BIR Ruling [DA-037-03]

February 6, 2003 BIR RULING [DA-037-03] 98 DA-251-99 Mr. Rodolfo G. Tuao 33 Ubay Street Quezon City S i r : This refers to your letter dated September 16, 2002 requesting for a ruling that the renunciation or waiver by Gloria A. Del Rosario of her right to inherit from the estate of the late Luis V. Del Rosario, her deceased husband, in favor of her eight (8) legitimate children is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. ESCDHA It is represented that on May 4, 1979, Luis V. Del Rosario died intestate leaving behind her spouse, Gloria A. Del Rosario and their eight (8) children, namely: Milagros, Luis Jr., Gil, Greg, Ma. Luisa, Gloria, Jose Miguel and Andres, all surnamed Del Rosario, as his compulsory heirs; and that on April 12, 2002, Gloria A. Del Rosario and her eight (8) children executed an "Extra Judicial Settlement of an Estate of the Deceased Luis V. Del Rosario" wherein the parties agreed to adjudicate the entire estate of the late Luis V. Del Rosario to the eight (8) children with Gloria A. Del Rosario waiving all her rights and interest therein. In reply, please be informed that as a rule, 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 denouncer 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 the instant case, when Gloria A. Del Rosario waived her share in the inheritance in favor of the eight (8) children, accretion had effectively taken place in the latters' favor and the renounced share was added or incorporated to their share. Undoubtedly, when the surviving spouse renounced her share in the inheritance, she did not donate the property which had never become hers. Such being the case, the renunciation is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. Moreover, the inheritance renounced by Gloria A. Del Rosario is an additional inheritance to the eight (8) children. 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 the eight (8) children. ( BIR Ruling No. DA-251-99 dated April 23, 1999 ) ACIDSc It should be emphasized that the subject of the waiver is limited to the share in the inheritance and does not cover the conjugal share of Gloria A. Del Rosario. Therefore, the adjudication of the entire properties to the eight (8) children refers to the conjugal refers to the conjugal share of the deceased, Luis V. Del Rosario. 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, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group