BIR Ruling [DA-561-06]

September 19, 2006 BIR RULING [DA-561-06] DA-093-2004 dtd 3/1/04 Atty. Jaime M. Maza Carnation St., St. Dominic 5 Banlat, Tandang Sora, Quezon City S i r : This refers to your undated letter for and in behalf of your client, the Estate of Florencio Elio, as represented by Arnaldo M. Elio inquiring on the correct basis of the valuation of the properties inasmuch as there was no approved zonal valuation at the time of the death of the decedent and on the effect of the sale or relinquishment of the wife's conjugal share of the properties and likewise her 1/4 share in favor of her four (4) children. It is represented that the late FLORENCIO ELIO, of Patnongon, Antique died on October 8, 1953, leaving properties as certified by the Provincial Assessor to his wife and four (4) children; that a certification of the Revenue District Officer (RDO) issued on October 26, 1971 stated that the taxes thereon had been paid under OR. No. B-2194685 on February 13, 1954; that it is your opinion that the reassessment if any at this time can no longer be made as more than ten (10) years had elapsed therefrom, even assuming that there is fraud which the RDO did not find any; that on January 2, 1986, the widow, Maria M. Elio died; that the estate tax return was filed and the tax due thereon paid on July 22, 1987 under Confirmation Receipt No. B-120506405 in the amount of P1,007.68; that there is no finding of fraud so the reassessment if any at this time is more than three (3) years, therefore, barred by prescription; and that the heirs, as represented by Mr. Arnaldo M. Elio, are requesting that a clearance be issued for the transfer of the title of the properties to them, as the legal heirs of their late parents. In reply, please be informed that inasmuch as the Chief, Asset Valuation Division, Bureau of Internal Revenue, had issued a Certification to the effect that there is no approved zonal valuation of real properties in Patnongon, Antique as of January 2, 1986, and that the initial valuation took effect only on June 29, 1994, the basis of the valuation of the properties for estate tax purposes then shall be the assessed value or the market value of the properties as indicated in the tax declaration, whichever is higher, since the decedents died on October 8, 1953 and January 2, 1986, respectively, prior to the effectivity of the approved zonal valuation of properties in Patnongon, Antique. As to the second issue, the effects of the sale or relinquishment of the wife's conjugal share and her share in the estate of her late husband in favor of their children, are as follows: 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 his co-heirs, co-devisees or co-legatees. The share of the renouncer 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 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 right of accretion among them, unlike in testamentary succession where there may or may not be a right of accretion. ( Arts. 1018, 977, 969, New Civil Code ) In the instant case, when the wife waived her share in the inheritance in favor of her children, accretion had effectively taken place in the latter's favor and the renounced shares were added or incorporated to the share of her children. Undoubtedly, when the wife renounced her share in the inheritance, she did not donate the property which had never become hers. 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 the wife/mother is an additional inheritance to her children. 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 her children ( BIR Ruling DA 251-99 dated April 23, 1999 ) However, if the wife sells her conjugal share in the properties and her share in the estate in favor of her children, such transaction is subject to the capital gains tax under Section 24 (D)(1) of the Tax Code of 1997 and to the documentary stamp tax on the transfer of the property under Section 176 of the same Code. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall 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