TAXATION LAW II

MARCOS II vs. CA The approval of the court, sitting in

273 SCRA 47, GR No. 120880, June 5, 1997 probate, or as a settlement tribunal over the
deceased's estate is not a mandatory
requirement in the collection of estate taxes. On
Facts: the contrary, under Section 87 of the NIRC, it is the
Bongbong Marcos sought for the reversal of probate or settlement court which is bidden not to
the ruling of the Court of Appeals to grant CIR's authorize the executor or judicial administrator of
petition to levy the properties of the late Pres. the decedent's estate to deliver any distributive
Marcos to cover the payment of his tax share to any party interested in the estate, unless it
delinquencies during the period of his exile in the is shown a Certification by the Commissioner of
US. The Marcos family was assessed by the BIR Internal Revenue that the estate taxes have been
after it failed to file estate tax returns. paid. This provision disproves the petitioner's
However the assessment were not contention that it is the probate court which
protested administratively by Mrs. Marcos and the approves the assessment and collection of the
heirs of the late president so that they became final estate tax.
and unappealable after the period for filing of
opposition has prescribed. Marcos contends that On the issue of prescription, the omission to
the properties could not be levied to cover the tax file an estate tax return, and the subsequent failure
dues because they are still pending probate with to contest or appeal the assessment made by the
the court, and settlement of tax deficiencies could BIR is fatal to the petitioner's cause, as under
not be had, unless there is an order by the probate Sec.223 of the NIRC, in case of failure to file a
court or until the probate proceedings are return, the tax may be assessed at anytime within
terminated. 10 years after the omission, and any tax so
Petitioner also pointed out that applying assessed may be collected by levy upon real
Memorandum Circular No. 38-68, the BIR's Notices property within 3 years (now 5 years) following the
of Levy on the Marcos properties were issued assessment of the tax. Since the estate tax
beyond the allowed period, and are therefore null assessment had become final and unappealable by
and void. the petitioner's default as regards protesting the
validity of the said assessment, there is no reason
why the BIR cannot continue with the collection of
Issue: the said tax. 
Whether or not the contentions of Bongbong
Marcos are correct Commissioner of Internal Revenue vs Pineda
No. L-22734, September 15, 1967

Ruling: FACTS:
No. The deficiency income tax assessments
and estate tax assessment are already final and Respondent Manuel Pineda, as one of the
unappealable -and-the subsequent levy of real heirs of the deceased Atanasio Pineda, received an
properties is a tax remedy resorted to by the amount of P2500 from the estate of his deceased
government, sanctioned by Section 213 and 218 of father as his share in the inheritance. The BIR
the National Internal Revenue Code. This summary assessed the estate with income tax deficiency and
tax remedy is distinct and separate from the other made Manuel Pineda liable for the payment of all
tax remedies (such as Judicial Civil actions and the taxes due from the estate in the total amount of
Criminal actions), and is not affected or precluded P760.28 instead of only for the amount of taxes
by the pendency of any other tax remedies corresponding to his share in the estate.
instituted by the government.

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 TAXATION LAW II
ISSUE: administer the real properties which, under the will,
Can the Government require an heir to pay were to pass to nephew Matthew ten years after
the full amount of the taxes assessed? 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
RULING: his stead.
Yes, an heir is liable but it cannot exceed
the amount of his share. He is liable for the
assessment as an heir and as a holder-transferee During the incumbency of the plaintiff as
trustee, the defendant Collector of Internal
of property belonging to the estate-taxpayer. As an Revenue (Posadas) assessed against the estate an
heir he is individually answerable for the part of the inheritance tax, together with the penalties for
tax proportionate to the share he received from the deliquency in payment. Lorenzo paid said amount
inheritance. As a holder of the property belonging under protest, notifying Posadas at the same time
to the estate, he is liable for the tax up to the that unless the amount was promptly refunded suit
amount of the property in his possession. The would be brought for its recovery. Posadas
overruled Lorenzo’s protest and refused to refund
Government has a lien on such property. But after
the said amount. Plaintiff went to court. The CFI
payment of such amount, he will have a right to dismissed Lorenzo’s complaint and Posadas’
contribution from his coheirs. counterclaim. Both parties appealed to this court.

The Government has two ways of collecting

ISSUE:
the taxes in question:  
1. By going after all the heirs and collecting Whether Has there been delinquency in the
from each one of them the amount of the payment of the inheritance tax?
tax proportionate to the inheritance
received; or RULING:
2. By subjecting said property of the estate
which is in the hands of an heir or YES. The appointment of Moore as trustee
transferee to the payment of the tax due the was made by the trial court in conformity with the
estate. wishes of the testator as expressed in his will. It is
true that the word “trust” is not mentioned or used
In this case, the BIR opted for the second in the will but the intention to create one is clear. No
remedy to collect the tax as it has the discretion to particular or technical words are required to create
avail the most expeditious way to collect the tax. a testamentary trust. The words “trust” and
“trustee”, though apt for the purpose, are not
Taxes are the lifeblood of the government and their
necessary. In fact, the use of these two words is
prompt and certain availability is an imperious not conclusive on the question that a trust is
need. created. ” To constitute a valid testamentary
trust there must be a concurrence of three
Lorenzo vs. Posadas circumstances:
G.R. No. L-43082
Dizon vs. CTA
FACTS:  G.R. No. 140944
Thomas Hanley died, leaving a will and a Facts:
considerable amount of real and personal
properties. Proceedings for the probate of his will On November 7, 1987, Jose P. Fernandez
and the settlement and distribution of his estate died. Thereafter, a petition for the probate of his will
were begun in the CFI of Zamboanga. The will was was filed.
admitted to probate.

The CFI considered it proper for the best The probate court then appointed retired
interests of the estate to appoint a trustee to Supreme Court Justice Arsenio P. Dizon and
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 TAXATION LAW II
petitioner, Atty. Rafael Arsenio P. Dizon as Special enforceable on the date of the decedent's death,
and Assistant Special Administrator. the fact that the claimant subsequently settled for
lesser amount did not preclude the estate from
deducting the entire amount of the claim for estate
Justice Dizon authorized Atty. Jesus M. tax purposes. These pronouncements essentially
Gonzales (Atty. Gonzales) to sign and file on behalf confirm the general principle that post-death
of the Estate the required estate tax return and to developments are not material in determining the
represent the same in securing a Certificate of Tax amount of the deduction. The court expresses its
Clearance. agreement with the date-of-death valuation rule.
First. There is no law, nor do we discern any
On April 27, 1990, BIR Regional Director legislative intent in our tax laws, which disregard
issued Certification stating that the taxes due on the date-of-death valuation principle and
then transfer of real and personal properties of particularly provide that post-death developments
Jose had been fully paid and said properties may must be considered in determining the net value of
be transferred to his heirs. the estate. It bears emphasis that tax burdens are
not to be imposed, nor presumed to be imposed,
beyond what the statute expressly and clearly
Petitioner requested the probate court's imports, tax statutes being construed strictissimi
authority to sell several properties forming part of juris against the government. Any doubt on whether
the Estate, for the purpose of paying its creditors. a person, article or activity is taxable is generally
resolved against taxation. Second. Such
Petitioner manifested that Manila Bank, a construction finds relevance and consistency in our
major creditor of the Estate was not included, as it Rules on Special Proceedings wherein the term
did not file a claim with the probate court since it "claims" required to be presented against a
had security over several real estate properties decedent's estate is generally construed to mean
forming part of the Estate. debts or demands of a pecuniary nature which
could have been enforced against the deceased in
his lifetime, or liability contracted by the deceased
However, on November 26, 1991, the before his death. Therefore, the claims existing at
Assistant Commissioner for Collection of the BIR, the time of death are significant to, and should be
issued Estate Tax Assessment Notice demanding made the basis of, the determination of allowable
the payment of P66,973,985.40 as deficiency deductions.
estate tax.

Issue:

Whether the actual claims of the creditors

may be fully allowed as deductions from the gross
estate of Jose despite the fact that the said claims
were reduced or condoned through compromise
agreements entered into by the Estate with its
creditors

Ruling:

It is admitted that the claims of the Estate's

aforementioned creditors have been condoned -
mode of extinguishing an obligation. The U.S. court
ruled that the appropriate deduction is the value
that the claim had at the date of the decedent's
death. Also, as held in Propstra v. U.S., where a
lien claimed against the estate was certain and
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