BIR Ruling [DA-328-05]

July 26, 2005 BIR RULING [DA-328-05] 90 (B) and (c); DA-039-2001 3/21/01 Mr. Victor Dennis M. Socrates Socrates Road, San Miguel Puerto Princesa City Palawan S i r : This refers to your letter dated June 24, 2003 requesting, in behalf of the heirs of the late Salvador P. Socrates, for an extension of time to file the estate tax return of the Estate of the deceased and an extension of two years within which to pay the tax. It is represented that the decedent, Salvador P. Socrates, died intestate on July 2, 2000 in a plane crash in the seas surrounding the Municipality of Cagayancillo, Province of Palawan; that since his remains were never recovered (and for that matter, neither the aircraft nor the remains of 12 other persons on board),you have assumed that his death would be a matter of only a legal presumption which would occur upon the lapse of four years from the date of the airplane crash, i.e.,2 July 2004; that on 4 March 2003, however, the Municipal Civil Registrar of Cagayancillo issue a certification regarding the fact of death of said decedent, which issuance, you presume, started the running of the six-month period for filing of the estate tax return and payment of the tax due, which period expired on 4 September 2003; that the estate consists for the most part of conjugally-owned real property; that liquidating the same or disposing of any portion thereof to raise the necessary funds to pay the estate tax due would require more time, not the least because the need to effect a judicial or extrajudicial partition among the heirs and to identify buyers; that at the moment, neither the estate nor any of the heirs is in a position to produce the amount that may be necessary to satisfy the estate tax liability; and that you were compelled to request for an extension of two (2) years from 4 September 2003 or the period until 4 September 2005 within which to pay the estate tax due on the estate of the late Salvador P. Socrates. In reply, please be informed that under Section 90(B) and (C) of the Tax Code of 1997, estate tax return is required to be filed within six months from the decedent's death and in meritorious cases, a reasonable extension not exceeding thirty (30) days for filing the return may be granted by the Commissioner of Internal Revenue. The payment of the estate tax or any part thereof shall be made upon the filing of the return or on such date as fixed if an extension is granted by the Commissioner, but in no case to exceed five (5) years in case the estate is settled through the courts, or two (2) years in case the estate is settled extrajudicially pursuant to Section 91(B) of the Tax Code of 1997. TaISEH Thus, when the Commissioner of Internal Revenue finds that the payment on due date would impose hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five years in case the estate is settled through the courts, or two years in case the estate is settled extra-judicially. However, the amount in respect of which the extension is granted shall be paid on or before the date of the expiration of the period of extension and the running of the statute of limitation of assessment as provided in Section 203 of the Tax Code of 1997 shall be suspended for the period of any such extension. (Section 91(B) of the Tax Code of 1997) (BIR Ruling No. DA-039-2001 dated March 21, 2001) Such being the case, and since the payment of estate tax on the date would impose undue hardship upon the heirs because of the current financial difficulties that the heirs are encountering, your request for an extension of two years counted from the time of filing of the return within which to pay the estate tax due or until 4 September 2005, is hereby granted. However, it shall be understood that the said estate shall be liable to the corresponding interest that have accrued thereon up to the time of filing of the return and payment of the estate tax due on the transmission of the said estate to the heirs. (BIR Ruling No. 066-98 dated May 21, 1998) A copy of this letter should be attached to the estate tax return of the decedent. 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 deemed null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service