BIR Ruling [DA-093-04]

March 1, 2004 BIR RULING [DA-093-04] 94; 98 DA 251-99 Mr. Adeodato C. Duque, Jr. Unit N, G & M Complex 109 J.P. Rizal Street Proj. 4, Quezon City S i r : This refers to your letter dated January 31, 2003 requesting for a ruling that the renunciation or waiver by Danilo and Reynaldo Duque of their right to inherit from the estate of their parents, Adeodato E. Duque and Eleuteria Cruz-Duque, in favor of Adeodato, Jr., Cesar and Laurel Duque is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. It is represented that Adeodato E. Duque died on April 3, 1983 and Eleuteria Cruz-Duque died on November 21, 2002 leaving five (5) children as their legal heirs, Danilo, Reynaldo, Adeodato, Jr., Cesar and Laurel, all surnamed Duque and that in the extrajudicial settlement of the estates, Danilo and Reynaldo waived or renounced all their rights, interests and participation in some real properties of the intestate estates equally in favor of Adeodato Jr., Cesar and Laurel. 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 renouncer shall accrue to his co-heirs in the same proportion that they inherit pursuant to Article 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 Danilo and Reynaldo waived their share in the inheritance in favor of their brothers and sister, accretion had effectively taken place in the latter's favor and the renounced shares were added or incorporated to the share of Adeodato, Jr., Cesar and Laurel. Undoubtedly, when both Danilo and Reynaldo renounced their share in the inheritance, they did not donate the property which had never become theirs. Such being the case, the renunciation is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. IHCacT Moreover, the inheritance renounced by Danilo and Reynaldo is an additional inheritance to Adeodato, Jr., Cesar and Laurel. 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 Adeodato, Jr., Cesar and Laurel. ( BIR Ruling DA 251-99 dated April 23, 1999 ). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall 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