Tax Digests
Content
9. Gallardo v Morales
FACTS:
In accordance with a compromise agreemen, a decision was rendered therein by the Court of First Instance
of Manila, on February 3, 1956, sentencing defendant Morales to pay to plaintiff Gallardo P7,000.00. In due
course, the corresponding writ of execution was issued and delivered to the Sheriff of Manila, who, on
August 8, 1956, garnished and levied execution on the sum of P7,000.00, out of the P30,000.00 due from
the Capital Insurance & Surety Co., Inc., to said defendant, as beneficiary under a personal accident policy
issued by said company to defendant’s husband, Luis Morales, who died, on August 26, 1950, by
assassination.
Defendant asked the sheriff to quash and lift said garnishment or levy on execution.
ISSUE:
whether a personal accident insurance which "insures for injuries and/or death as a result of murder or
assault or attempt thereat" is a life insurance, within the purview of Rule 39, section 12, subdivision (k), of
the Rules of Court, exempting from execution.
RULING
Yes.
Indeed, it has been held that statutes of this nature seek to enable the head of the family to secure his
widow and children from becoming a burden upon the community and, accordingly, should merit a liberal
interpretation.
exemption statutes or rules should be liberally construed with a view to giving effect to their beneficent and
humane purpose. To this end, every reasonable doubt as to whether a given property is or is not exempt
should be resolved in favor of exemption
10. BPI v Posadas
G.R. No. L-34583 October 22, 1931
FACTS:
The present complaint seeks to recover from the defendant Juan Posadas, Jr., Collector of Internal
Revenue, the amount of P1,209 paid by the plaintiff under protest, in its capacity of administrator of the
estate of the late Adolphe Oscar Schuetze, as inheritance tax upon the sum of P20,150, which is the amount
of an insurance policy on the deceased's life, wherein his own estate was named the beneficiary.
ISSUES:
1. whether the amount thereof is paraphernal or community property.
2. whether an insurance policy on said Adolphe Oscar Schuetze's life was, by reason of its ownership,
subject to the inheritance tax
RULING:
1. With the exception of the premium for the first year covering the period from January 14, 1913 to January
14, 1914, all the money used for paying the premiums, i. e., from the second year, or
January 16, 1914, or when the deceased Adolphe Oscar Schuetze married the plaintiff-appellant Rosario
Gelano, until his death on February 2, 1929, is conjugal property inasmuch as it does not appear to have
exclusively belonged to him or to his wife
2. Yes. the proceeds of a life-insurance policy payable to the insured's estate as the beneficiary, if delivered
to the testamentary administrator of the former as part of the assets of said estate under probate
administration, are subject to the inheritance tax according to the law on the matter, if they belong to the
assured exclusively, and it is immaterial that the insured was domiciled in these Islands or outside.
Wherefore, the judgment appealed from is reversed, and the defendant is ordered to return to the plaintiff
the one-half of the tax collected upon the amount of P20,150, being the proceeds of the insurance policy on
the life of the late Adolphe Oscar Schuetze, after deducting the proportional part corresponding to the first
premium
12. Balboa v Farrales
G.R. No. L-27059 February 14, 1928
FACTS:
Sometime in the year 1913, the plaintiff Buenaventura Balboa filled with the Bureau of Lands an application
for homestead, No. 10619, under the provisions of Act No. 926, covering a tract of land in Culis, Hermosa,
Bataan. On July 1, 1919, said Act No. 926 was repealed by Act No. 2874.
On August 11, 1924, said Buenaventura Balboa, for and in consideration of the sum of P950, sold said land
to the defendant Cecilio L. Farrales.
On March 6, 1926, the plaintiff commenced the present action for the purpose of having said sale declared
null and void on the ground of lack of consent on his part and fraud on the part of the defendant, and on the
further ground that said sale was contrary to, and in violation of the provisions of section 116 of Act No.
2874.
trial judge rendered a judgment in favor of the plaintiff and against the defendant, ordering the latter to return
to the plaintiff the land
ISSUE:
which of the two Acts — 926 and 2874 — shall be applied in determining whether the sale in question is
valid or not?
RULING:
Act 926 applies and the sale is valid.
The moment the plaintiff had received a certificate from the Government and had done all that was
necessary under the law to secure his patent, his right had become vested before the patent was issued. His
right had already vested prior to the issuance of the patent, and his rights to the land cannot be affected by a
subsequent law or by a subsequent grant by the Government to any other person.
It follows, therefore that the sale of the land in question by the plaintiff Buenventura Balboa to the defendant
Cecilio L. Farrales does not infringe said prohibition, and consequently said sale is valid and binding, and
should be given full force and effect.
13. Vera v Navarro
G.R. No. L-27745 October 18, 1977
FACTS:
Elsie M. Gaches died on March 9, 1966 without a child. The deceased, however, left a last will and
testament giving properties to several persons.
Judge Tan was appointed as executor of the testate estate of Elsie M. Gaches without a bond.
In a letter, dated June 3, 1966, Judge Tan informed the Commissioner that the testate estate was worth
about ten million (P10 million) pesos and that the estate and inheritance taxes due thereon were about P9.5
million.
After several reassessments, the case ultimately came to the Supreme Court.
ISSUES:
(1) Should the herein respondent heirs be required to pay first the inheritance tax before the probate court
may authorize the delivery of the hereditary share pertaining to each of them?
(2) Are the respondent heirs herein who are citizens and residents of the Philippines liable for the payment
of the Philippine inheritance tax corresponding to the hereditary share of another heir who is a citizen and
resident of the United States of America. said share of the latter consisting of personal (cash deposits and,
shares) properties located in the mentioned court
(3) Does the assignment of a certificate of time deposit to the comissioner of Internal Revenue for the
purpose of paying t I hereby the estate tax constitute payment of such tax?
(4) Should the herein respondent heirs be held liable for the payment of surcharge and interest on the
amount (P700,000.00) representing the face value of time deposit certificates assigned to the Commissioner
which could not be converted into cash?
RULING: yes
(1) No. the distribution of a decedent's assets may only be ordered under any of the following three
circumstances, namely, (1) when the inheritance tax, among others, is paid; (2) who bond a suffered bond is
given to meet the payment of the tax and all the other options of the nature enumerated in the above-cited
provision; etc. This was not complied with
(2) No. An analysis of our tax statutes supplies no sufficient indication that the inheritance tax, as a rule,
was meant to be the joint and solidary liability of the heirs of a decedent. the payment of the inheritance tax
should be taken as'the individual responsibility, to the extent of the benefits received, of each heir.
3. No. a time deposit certificate is a mercantile document and is essentially a promissory note. 5 By the
express terms of Article 1249 of the Civil Code of the Philippines, the use of this medium to clear an
obligation will "produce the effect of payment only when they have been cashed, or when through the fault of
the creditor they have been impaired." Consequently, the value of the said certificates (P700,000.00) should
still be considered outstanding.
4. Yes. The Interest charge for 1% per month imposed under Section 101 (a) (1) of the Tax Code is
essentially a commotion to the State for delay in the payment of the tax due thereto
The estate cannot likewise be exempted from the payment of the 5% surcharge imposed by Section 101 (c)
of the Tax Code
14. G.R. No. L-9776 July 31, 1957
Ozaeta v Palanca
FACTS:
On May 5, 1955, the special administrator filed a petition in court for authority to pay the accounting firm of
Sycip, Gorres, Velayo & Co. the sum of P3,650, for services rendered in taking inventory of assets in 1950,
tax consultations in 1950 to 1954, and preparation of income tax returns for 1953 and 1954. The court below
denied this motion, on the ground that the services covered by the fees of the accounting firm were rendered
to the former special administrator Philippine Trust Company
ISSUE:
whether the services rendered to the special administrator named in the will, previous to his actual
appointment as such and at his instance, are chargeable against the estate.
RULING:
Yes.
Whoever may have contracted the services of the accountants, whether it was Mr. Ozaeta before his
appointment or the Philippine Trust, such services were for the benefit of the estate and have redounded to
the estate's benefit.
The general rule is that acts done by an executor in the interest of his trust, prior to his qualification as such,
become binding on the estate upon his qualification
There is no question that the services rendered were for the benefit of the estate. The Rules require that the
administrator should submit an inventory of the properties of the estate within three months from his
appointment
17. Estate of Hilario Ruiz v CA
G.R. No. 118671. January 29, 1996
FACTS:
Hilario M. Ruiz executed a holographic will naming as his heirs his only son, Edmond Ruiz, his adopted
daughter, private respondent Maria Pilar Ruiz Montes, and his three granddaughters,
On April 12, 1988, Hilario Ruiz died.
On June 29, 1992, four years after the testator’s death, it was private respondent Maria Pilar Ruiz Montes
who filed before the Regional Trial Court, Branch 156, Pasig, a petition for the probate and approval of
Hilario Ruiz’s will and for the issuance of letters testamentary to Edmond Ruiz
ISSUE:
whether the probate court, after admitting the will to probate but before payment of the estate’s debts and
obligations, has the authority: (1) to grant an allowance from the funds of the estate for the support of the
testator’s grandchildren; (2) to order the release of the titles to certain heirs; and (3) to grant possession of
all properties of the estate to the executor of the will.
RULING:
1. No. Be that as it may, grandchildren are not entitled to provisional support from the funds of the
decedent’s estate. The law clearly limits the allowance to “widow and children” and does not extend it to the
deceased’s grandchildren, regardless of their minority or incapacity.
2. No. No distribution shall be allowed until the payment of the obligations above-mentioned has been made
or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court,
conditioned for the payment of said obligations within such time as the court directs.
3. No. The right of an executor or administrator to the possession and management of the real and personal
properties of the deceased is not absolute and can only be exercised “so long as it is necessary for the
payment of the debts and expenses of administration, He cannot unilaterally assign to himself and possess
all his parents’ properties and the fruits thereof without first submitting an inventory and appraisal of all real
and personal properties of the deceased, rendering a true account of his administration, the expenses of
administration, the amount of the obligations and estate tax, all of which are subject to a determination by
the court as to their veracity, propriety and justness.
20. Gonzales v CTA G.R. No. L-14532 May 26, 1965
FACTS:
Both petitioners Jose and Juana Gonzales are co-heirs and co-owners, (one-sixth each) of a tract of land of
871, [982.] square meters which they, along with four other co-heirs, inherited from their mother. So on
November 15, 1956, Jose Leon Gonzales and Juana F. Gonzales submitted to the Court of Tax Appeals a
joint petition seeking a refund, this time of the amount of P86,166.00 for each of the two petitioners.
ISSUES:
(1) Whether or not petitioners' claim for refund of the total of P86,166.00 may be properly entertained; and
(2) Whether or not the sum of P89,309.61 which each of the petitioners received as interest on the value of
the land expropriated is taxable as ordinary income, and not as capital gain.
RULING:
1. No. the requirement of prior timely claim for refund of the sum of P86,166.00 had not been met in this
case. The demand for refund must precede the suit, and this requirement is mandatory; so much so that
non-compliance therewith bars the action
2. It is ordinary income."the acquisition by the Government of private properties through the exercise of the
power of eminent domain, said properties being justly compensated, is embraced within the meaning of the
term 'sale' or 'disposition of property'" and the definition of gross income laid down by Section 29 of the Tax
Code of the Philippines. We also adhered to the view that the transfer of property through condemnation
proceedings is a sale or exchange and that profit from the transaction constitutes capital gain.
In fact, the authorities support the conclusion that for income tax purposes, interest does not form part of the
price paid by the Government in condemnation proceedings; and may not be treated as part of the capital
gain.
22. Dizon v CTA G.R. No. 140944 April 30, 2008
FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his will was
filed with Branch 51 of the Regional Trial Court (RTC) of Manila (probate court). The probate court then
appointed retired Supreme Court Justice Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael
Arsenio P. Dizon (petitioner) as Special and Assistant Special Administrator, respectively, of the Estate of
Jose (Estate). Petitioner alleged that several requests for extension of the period to file the required estate
tax return were granted by the BIR since the assets of the estate, as well as the claims against it, had yet to
be collated, determined and identified.
ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of evidence
which were not formally offered by the BIR; and
2. Whether the actual claims of the aforementioned creditors may be fully allowed as deductions from the
gross estate of Jose despite the fact that the said claims were reduced or condoned through compromise
agreements entered into by the Estate with its creditors Or Whether or not the CA erred in affirming the CTA
in the latter's determination of the deficiency estate tax imposed against the Estate.
RULING:
1. Yes. While the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not
ends in themselves and are primarily intended as tools in the administration of justice, the presentation of
the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the
only means by which the CTA may ascertain and verify the truth of BIR's claims against the Estate. The
BIR's failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its cause
2. Yes. The claims existing at the time of death are significant to, and should be made the basis of, the
determination of allowable deductions. Also, as held in Propstra v. U.S., where a lien claimed against the
estate was certain and enforceable on the date of the decedent's death, the fact that the claimant
subsequently settled for lesser amount did not preclude the estate from deducting the entire amount of the
claim for estate tax purposes. This is called the date-of-death valuation rule.
FACTS:
In accordance with a compromise agreemen, a decision was rendered therein by the Court of First Instance
of Manila, on February 3, 1956, sentencing defendant Morales to pay to plaintiff Gallardo P7,000.00. In due
course, the corresponding writ of execution was issued and delivered to the Sheriff of Manila, who, on
August 8, 1956, garnished and levied execution on the sum of P7,000.00, out of the P30,000.00 due from
the Capital Insurance & Surety Co., Inc., to said defendant, as beneficiary under a personal accident policy
issued by said company to defendant’s husband, Luis Morales, who died, on August 26, 1950, by
assassination.
Defendant asked the sheriff to quash and lift said garnishment or levy on execution.
ISSUE:
whether a personal accident insurance which "insures for injuries and/or death as a result of murder or
assault or attempt thereat" is a life insurance, within the purview of Rule 39, section 12, subdivision (k), of
the Rules of Court, exempting from execution.
RULING
Yes.
Indeed, it has been held that statutes of this nature seek to enable the head of the family to secure his
widow and children from becoming a burden upon the community and, accordingly, should merit a liberal
interpretation.
exemption statutes or rules should be liberally construed with a view to giving effect to their beneficent and
humane purpose. To this end, every reasonable doubt as to whether a given property is or is not exempt
should be resolved in favor of exemption
10. BPI v Posadas
G.R. No. L-34583 October 22, 1931
FACTS:
The present complaint seeks to recover from the defendant Juan Posadas, Jr., Collector of Internal
Revenue, the amount of P1,209 paid by the plaintiff under protest, in its capacity of administrator of the
estate of the late Adolphe Oscar Schuetze, as inheritance tax upon the sum of P20,150, which is the amount
of an insurance policy on the deceased's life, wherein his own estate was named the beneficiary.
ISSUES:
1. whether the amount thereof is paraphernal or community property.
2. whether an insurance policy on said Adolphe Oscar Schuetze's life was, by reason of its ownership,
subject to the inheritance tax
RULING:
1. With the exception of the premium for the first year covering the period from January 14, 1913 to January
14, 1914, all the money used for paying the premiums, i. e., from the second year, or
January 16, 1914, or when the deceased Adolphe Oscar Schuetze married the plaintiff-appellant Rosario
Gelano, until his death on February 2, 1929, is conjugal property inasmuch as it does not appear to have
exclusively belonged to him or to his wife
2. Yes. the proceeds of a life-insurance policy payable to the insured's estate as the beneficiary, if delivered
to the testamentary administrator of the former as part of the assets of said estate under probate
administration, are subject to the inheritance tax according to the law on the matter, if they belong to the
assured exclusively, and it is immaterial that the insured was domiciled in these Islands or outside.
Wherefore, the judgment appealed from is reversed, and the defendant is ordered to return to the plaintiff
the one-half of the tax collected upon the amount of P20,150, being the proceeds of the insurance policy on
the life of the late Adolphe Oscar Schuetze, after deducting the proportional part corresponding to the first
premium
12. Balboa v Farrales
G.R. No. L-27059 February 14, 1928
FACTS:
Sometime in the year 1913, the plaintiff Buenaventura Balboa filled with the Bureau of Lands an application
for homestead, No. 10619, under the provisions of Act No. 926, covering a tract of land in Culis, Hermosa,
Bataan. On July 1, 1919, said Act No. 926 was repealed by Act No. 2874.
On August 11, 1924, said Buenaventura Balboa, for and in consideration of the sum of P950, sold said land
to the defendant Cecilio L. Farrales.
On March 6, 1926, the plaintiff commenced the present action for the purpose of having said sale declared
null and void on the ground of lack of consent on his part and fraud on the part of the defendant, and on the
further ground that said sale was contrary to, and in violation of the provisions of section 116 of Act No.
2874.
trial judge rendered a judgment in favor of the plaintiff and against the defendant, ordering the latter to return
to the plaintiff the land
ISSUE:
which of the two Acts — 926 and 2874 — shall be applied in determining whether the sale in question is
valid or not?
RULING:
Act 926 applies and the sale is valid.
The moment the plaintiff had received a certificate from the Government and had done all that was
necessary under the law to secure his patent, his right had become vested before the patent was issued. His
right had already vested prior to the issuance of the patent, and his rights to the land cannot be affected by a
subsequent law or by a subsequent grant by the Government to any other person.
It follows, therefore that the sale of the land in question by the plaintiff Buenventura Balboa to the defendant
Cecilio L. Farrales does not infringe said prohibition, and consequently said sale is valid and binding, and
should be given full force and effect.
13. Vera v Navarro
G.R. No. L-27745 October 18, 1977
FACTS:
Elsie M. Gaches died on March 9, 1966 without a child. The deceased, however, left a last will and
testament giving properties to several persons.
Judge Tan was appointed as executor of the testate estate of Elsie M. Gaches without a bond.
In a letter, dated June 3, 1966, Judge Tan informed the Commissioner that the testate estate was worth
about ten million (P10 million) pesos and that the estate and inheritance taxes due thereon were about P9.5
million.
After several reassessments, the case ultimately came to the Supreme Court.
ISSUES:
(1) Should the herein respondent heirs be required to pay first the inheritance tax before the probate court
may authorize the delivery of the hereditary share pertaining to each of them?
(2) Are the respondent heirs herein who are citizens and residents of the Philippines liable for the payment
of the Philippine inheritance tax corresponding to the hereditary share of another heir who is a citizen and
resident of the United States of America. said share of the latter consisting of personal (cash deposits and,
shares) properties located in the mentioned court
(3) Does the assignment of a certificate of time deposit to the comissioner of Internal Revenue for the
purpose of paying t I hereby the estate tax constitute payment of such tax?
(4) Should the herein respondent heirs be held liable for the payment of surcharge and interest on the
amount (P700,000.00) representing the face value of time deposit certificates assigned to the Commissioner
which could not be converted into cash?
RULING: yes
(1) No. the distribution of a decedent's assets may only be ordered under any of the following three
circumstances, namely, (1) when the inheritance tax, among others, is paid; (2) who bond a suffered bond is
given to meet the payment of the tax and all the other options of the nature enumerated in the above-cited
provision; etc. This was not complied with
(2) No. An analysis of our tax statutes supplies no sufficient indication that the inheritance tax, as a rule,
was meant to be the joint and solidary liability of the heirs of a decedent. the payment of the inheritance tax
should be taken as'the individual responsibility, to the extent of the benefits received, of each heir.
3. No. a time deposit certificate is a mercantile document and is essentially a promissory note. 5 By the
express terms of Article 1249 of the Civil Code of the Philippines, the use of this medium to clear an
obligation will "produce the effect of payment only when they have been cashed, or when through the fault of
the creditor they have been impaired." Consequently, the value of the said certificates (P700,000.00) should
still be considered outstanding.
4. Yes. The Interest charge for 1% per month imposed under Section 101 (a) (1) of the Tax Code is
essentially a commotion to the State for delay in the payment of the tax due thereto
The estate cannot likewise be exempted from the payment of the 5% surcharge imposed by Section 101 (c)
of the Tax Code
14. G.R. No. L-9776 July 31, 1957
Ozaeta v Palanca
FACTS:
On May 5, 1955, the special administrator filed a petition in court for authority to pay the accounting firm of
Sycip, Gorres, Velayo & Co. the sum of P3,650, for services rendered in taking inventory of assets in 1950,
tax consultations in 1950 to 1954, and preparation of income tax returns for 1953 and 1954. The court below
denied this motion, on the ground that the services covered by the fees of the accounting firm were rendered
to the former special administrator Philippine Trust Company
ISSUE:
whether the services rendered to the special administrator named in the will, previous to his actual
appointment as such and at his instance, are chargeable against the estate.
RULING:
Yes.
Whoever may have contracted the services of the accountants, whether it was Mr. Ozaeta before his
appointment or the Philippine Trust, such services were for the benefit of the estate and have redounded to
the estate's benefit.
The general rule is that acts done by an executor in the interest of his trust, prior to his qualification as such,
become binding on the estate upon his qualification
There is no question that the services rendered were for the benefit of the estate. The Rules require that the
administrator should submit an inventory of the properties of the estate within three months from his
appointment
17. Estate of Hilario Ruiz v CA
G.R. No. 118671. January 29, 1996
FACTS:
Hilario M. Ruiz executed a holographic will naming as his heirs his only son, Edmond Ruiz, his adopted
daughter, private respondent Maria Pilar Ruiz Montes, and his three granddaughters,
On April 12, 1988, Hilario Ruiz died.
On June 29, 1992, four years after the testator’s death, it was private respondent Maria Pilar Ruiz Montes
who filed before the Regional Trial Court, Branch 156, Pasig, a petition for the probate and approval of
Hilario Ruiz’s will and for the issuance of letters testamentary to Edmond Ruiz
ISSUE:
whether the probate court, after admitting the will to probate but before payment of the estate’s debts and
obligations, has the authority: (1) to grant an allowance from the funds of the estate for the support of the
testator’s grandchildren; (2) to order the release of the titles to certain heirs; and (3) to grant possession of
all properties of the estate to the executor of the will.
RULING:
1. No. Be that as it may, grandchildren are not entitled to provisional support from the funds of the
decedent’s estate. The law clearly limits the allowance to “widow and children” and does not extend it to the
deceased’s grandchildren, regardless of their minority or incapacity.
2. No. No distribution shall be allowed until the payment of the obligations above-mentioned has been made
or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court,
conditioned for the payment of said obligations within such time as the court directs.
3. No. The right of an executor or administrator to the possession and management of the real and personal
properties of the deceased is not absolute and can only be exercised “so long as it is necessary for the
payment of the debts and expenses of administration, He cannot unilaterally assign to himself and possess
all his parents’ properties and the fruits thereof without first submitting an inventory and appraisal of all real
and personal properties of the deceased, rendering a true account of his administration, the expenses of
administration, the amount of the obligations and estate tax, all of which are subject to a determination by
the court as to their veracity, propriety and justness.
20. Gonzales v CTA G.R. No. L-14532 May 26, 1965
FACTS:
Both petitioners Jose and Juana Gonzales are co-heirs and co-owners, (one-sixth each) of a tract of land of
871, [982.] square meters which they, along with four other co-heirs, inherited from their mother. So on
November 15, 1956, Jose Leon Gonzales and Juana F. Gonzales submitted to the Court of Tax Appeals a
joint petition seeking a refund, this time of the amount of P86,166.00 for each of the two petitioners.
ISSUES:
(1) Whether or not petitioners' claim for refund of the total of P86,166.00 may be properly entertained; and
(2) Whether or not the sum of P89,309.61 which each of the petitioners received as interest on the value of
the land expropriated is taxable as ordinary income, and not as capital gain.
RULING:
1. No. the requirement of prior timely claim for refund of the sum of P86,166.00 had not been met in this
case. The demand for refund must precede the suit, and this requirement is mandatory; so much so that
non-compliance therewith bars the action
2. It is ordinary income."the acquisition by the Government of private properties through the exercise of the
power of eminent domain, said properties being justly compensated, is embraced within the meaning of the
term 'sale' or 'disposition of property'" and the definition of gross income laid down by Section 29 of the Tax
Code of the Philippines. We also adhered to the view that the transfer of property through condemnation
proceedings is a sale or exchange and that profit from the transaction constitutes capital gain.
In fact, the authorities support the conclusion that for income tax purposes, interest does not form part of the
price paid by the Government in condemnation proceedings; and may not be treated as part of the capital
gain.
22. Dizon v CTA G.R. No. 140944 April 30, 2008
FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his will was
filed with Branch 51 of the Regional Trial Court (RTC) of Manila (probate court). The probate court then
appointed retired Supreme Court Justice Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael
Arsenio P. Dizon (petitioner) as Special and Assistant Special Administrator, respectively, of the Estate of
Jose (Estate). Petitioner alleged that several requests for extension of the period to file the required estate
tax return were granted by the BIR since the assets of the estate, as well as the claims against it, had yet to
be collated, determined and identified.
ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of evidence
which were not formally offered by the BIR; and
2. Whether the actual claims of the aforementioned creditors may be fully allowed as deductions from the
gross estate of Jose despite the fact that the said claims were reduced or condoned through compromise
agreements entered into by the Estate with its creditors Or Whether or not the CA erred in affirming the CTA
in the latter's determination of the deficiency estate tax imposed against the Estate.
RULING:
1. Yes. While the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not
ends in themselves and are primarily intended as tools in the administration of justice, the presentation of
the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the
only means by which the CTA may ascertain and verify the truth of BIR's claims against the Estate. The
BIR's failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its cause
2. Yes. The claims existing at the time of death are significant to, and should be made the basis of, the
determination of allowable deductions. Also, as held in Propstra v. U.S., where a lien claimed against the
estate was certain and enforceable on the date of the decedent's death, the fact that the claimant
subsequently settled for lesser amount did not preclude the estate from deducting the entire amount of the
claim for estate tax purposes. This is called the date-of-death valuation rule.
