INTESTADO DE DON VALENTIN DESCALS VS.

ADMINISTRATOR DE RENTAS INTERNAS

G.R. NO. L-7253 March 26, 1956

FACTS:
Valentin Descals, an American citizen, died on September 17, 1948, in the City of Manila
where he was a resident. He left as heirs his brothers Antonio and Ricardo and a sister Angeles.
About t wo years before his death he and his brother Ricardo jointly bought a piece of real estate
property situated in the city of Barcelona, Spain. Valentin became the owner of the entire property
by buying his brother’s interest in it which was valued at P46,000.00, acknowledged as a debt by
means of a promissory note.

After the death of Valentin, proceedings were initiated in the City of Manila for the
administration of his estate. Ricardo filed before the probate court a claim for P46,000 with interest
based on the promissory note executed by his brother in 1946. Said claim was approved.
The Collector of Internal Revenue, however, assessed the estate for purposes of taxation
without deducting the claim filed by Ricardo despite its approval by the probate court a nd fixed
and demanded the payment of P701.53 by way of estate tax and P2,144.10 as inheritance tax, or a
total of P2,845.63. The administrator paid this amount under protest.

ISSUE:
Whether indebtedness in respect to property acquired outside the Philippines should be
allowed as deductions from the gross estate in the determination of the net estate.

HELD:
No. Real property situated outside the Philippines is not included in the value of the gross
estate of a deceased resident, hence, indebtedness incurred in respect to or by reason of said
property, are not considered, being regarded as impossible items.