Ms. Annabelle Ebio Badana

January 5, 2007 BIR RULING [DA-003-07] Section 98, NIRC; BIR Ruling No. DA-561-2006 Ms. Annabelle Ebio Badana 921 Samar St., Sampaloc Manila M a d a m : This refers to your letter dated August 29, 2006, for and in behalf of your co-heirs requesting clarificatory ruling on the taxability of the Extrajudicial Settlement of Estate with Waiver of Rights. cSTDIC It is represented that you are the daughter and one of the heirs of the late Jovencio D. Ebio, who died intestate on July 16, 2006 at Manila; that in the settlement of the estate of the deceased, you, together with your brothers and sisters, executed an Extrajudicial Settlement with Waiver of Rights in favor of your mother, who is now old and without visible means of income; that you are now asking if you are subject to donor's tax in waiving your rights and interest in the estate of your late father in favor of your mother. HCacTI In reply, please be informed as follows: When a person renounces/repudiates his part of the inheritance, the right of accretion takes place and the same is added or incorporated to that of his co-heirs, co-devisees or co-legatees. The share of the renouncer shall accrue to his co-heirs in the same proportion that they inherit pursuant to Articles 1018 and 1019 of the New Civil Code of the Philippines. In legal succession, accretion takes place in case of repudiation among heirs of the same degree. This is so because there is no right of representation. The co-heirs in legal succession are co-owners of the inheritance, for which reason there is always right of accretion among them, unlike in testamentary succession where there may or may not be a right of accretion. ( Arts. 1018, 977, 969, New Civil Code ) In the instant case, when you, together with your brothers and sisters, waived your inheritance in favor of your mother, accretion had effectively taken place in the latter's favor and the renounced shares were added or incorporated to the share of your mother. Undoubtedly, when all of you renounced your share in the inheritance, you did not donate the property which had never become yours. Such being the case, the renunciation is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. ACSaHc Moreso, the inheritance you renounced is an additional inheritance to your mother. Consequently, the corresponding estate tax computed in accordance with the schedule provided for under Section 84 of the same Tax Code shall be imposed upon transfer of the net estate to your mother. ( BIR Ruling DA-251-99 dated April 23, 1999 ) cIHDaE 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