Estate tax return showed ZERO estate tax liability. Estate tax assessment was subsequently reduced by CTA to Php 37. Million. Petitioner claims valid claims of creditors against the estate are in excess of the gross estate. Respondents argue that since the claims of the estate's creditors have been condoned, such claims may no longer be deducted from the gross estate of the decedent.
Estate tax return showed ZERO estate tax liability. Estate tax assessment was subsequently reduced by CTA to Php 37. Million. Petitioner claims valid claims of creditors against the estate are in excess of the gross estate. Respondents argue that since the claims of the estate's creditors have been condoned, such claims may no longer be deducted from the gross estate of the decedent.
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Estate tax return showed ZERO estate tax liability. Estate tax assessment was subsequently reduced by CTA to Php 37. Million. Petitioner claims valid claims of creditors against the estate are in excess of the gross estate. Respondents argue that since the claims of the estate's creditors have been condoned, such claims may no longer be deducted from the gross estate of the decedent.
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Whether the actual claims of creditors may be fully allowed
G.R. No. 140944 as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned through RAFAEL ARSENIO S. DIZON, IN HIS CAPACITY AS THE compromise agreements entered into by the Estate with its JUDICIAL ADMINISTRATOR OF THE ESTATE OF THE creditors DECEASED JOSE P. FERNANDEZ v. COURT OF TAX APPEALS AND COMMISSIONER OF INTERNAL REVENUE Decision
Ponente YES.
Justice Nachura Ratio
Subject Following the US Supreme Court’s ruling in Ithaca Trust Co.
v. United States, the Court held that post-death Estate Taxation – Allowable Deductions, Date-of-Death developments are not material in determining the amount of Valuation Principle deduction. This is because estate tax is a tax imposed on the act of transferring property by will or intestacy and, Facts because the act on which the tax is levied occurs at a discrete time, i.e., the instance of death, the net value of the Jose P. Fernandez died in November 7, 1987. Thereafter, a property transferred should be ascertained, as nearly as petition for the probate of his will was filed. The probate possible, as of the that time. This is the date-of-death court appointed Atty. Rafael Arsenio P. Dizon as valuation rule. administrator of the Estate of Jose Fernandez. The Court, in adopting the date-of-death valuation principle, An estate tax return was filed later on which showed ZERO explained that: estate tax liability. BIR thereafter issued a deficiency estate tax assessment, demanding payment of Php 66.97 million • First. There is no law, nor do we discern any as deficiency estate tax. This was subsequently reduced by legislative intent in our tax laws, which disregards CTA to Php 37.42 million. The CA affirmed the CTA’s ruling, the date-of-death valuation principle and particularly hence, the instant petition. provides that post-death developments must be considered in determining the net value of the The petitioner claims that in as much as the valid claims of estate. It bears emphasis that tax burdens are not to creditors against the Estate are in excess of the gross be imposed, nor presumed to be imposed, beyond estate, no estate tax was due. On the other hand, what the statute expressly and clearly imports, tax respondents argue that since the claims of the Estate’s statutes being construed strictissimi juris against the creditors have been condoned, such claims may no longer government. be deducted from the gross estate of the decedent. • Second. Such construction finds relevance and consistency in our Rules on Special Proceedings Issue wherein the term "claims" required to be presented against a decedent's estate is generally construed to mean debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime, or liability contracted by the deceased before his death. Therefore, the claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable deductions.