BIR Ruling

September 29, 1966 Atty. Florencio E. Tierra Gumaca, Quezon S i r : This refers to your letter dated January 19, 1966 requesting information on a query stated as follows: llcd "Supposing "A" was ran over by one of the buses of a transportation company and died thereafter, or died instantaneously. The driver, "B", of the Bus Company was convicted of the crime of homicide through reckless imprudence. Immediately thereafter, "C" and "D", the parents of the deceased "A", filed a civil complaint in the court of First Instance to recover compensatory damages and other incidental expenses arising out of the death of the latter. Before the presentation of evidence by the plaintiffs, "C" and "D", the latter and the defendant company entered into a compromise agreement, the defendant company paying the amount of P10,000 to the plaintiffs, as the liability of the defendant company. Question: Is the amount of P10,000 received by the plaintiffs "C" and "D" liable for the payment of estate and inheritance tax?" In reply, please be informed that what forms part of a decedent's gross estate subject to estate and inheritance taxes is specifically provided for in Section 88 of the Tax Code. Certainly, the amount received by the parents or heirs of the deceased under a compromise agreement adverted to in the abovequoted query cannot be considered property of the deceased existing upon the latter's death, hence, the same does not legally form part of his gross estate. In view thereof, this Office believes and so holds that the amount of P10,000.00 received by the parents of A through a compromise agreement is exempt from estate and inheritance taxes. LLjur Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue