Ma. Erlinda I. Bildner

February 27, 2008 BIR RULING [DA-112-08] RA 9480; DO 29-07; RMC 55-2007; RMC 69-2007 Ma. Erlinda I. Bildner 10th Floor, Ramon Magsaysay Center Roxas Boulevard, Manila M a d a m : This refers to your letter dated February 6, 2008, requesting for an opinion on the criminal liability imposed in the Tax Amnesty Law or Republic Act No. 9480 in case of unintentional understatement of an estate's networth to the extent of thirty percent (30%) or more. It is represented that you are one of the heirs of the late Atty. Potenciano Ilusorio and a named executrix in the latter's Last Will and Testament; that Atty. Ilusorio died on June 28, 2001 and the proceeding for the probate of his Last Will and Testament is still pending with the Regional Trial Court of Paraaque City; that to date, no Special Administrator has been appointed to make an inventory of the estate of Atty. Ilusorio; that you are awaiting the appointment of your sister, Sylvia K. Ilusorio, as Special Administrator for the purpose of formally taking charge in the preparation of the required inventory of the assets and settlement of the estate taxes; that your family has been embroiled in the highly publicized and controversial family feud since 1997; that the squabble resulted in the filing of two hundred (200) cases in various courts, many of which involve the family corporations and diverse properties; that the essential issue of whether certain of these properties actually form part of the estate of Atty. Ilusorio remains unresolved; that this is one of the reasons why the estate of Atty. Ilusorio has not fully settled its estate taxes; that as a responsible heir, you intend to avail of the tax amnesty in the settlement of the estate taxes of Atty. Ilusorio's estate; that due to the circumstances mentioned, especially that no inventory of the assets has been officially made, you are concerned with the criminal liability imposed by law in cases of understatement of the amount of networth to the extent of thirty percent (30%) or more; that should you avail of the tax amnesty in the payment of the estate taxes of Atty. Ilusorio's estate, you undertake that your declaration is made to the best of your knowledge and honest assessment, of the information and details as required in the Statement of Assets, Liabilities and Networth (SALN). In reply, please be informed that this Office is of the opinion that there is no criminal liability if the declaration in the SALN is done in good faith, to the best of the applicant's knowledge and honest assessment, especially in your case where the circumstances show the difficulty in ascertaining the precise and accurate networth of the decedent's estate. As you represented, the 200 cases involving the estate of Atty. Ilusorio hinges on one essential issue that is whether certain properties actually form part of the estate of the decedent . In this connection, please be advised that only properties belonging to the decedent at the time of his death must form part of his gross estate. (Section 85, NIRC) . If the ownership of certain properties are put to question, these properties can not be included as part of the gross estate until they are finally declared by the Court that these properties belong to the decedent. In BIR Ruling No. 025-96 dated February 23, 1996, this Office ruled that for properties whose ownership is being questioned in Court, collection of the estate tax that would have been due on the transmission of the said estate to the heirs shall be suspended. If later on the decedent is adjudged by the Court to be the real owner of the questioned properties, the corresponding value thereof shall be declared as part of his gross estate and the estate tax due thereon paid within thirty (30) days after the decision has become final and executory. It is clear that estate properties, the ownership of which is under question, shall not be included in the gross estate of the decedent for estate tax purposes until after the decedent has been determined as its rightful owner. aCSEcA For purposes of availing of the tax amnesty pursuant to the provisions of RA No. 9480, the properties that must be included in the gross estate of the decedent are only those properties which indubitably belong to him as of December 31, 2005. Accordingly, should it be established and proven in a proceeding initiated within one (1) year from filing of the tax amnesty return and SALN that the amount of declared networth is understated to the extent of thirty percent (30%) or more, but there is reasonable proof to show that indeed the applicant acted in good faith, taking into consideration the circumstances mentioned above, there is no criminal liability on the part of the said heir-applicant, but the estate shall be liable to pay the remaining unpaid estate taxes based on the regular estate tax rates imposed under Section 84 of the Tax Code, as amended. 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. IHcTDA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service