THE COLLECTOR OF INTERNAL REVENUE v. ANTONIO CAMPOS RUEDA. G.R. No. L-13250.

October 29,
1971

FACTS:

Antonio Campos Rueda is the administrator of the estate of the deceased Maria Cerdeira. Cerdeira is a
Spanish national, by reason of her marriage to a Spanish citizen and was a resident of Tangier, Morocco
up to her death. At the time of her demise she left, among others, intangible personal properties in the
Philippines. The CIR then issued an assessment for state and inheritance taxes of P369,383.96. Rueda
filed an amended return stating that intangible personal properties worth P396,308.90 should be
exempted from taxes. The CIR denied the request on the ground that the law of Tangier is not reciprocal
to Section 122 (now Section 104) of the National Internal Revenue Code.

The case was elevated to the CTA which sided with Rueda. The CTA stated that the foreign country
mentioned in Section 122 "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, or whose law allows a similar
exemption from such taxes. It is, therefore, not necessary that Tangier should have been recognized by
our Government order to entitle the petitioner to the exemption benefits of the proviso of Section 122
of our Tax. Code."

ISSUE: Whether the exemption is valid

RULING: YES. The controlling legal provision as noted is a proviso in Section 122 of the National Internal
Revenue Code. It reads thus: "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 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
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."

It does not admit of doubt that 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 penalties of nationhood, legally supreme within its territory, acting through a
government functioning under a regime of law. A foreign country is thus a sovereign person with the
people composing it viewed as an organized corporate society under a government with the legal
competence to exact obedience to its commands.

Even on the assumption then that Tangier is bereft of international personality, the CIR has not
successfully made out a case. The Court did commit itself to the doctrine that even a tiny principality,
like Liechtenstein, hardly an international personality in the sense, did fall under this exempt category.
Vidal de Roces v. Posadas

Facts:

1. Sometime in 1925, plaintiffs Concepcion Vidal de Roces and her husband, as well as one Elvira
Richards, received as donation several parcels of land from Esperanza Tuazon. They took possession of
the lands thereafter and likewise obtained the respective transfer certificates.

2.The donor died a year after without leaving any forced heir. In her will, which was admitted to
probate, she bequeathed to each of the donees the sum of P5,000. After the distribution of the estate
but before the delivery of their shares, the CIR (appellee) ruled that plaintiffs as donees and legatees
should pay inheritance taxes. The plaintiffs paid the taxes under protest.

3. CIR filed a demurrer on ground that the facts alleged were not sufficient to constitute a cause of
action. The court sustained the demurrer and ordered the amendment of the complaint but the
appellants failed to do so. Hence, the trial court dismissed the action on ground that plaintiffs, herein
appellants, did not really have a right of action.

4. Plaintiffs (appellant) contend that Sec. 1540 of the Administrative Code does not include donation
inter vivos and if it does, it is unconstitutional, null and void for violating SEC. 3 of the Jones Law
(providing that no law shall embrace more than one subject and that the subject should be expressed in
its titles ; that the Legislature has no authority to tax donation inter vivos; finally, that said provision
violates the rule on uniformity of taxation.

5. CIR however contends that the word 'all gifts' refer clearly to donation inter vivos and cited the
doctrine in Tuason v. Posadas.

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

YES. Sec. 1540 of the Administrative Code clearly refers to those donation inter vivos that take effect
immediately or during the lifetime of the donor, but made in consideration of the death of the
decedent. Those donations not made in contemplation of the decedent's death are not included as it
would be equivalent to imposing a direct tax on property and not on its transmission.

The phrase 'all gifts' as held in Tuason v. Posadas refers to gifts inter vivos as they are considered as
advances in anticipation of inheritance since they are made in consideration of death.
Dison v. Posadas Digest

Dison v. Posadas

G.R. No. 36770 November 4, 1932

Butte, J.:

Facts:

1. Plaintiff Luis Dison filed a suit against CIR to recover inheritance tax paid under protest amounting to
P2,808.73. Felix Dison, plaintiff's father executed a deed of gift which transferred 22 tracts of land,
reserving to himself during his lifetime the usufruct of 3 tracts. The donation was formally accepted by
plaintiff.

2. The plaintiff (herein petitioner) alleged in his complaint that the tax is illegal since he received the
property by a deed of gift inter vivos duly accepted and registered before the death of his father. He also
contended that Act 2601 being an inheritance tax statute, does not tax gifts. The defendant answered in
general denial with a countermand. The court dismissed the countermand. Both sides appealed, but the
CIR appeal was dismissed.

Issue: Whether or not the gifts inter vivos are taxable (inheritance tax)

YES.

Inheritance tax is imposed upon the gift inter vivos that plaintiff received from his father as this was
really an advancement upon the inheritance to which he would be entitled upon the death of the latter.
Sec. 1540 of the Administrative Code did not tax gifts per se but only those which are made to those
who shall prove to be heirs, devisees, legatees and donees mortis causa of the donor. The term 'heirs'
include those given the status of heirs irrespective of the quantity of property they may receive as such.

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