BIR Ruling [DA-014-98]

January 23, 1998 BIR RULING [DA-014-98] Ms. Purita N. Espinosa 164 Roosevelt Avenue Quezon City M a d a m : This refers to your letter dated January 5, 1998 requesting for a ruling as to whether or not your share in the estate of your deceased husband which you renounced in favor of all your six (6) children is subject to Donor's Tax. It is represented that your late husband, Mario Bellarosa Espinosa died of heart attack on January 24, 1997; that in the Deed of Extra Judicial Settlement of the Estate of the deceased, which you executed among you and your children, you elected not to share in the said estate and renounced your one-seventh (1/7) portion in the inheritance, which was equally divided among your six (6) children; that on July 24, 1997, the corresponding estate tax in the amount of P474,448.20 was paid; that on December 29, 1997, without any explanation, you paid an additional sum of P244,053.23 as estate tax under the Voluntary Assessment Program, pursuant to RMO 63-97; and that you are now asking whether the aforesaid 1/7 renounced portion is likewise, subject to donor's tax. In reply, please be informed that pursuant to Section 1018 and 1019 of the New Civil Code, when a person renounces/repudiates his inheritance, right of accretion takes place and the same is added with or incorporated to that of his co-heirs, co-devisees or colegatees. The share of the renouncer shall accrue to his co-heirs in the same proportion that they inherit. However, among two or more compulsory heirs or to any of them and a stranger, the right of accretion shall take place only with respect to the free portion; and if the part repudiated be the legitime, no right of accretion shall take place as the other heirs shall succeed to it in their own right (Article 1021 of the same Code) IDCHTE Thus, considering that the renunciation made by you was in favor of all the other co-heirs, involving both the legitime and the free portion without designating any specific person/transferee, right of accretion took place, and the renounced portion which never passed into your hands was immediately added or incorporated to that of your co-heirs without any further act of disposition on your part. Your act of renunciation shall be treated as inheritance, both by right of accretion or in their own right, by the other co-heirs. Such being the case, applying BIR Ruling No. 65 dated August 20, 1965, the renunciation in favor of the other co-heirs who inherited the property together with the renouncer shall be subject only to estate tax, and not to donor's tax. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group