BIR Ruling [DA-284-04]

May 24, 2004 BIR RULING [DA-284-04] Civil Code, Right of Representation; 108-96 Arcinas & Arcinas 2K Edificio Enriqueta, 442 N.S. Amoranto Street Corner D. Tuazon Avenue, Quezon City Attention: Atty. Benedicto G. Arcinas Gentlemen : This refers to your letter dated February 6, 2004 stating that the real property covered by TCT No. T-1019-A situated in Toledo City, Cebu is registered in the name of Mateo C. Rodriguez and his spouse, Raymunda Rodriguez, who begot six (6) children, namely: Januario (deceased), Araceli, Felix (deceased), Oscar, Fe and Lydia (deceased); that Raymunda died ahead of Mateo who died on June 25, 1983; that Januario and Lydia both pre-deceased their father Mateo; that Januario left one legitimate child, Augusto, and Lydia died at a young age, leaving no issue; that Felix died two years ago without issue; that Augusto, Araceli, Oscar, Fe and the Estate of Felix Rodriguez, the living heirs, have executed an Extrajudicial Settlement of the Estate of Mateo and Raymunda Rodriguez which consists of the above-mentioned real estate; that the Estate Tax Return was brought before Revenue Examiner Elisa San Juan for estate tax clearance; that as a pre-condition for her acting on the application, said Examiner requires that an Extrajudicial Settlement of the Estate of Januario in favor of his son, Augusto, be submitted to her, claiming that a valid descent of the above property requires the foregoing intermediate procedure; and that from the foregoing, you are requesting, in effect, that a ruling be issued dispensing the above requirement set forth by the examiner for the reason that the settlement of Januario's Estate is not called for by law in the above situation. In reply thereto, please be informed that Articles 970, 971 and 981 of the Civil Code of the Philippines provide as follows: "ART. 970. Representation is a right created by fiction of law, by virtue of which the representative is raised to the place and the degree of the person represented, and acquires the rights which the latter would have if he were living or if he could have inherited." "ART. 971. The representative is called to the succession by law and not by the person represented. The representative does not succeed the person represented but the one whom the person represented would have succeeded." "ART. 981. Should children of the deceased and descendants of other children who are dead, survive, the former shall inherit in their own right, and the latter by right of representation." Based on the foregoing provisions, Augusto, the representative of Januario, is called to succession by operation of law and not by Januario whom he represents. Thus, Augusto does not succeed from his father, Januario, but from Mateo by right of representation. (ART. 971 & 981, Civil Code of the Philippines) In other words, Augusto, not Januario, in this case is the heir inheriting directly by law from Mateo, in an amount equivalent to what Januario would have received had he been alive when Mateo died. (BIR Ruling No. 108-96 dated October 21, 1996) Hence from the foregoing, the requirement set forth by the examiner in the instant case is not called for by law, thus, should be dispensed as it has no relevance in the matter at hand. On the other hand, since in the instant case Raymunda Rodriguez, the wife of Mateo Rodriguez, died ahead of him, the estate of Raymunda should have been first settled by her heirs, which include Mateo as her surviving spouse. The conjugal share of Raymunda in the above-mentioned property which comprises as her entire estate should have been settled among her heirs and a return filed with the BIR for the purpose of determining the estate tax liability of said estate. After the estate of Raymunda is settled, the estate of Mateo, which is composed of his conjugal share in the above-mentioned property and his proportionate share in the estate of Raymunda, may now be settled by and among his aforementioned heirs and returned for estate tax purposes with the BIR. Lastly, since both estates of Raymunda and Mateo will be filing their respective estate tax returns as well as the payment of the estate tax late, both estates shall be subject to the payment of interest, surcharges and penalties. 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. STHAID Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group