BIR Ruling [DA-143-01]

August 30, 2001 BIR RULING [DA-143-01] Sec. 84 BIR Rlng Nos. 65-092; 455-93 Mr. Renato Noel 24 S. Estrada, Tierra Bella Subd. Culiat, Quezon City S i r : This refers to your letter dated July 2, 2001 requesting for a confirmatory ruling that the waiver by all the children of WILLIS YEE of their respective inheritance in favor of their mother, PACITA YEE, does not constitute donation and therefore not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. It is represented that on November 21, 2000, the Estate Tax Return of the late WILLIS YEE was filed and the corresponding estate and documentary stamp taxes were paid accordingly; that the estate of the deceased, WILLIS YEE, was extrajudicially settled among the surviving spouse, Pacita Yee and her children, namely, Edmond, Zigmond, Damond and Ellibelle, all surnamed Yee; that all the children of the deceased waived and adjudicated the entire estate in favor of their mother, PACITA YEE; that upon review by the Regional Director, it was opined that the waiver by all the children of their respective inheritance in favor of their mother, PACITA YEE, constituted donation on the part of the former in the light of BIR Ruling No. 455-93 dated November 19, 1993; that it is your opinion that the aforesaid BIR ruling which held "that the renunciation of the wife of her inheritance in favor of her grandchildren who are not her co-heirs is subject to donor's tax imposed under then Section 91 (now Section 98) of the Tax Code, as amended", will not apply in the instant case; and that the applicable ruling in this case is BIR Ruling No. 65-092 dated August 20, 1965. In reply, please be informed that your opinion is hereby confirmed as follows: 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 Articles 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 the children of the deceased, namely Edmond, Zigmond, Damond and Ellibelle waived their respective share in the inheritance in favor of their mother, PACITA YEE, accretion had effectively took place in the latter's favor and the renounced share was added or incorporated to her share. Undoubtedly, when the children renounced their respective 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 donors tax imposed under Section 98 of the 1997 Tax Code. Moreover, the inheritance renounced by Edmond, Zigmond, Damond and Ellibelle, all surnamed YEE, is an additional inheritance to PACITA YEE. 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 PACITA YEE. ( BIR Ruling No. 65-092 dated August 20, 1965 ) 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, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group