BIR Ruling [DA-294-98]

July 2, 1998 BIR RULING [DA-294-98] Heirs of Florencia Concepcion Phase 4, Block 5, Lot 15, V & G Subd. Tacloban City Gentlemen : This refers to your letter dated November 30, 1997 requesting for a ruling as to which of the following properties should be considered as the family home of the decedent, the late Florencia Concepcion, in order to qualify as an allowable deduction from the gross estate of the said decedent for estate tax purposes. ACaDTH It is represented that the following properties of the Spouses Antonio and Florencia Concepcion are the properties at issue in this case: TEDAHI Classification/Area Location Fair Market Adjusted Market (sq.m.) Value Value Res. Land (147 sq.m.) Brgy. 48 P39,690.00 P489,100.00 San Fernando Tacloban City Res. Building Brgy. 48 109,620.00 109,620.00 San Fernando Tacloban City Res. Land (240 sq.m.) Brgy. 109 69,600.00 84,800.00 Calanipawan Tacloban City Res. Building Brgy. 109 188,450.00 188,450.00 Calanipawan Tacloban City that Florencia B. Concepcion, wife of Antonio G. Concepcion of Block 5, Lot 15, Phase 4, V & G Subd., Tacloban City (address as indicated in decedent's Certificate of Death) died on October 31, 1996 leaving as heirs, her husband Antonio and three (3) children namely: Thelma, Vilma and Olivia, all surnamed Concepcion; that on September 16, 1997, the estate tax return of the decedent was filed with RDO No. 88; that per Revenue Officer's Audit Report dated October 13, 1997, the investigating Revenue Officer allowed as deduction from the decedent's share in the conjugal properties 58% of the value of the property located in Brgy. 48, San Fernando, Tacloban City as the family home of the said Spouses Concepcion and their children; that the allowance as a deduction of the property located in Brgy. 48 as the family home of the Spouses Concepcion was based on the certification of Brgy. 48 Chairman, certifying to the effect that the said property is the family home of the decedent and her family; that upon submission for review of the report of investigation to the Assessment Division of the Regional Office, the Assessment Division returned the docket of this case to RDO No. 88, citing as issued among others, that the family home should be the residential house and lot of the Spouses Concepcion located at Brgy. 109 (now 109A) and not the property of the said Spouses located in Brgy. 48 based on the following: a) that Brgy. 109 (now 109A) residence was indicated as the address of the decedent in Tax Declaration of Real Property, ARP No. 027-0772 covering the lot at Brgy. 48; b) that Brgy. 109 (now 109A) residence is the address indicated in the estate tax return; c) that per actual investigation conducted by the Asst. Chief of the Assessment Division who made an ocular inspection and interview of witnesses, it was confirmed that the Spouses residence was at Brgy. 109; TCIDSa d) that the telephone directory listings of the EVTELCO indicates that the address of the Spouses is at Brgy. 109; and e) that item B-1, Page VX-31 of the Review Audit Manual states, among others, that the family home, as a condition for the allowance of the same as deduction from the gross estate, for estate tax purposes, be the actual residential house of the decedent and his family at the time of death. That in a letter dated November 4, 1997, the heirs of Florencia Concepcion protested the preliminary assessment against the estate of Florencia B. Concepcion in the amount of P19,012.25; that in respond to the said letter-protest, ROI Icaranom in a memorandum report dated November 6, 1997 submitted the following additional evidences and/or findings relative thereto: a) that the lot in Brgy. 109 (now 109A) covered by TD No. 006-0350 had been sold by the Spouses to one of their daughters, Vilma Concepcion, per Deed of Absolute Sale dated June 16, 1995 for the amount of P60,000.00, with CAR No. 000865 issued on the same date; aEcSIH b) that an heir (Alma Concepcion) confirmed the third party information that the Brgy. 48 residence was rented out to student boarders and was even mortgaged by their parents to one of their relatives long before the death of Florencia Concepcion; c) that the certified copies of the Voter's Affidavit of the decedent's heirs, as well as certified voter's list listed the Spouses Antonio and Florencia as residents/voters of Brgy. 109 (now 109A); d) that the duly accomplished copy of BIR Form No. 1902 (THRU application for registration) of Antonio Concepcion (now also deceased as of September 19, 1997) showed his address at Brgy. 109; e) Certification of Brgy. Chairman Alberto Octaviano of Brgy. 48 that the residential house and lot is one of the boarding houses in said barangay, and not used by the owner as their dwelling unit; and f) Certification of Brgy. Chairman Gorgonio Aguinalde of Brgy. 109-A, that the house and lot at Block 5, Lot 15, Phase 4, V&G Subd., is the family home of the Spouses Antonio and Florencia Concepcion, and residents thereof. AICHaS that based on the above findings, ROI Icaranom opined that none of the two (2) properties can be the subject of allowance as a family home for purposes of determining the net estate of the deceased Florencia Concepcion; that in your aforesaid letter dated November 30, 1997, you stated the following in protest of the above findings: 1) That it is beyond question that the established original and permanent family home of the Sps. Antonio and Florencia Concepcion is the residential house and lot located at Brgy. 48, San Fernando, Tacloban City and not at the partially demolished residential house erected on the lot owned and purchased by one of the Spouses children at Phase 4, Lot 15, Blk. 5, V&G Subdivision, Tacloban City; 2) That in truth and in fact, Sps. Florencia and Antonio Concepcion have seven (7) children as legal heirs, namely, from eldest to youngest, Mrs. Gemma Concepcion-Carillo, Edelberto B. Concepcion, Thelma B. Concepcion, Dick B. Concepcion, Wilma Concepcion-Guenther, Vilma B. Concepcion and Alma B. Concepcion; 3) That per certification issued by the City Assessor of Tacloban City, the listed property holding of the Spouses Antonio and Florencia Concepcion does not include the 240 sq.m. residential lot located in Brgy. 109-A (Lot 15, Block 5, Phase 4) V&G Better Homes Subd., Calanipawan, Tacloban City, on the ground that the subject lot had already been alienated by way of absolute sale on June 06, 1995, in favor of one of their daughters Wilma B. Concepcion (now Wilma C. Guenther); 4) That the address and telephone directory of the Spouses in Brgy. 109-A were used only for communication and mailing convenience. The sale of their residential lot in the subject Brgy. clearly indicated their intention to return to their constituted family home at Brgy. 48, San Fernando, Tacloban City. The continued stay of the Spouses in Brgy. 109-A even after their lot was sold was merely as caretaker/overseer of the subject property as requested by their daughter, Mrs. Wilma C. Guenther; AHcDEI 5) That the memorandum report submitted by ROI Icaranom which she consider as additional evidence, was inaccurate considering that the truth of the matter are the following: a. that the lot in Brgy. 109 (now 109-A) covered by TD No. 006-0350 was sold by the Spouses Antonio and Florencia Concepcion to one of their daughter, Wilma B. Concepcion (now Mrs. Wilma C. Guenther) and not to Vilma B. Concepcion. b. that the information derived by ROI Icaranom from third party sources were short changed for the reason that the occupants of the 2/3 portion of the house at Brgy. 48, San Fernando, Tacloban City, are relatives either by affinity or consanguinity. The remaining 1/3 portion is occupied by one of the Spouses son, Edilberto B. Concepcion. In addition, the subject house and lot at Brgy. 48 were only mortgaged verbally to one of their relatives, without registration with the Register of Deeds. In mortgage, there is no transfer of ownership of the property but was only made as security of a loan, hence, said property as certified by the City Assessor of Tacloban City is still among the property holding of the Spouses Concepcion; c. that the voters affidavit as well as the certified voter's list cannot be made as the basis in determining the family home or the permanent dwelling place of the family on account that the voter's registration could be obtained by anybody who has stayed in the place for a period specified by law to qualify a person to register as a voter; d. it is asserted under paragraph 4 hereof that the Spouses address in Brgy. 109-A was made only for mailing and communication convenience, it being their temporary residence; aATHES e. that the Brgy. Chairman of Brgy. 48 has issued the certification to the effect that the house and lot of the Spouses Antonio and Florencia Concepcion located in that Brgy. are the Spouses "family home" and in fact, 1/3 of it is occupied by one of the sons of the Spouses, Edilberto B. Concepcion; f. that the Brgy. Chairman of Brgy. 109-A Gorgonio Aguilande, recanted the certification he earlier issued to ROI Icaranom, after being appraised of the actual status of Lot 15, Block 5, Phase 4, located in Brgy. 109-A. and that the opinion and recommendation of ROI Icaranom that none of the properties of the Spouses Concepcion which are classified as residential house and lot can be the subject of an allowable deduction as a family home for purposes of determining the net estate of the decedent, Florencia Concepcion is tantamount to stripping the heirs of Florencia Concepcion of their rights and privilege afforded to them by law under R.A. No. 7499. Under Article 152 of the Family Code, family home is defined as: 1. Constituted jointly by the husband and the wife or by an unmarried head of a family; 2. The dwelling house where they and their family reside, and the land in which it is situated. In the instant case, the house and lot of the Spouses Antonio and Florencia Concepcion located at Barangay 109-A (Lot 15, Block 5, Phase 4) V & G Better Homes Subdivision, Calanipawan, Tacloban City, has already been sold on June 6, 1995 or prior to the death of Florencia Concepcion, who as aforesaid died on October 3, 1996, by the said Spouses in favor of one of their daughters, Wilma C. Guenther, thereby leaving only the house and lot situated in Brgy. 48, San Fernando, Tacloban City as the remaining property of the Spouses Concepcion which need to be resolved. aHcACI Under then Section 79 (a) (ii) of the Tax Code, as amended, for purposes of the tax imposed in Chapter I, Title III of the Tax Code, as amended, the value of the net estate shall be determined in the case of a citizen or resident of the Philippines, by deducting from the value of the gross estate among others, an amount equivalent to the current or fair market value or zonal value of the decedent's family home, whichever is higher, provided, however, that if the said current or fair market value or zonal value exceeds One Million Pesos (P1,000,000.00), the excess shall be subject to estate tax. As a sine-qua-non condition for the exemption or deduction, the said family home must have been the decedent's family home as certified by the Barangay Captain of the locality. Such being the case, and since the house and lot of the Spouses Florencia and Antonio Concepcion situated in Brgy. 48, San Fernando, Tacloban City was constituted by them as their dwelling house where they and their unmarried children reside, and therefore their family home, prior to their moving to the house and lot they sold in favor of their daughter, Wilma C. Guenther, who requested them to look after the same in her absence and upon the advice of their family physician that they move to another place where the environmental condition is less polluted, coupled with the fact that the Barangay Chairman of Brgy. 48, certified that the house and lot of the said Spouses in the said barangay is the family home of the Spouses Concepcion together with their children. The Barangay Chairman of Brgy. 109-A, recanting his previous certification to the same effect after being appraised of the actual status of the house and lot located in said Barangay, this Office is of the opinion as it hereby holds that the house and lot of the Spouses Antonio and Florencia Concepcion situated in Brgy. 48, San Fernando, Tacloban City, is the family home of the said Spouses Concepcion and their children, 1/2 of the value (current fair market value or zonal value, whichever is higher) of which, could be deducted from the gross estate of the decedent, Florencia Concepcion, for purposes of determining her net estate. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue