BIR Ruling [DA-409-03]

November 12, 2003 BIR RULING [DA-409-03] 98 DA-037-2003 dtd. 2-6-03 Atty . Orlando S . Lim Rm. 307 Marvel Bldg. II 576 Juan Luna St. Binondo, Manila S i r : This refers to your letter dated July 1, 2003 requesting in behalf of your client, BENJAMIN TAN, for a ruling that the renunciation or waiver by Benjamin Tan of his right to inherit from the estate of the late Susana Sy-Tan, his deceased wife, in favor of his only son, SAMMY TAN, is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. It is represented that SUSANA SY-TAN died on June 20, 1987 a resident of Manila; that her heirs are her spouse, BENJAMIN TAN and son, SAMMY TAN; that on December 11, 2002, Benjamin Tan and Sammy S. Tan executed an "Extrajudicial Settlement of the Estate with Waiver of Rights" wherein they agreed to adjudicate the entire estate of the late Susana Sy-Tan to Sammy S. Tan with Benjamin Tan waiving all his rights and interest therein. In reply, please be informed that as a rule, 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 of 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. In the instant case, when Benjamin Tan waived his share in the inheritance in favor of his son, Sammy Sy Tan, accretion had effectively taken place in the latter's favor and the renounced share was added or incorporated to his share. Undoubtedly, when the surviving spouse renounced his share in the inheritance, he did not donate the property which had never became his. Such being the case, the renunciation is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. Moreover, the inheritance renounced by Benjamin Tan is an additional inheritance to his son, Sammy Sy Tan. Consequently, the corresponding estate tax computed in accordance with the schedule provided for under Section 84 of the same Tax Code, shall be imposed upon transfer of the net estate to his son, Sammy Sy Tan. (BIR Ruling No. DA-251-99 dated April 23, 1999) It should be emphasized that the subject of the waiver is limited to the share in the inheritance and does not cover the conjugal share of Benjamin Tan. Therefore, the adjudication of the entire properties to Sammy Tan refers to the conjugal share of the deceased, Susana Sy Tan. 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. EICSTa Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group