CIR VS.

COURT OF APPEALS
G.R. NO. L-123206 March 22, 2000

FACTS:

Private respondent was the administrator of the estate of her brother Pedro who was a World War
II veteran. A Php1.5M estate tax was paid by the respondent, but such amount was contested before
the CTA. CTA ruled in favour of the respondent.

The CTA allowed the deduction form the gross estate of the decedent were notarial fee for the
extrajudicial settlement and the attorney’s fee in the special proceeding for guardianship where, PNB
acted as the guardian prior to the appointment of the respondent as administrator.

ISSUE:

Whether or not the item notarial fee and attorney’s fee be allowed as deductions from the gross
estate.

HELD:

Yes. Judicial expenses are expenses of administration. Administration expenses, as an allowable

deduction from the gross estate of the decedent for purposes of arriving at the value of the net
estate, have been construed by the federal and state courts of the United States to include all
expenses “essential to the collection of the estate, payment of debts or the distribution of the
property to the persons entitled to it. In other words, the expenses must be essential to the propoer
settlement of the estate. Expenditures incurred for the individual benefit of the heirs, devisees or
legatees are not deductible.