Lim, Lynnx Kasey C.

4ALM TAX 2 DIGESTS

Vidal de Roces v. Posadas G.R No, 34937 March 13, 1933

The plaintiffs in this case brought an action to recover from the defendant, Collector of Internal
Revenue for certain sums of money paid by them under protest as inheritance tax. On March
10 and 12, 1925, Esperanza Tuazon donated parcels of land situated in Manila to the plaintiffs
who received them in the same public documents, which were duly recorded in the registry of
deeds. On January 5, 1926, the donor died in the City of Manila without leaving any forced heir
and bequeathed P5,000 to each of the donees. CIR ruled that as donees and legatees, they
are required to pay an inheritance tax in the amount of P16,673 and P13,951.45, respectively.
P15,191.48 was levied as tax on the donation to Concepcion Vidal de Roces and P1,481.52
on her legacy, and P12,388.95 upon the donation made to Elvira Vidal de Richards and
P1,462.50 on her legacy. Thereafter, the appelants paid under protest. The contention of the
appellant contends that Sec. 1540 of the Administrative Code does not include donation inter
vivos and if it does, it is unconstitutional and contend that ‘all gifts’ refer to donation inter vivos
and supports this theory where Sec. 1540 does not include said donation inter vivos. While
CIR maintains that the word ‘all gifts’ refers to donations intervivos.

Issue: Whether or not the donations should be subjected to inheritance tax

Ruling: Yes. The gifts referred to in section1540 of the Revised Administrative Code refers to
those donations inter vivos that take effect immediately or during the lifetime of the donor but
are made in consideration or in contemplation of death. Gifts inter vivos, the transmission of
which is not made in contemplation of the donor's death should not be understood as included
within the said legal provision for the reason that it would amount to imposing a direct tax on
property and not on the transmission which act does not come within the scope of the
provisions contained in Article XI of Chapter 40 of the Administrative Code which deals
expressly with the tax on inheritances, legacies and other acquisitions mortis causa.
The tax collected by the appellee on the properties donated in 1925 really constitutes an
inheritance tax imposed on the transmission of said properties in contemplation or in
consideration of the donor's death and under the circumstance that the donees were later
instituted as the former's legatees. For this reason, the law considers such transmissions in the
form of gifts inter vivos, as advances on inheritance and nothing therein violates any
constitutional provision, inasmuch as said legislation is within the power of the Legislature.

Facts: Walter G. Stevenson who was born in the Philippines of both British parents and
married in the City of Manila to a Filipina, Beatrice Stevenson, died in San Francisco, USA,
where he and his wife established their permanent residence. In his will, he instituted his wife,
Beatrice as his sole heiress to certain real and personal properties acquired by the spouses
during their stay in the Philippines. The administrator of the estate filed a preliminary estate
and inheritance tax return with the reservation that the declared properties are appraised at
their values six months after the death of Stevenson. on December 1, 1952, Beatrice
Stevenson assigned all her rights and interests in the estate to the spouses, Douglas and
Bettina Fisher, respondents in this case. On September 7, 1953, the administrator filed a
second amended estate and inheritance tax return containing new claims for additional
exemptions and deductions.
Issues:

(1) Whether or not in determining the taxable net estate of the decedent, one half of the net
estate should be deducted as the share of the surviving spouse in accordance with our law on
conjugal partnership
(2) Whether or not the estate can avail itself of the reciprocity proviso granting exemption from
the payment of estate and inheritance taxes on the 210,000 shares of stock in the Mindanao
Mother Lode Mines, Inc.
(3) Whether or not the estate is entitled to the deduction of P4,000 allowed by Section 8610,
U.S IRC in relation to Sec. 122 od NIRC
(4) Whether or not the real estate properties of the decedent located in Baguio City and the
210,00 shares of stock in the Mindanao Lode Mines, Inc. were correctly appraised by the lower
court.
(5) Whether or not the estate is entitled to the deductions for judicial, administration, funeral
expenses, real estate taxes and the amount of indebtedness allegedly incurred by the
decedent during his lifetime
(6) Whether or not the real estate properties of the decedent located in Baguio City and the
210,000 shares of stock in the Mindanao Mother Lode Mines Inc., were correctly appraised by
the lower court.

Ruling:
(1) Yes. In the absence of any ante-nuptial agreement, the husband and wife are presumed to
have adopted the system of conjugal partnership. English law governs the property relations of
a man and woman, both British citizens, who were married in Manila 1909. In the absence of
proof of a foreign law, the processual presumption is that it is the same as the law of the forum.
(2) Yes. Under section 122 of the Tax Code and section 13851of the California Inheritance Tax
Law, the reciprocity must be total, that is, with respect to transfer or death taxes of any and
every character, in the case of the Philippine law, and to legacy, succession, or death taxes of
any and every character, in the case of the California law. Therefore, if any of the two states
collects or imposes and does not exempt any transfer, death, legacy, or succession tax of any
character, the reciprocity does not work. The shares of stock in the Philippines, left by a
deceased resident of California, are subject to the Philippine inheritance tax. The reciprocity
provisions of section 122 of the Tax Code are not applicable because there is no total
reciprocity under the two laws.
(3) No. The amount allowed under the Federal Estate Tax Law is in the nature of a deduction
and not of an exemption, regarding which reciprocity cannot be claimed under section 122 of
the Philippine Tax Code. Nor is reciprocity allowed under the Federal Law.
(4) The assessed value is not the controlling market value. Value. For purposes of the estate
and inheritance taxes, the assessed value of real estate is considered as the fair market value
only when evidence to the contrary has not been submitted. If there is such contrary evidence,
the assessed value will not be considered the fair market value. Shares of stock of a Philippine
(domestic) corporation have a situs here for purposes of taxation. Their situs is not California
where the certificates were located and in whose stock exchange the shares were registered.
Their fair market value should be based on the price prevailing in this country where they are
sought to be taxed.
(5) Only the P10,000 amount of indebtedness is allowed. The Supreme Court will not disturb
the ruling of the Tax Court, allowing the administrator's fee, lawyer's fee and judicial and
administration expenses as liabilities of the estate, it appearing the said items were likewise
allowed by the probate court. The ruling of the Tax Court, disallowing an additional amount for
funeral expenses, for lack of evidence, should be upheld. The Supreme Court will set aside the
factual findings of the Tax Court only in case they are not supported by any evidence.
(6) No. In the absence of any statutory provision clearly or expressly directing or authorizing
the payment of interest on taxes overpaid, the National Government cannot be required to pay
interest.
Spouses Evono vs. CIR

Facts: On March 12, 2001, petitioner Maribel C. Evono acting in her own capacity and in
behalf of her minor children, executed a “Deed of Conditional Sale” involving a percel of land
located in Barrio Gun-ob Lapu-lapu City. On February 19, 2003, petitioner Maribel Evono and
Spouses Credo executed a “Deed of Absolute Sale” wherein the spouses sold to the former
two parcels of land. Maricel Evono subsequently purchased parcels of land and acquired deed
of absolute sale for the same while an amendment to deed of absolute sale was executed
acknowledging that the amount paid to the parcel of land covered by TCT Nos. 3085 and
18185 was under Maribel Evono and in behalf of her minor children. Petitioner requested to
the Revenue District Officer of BIR Cebu that the names of her children be added in the CARs
so that their names be affixed in the titles of the property they brought. Inaction was alleged by
petitioner and filed a petition for review but respondent CIR alleged that the amount being
claimed by petitioner as alleged erroneously paid donor’s tax was not properly documented
and claimed that the request for adding the minor children in the CAR as transferees is in
effect a donation within the realms of taxation law.
Issue: Whether or not the inclusion of the names of the petitioner’s minor children in the CAR
and transfer certificate of titles may be deemed a donation from their parents and be subjected
to donor’s tax.
Ruling: Yes. the intent to donate was clearly established; the inclusion of the children's name
in the CAR is a mere afterthought since the original transaction shows that petitioner is the
sole buyer of the properties; the children have no income, and the alleged monies given by the
parents are considered donations since these monies are excessive allowances, which
enabled them to save substantial amounts to purchase real properties. After a careful
consideration of the arguments of both parties, and the applicable law and jurisprudence, we
rule for the respondents. Donation (donatio) is defined as "a gift; a transfer of the title to
property to one who receives it without paying for it; the act by which the owner of a thing
voluntarily transfers the title and possession of the same from himself to another person,
without any consideration." Logically, at such young ages, the three minor children would not
be able to save such substantial amount, even if they were receiving e
normous allowances from their parents. As a consequence thereof, the inclusion of the
children's names in the transfer of the titles/properties shall be deemed a donation or gift from
their parents.

Rafael Arsenio S. Dizon vs. Court of Tax Appeals G.R. No. 140944; 30 April 2008
On November 7, 1987, Jose P. Fernandez died. A petition for the probate of his will was filed
with RTC-Manila. Thereafter, the pro