BIR Ruling [DA-016-04]

January 12, 2004 BIR RULING [DA-016-04] Sec. 86 (C) 509-88 Mr. Alfredo C. Salvador No. 1647 Santiago Street Paco, Manila S i r : This refers to your letter dated November 12, 2002 stating that your parents, Pablito and Rosa Salvador were owners of two (2) real estate properties situated at Mandaluyong City and covered by TCT Nos. 63660 and 61510, both of the Registry of Deeds of the Province of Rizal; that your father died on April 27, 1991; that after ten (10) years, your mother died on May 15, 2001; that the estate tax due on the estate of your father was settled on December 13, 2001 under the Voluntary Assessment Program (VAP) in the amount of P157,692.00, while, the estate tax due on the estate of your mother, as assessed by the examiner of BIR Revenue District Office No. 34, Paco Pandacan-Sta. Ana, Manila on December 11, 2001, was paid on December 31, 2001 in the amount of P40,234.80; that after presentation of the receipts evidencing payment of the estate taxes due on the estate of both of your parents, you were assessed a deficiency tax on the estate of your late mother in the amount of P22,747.62; that the said deficiency tax was paid on January 17, 2002; that upon presentation of the receipts and after repeated demands to release the CAR, you were informed by Revenue Officer Illuminada V. Lucio that the real property covered by TCT No. 61510 is to be taxed exclusively or separately because it was acquired by your father when he was still single; that you do not agree with her findings, thus, you submitted to her the Marriage Certificate of your parents showing that they were already married at the time the above-mentioned property was acquired; that based on the said Marriage Certificate, your parents were married on February 6, 1950 while the above-mentioned property was acquired on September 10, 1958; that prior to the acquisition of the above property, on March 6, 1951, an endorsement was made by Rosa Carpio-Salvador in favor of Pablito Salvador whereby she transferred to the latter all her rights pertaining to a Contract of Sale on Installment dated September 2, 1949 covering the above-mentioned property; that from the foregoing, it is your contention that despite registration of the above property in the name of your father, Pablito Salvador, the same should still be treated as conjugal property since it was acquired by your parents during their marriage and that the funds used to buy the said property came from both of your parents, hence, this request for a ruling to acknowledge that the above-mentioned property is the conjugal property of your late parents, Spouses Pablito and Rosa Salvador. In reply, please be informed that pursuant to Article 1393 of the Civil Code of Spain, the law applicable at the time the marriage of Pablito and Rosa Salvador was celebrated, property relation of spouses was governed by the conjugal partnership. Under the said property regime as provided for under paragraph 1 of Article 1401 of the same Code, property acquired for a valuable consideration during the marriage at the expense of the common fund, whether the acquisition is made for the partnership or for one of the spouses only, shall belong to the conjugal partnership. The documents submitted show that the above-mentioned property was acquired by the spouses during their marriage. Moreover, there is a presumption that funds used to buy properties during coverture are conjugal ( Lorenzo, et al. vs. Nicolas, et al., G.R. No. L-4085, July 30, 1952 ). From the foregoing, there is no doubt that the property covered by TCT No. 61510 of the Registry of Deeds of the Province of Rizal under the name of Pablito Salvador was a conjugal property. Thus, pursuant to Section 86(C) of the Tax Code of 1997, the net share of the surviving spouse in the conjugal partnership property as diminished by the obligations properly chargeable to such property shall, for purposes of said Section, be deducted from the net estate of the decedent. Such being the case, and since in the instant case, you had already paid the estate tax due on the estate of your late father when he died on April 27, 1991, it follows that even if his share in the conjugal partnership property remained intact up to the time of death of your late mother on May 15, 2001, the same (share of your father in the conjugal partnership property) should be deducted in the computation of the gross estate of your mother. Accordingly, the computation of the gross estate of both of your parents and the estate taxes paid thereon were correct. ( BIR Ruling No. 509-88 dated October 14, 1988 ) The Revenue District Officer (RDO) concerned is hereby instructed to release the corresponding Tax Clearance (TCL) or Certificate Authorizing Registration (CAR) of the properties of the estate of the late Spouses Pablito and Rosa Salvador. 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. TEHIaD Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group