CASE 3-1 GR L-13250 October 29, 1971 CIR vs Rueda Maria Cerdeira died in Tangier, (an international zone

[foreign country] in North Africa), on January 2, 1955. At the time of her demise, she was married to a Spanish Citizen and a permanent resident of Tangier from 1931 up to her death, on January 2, 1955. She left properties in Tangier as well as in the Philippines. Among the properties in the Philippines are several parcels of land and many shares of stock, accounts receivable and other intangible personal properties. On the real estate the respondent Antonio Campos Rueda, as administrator of her estate, paid the sum of P111,582.00 as estate tax and the sum of P151,791.48 as inheritance tax, on the transfer of her real properties in the Philippines, but refused to pay the corresponding deficiency estate and inheritance taxes due on the transfer of her intangible personal properties, claiming that the estate is exempt from the payment of said taxes pursuant to section 122 of the Tax Code and that he could avail of the reciprocal tax exemptions based on the provisions of our Tax Code. CIR denied the petition for tax exemption because there was no reciprocity of tax exemption because Tangier is not considered a foreign country but a mere principality. ISSUE: Whether or not Tangier is a foreign country as expressed in Section 122 of the National Internal revenue Code. HELD: Foreign Country used in Sec 122 of the National Internal Revenue Code, refers to a government of that foreign power which although not an international person in the sense of international law, doe not impose transfer of death taxes upon intangible personal properties of citizens not residing therein. Or whose law allows a similar exemption from such taxes. It is not necessary that Tangier should have been recognized by our government in order to entitle the petitioner to the exemption benefits provided by our Tax Law. But since such law has not been alleged, this case is to remanded to the lower court for further trial.

Definition of State Pound mentions that a state is a politically organized sovereign community independent of outside control bound by penalties of nationhood, legally supreme within its territory, acting through a government functioning under a regime of law.

Esmein refers to the state as "the juridical personification of the 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 personality. Laski could speak of it then as a territorial society divided into government and subjects, claiming within its allotted area a supremacy over all other institutions. McIver 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 international relations. Hype opines that with the latter requisite satisfied, international law does not exact independence as a condition of statehood.