares of stock pursuant to a reciprocity proviso in the NIRC, hence, warrant-
ing a refund from what he initially paid. The collector denied the claim.
He then filed in the CFI of Manila for the said amount.
CFI ruled that (a) the ½ share of Beatrice should be deducted from the net
estate of Walter, (b) the intangible personal property belonging to the estate of
Walter is exempt from inheritance tax pursuant to the reciprocity proviso in
NIRC.
Issue:
Whether or not the estate can avail itself of the reciprocity proviso in the
NIRC granting exemption from the payment of taxes for the Mines shares of
stock.
Ruling:
NO.
Reciprocity must be total. If any of the two states collects or imposes or does
not exempt any transfer, death, legacy or succession tax of any character, the
reciprocity does not work.
In the Philippines, upon the death of any citizen or resident, or non-resident
with properties, there are imposed upon his estate, both an estate and an inher-
itance tax.
But, under the laws of California, only inheritance tax is imposed. Also, alt-
hough the Federal Internal Revenue Code imposes an estate tax, it does not
grant exemption on the basis of reciprocity. Thus, a Filipino citizen shall al-
ways be at a disadvantage. This is not what the legislators intended.
Collector of Internal Revenue vs. Campos-rueda
GR. No. L-11622
January 28, 1961
Doctrine:
Requisites of statehood, or at least so much thereof as may be necessary for
the acquisition of an international personality, must be satisfied for a "foreign
country" to fall within the exemption of Section 122 of the National Internal
Revenue Code
Name of the parties: (and their respective role in the case):
Petitioner: Commissioner of Internal Revenue
Respondent: Campos Rueda
Third person (Mortgagor, Assignor): if available
Law:
Section122 of the NIRC provides that “No tax shall be collected under this
Title in respect of intangible personal property
(a) if the decedent at the time of his death was a resident of a foreign country
which at the time of his death did not impose a transfer of tax or death tax of
any character in respect of intangible personal property of citizens of the Phil-
ippines not residing in that foreign country, or
(b) if the laws of the foreign country of which the decedent was a resident at
the time of his death allow a similar exemption from transfer taxes or death
taxes of every character in respect of intangible personal property owned by
citizens of the Philippines not residing in that foreign country."
Facts:
Antonio Campos Rueda was the designated administrator of the estate of Ma-
ria Cerderia who died in Tangier, Moroco (an international zone [foreign
country] in North Africa) on January 2, 1955. At the time of her death, she
was a Spanish citizen and was a resident of Tangier from 1931 up to the time
of her death in 1955. She however left some personal properties (shares of
stocks and other intangibles) in the Philippines.
On September 29, 1955, petitioner filed a provisional estate and inheritance
tax return on all the properties of the late Maria Cerdeira. On the same date,
respondent, pending investigation, issued an assessment for state and inher-
itance taxes in the respective amounts of P111,592.48 and P157,791.48, or a
total of P369,383.96 which tax liabilities were paid by petitioner ... . On No-
vember 17, 1955, an amended return was filed ... wherein intangible personal
properties with the value of P396,308.90 were claimed as exempted from tax-
es. On November 23, 1955, respondent, pending investigation, issued another
assessment for estate and inheritance taxes in the amounts of P202,262.40 and
P267,402.84, respectively, or a total of P469,665.24 ... . In a letter dated Janu-
ary 11, 1956, respondent denied the request for exemption on the ground that
the law of Tangier is not reciprocal to Section 122 of the National Internal
Revenue Code. Hence, respondent demanded the payment of the sums of
P239,439.49 representing deficiency estate and inheritance taxes including ad
valorem penalties, surcharges, interests and compromise penalties ... . In a
letter dated February 8, 1956, and received by respondent on the following
day, petitioner requested for the reconsideration of the decision denying the
claim for tax exemption of the intangible personal properties and the imposi-
tion of the 25% and 5% ad valorem penalties ... . However, respondent denied
request, in his letter dated May 5, 1956 ... and received by petitioner on May
21, 1956. Respondent premised the denial on the grounds that there was no
reciprocity [with Tangier, which was moreover] a mere principality, not a for-
eign country. Consequently, respondent demanded the payment of the sums of
P73,851.21 and P88,023.74 respectively, or a total of P161,874.95 as defi-
ciency estate and inheritance taxes including surcharges, interests and com-
promise penalties.
Campos Rueda refused to pay the assessed tax as he claimed that the estate is
exempt from the payment of said taxes pursuant to section 122 of the Tax
Code which provides:

“That no tax shall be collected under this Title in respect of intangible per-
sonal property (a) if the decedent at the time of his death was a resident of a
foreign country which at the time of his death did not impose a transfer tax or
death tax of any character in respect of intangible person property of the
Philippines not residing in that foreign country, or (b) if the laws of the for-
eign country of which the decedent was a resident at the time of his death al-
low a similar exemption from transfer taxes or death taxes of every character
in respect of intangible personal property owned by citizens of the Philippines
not residing in that foreign country.”
Campos Rueda was able to prove that there is reciprocity between Tangier
and the Philippines. However, the CIR still denied any tax exemption in favor
of the estate as it averred that Tangier is not a “state” as contemplated by Sec-
tion 22 of the Tax Code and that the Philippines does not recognize Tangier as
a foreign country.
Ruling of the lower court:
It is not necessary that Tangier should have been recognized by our Govern-
ment in order to entitle the petitioner to the exemption benefits of the last pro-
viso of Section 122 of our Tax Code.
Issue:
Whether or not the requisites of statehood, or at least so much thereof
as may be necessary for the acquisition of an international personality,
must be satisfied for a "foreign country" to fall within the exemption
of Section 122 of the National Internal Revenue Code
Ruling:
NO - [ tax exempted]
If a foreign country is to be identified with a state, it is required in line with
Pound's formulation that it be a politically organized sovereign community
independent of outside control bound by ties of nationhood, legally supreme
within its territory, acting through a government functioning under a regime
of law.
It is thus a sovereign person with the people composing it viewed as an orga-
nized corporate society under a government with the legal competence to ex-
act obedience to its commands.
The stress is on its being a nation, its people occupying a definite territory,
politically organized, exercising by means of its government its sovereign will
over the individuals within it and maintaining its separate international per-
sonality.
State is a territorial society divided into government and subjects, claiming
within its allotted area a supremacy over all other institutions. Moreover,
similarly would point to the power entrusted to its government to maintain
within its territory the conditions of a legal order and to enter into internation-
al relations. With the latter requisite satisfied, international law does not exact
independence as a condition of statehood.
The controlling legal provision as noted is a proviso in section 122 of the
NIRC. It reads thus:
That no tax shall be collected under this title in respect of intangible personal
properties
1. if the decedent at the time of his death was a resident of a foreign
country which at the time of his death did not impose a transfer tax or
death tax of any character in respect of intangible personal properties
of the Philippines not residing in that foreign country; or
2. if the laws of the foreign country of which the decedent was a resident
at the time of his death allow a similar exemption from transfer taxes
or death taxes of every character in respect of intangible personal
properties owned by citizens of the Philippines not residing in that
foreign country.
This court commit itself to the doctrine that even a tiny principality, hardly an
international personality in the sense did fall under the exempt category.
The expression “foreign country,” was used in the last proviso of section 122
of NIRC refers to a government of that foreign power which although not an
international person in the sense of international law does not impose transfer
or death upon intangible person properties of our citizens not residing therein
whose law allow a similar exemption from such taxes. It is therefore not nec-
essary that Tangier should have been recognized by our government in order
to entitle the respondent to the exemption benefits of the proviso of said sec-
tion 122 of our tax code.
Hugo H. Miller, an American citizen, came to thePhilippines. From 1906 to
1917, he was connected with the public school system, first as a teacher and
later as a division superintendent of schools. After his retirement, Miller ac-
cepted an executive position in the local branch of Ginn & Co., book publish-
ers with principal offices in New York and Boston,U.S.A., up to the outbreak
of the Pacific War. Miller lived at the Manila Hotel. He never lived in any
residential house in thePhilippines. After the death of his wife in 1931, he
transferred from the Manila Hotel to the Army and Navy Club, where he was
staying at the outbreak of the Pacific War. On January 17,1941, Miller exe-
cuted his last will and testament in Santa Cruz,California, because of the Pa-
cific War, the office of Ginn & Co. was closed, and Miller joined theBoard of
Censors of the United States Navy. During the war,he was taken prisoner by
the Japanese forces in Leyte, then, he was transferred to Catbalogan, Sa-
mar,where he was reported to have been executed by said forceson
Testate proceedings were instituted before the Courtof California in Santa
Cruz County, which subsequently issued an order and decree of settlement of
final account and final distribution. The Bank of America, National Trust and
Savings Association of San Francisco California, co-executor named inMil-
ler's will, filed an estate and inheritance tax return with the Collector, covering
only the shares of stock issued by Philippine corporations. After due investi-
gation, the Collector assessed estate and inheritance taxes, which was received
by the said executor. The estate of Miller protested said assessment. This as-
sessment was appealed by De Lara as Ancilliary Administrator before the
Board of Tax Appeals, decide whether the decedent was a resident or anon-
resident of the Philippines at the time of his death. The Collector maintains
that under the tax laws, residence and domicile have different meaning
Miller during his long stay in the Philippines had required a "residence" in this
country, and wasa resident thereof at the time of his death, and consequently,
his intangible personal properties situated here as well as in the United States
were subject to said taxes. The Ancilliary Administrator, however, equally
maintains that for estate and inheritance tax purposes, the term "residence" is
synonymous with the term domicile.
Issue:
Whether the estate is liable to file an estate and inheritance tax return besides
those covering shares of stock sissued by Philippine corporations.
Ruling:
The Court agrees with the Court of Tax Appeals that at the time that The Na-
tional Internal Revenue Code waspromulgated in 1939, the prevailing con-
struction given by the courts to the "residence" was synonymous with domi-
cile and that the two were used interchangeably. Moreover, there is reason to
believe that the Legislature adopted the American(Federal and State) estate
and inheritance tax system. In the United States, for estate tax purposes, a res-
ident is considered one who at the time of his death had his domicile in the
United States, and in American jurisprudence, for purposes of estate and taxa-
tion, "residence"is interpreted as synonymous with domicile, and that—
The incidence of estate and succession has historically been determined by
domicile and situs and not by the fact of actual residence.
In this case, when Miller died he had his residence or domicile in Santa Cruz,
California. During his stay in the country, Miller never acquired a house for
residential purposesfor he stayed at the Manila Hotel and later on at the Army
andNavy Club. The bulk of his savings and properties were in theUnited
States. To his home in California, he had been sendingsouvenirs. In Novem-
ber, 1940, Miller took out a propertyinsurance policy and indicated therein his
address as SantaCruz, California, this aside from the fact that Miller, as al-
ready stated, executed his will in Santa Cruz, California, wherein he stated
that he was "of Santa Cruz, California".*** As to the shares of stocks issued
by Philippine corporations, an exemption was granted to the estate by virtue
of Section 122 of the Tax Code, which provides as follows:. . ."And Provided,
however, That no tax shall becollected under this Title in respect of intangible
personal property (a) if the decedent at the time of hisdeath was a resident of a
foreign country which at thetime of his death did not impose a transfer tax or
death tax of any character in respect of intangible personal property of citizens
of the Philippines notresiding in that country, or (b) if the laws of the foreign-
country of which the decedent was resident at thetune of his death allow a
similar exemption fromtransfer taxes or death taxes of every character inre-
spect of intangible personal property owned bycitizen, of the Philippine not
residing in that foreigncountry.