BIR Ruling [DA-524-06]

August 31, 2006 BIR RULING [DA-524-06] 91 (B) De Leon and De Leon Law Office Suites G&H Heritage Building Aguinaldo Highway, Niog Bacoor, Cavite Attention: Atty. Ricardo T. de Leon, Jr. Senior Managing Partner Gentlemen : This refers to your letter dated June 20, 2006 requesting on behalf of your client, the Heirs of Leonardo B. Salcedo for an extension of two (2) years from July 29, 2006 within which to pay the estate tax of the late Leonardo B. Salcedo. It is represented that Mr. Leonardo B. Salcedo died intestate on January 29, 2006 in Muntinlupa City. As the legal counsel, you were tasked to handle the settlement of his estate. The estate tax is due to be paid on July 29, 2006. One of the steps undertaken was to furnish BIR-Muntinlupa City on February 27, 2006 a copy of the Notice of Death signed by the heirs of Mr. Salcedo. Subsequently, you tried to make an inventory of all the properties, real and personal, left by the deceased and to obtain certified true copies of all the titles and tax declarations of the said properties. While in the process of obtaining all the documents pertinent to the settlement of the estate of the deceased, you discovered in the second week of June 2006 that there are real properties in Bacoor, Cavite that are still covered by tax declarations in the name of Leonardo B. Salcedo and his surviving legal spouse, Amada L. Salcedo, despite the fact that these real properties have already been acquired by Lesal Corporation for which new titles in the name of the said corporation have been issued. As a result, the said real properties are still declared for taxation purposes in the name of Leonardo B. Salcedo and Amada L. Salcedo and appeared on the records of the Office of the Assessor in Trece Martires City, Cavite. Hence, there is a need to cause the cancellation of these tax declarations in the name of Leonardo B. Salcedo and Amada L. Salcedo. Otherwise, the said real properties might be mistakenly included in the estate of the deceased. For this reason, the heirs of Leonardo L. Salcedo will need a reasonable period beyond July 29, 2006 within which to cause the transfer of the said tax declarations. In addition, the transfer of these tax declarations to Lesal Corporation would be shouldered by the heirs of Mr. Salcedo. As a result, it would significantly add to their expenses for the settlement of Mr. Salcedo's estate. TDEASC Moreover, Ma. Carmen Salcedo-Gliponeo, one of the heirs of Leonardo B. Salcedo, is presently in the United States and might be coming back to the Philippines in the last quarter of 2006. She will not be able to come back for the execution of the Extra-judicial Settlement of the estate of his deceased father before July 29, 2006. Since, Ms. Salcedo-Gliponeo is in the United States, she and other heirs have not really had the time to discuss how the estate will be partitioned among them. All these have been hampering your efforts to finalize the settlement of the estate and to pay the estate tax due thereon. After the initial inventory of the properties left by the late Mr. Salcedo, the payments of the estate tax as of this time will cause undue burden and hardship on the estate and his heirs since most of the estate of Mr. Salcedo are real properties and the heirs have no sufficient cash as of this time to pay the estate tax on or before July 29, 2006. As a matter of fact, even at this time, the heirs of Mr. Salcedo are still trying to find ways on how to come up with the amount that might be needed for the payment of the estate tax. In reply, please be informed that under Section 90(B) and (C) of the Tax Code of 1997, the estate tax return is required to be filed within six (6) 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 years in case the estate is settled through the courts, or two (2) years in case the estate is settled extra-judicially pursuant to Section 91(B) of the Tax Code of 1997. Based on the aforementioned justifiable reasons, your request for an extension is hereby granted. Accordingly, on the basis of the pay as you file system, payment of the estate tax may be made within two (2) years counted from the last day of the 6-month period of filing the return which is July 29, 2006 or until July 28, 2008, pursuant to Section 91(B) of the same Code as this must be done based on the "pay as you file" rule. Further, Rule 74 Section 1 of the Revised Rules of Court provides that: "SEC. 1. Extrajudicial settlement by agreement between heirs . . . . The fact of the extrajudicial settlement or administration shall be published in a newspaper of general circulation in the manner provided in the next succeeding section; but no extrajudicial settlement shall be binding upon any person who has not participated therein or had no notice thereof." Based on the above Rule, the Deed of Extra-judicial Settlement of the Estate has to be published in a newspaper of general circulation and the Affidavit of the Publisher shall be attached to the Estate Tax Return. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. LexLib Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service