Atty. Josefin Benedict Mendoza

June 17, 2008 BIR RULING [DA-367-08] Section 84; R.A. 9480; DA-291-2006 dtd. 05/03/06 Atty. Josefin Benedict Mendoza Lot 2-F, Block 10, Dahlia Avenue Fairview, Quezon City S i r : This refers to your letter dated April 30, 2008 in behalf of your client, FRANCISCO DAEZ, requesting a clarificatory ruling on the proper application of Section 84 of the Tax Code of 1997 in relation to Republic Act (R.A.) No. 9480 (Tax Amnesty Program) and the pertinent provisions of the Civil Code. It is represented that on March 2, 1983, Juan Daez died at Novaliches, Quezon City without a will, leaving four (4) heirs: Gregorio, Francisco, Ricardo and Donato and an estate consisting of two parcels of land covered by TCT No. RT-40856 (84005) and TCT No. 24715, both located in Novaliches, Quezon City; that thereafter, Donato died on July 27, 1993, and Ricardo died on April 20, 1998, both at Novaliches, Quezon City, without a will and leaving as heirs their children; that on May 31, 2002, the aforementioned heirs executed an extrajudicial partition renouncing and waiving all the rights over TCT No. 40856 (84005) in favor of your client, Francisco S. Daez; that on March 4, 2008, Francisco availed of the Tax Amnesty Program under R.A. 9480 and paid the corresponding estate tax for the abovementioned properties so that the corresponding Certificate Authorizing Registration (CAR) be issued to him for the purpose of registering TCT No. RT-40856 (84005) in his name; that it is your contention that repudiation of the heirs of Donato and Ricardo retracts to the time of death of the decedents as provided under Article 1042 of the Civil Code; that likewise, repudiation by the heirs over TCT No. RT-40856 (84005) is tantamount to repudiation by the deceased Donato and Ricardo of their inheritance from their father Juan P. Daez; that further, TCT No. RT-40856 (84005) is not and has never been a part of the estates of the deceased Donato and Ricardo. In reply, please be informed that Sec. 777 of the New Civil Code of the Philippines provides that the rights to the succession are transmitted from the moment of the death of the decedent. However, the heirs have a right to either accept or repudiate the inheritance. Such is a free and voluntary act. (Sec. 1041, New Civil Code) In the event that an heir should die without having accepted or repudiated the inheritance, his rights shall be transmitted to his heirs. (Sec. 1053, New Civil Code) In the instant case, the late Donato and Ricardo never accepted their inheritance from their late father, Juan P. Daez. The law clearly provides that mere acts of preservation do not imply an acceptance of inheritance. Upon their death on July 27, 1993 and April 20, 1998 respectively, the right to accept or repudiate their inheritance from their father was transmitted to their legal heirs, which is clearly provided by Article 1053 of the Civil Code of the Philippines. Their heirs exercised their right by repudiating the inheritance from the late Juan P. Daez by executing written and notarized Extrajudicial Settlement with Waiver of Rights. In doing so, it is as if the late Donato and Ricardo were never the heirs of the late Juan Daez as to the property covered by TCT No. RT-40856 (84005) since the law clearly provides that the effect of acceptance or repudiation shall always retroact to the moment of the death of the decedent (Sec. 1042, New Civil Code). Thus, 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 the co-heirs, co-devisees or co-legatees. The share of the one who renounces his part in the inheritance 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. Thus, when the other heirs executed the extrajudicial settlement on May 31, 2002 with the provision of a waiver of rights over the property covered by TCT No. RT-40856 (84005) of the Registry of Deeds for Quezon City, in favor your client, FRANCISCO DAEZ, accretion had effectively taken place in the latter's favor and the renounced shares were added or incorporated to your client's share. Consequently, the inheritance renounced by the other heirs in favor of your client, FRANCISCO DAEZ, is an additional inheritance to him, thereby, the corresponding estate tax computed in accordance with the schedule provided for under Section 84 of the same Tax Code, shall be imposed upon the transfer of the net estate to your client, FRANCISCO DAEZ. (BIR Ruling No. DA-251-99 dated April 23, 1999) Accordingly, inasmuch as the late Donato and Ricardo were never the heirs of their late father as to the property covered by TCT No. RT-40856 (84005) in view of the repudiation by their respective heirs, the supposed inheritance has never been passed on to them. In fact, the estate tax due on this property has been fully paid by your client, FRANCISCO DAEZ, who availed of the provisions of R.A. 9480, Tax Amnesty Program. 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service