LORENZO vs. POSADAS JR.

G.R. No. L-43082

June 18, 1937

FACTS: Thomas Hanley died, leaving a will and a considerable amount of real
and personal properties. Proceedings for the probate of his will and the
settlement and distribution of his estate were begun in the CFI of Zamboanga.
The will was admitted to probate.
The CFI considered it proper for the best interests of the estate to appoint a
trustee to administer the real properties which, under the will, were to pass to
nephew Matthew ten years after the two executors named in the will was
appointed trustee. Moore acted as trustee until he resigned and the plaintiff
Lorenzo herein was appointed in his stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of

Internal Revenue (Posadas) assessed against the estate an inheritance tax,
together with the penalties for deliquency in payment. Lorenzo paid said
amount under protest, notifying Posadas at the same time that unless the
amount was promptly refunded suit would be brought for its recovery.
Posadas overruled Lorenzo’s protest and refused to refund the said amount.
Plaintiff went to court. The CFI dismissed Lorenzo’s complaint and Posadas’
counterclaim. Both parties appealed to this court.

ISSUE:

(e) Has there been delinquency in the payment of the inheritance tax?

HELD: The judgment of the lower court is accordingly modified, with costs
against the plaintiff in both instances
YES
The defendant maintains that it was the duty of the executor to pay the
inheritance tax before the delivery of the decedent’s property to the trustee.
Stated otherwise, the defendant contends that delivery to the trustee was
delivery to the cestui que trust, the beneficiary in this case, within the meaning
of the first paragraph of subsection (b) of section 1544 of the Revised
Administrative Code. This contention is well taken and is sustained. A trustee
is but an instrument or agent for the cestui que trust

The appointment of Moore as trustee was made by the trial court in

conformity with the wishes of the testator as expressed in his will. It is true
that the word “trust” is not mentioned or used in the will but the intention to
create one is clear. No particular or technical words are required to create a
testamentary trust. The words “trust” and “trustee”, though apt for the
purpose, are not necessary. In fact, the use of these two words is not
conclusive on the question that a trust is created. ” To constitute a valid
testamentary trust there must be a concurrence of three circumstances:

(1) Sufficient words to raise a trust;

(2) a definite subject;

(3) a certain or ascertain object; statutes in some jurisdictions expressly or in

effect so providing.”

There is no doubt that the testator intended to create a trust. He ordered in his
will that certain of his properties be kept together undisposed during a fixed
period, for a stated purpose. The probate court certainly exercised sound
judgment in appointmening a trustee to carry into effect the provisions of the
will

As the existence of the trust was already proven, it results that the estate which
plaintiff represents has been delinquent in the payment of inheritance tax and,
therefore, liable for the payment of interest and surcharge provided by law in
such cases.

The delinquency in payment occurred on March 10, 1924, the date when
Moore became trustee. On that date trust estate vested in him. The interest
due should be computed from that date.
 REV. FR. CASIMIRO LLADOC v. The COMMISSIONER OF INTERNAL
REVENUE and The COURT of TAX APPEALS. G.R. No. L-19201. June 16,
1965
FACTS:

M.B. Estate, Inc. donated P10,000.00 in cash to the parish priest of Victorias, Negros Occidental, for the
construction of a new Catholic Church in the locality. The total amount was actually spent for the purpose
intended.

A year later, M.B. Estate, Inc., filed the donor's gift tax return. CIR issued an assessment for donee's gift tax
against the parish, of which petitioner was the priest.

Petitioner filed a protest which was denied by the CIR. He then filed an appeal with the CTA citing that he was
not the parish priest at the time of donation, that there is no legal entity or juridical person known as the
"Catholic Parish Priest of Victorias," and, therefore, he should not be liable for the donee's gift tax and that
assessment of the gift tax is unconstitutional.

The CTA denied the appeal thus this case.

ISSUE: Whether petitioner and the parish are liable for the donee's gift tax.

RULING:

Yes for the parish. The Constitution only made mention of property tax and not of excise tax as stated in Section
22, par 3. The assessment of the CIR did not rest upon general ownership; it was an excise upon the use made
of the properties, upon the exercise of the privilege of receiving the properties. A gift tax is not a property tax,
but an excise tax imposed on the transfer of property by way of gift inter vivos, the imposition of which on
property used exclusively for religious purposes, does not constitute an impairment of the Constitution.

No for the petitioner. The Court ordered petitioner to be substituted by the Head of Diocese to pay the said gift
tax after the CIR and Solicitor General did not object to such substitution

MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D.

REGALA, AVELINO V. CRUZ v. COMMISSIONER OF INTERNAL
REVENUE and COURT OF APPEALS. G.R. No. 120721. February
23, 2005
FACTS:

During the 1987 national elections, petitioners, who are partners in the ACCRA law firm, contributed
P882,661.31 each to the campaign funds of Senator Edgardo Angara, then running for the Senate.
The BIR then assessed each of the petitioners P263,032.66 for their contributions. Petitioners
questioned the assessment claiming that political or electoral contributions are not considered gifts
under NIRC therefore, not liable for donors tax. The claim for exemption was denied by the
Commissioner.

The BIR denied their motion. They then filed a petition with the CTA, which was granted.

On appeal, the CA again held in favor of the BIR.

ISSUE: Whether the contributions are liable for donor's tax.

RULING:

Yes. The NIRC does not define transfer of property by gift. However, the Civil Code, by reference,
considers such as donations. The present case falls squarely within the definition of a donation.
There was intent to do an act of liberality or animus donandi was present since each of the
petitioners gave their contributions without any consideration.

Taken together with the Civil Code definition of donation, Section 91 of the NIRC is clear and
unambiguous, thereby leaving no room for construction.

Petitioners contribution of money without any material consideration evinces animus donandi. The
fact that their purpose for donating was to aid in the election of the donee does not negate the
presence of donative intent.

Petitioners raise the fact that since 1939 when the first Tax Code was enacted, up to 1988 the BIR
never attempted to subject political contributions to donors tax.

This Court holds that the BIR is not precluded from making a new interpretation of the law,
especially when the old interpretation was flawed. It is a well-entrenched rule that

"erroneous application and enforcement of the law by public officers do not block subsequent
correct application of the statute" (PLDT v. Collector of Internal Revenue, 90 Phil. 676), "and that
the Government is never estopped by mistake or error on the part of its agents" (Pineda v. Court of
First Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. v. Pineda, 98 Phil.
711, 724).