Beltran Reyes-Beltran & Beltran Law Offices

June 9, 2009 BIR RULING [DA-(ET-008) 289-09] 85; DA-006-04; DA-607-07; DA-503-03; 039-99; 060-81 Beltran Reyes-Beltran & Beltran Law Offices Unit 1631, City & Land Mega Plaza ADB Avenue corner Grant Road Ortigas Center, Pasig City Attention: Atty. Roland B. Beltran Gentlemen : This refers to your letter dated November 27, 2008 requesting for a ruling that bank deposits including the corresponding interests of your client, Ana Distor-McGroarty are excluded from the gross estate of his brother Manuel C. Distor, Jr. and as such is not subject to estate tax. It is represented that Ana Distor-McGroarty is a Filipino citizen with Passport No. PP0028276 issued on September 14, 2004 by the Philippine Consulate General at San Francisco, California, United States of America (USA) and residing in 155 Donner Drive, Vacaville, California, USA and was married to the late James M. McGroarty, American citizen, who during his lifetime, secured a life insurance policy designating Ana Distor-McGroarty as the sole beneficiary. On February 13, 2008, James M. McGroarty died. Thus, after presentation of claim and submission of the required documents, the insurance company released the proceeds thereof to Ana Distor-McGroarty. Sometime in the last week of September 2008, Ana Distor-McGroarty instructed his brother Manuel C. Distor, Jr. with Tax Identification No. (TIN) 237-735-962, who is in the Philippines to open a Dollar Savings account in order that she can wire part of the money she received as sole beneficiary, and to thereafter invest a portion thereof to a Time Deposit and other high yielding money market ventures. On October 3, 2008, Manuel C. Distor, Jr., opened Dollar Savings Account No. 5400075674, with Banco de Oro (BDO) Universal Bank, Inc.-Chino Roces Ave. Branch, Makati City. On October 9, 2008, Ana Distor-McGroarty wired the amount of USD: Two Hundred Fifty Thousand ($250,000.00), to BDO Dollar Account No. 5400075674, instructing his brother, Manuel C. Distor, Jr., to hold the money in trust until such time that she returns to the Philippines and is physically present to transfer the money in her name. On October 14, 2008, the money wired by Ana Distor-McGroarty was credited to BDO Dollar Account No. 5400075674. In the morning of October 17, 2008, acting pursuant to the specific instructions of Ana Distor-McGroarty, the trustee Manuel C. Distor, Jr., transferred from BDO Dollar Account No. 5400075674 the amount of USD: Ten Thousand ($10,000.00) to a Time deposit under Certificate. No. 4312749; and another amount of USD: Twenty Thousand ($20,000.00) to BDO Trust Placement under Official Receipt No. 1675696. In the afternoon of October 17, 2008, or barely three (3) days from the time the money was wired and credited to BDO Dollar Account No. 5400075674, Manuel C. Distor, Jr. suffered a massive heart attack resulting to his death. The decedent died intestate and without an issue. The sole heir is the widowed mother who has acknowledged that indeed the money is rightfully owned by her daughter Ana Distor-McGroarty. The latter is claiming exclusive right and absolute ownership over the aforesaid dollar denominated accounts held in trust by her late brother, Manuel C. Distor, Jr. and that the trust property/money should be excluded from the gross estate of the said decedent. BDO however, refused to release in favor of Ana Distor-McGroarty the dollar denominated accounts unless the latter secures a definite ruling or opinion from the BIR to the effect that the money held in trust by the decedent is excluded from the latter's gross estate. acAIES In reply thereto, please be informed that pursuant to Section 85 of the Tax Code of 1997, the value of the gross estate of the decedent shall be determined by including the value at the time of his death all of his property, real or personal, tangible or intangible, wherever situated. Moreover, deposit account or the corresponding interest maintained by a decedent is deemed to be owned by him, but the said presumption may, nonetheless, be applied if there is evidence to the effect that the rightful ownership of the aforesaid deposit account does not pertain to said decedent. From the foregoing, it would seem that if there is an evidence controverting the above presumption, or there is a showing that the deposit account rightfully belongs to another, other than the one named in the account, then the balance of the said deposit should not be included in the gross estate of the deceased-depositor. In the instant case, it is claimed by Ana Distor-McGroarty, the sister of the deceased, Manuel C. Distor, Jr., that the above subject dollar account exclusively belongs to her. Thus, with the submission of documents that would substantiate her claim, the entire dollar account shall be declared to be that of Ana Distor-McGroarty's exclusive property, thereby no part of said account shall belong to the deceased depositor, Manuel C. Distor, Jr. and therefore should be excluded from the latter's gross estate and thus should not be subject to estate tax. Furthermore, under Section 1 of Presidential Decree (P.D.) No. 1246, amending Section 6 of Republic Act (R.A.) No. 6426, all foreign currency deposits made under the said Act, as amended by Presidential Decree (P.D.) No. 1035, as well as foreign currency deposits authorized under P.D. 1034, including interest and all other income or earnings of such deposits, are exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or non-residents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of non-residents, irrespective of whether or not they are engaged in trade or business in the Philippines. (BIR Ruling Nos. DA-607-07 dated December 3, 2007 and DA-503-03 dated December 15, 2003) Accordingly, the foreign currency bank deposit, including interest and all other income or earnings of such deposit made by Ana Distor-McGroarty and merely held in trust by her late brother, Manuel C. Distor, Jr. with BDO-Chino Roces Ave. Branch, Makati City in the amount of $250,000.00 under BDO Dollar Account No. 5400075674, as well as the Time Deposit under Certificate No. 4312749 which was transferred from the aforestated BDO Dollar Account No. 5400075674 and another amount of $20,000.00 to BDO Trust Placement under Official Receipt No. 1675696 are exempted from any and all taxes whatsoever, and moreover, should be excluded from Manuel C. Distor, Jr.'s gross estate. 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 void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service