BIR Ruling [DA-396-98]

September 1, 1998 BIR RULING [DA-396-98] Roco Buag Kapunan & Migallos 16th Floor, Strata 200 Building Emerald Avenue, Pasig City Attention: Attys . Jose Mario C . Buag and Romero A . Bison, Jr . Gentlemen : This refers to your letter dated June 26, 1997 requesting, on behalf of your client, Mrs. Edith J. Atienza, for a confirmation of your opinion that the proceeds of insurance not taken out by the decedent upon his own life but by an employer under a group insurance are excluded from the gross estate of the insured-decedent and therefore, not subject to estate tax. aisadc It is represented that your client's husband, Andres I . Atienza (decedent), died intestate on June 26, 1987; that real and personal properties of the decedent were valued at P415,256.39, to wit: A. Real Properties (all located at Roxas City) TCT NO. VALUE 1. 16577 P9,658.00 2. 16572 7,920.00 3. 16578 3,850.00 4. 18758 2,684.00 5. 15677 1,815.00 B. Personal Properties 1. Cash on hand and in bank P3,000.00 2. Motor Vehicle (Toyota) 50,000.00 3. Installment Payments (Advance)-Real Estate 36,329.39 4. Proceeds-Life Insurance (Sunlife) 300,000.00 that the estate tax due in the amount of P13,033.36 has been paid on December 18, 1987; that on September 21, 1987, Salvadora Atienza, mother of the decedent, filed a complaint before the Regional Trial Court of Manila for "Accounting, Injunction, and other reliefs, with prayer for preliminary injunction" against Edith J. Atienza, Ma. Beatriz Atienza and Singer Sewing Machine Co., Inc. (Singer); that Salvadora Atienza prayed for, among others, the delivery of her one-half share in the estate of the decedent; that Singer stated the following benefits, among others, due the decedent in its Answer to Interrogatories, namely: (a) proceeds of a local group personal insurance (accidental death) issued by American International Underwriter, Inc. for P777,904.56 and (b) proceeds of a foreign accident insurance issued by Life Insurance Co. of North America for $100,000.00; that both insurance policies were taken out by Singer for its employees, including the insured-decedent Andres I. Atienza; that on September 13, 1989, Regional Trial Court-Branch 27, Manila, rendered a decision, the dispositive portion of which reads: "WHEREFORE, judgment is hereby rendered declaring the insurance proceeds . . . accrued to the estate of the decedent and directing the division thereof as follows, to wit: to plaintiff mother , to defendant spouse and to defendant adopted child , and directing defendant Singer Sewing Machine Co. Inc. to forthwith deliver to the heirs their respective shares . . . but prior to such division and delivery, the taxes due the government on the said proceeds and benefits shall have been paid and the same shall be chargeable to the respective shares of the heirs to the extent of their shares." that on February 25, 1997, the court issued an Order directing Singer to release to the heirs of decedent Andres Atienza, the amount of P583,988.67 minus taxes, taking into account prior remittances given to them; and that on March 7, 1997, Singer through its counsel, Atty. Henry Ll. Yusingco informed your office that they are ready and able to release the amount of P583,988.67 net of taxes after securing a clearance from the Bureau of Internal Revenue that the estate tax has already been paid. In reply, please be informed that then Section 78 (e) of the National Internal Revenue Code of 1977, as amended provides: cdt "SEC. 78. Gross Estate . The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated: Provided, however, That in the case of a nonresident decedent who at the time of his death was not a citizen of the Philippines, only that part of the entire gross estate which is situated in the Philippines shall be included in his taxable estate. xxx xxx xxx "(e) Proceeds of Life Insurance . To the extent of the amount receivable by the estate of the deceased, his executor, or administrator, as insurance under policies taken out by the decedent upon his own life , irrespective of whether or not the insured retained the power of revocation, or to the extent of the amount receivable by any beneficiary designated in the policy of insurance, except when it is expressly stipulated that the designation of the beneficiary is irrevocable. (Emphasis supplied) xxx xxx xxx" Such being the case, and considering that the insurance policies upon the life of the decedent, the late Andres I. Atienza, was taken by his employer, Singer, for its employees, the proceeds thereof shall not form part of the gross estate of the decedent for the purpose of determining the estate tax due, hence, your opinion is hereby confirmed. (BIR Ruling No. 081-83 dated May 10, 1983) 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 null and void. LLpr Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)