BIR Ruling No. 039-63

April 26, 1963 BIR RULING NO. 039-63 MEMORANDUM FOR: The Chief, Income Tax Division (Thru the Revenue Operations Head (Assessment) This is in connection with the internal revenue tax case of the estate of the late Mrs. Rita F. Schrader, which was the subject of the letters of J.A. Rieche & Co., Inc. 1920 Chestnut St., Philadelphia 3, Philadelphia, U.S.A. dated September 20, 1962 and November 9, 1962, respectively. LLphil It appears that Mr. John J. Schrader and the late Mrs. Rita F. Schrader, husband and wife, were owners of 200 shares of stock of the Atok Big Wedge Mining Company, registered in their names as Joint Tenant with Right of Survivorship. Mrs. Schrader died in Philadelphia on July 2, 1953. After her death, Mr. Schrader sold the said 200 shares of stock. However, before making the necessary transfer in favor of the vendees, a question is posed for our consideration and resolutions, viz: whether or not the acquisition by Mr. Schrader, as sole owner, of the entire 200 shares of stock originally held by him and the late Mrs. Schrader as joint tenants with right of survivorship, is subject to Philippine estate and inheritance taxes? Now, for estate and inheritance tax purposes, we should first determine whether under such circumstances, there was really an actual transmission of shares by inheritance from the late Mrs. Schrader to her husband upon the death of the Former. If so, up to what extent? If, as represented, the shares in question were really held by the spouses as joint tenants with right of survivorship, we should apply the national law of the decedent (Article 16, New Civil Code) which in this case ought to be the law of the State of Philadelphia (see Aznar vs. Garcia, L-16749, prom. Jan. 31, 1963), the question involved being one of inheritance and succession. Under the joint tenancy with right of survivorship law, the surviving co-owner is subrogated in the rights of the deceased co-owner immediately upon the death of the latter, by the mere fact of said death (Mette vs. Feltgen (148 III. 357,371). For this reason, when the joint tenants are still living, not one of them can dispose of his share or interest in the property which is the subject matter of the joint tenancy, without the consent of the other co-owner because in so doing he prejudices the other's rights and interest. (Cited in the case of Lagarao vs. Garcia, 61 Phil. 5). In joint tenancy, the rights of the joint tenants are inseparable. Upon the death of a joint tenant, the surviving tenant becomes the sole owner of the property which is the subject matter of the joint tenancy, not by inheritance but by operation of the law on joint tenancy with rights of survivorship. Accordingly, this Office believes and so holds that the transmission and acquisition under such circumstances will not be subject to estate and inheritance taxes. In view of the foregoing considerations, all the papers (12 sheets enclosed) relative to this case are, therefore, returned to you with the instruction that immediate investigation should be conducted for the purpose of ascertaining the veracity of taxpayer's allegation that the shares in question were held by Mr. John J. Schrader and the late Mrs. Schrader as joint tenants with right of survivorship. In the affirmative, the inheritance tax assessed against Mr. John J. Schrader should be withdrawn and cancelled. LLjur (SGD.) JOSE B. LINGAD Acting Commissioner of Internal Revenue