BIR Ruling [DA-536-98]

December 1, 1998 BIR RULING [DA-536-98] Mesdames Wilhelmina S. Montemayor, Marilyn Montemayor-Perchard and Monina S. Montemayor 46 Magdalena St., Magallanes Village Makati City Mesdames : This refers to your letter dated October 21, 1998 requesting exemption from the payment of estate tax the Partition of your co-ownership by virtue of your execution of Waiver of Rights over the residential lot with improvements situated in Makati City identified as Lot No. 4 and covered by Transfer Certificate of Title No. 150790 in favor of your co-heirs, Mamerto S. Montemayor, Jr. and Paul Jesus S. Montemayor. aisadc Documents submitted show that Mamerto R Montemayor died a resident of Makati City on November 21, 1994 leaving his wife, Mrs. Wilhelmina S. Montemayor, and six (6) children, Michael S. Montemayor, Wilhelmina M. Narciso, Marilyn M. Dela Merced, Mamerto S. Montemayor, Jr., Monina Montemayor and Paul Jesus S. Montemayor, as his heirs; that a residential lot identified as Lot 4 including improvements thereon situated in Makati City covered by Transfer Certificate of Title No. 150790 is among the real properties which form part of his estate; that an extra-judicial settlement of his estate was executed by his above-named heirs on March 15, 1978, wherein the said heirs divided among themselves his entire estate; that the amount of P12,514.15 was paid by his heirs in full settlement of the estate tax and penalties due after an investigation conducted by an examiner of this Office under Revenue Tax Receipt No. 11089094 dated July 15, 1975; that in October, 1998, Wilhelmina S. Montemayor, Marilyn Montemayor-Perchard and Monina S. Montemayor executed a Waiver of Rights over the residential lot identified as Lot 4 including improvements thereon covered by Transfer Certificate of Title No. 150790 wherein they waived their rights to the said property in favor of co-heirs Mamerto S. Montemayor, Jr. and Paul Jesus S. Montemayor, and that you are seeking the aforesaid request to comply with the requirement of the Register of Deeds of Makati City to effect the transfer of the subject property to your co-heirs/co-owners. In reply, please be informed that in legal succession, accretion takes place in case of repudiation among heirs of the same degree. This is so because there is no right of representation. The co-heirs in legal succession are co-owners of the inheritance, for which reason there is always a right of accretion among them, unlike in testamentary succession where there may or may not be a right of accretion. (Arts. 1018, 977, 967, New Civil Code) However, if the renunciation by an heir or heirs is made in favor of one or more heirs but not all the other heirs, the act of renunciation is in effect an act of disposition inasmuch as the act of disposition and the benefits thereof are not enjoyed by everybody but only by one or more heirs. (Arts. 1050, 1051, 1016, New Civil Code) (BIR Ruling No. 65-092 dated August 20, 1965) It would seem clear that renunciation or waiver by any of the co-heirs in favor of one or more of the co-heirs but not all of the co-heirs, no right of accretion shall take place in favor of the co-heir/s to whom the share in the inheritance was renounced since the act of renunciation shall be treated both as inheritance and donation and the co-heirs to whom the waiver was made shall equally divide the same and shall equally pay the estate tax computed in accordance with Section 77 of the Tax Code of 1997. The corresponding gift tax thereof shall likewise be paid computed in accordance with Section 92 of the same Code; otherwise, the waiver may be considered as if made by any of the co-heirs in favor of all the other co-heirs. (BIR Ruling No. 455-93 dated November 19, 1993) The renunciation in favor of the other co-heirs specifying the areas for each and every co-heir shall be treated as donation and therefore the co-heirs to whom the renunciation was made shall pay not only the inheritance/estate tax but also the gift tax in proportion to what they received. Accordingly, in the instant case, the renunciation by Wilhelmina S. Montemayor, Marilyn S. Montemayor-Perchard and Monina S. Montemayor of their inheritance in favor of Mamerto S. Montemayor, Jr. and Paul Jesus S. Montemayor, insofar as the subject realty is concerned, is likewise subject to the donor's tax imposed under Section 98 of the Tax Code of 1997 which Mamerto S. Montemayor, Jr. and Paul Jesus S. Montemayor shall pay in proportion to what they received. LLjur Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)