Tax 2 Assignment December 12, 2013 April 25, 2012 BIR RULING NO. 284-12 Sec.

104 of the Tax Code of 1997; 000-00 Caguioa & Gatmaytan 3/F La Paz Centre Salcedo corner V.A. Rufino Streets Legaspi Village, Makati City Attention: Alfredo Benjamin S. Caguioa Gentlemen : This refers to your letter dated March 18, 2010 requesting whether Philip Llani Evans' estate is liable for estate tax. It is represented that the deceased, Philip Llani Evans, was a citizen and a resident of New Zealand, died in Bangkok, Thailand, left a Will upon his death on October 9, 2001, which was probated in the High Court of New Zealand and on November 22, 2001, judgment was rendered admitting Evan's will to probate and appoint Barry Samuel Macdonald as Executor; that a Reprobate proceedings were conducted before Regional Trial Court of Pasig Branch 160 and in a decision dated March 6, 2006 the Court granted the reprobate of Evan's will and appoint Alfredo Benjanmin S. Caguioa; that prior to Evan's death, he entered into a Contract to Sell with Atlanta Land Corporation ("Atlanta") a domestic corporation, for purchase of a condominium unit in Atlanta Center ("Atlanta Condo") on November 7, 1995; that despite full payment, Atlanta refused to execute a deed of absolute sale over the condominium unit in Evan's favor: that on January 18, 2008, you filed a complaint for specific performance against Atlanta before the Housing and Land Use Regulatory Board (HLURB); that on February 26, 2009, Atlanta and you undertook to look for a buyer willing to purchase the Atlanta condo and to apply the proceeds of the sale as a settlement of the respective claims; that the parties subsequently found a buyer for the Atlanta condo. Evans' estate received P3,500,000.00, equivalent to the amount for which the Atlanta condo was sold. It is your opinion that at the time of Evan's death, he was a non-resident alien; that his Philippine estate consists solely of intangible personal property; that his country has no transfer taxes and the settlement price over the Atlanta condo does not form part of the taxable estate hence not liable for Philippine estate's tax.

In reply, please be informed that pursuant to Section 85 of the Tax Code of 1997, as amended, the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated. However, Section 104 of the 1997 Tax Code, as amended, provides, viz.: SEC. 104. Definitions. For purposes of this Title, the terms 'gross estate' and 'gifts' include real and personal property, whether tangible or intangible, or mixed, wherever situated: Provided, however, That where the decedent or donor was a nonresident alien at the time of his death or donation, as the case may be, his real and personal property so transferred but which are situated outside the Philippines shall not be included as part of his 'gross estate' or 'gross gift': Provided, further, That franchise which must be exercised in the Philippines; shares, obligations or bonds issued by any corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws; shares, obligations or bonds by any foreign corporation eighty-five percent (85%) of the business of which is located in the Philippines; shares, obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines; shares or rights in any partnership, business or industry established in the Philippines, shall be considered as situated in the Philippines: Provided, still further, 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 or the donor at the time of the donation was a citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of any character, in respect of intangible personal property of citizens of the Philippines not residing in that foreign country, or (b) if the laws of the foreign country of which the decedent or donor was a citizen and resident at the time of his death or donation allows a similar exemption from transfer or death taxes of every character or description in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country. Moreover, Section 2 of Republic Act (RA) No. 4726, provides: "Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such real property. Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas. The real right in condominium may be ownership or any other interest in real property recognized by law, on property in the Civil Code and other pertinent laws." As represented, Evans' Philippine Estate consists of an office condominium unit designated as Unit 2401, Atlanta Centre, located at No. 31 Annapolis St., Greenhills, San Juan Metro Manila and two (2) parking lots identified as B315 and B316, located at 3rd level basement of the same building. 1 Mr. Evans already has real rights or interest over the condominium unit, equivalent to its value, as the same has

been fully paid, although the condominium Certificate of Title thereof has yet to be registered in his name. Moreover, paragraph 10 of Article 415 of the Republic Act No. 386 also known as the "Civil Code of the Philippines", provides: "Article 415. The following are immovable property: xxx xxx xxx (10) Contracts for public works, and servitudes and other real rights over immovable property." (emphasis supplied) Considering that at the time of death of Evans, the only property left by the latter in the Philippines consists of P3,500,000.00, equivalent to the amount for which the Atlanta condo was sold, which is a real right over the immovable, the same shall be included in his gross estate for purposes of computing the Philippine estate tax under Section 84 of the Tax Code of 1997. Accordingly, this Office holds that the heirs of the late Evans, a non-resident decedent, should file the estate tax return and pay the corresponding estate tax due on the transmission of the said estate to the heirs. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue

January 11, 2012 BIR RULING NO. 023-12 RA 6426, PD 1246 Atty. Atilano Huaben B. Lim 4 Amethyst St., Sta. Monica II Dalandanan, Valenzuela City Sir : This refers to your letters dated June 25, 2010 and October 12, 2010 stating that your client, Romeo B. Go opened joint accounts with Augusto P. Urrutia at the then Equitable PCI Bank (now Banco de Oro), and Bank of the Philippine Islands at their Meycauayan, Bulacan branches; that thereafter, on September 5, 2007, Mr. Urrutia died unmarried, intestate, and without any children or issue; and that both the aforementioned banks, refused to allow Mr. Romeo B. Go to withdraw/close the subject Peso and US Dollar deposits unless there is a certification from the Bureau of Internal Revenue that the estate tax has been paid or that the estate is exempt from the payment of the said tax in compliance with Section 97 of the National Internal Revenue Code (NIRC). For this reason, you requested that a ruling be issued in favor of your client allowing him to withdraw his share of the deposits in the joint accounts without having to pay the estate tax of his deceased codepositor. In reply thereto, please be informed that pursuant to Section 85 of the Tax Code of 1997, the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated. Moreover, interest on a deposit account maintained by two persons is deemed to be equally owned by them for income tax purposes. The same presumption may likewise apply for estate tax purposes, thus, only half of the balance of the deposit should be reported for estate tax purposes pertaining to the decedent. Thus, the one-half portion of the balance of the said accounts shall not be included in the computation of the gross estate of the decedent. This shall serve as authority for the aforementioned banks to release half of the balances in the joint accounts between Romeo B. Go and Augusto P. Urrutia. After the shares of Romeo B. Go in the said bank accounts have been paid to him, the accounts shall cease to be "and/or" accounts and shall be converted to individual accounts in the name of Augusto P. Urrutia. The aforementioned banks are further required to submit reports to the Law Division, Bureau of Internal Revenue, National Office Building, that they have effected these changes within 30 days after the withdrawal by Romeo B. Go of his share in said bank accounts.

This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue November 11, 2011 BIR RULING NO. 440-11 Sec. 86 (A) (4) NIRC; RR 02-03; CIR vs. Isabela Cultural Corp., G.R. No. 172231 Cynthia L. Tiotuyco #14 S. Moldero, B.F. Homes Capitol Site, Quezon City Ma'am : This refers to your letter dated February 4, 2011 requesting for a clarificatory ruling on whether the family home of your father, the deceased Maximo B. Landrito, may be deducted from his gross estate for purposes of estate tax. It can be gathered from the documents submitted that Maximo Landrito and his wife, Paz Landrito, ("Spouses Landrito") obtained a loan from Zoilo and Primitiva Espiritu ("Spouses Espiritu") in the amount of P350,000.00; that to secure the loan, the Spouses Landrito executed a real estate mortgage over their real property located in Alabang, Muntinlupa covered by Transfer Certificate of Title (TCT) No. S-48498, in favor of Spouses Espiritu; that said property was being used by Spouses Landrito as their residence. Furthermore, the Spouses Landrito were unable to settle the loan when the same became due and demandable. As a consequence, the mortgaged property was foreclosed on October 31, 1990 and sold to Spouses Espiritu as the sole bidder. The title of the property was subsequently transferred in the name of Spouses Espiritu under TCT No. 179802 of the Registry of Deeds for Makati. Meanwhile, Spouses Landrito were ejected from their property and rented an apartment as their residence. On October 9, 1992, the Spouses Landrito, represented by their son, Zoilo Landrito, filed an action for annulment or reconveyance of title of the subject property against Spouses Espiritu. The Supreme Court, in its decision promulgated on April 3, 2007, declared invalid the foreclosure proceedings and ordered the Spouses Espiritu to reconvey the property to the Spouses Landrito. Pending the execution of the Court's decision, Maximo Landrito died on December 20, 2007 in his rented apartment in Sampaloc, Manila.

The sole issue is whether or not the family home constituted on the lot that was foreclosed but subsequently reconveyed to Spouses Landrito may be deducted from the gross estate of Maximo Landrito. In reply, please be informed that Section 6 (D) (b) of the Revenue Regulations No. 02-2003, which implements Section 86 (A) (4) of the Tax Code of 1997, provides, to wit: "Conditions for the allowance of FAMILY HOME as deduction from the gross estate 1. The family home must be the actual residential home of the decedent and his family at the time of his death, as certified by the Barangay Captain of the locality where the family home is situated; 2. The total value of the family home must be included as part of the gross estate of the decedent; and 3. Allowable deduction must be in an amount equivalent to the current fair market value of the family home as declared or included in the gross estate, or the extent of the decedent's interest (whether conjugal/community or exclusive property), whichever is lower, but not exceeding P1,000,000." Based from the above-quoted provision, it is clear that the family home, in order to be allowed as a deduction from the gross estate, must be the actual residential home of the decedent and his family at the time of his death. In this case, Mr. Landrito and his family were not actually residing at their family home at the time of his death. Hence, the said family home may not be allowed as a deduction from the gross estate for purposes of estate tax. It is a governing principle in taxation that tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. One who claims an exemption must be able to justify the same by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications. And since a deduction for income tax purposes partakes of the nature of a tax exemption, then it must also be strictly construed. (CIR vs. Isabela Cultural Corporation, G.R. No. 172231 dated February 12, 2007) Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue

January 28, 2008 BIR RULING NO. 001-08 Secs. 85, 24 (D) (1), 196, NIRC; Sec. 9, E.O. 1035 National Power Corporation Quezon Ave. cor BIR Road, Diliman, Quezon City Attention: Ricardo V. Samorio Officer-in-Charge, South Luzon Projects Gentlemen : This refers to your letter dated May 23, 2007, requesting for estate tax assessment for a lot to be acquired by the National Power Corporation (NPC) for the Caliraya-Botocan-Kalayaan-Build-OperateTransfer (CBK-BROT) * Project. It is represented that the NPC is acquiring lots within the area of the Caliraya Hydro Electric Power Plant (CHEP). One of these lots is Lot No. 1469-B in Lumban, Laguna wherein the Caliraya tailrace canal is situated. The subject lot was formerly owned by Lorenza Aaliwin and Aquilina Aquino who died on January 22, 1987 and October 25, 1990, respectively. The heirs of the deceased then executed an extrajudicial partition of real estate with special power of attorney on March 29, 2007 to partition the abovementioned property and negotiate its sale to NPC. It is further represented that the heirs are being required by BIR San Pablo City, Laguna to settle unpaid estate taxes for all other real properties including those not involved in this transaction. Apparently, the net proceeds for the lot to be acquired by NPC is meager compared to the expenses to be incurred. This has caused the heirs to be unwilling to sell their property to NPC. You now request this Office to confirm your opinion that under Section 9 (b) of Executive Order (EO) No. 1035, only the lot to be acquired by the NPC should be assessed estate tax in order that the heirs would proceed with the sale of said land to NPC. In reply, please be informed that the law in effect at the time of death of the decedents was Section 100 of the Tax Code of 1977 (now Section 85 of the Tax Code of 1997, as amended by Republic Act (RA) No. 9337) which provided that: "Section 100. Gross Estate. The value of the gross estate of the decedent shall be determined by including the value at the time of death of all property, real or personal, tangible or intangible, wherever situated: . . . " Presently, Section 85 of the current version of the NIRC is virtually identical to the abovementioned provision. As such, the determination of what constitutes the gross estate of decedents subject to estate

tax is the same now as it was at the time of death of the lot owners in the present case (1987 and 1990). For purposes of determining the estate tax liability of a decedent's estate, the gross estate of the latter must first be ascertained and this includes all real property owned by the decedent, real or personal, tangible or intangible, wherever situated. In the present case, the lot which will be acquired by NPC is included among the mass of properties that form part of the gross estate of Lorenza Aaliwin and Aquilina Aquino. However, it appears that the estate tax due on the real properties of the deceased has not yet been paid and that this is now preventing the transfer of the abovementioned lot to NPC for the operation of the CHEP. In this regard, Section 9 (b) of EO 1035 states that: "Sec. 9. Assessment of Taxes Due. The Bureau of Internal Revenue and the respective Provincial/City/Municipal Treasurers shall assess the following taxes, where applicable, on the property being acquired . . . b) Estate tax due on the portion of the estate of a deceased owner to be acquired by the government and; xxx xxx xxx

Such assessment shall be made and transmitted to the government implementing agency/instrumentality concerned within one (1) week from the submission of the complete requirements." The purpose behind EO 1035 is to expedite the transfer of private property to the government for infrastructure and development projects. By expediting the processes surrounding such transfers, the government ensures that its public projects will not be hampered by unnecessary delays and obstacles that would prevent the people from benefiting from these projects. The present case is well within the contemplation of the foregoing provision. Section 9 (b) EO 1035 clearly mandates that upon NPC's submission of the complete requirements, the BIR should submit the estate tax assessment on property to be acquired within one week from such submission. In the present case, the fact that the subject lot is a common part of the estate of Lorenza Aaliwin and Aquilina Aquino that have yet to be subjected to estate tax, should not prevent the assessment of said lot in order to facilitate its transfer to NPC. To do otherwise would certainly be violative of the clear intent of EO 1035 to prioritize the assessment of estate taxes if such prove a hindrance to the proper implementation of government projects. It must be stressed, however that the priority given for the assessment of estate taxes on the abovementioned lot does not exempt the transfer of the same from the imposable taxes under the same Tax Code of 1997, as amended. Thus, the transfer of the said lot to NPC shall be subject to capital

gains tax and documentary stamp tax under Section 24 (D) (1) and 196, respectively, of the same Tax Code. Accordingly, this Office holds that Lot No. 1469-B in Lumban, Laguna should be assessed for estate tax separately, but the heirs should likewise be assessed on the remainder of the gross estates of Lorenza Aaliwin and Aquilina Aquino which have not been subjected to estate tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling should be considered null and avoid. Very truly yours, (SGD.) LILIAN B. HEFTI Commissioner of Internal Revenue

April 25, 2006 BIR RULING [DA-279-06] 24 (B) (1); DA-064-02 Philippine Veterans Bank PVB Bldg., 101 V.A. Rufno cor. Dela Rosa Sts. Legaspi Village, Makati City Attention: Ma. Milagros Campomanes-Yuhico VP and Trust Officer Gentlemen : This refers to your letter dated December 8, 2005 requesting for a certificate of tax exemption from the 20% final tax imposed under Section 24(B)(1) of the Tax Code of 1997 of the interest income from long term deposit or investment in the form of a Living Trust or a Trust Estate administered by the Philippine Veterans Bank through its Trust and Investment Division. It is represented that the Revocable Living Trust Agreement and the Irrevocable Living Trust Agreement cover the Living Trust and Trust Estate; and that the accounts opened through these trust vehicles are generally and fundamentally built for long-term administration and accumulation for the eventual transfer to the designated beneficiary/ies of the clients. In reply thereto, please be informed that Section 24(B)(1) of the Tax Code of 1997 provides that "a final tax at the rate of twenty percent (20%) is hereby imposed upon the amount of interest from any currency bank deposit and yield or any other monetary benefit from deposit substitute and from trust funds and similar arrangements; . . . : Provided, further, That interest income from long term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investment evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas (BSP) shall be exempt from the tax, Provided, finally, That should the holder of the certificate preterminate the deposit or investment before the fifth (5th) year, a final tax shall be imposed on the entire income and shall be deducted and withheld by the depository bank from the proceeds of the long-term deposit or investment certificate based on the remaining maturity thereof: Four (4) years to less than five (5) years Three (3) years to less than four (4) years Less than three (3) years 5% 12% and 20%"

Such being the case, the interest income derived by the Philippine Veterans Bank through its Trust and Investment Division is exempt from final withholding tax provided that the fund is held by the trusteebank for at least five (5) years. However, if the participation is for a period of less than 5 years, the interest income shall be subject to a final withholding tax which shall be deducted and withheld from

the proceeds of said investment and which shall be computed in accordance with the pre-termination rate schedule under Sections 24(B)(1) and 25(A)(2) of the Tax Code of 1997. (BIR Ruling No. DA-064-02 dated April 03, 2002) Moreover, it can be gleaned from your representation that the Revocable Living Trust Agreement and the Irrevocable Living Trust Agreement cover the Living Trust and Trust Estate, and that the accounts opened through these trust vehicles are generally and fundamentally built for long-term administration and accumulation for the eventual transfer to the designated beneficiary/ies of your clients. Whereas, as compared to the Common Trust Fund (CTF), the beneficiaries are one and the same person which is the trustor or the beneficial ownership of the trust fund remains with the individual participant of the trust. In a revocable transfer of funds to the designated beneficiary/ies of your client, such as in this case, the funds continue to be owned by the trustor during his lifetime notwithstanding the transfer, as he still retains the beneficial ownership. The rationale for taxing such transfer in trust at the time of death of the trustor is to reach transfers which are really substitutes for testamentary disposition and thus prevent evasion of estate tax. To be exempt from estate tax, the transfer of trust fund by inter vivos must be absolute and outright with no strings attached whatsoever by the trustor. In other words, all trust funds covered by the Revocable Living Trust Agreement of your client shall be considered as forming part of its gross estate subject to estate tax pursuant to Section 85 of the Tax Code of 1997, upon the death of the trustor. Thus, in case of death of your client-trustor, the transfer of funds to the designated beneficiary/ies under the Revocable Living Trust Agreement shall be subject to estate tax to the extent of your client-trustor's or beneficiary/ies' interest therein, as the case may be, at the time of death pursuant to Section 85(C) of the Tax Code of 1997. (BIR Ruling No. 013-2005 dated August 16, 2005) Finally, for monitoring purposes, the bank shall set up a separate numbering system in its trust books for its long-term products. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service