Inclusion of the Shares of Deceased Spouses Carriedo in the Decedents' Gross Estates

January 27, 1958 BIR RULING NO. 063-58 2nd Indorsement Respectfully returned, thru the Revenue Operations Executive (Assessment) to the Chief, Income Tax Division B.I.R., Manila, the within papers bearing on the transfer tax cases of the estates of the late spouses Pedro S. Carriedo and Asuncion San Jose de Carriedo, for further action. LLphil This Office is of the opinion that the supposed transfers of 1200 shares of stock of the P.S. Carriedo e Hijos, Inc. by decedent Pedro S. Carriedo to his children in 1949 and 1950 did not constitute valid and completed gifts inter vivos of conjugal property, and accordingly, the value of such shares should form part of the decedents gross estates when they died in 1953. "In order to constitute a gift, there must be, on the part of the donor, an intent to give, and a delivery of the thing given, to or for the donee, in pursuance of such intent, and on the part of the donee, acceptance. . . "Delivery may be either actual, symbolical, or constructive, but must be such as to divest the donor of the possession, control and dominion over the thing given ". In re Babcock's Estate, 147 N.Y.S. 168, affirmed 153 153 N.Y.S. 1105; Essie Irene Gaffney v. Commissioner of Internal Revenue, 36 B.T.A. 610 (Emphasis supplied.) "It will thus be seen that whereas some cases hold that delivery of a deed is sufficient to transfer title to stock, and some that delivery of the certificates themselves is essential, they all agree that there must be an intent on the part of the donor to pass title. Where the donor retains the power to control the property which is the subject matter of the gift, the gift is not completed until she has put it out of her power to exercise such control . . ." (Kate R. de Forest v. Commissioner of Internal Revenue. 27 B.T.A 373, 376; Emphasis supplied). It appears that the heirs' sole argument in claiming that these shares of stock were donated to them is that they were properly indorsed by the deceased (Pedro S. Carriedo), thereby effecting valid transfer thereto during his lifetime, that is, in 1949 and in 1950". The argument, however, loses force in the face of the following facts: (1) the personal book of the late Pedro S. Carriedo failed to indicate the transfer of said shares or the reduction of his total shares by the allegedly donated shares and (2) the new certificates of stock which cancelled the supposedly donated shares were irregularly issued and recorded in the stock and transfer book of the corporation. Furthermore, the 1200 shares of stock in question have always been declared by the heirs as part of the decedents' estates in both the original and amended returns filed for said estates. It was only in 1956, during the course of the verification of the returns by the examiner of this Office, that the heirs changed their stand when they claimed that these shares were donated to them during the lifetime of the decedents, and filed the corresponding gift tax returns. LLjur It can thus be seen from the foregoing that the belated claim of a valid and completed gift inter vivos is not supported by the facts and circumstances surrounding the alleged transfer. As already noted hereinabove, a valid and completed gift inter vivos requires certain specific acts of both the donor and the donee. There must be clear and unmistakable intention on the part of the donor to divest himself of title, dominion and control of the subject matter of the gift, absolutely and irrevocably, and the donee, must have accepted the gift in accordance with law and exercised the rights of ownership over the donated property. These factors are obviously not present in the alleged transfer. In fact the treatment of the shares by the transferor after the alleged indorsement as well as the declarations in the returns by the heirs contradict their claim of gifts inter vivos . There is even the likelihood that the alleged indorsements were completed after the decedents' death (see the dates thereof). It may also be stated in this connection that the filing of gift tax returns only after assessment and part payment of the estate and inheritance taxes demanded by the Bureau of Internal Revenue is looked upon with distrust. (Tang Ho., etc. as Heirs of Li Seng Giap vs. B.T.A., et al., G.R. No. L-5949, November 19, 1955). It is, therefore, requested that the value, of the shares in question be included in the decedents' gross estates for estate and inheritance tax purposes. Deficiency assessment notices should be issued before September 17, 1958 in the case of the late Pedro S. Carriedo and April 1, 1959 in the case of the late Asuncion S. de Carriedo, in order to avoid the 5-year prescriptive period under Section 331 of the Tax Code. cdta (SGD.) JOSE ARAAS Commissioner of Internal Revenue