BIR Ruling [DA-573-99]

October 6, 1999 BIR RULING [DA-573-99] Mr. Ruben A. Ferrer 2251-C Adonis Street Pandacan, Manila S i r : This refers to your letter dated July 16, 1999 stating that an Extra-Judicial Settlement of Estate with Waiver was executed on March 1, 1999 by and among Isaias A. Ferrer, Leonardo A. Ferrer, Teresita F. Torres, Celia F. Fortuny, Norma M. Castro, Rolando B. Ferrer, Carmencita F. Fabros, Nieves B. Ferrer and Myrna F. Lavarez, they being the brothers, nephews, nieces and sister-in-law of the late Lourdes A. Ferrer, who died intestate at the Philippine Heart Center in Quezon City; that at the time of her death, she left real property located in Pasig City covered by TCT No. PT-78521 of the Register of Deeds for Pasig City; that the above-mentioned heirs have agreed to waive their respective rights, interests, shares and participation over the said property in favor of their co-heir, Rolando B. Ferrer; and that you are of the opinion that the renunciation by the above-mentioned heirs of their respective inheritance in favor of the latter will not render them liable for any tax since the renunciation of their share is not tantamount to a gift considering that when they renounced their inheritance in favor of Rolando B. Ferrer, the said property became the property of the latter as his additional inheritance and not a donation from them which would render them liable to pay the donor's tax. In connection therewith, you now request for a ruling that the renunciation by the above-mentioned heirs of their respective inheritance in favor of their co-heir is not subject to donor's tax. 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 by one or more heirs (Arts. 1050, 1051, 1016, New Civil Code). Considering that in the instant case, when the above-mentioned heirs waived their share in the property, which they have inherited from their sister or aunt, as the case may be, in favor of Rolando B. Ferrer, who is a co-heir with respect to Teresita F. Torres, Celia F. Fortuny, Norma F. Manalese, Carmencita F. Fabros and Myrna F. Lavarez accretion had in fact took place in favor of Rolando B. Ferrer and the renounced share was added or incorporated to his share. Accordingly, when the co-heirs of Rolando B. Ferrer renounced their share in the inheritance, they did not donate the property which had never became their own. Such being the case, the renunciation is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. However, with respect to Isaias A. Ferrer and Leonardo A. Ferrer, who are the brothers of the late Lourdes A. Ferrer, the disposition of their share in the said property in favor of Rolando B. Ferrer was made out of liberality subject to donor's tax imposed under Section 98 of the said Code, since they are not co-heirs but heirs of different degree as that of the latter. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)