De Leon and De Leon Law Office

July 23, 2008 BIR RULING [DA-(ET-004) 072-08] Sec. 91 (B); DA-342-2007 De Leon and De Leon Law Office Suite H, 2nd Floor, Heritage Building Aguinaldo Highway, Niog Bacoor, Cavite Attention: Atty. Ricardo T. de Leon, Jr. Counsel Gentlemen : This refers to your letter dated June 05, 2008 requesting on behalf of your client, the Heirs of Leonardo B. Salcedo, for an extension of one (1) year from July 28, 2008 to July 27, 2009 within which to pay the estate tax. It appears that the heirs of the late Leonardo B. Salcedo have been exerting their best efforts to finalize the extra-judicial settlement of the said estate. That in BIR Ruling No. DA-524-2006 dated August 31, 2006, the said estate was granted a two (2) years period counted from the last day of the 6-month period of filing the return which is July 29, 2006 or until July 28, 2008 within which to pay and file the estate tax return. Unfortunately, as of this date, the heirs have yet to finalize the partition of the properties comprising the estate of the said estate, thus there is a possibility that they may not be able to finish the partition and to pay the estate tax thereon on or before July 28, 2008. During the two-year extension granted to the heirs and while they were trying to determine how the estate will be partitioned, they discovered that the deceased secured an insurance policy from Philamlife Insurance specifically for the payment of the estate tax. The proceeds of the policy is in the amount of Seven Hundred Fifty Thousand Pesos (P750,000.00). In view of the possibility that the heirs will not be able to finalize the settlement of the estate of late Leonardo B. Salcedo on or before July 28, 2008, they are seeking an extension of one (1) year or until July 27, 2009 within which to finalize the partition of the estate and to pay the estate tax thereon. As a sign of good faith, the heirs are proposing, if possible, to make a partial payment of the estate tax, though the same is still undetermined as of this date, by paying the amount of Seven Hundred Fifty Thousand Pesos (P750,000.00) that will be covered by a check issued by Philamlife Insurance. IHDCcT In reply, please be informed that under Section 90 (B) and (C) of the Tax Code of 1997, as amended, 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 (5) years in case the estate is settled through the courts, or two (2) years in case the estate is settled extrajudicially pursuant to Section 91 (B) of the Tax Code of 1997, as amended. Considering that the estate of late Leonardo B. Salcedo is settled extrajudicially, an extension of time within which to pay the estate tax for a period of two (2) years was granted under BIR Ruling No. DA-524-2006 dated August 31, 2006. Accordingly, the estate tax due on the estate of late Leonardo B. Salcedo may be paid up to two (2) years counted from July 29, 2006 the last day prescribed by law within which to pay the said tax, or until July 28, 2008. Considering further, that the decedent died on January 29, 2006, said period had already lapsed. Such being the case, you are hereby directed to immediately file the estate tax return for the estate of late Leonardo B. Salcedo in order to stop the running of the interest for late filing thereof. With regard to your request to partially settle the estate due and pay the balance thereof within one (1) year or until July 27, 2009, this Office denies your request for lack of legal basis. The proposal of the heirs to make partial payment of the estate tax may be granted provided there shall be an imposition of the surcharge and penalties on the estate tax due on the transmission of the estate of late Leonardo B. Salcedo, and it shall be understood that the estate shall be liable for the corresponding interest that has accrued thereon up to the time of payment of the aforesaid estate tax pursuant to Section 249 of the Tax Code of 1997. 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. ISTCHE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service