Land Bank of the Philippines Bonds Can be Used by the Holder Thereof in Payment of Estate/Inheritance Taxes

May 5, 1996 BIR RULING NO. 056-96 77 000-00 056-96 Ms. Stevia Montinola-Ochoco Attorney-in-Fact, Intestate Estate of Spouses Jose and Hilaria Abaya 748 Real Street, Dumaguete City M a d a m : This refers to your letter dated March 18, 1996, stating that you are Attorney-in-Fact of the Estates of the late spouses Jose and Hilaria Abaya, whose real properties were covered by the Comprehensive Agrarian Reform Program (CARP) under the Compulsory Acquisition Scheme; that the Department of Agrarian Reform (DAR) through the Land Bank of the Philippines (LBP) valued the properties at Three Million Two Hundred Thirty Two Hundred Thirty Two Thousand Eight Hundred Fifteen Pesos & 10/100 (P3,232,815.10) as its fair and just compensation which you have accepted in your letter to DAR dated February 2, 1996; that the LBP will pay 25% of said value in cash and the remaining 75% in LBP bonds; that before final payment can be made by LBP owner-heirs, it is requesting that the estate/inheritance taxes as well as the real property taxes be paid; that the estate/inheritance taxes as computed by Revenue District No. 79, Dumaguete City amounts to P1,015,566.44 inclusive of interest, surcharge and compromise penalty for the Estate of Jose Abaya, who died on September 11, 1964, a resident of Bayawan, Negros Oriental, whose estate is subject to then estate and inheritance taxes; Estate of Hilaria A. Abaya who died on March 30, 1981 a resident of Bayawan, Negros Oriental; and Estate of Corazon Abaya Montinola who died on July 12, 1990 also a resident of Bayawan, Negros Oriental; that you can not pay the estate/inheritance taxes because it is a big amount and beyond your financial capacity; and that only two (2) of the properties are titled. cdpr In connection therewith, you are requesting opinion as to whether you can pay the estate/inheritance taxes of the Estate of spouses Jose Abaya & Hilaria Abaya with LBP bonds as well as for the waiver of the interest, surcharge and compromise penalties. In reply thereto, please be informed that under Section 18 of R.A. 6657 otherwise known as an Act Instituting a Comprehensive Agrarian Reform Program to Promote Social Justice and Industrialization, Providing the Mechanism for its Implementation; and For Other Purposes, LBP bonds may be used by the landowner, his successors in interest or his assigns, up to the amount of their face value, for any of the following: (i) Acquisition of land or other real properties of the government, including assets under the Asset Privatization Program and other assets foreclosed by government financial institutions in the same province or region where the lands for which the bonds were paid are situated; (ii) Acquisition of shares of stock of government-owned or controlled corporations or shares of stock owned by the government in private corporations; (iii) Substitution for surety or bail bonds for the provisional release of accused persons, or for performance bonds; (iv) Security for loans with any government financial institution, provided the proceeds of the loans shall be invested in an economic enterprise, preferably in a small and medium-scale industry, in the same province or region as the land for which the bonds are paid; (v) Payment for various taxes and fees to government : Provided, That the use of these bonds for these purpose will be limited to a certain percentage of the outstanding balance of the financial instruments: Provided, further, that the Presidential Agrarian Reform Council (PARC) shall determine the percentage mentioned above; (vi) Payment for tuition fees of the immediate family of the original bondholder in government universities, college, trade schools, and other institutions; (vii) Payment for fees of the immediate family of the original bondholders in government hospitals; and (viii) Such other uses as the PARC may from time to time allow. Such being the case, LBP bonds can be used by the holder thereof, in this case, the Estates of Spouses Jose Abaya and Hilaria Abaya in payment of their estate/inheritance taxes. However, since as alleged by you, the Estates of spouses Jose Abaya and Hilaria Abaya will only be paying the amount of P372,837.68 out of the total amount of P1,015,566.44 because said amount includes the estate tax liability of Corazon Abaya Montinola in the amount of P687,728.76, your request for waiver of interest, surcharge and penalties is therefore, hereby denied. cdll Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue