Whether Money Pursuant to a Trust Agreement is Subject to Estate Tax Considering that from the Document Itself it Shows that the Money Belonged to Mario J. Mendezona Given in Trust to the Heirs of Carmen Ozamiz, with the Death of Carmen Ozamiz as the Condition for Its Transfer to the Heirs

June 13, 1995 BIR RULING NO. 086-95 78 000-00 086-95 Atty. Julio H. Ozamiz 2/F Philamlife Building 1411 Benavidez St., Legaspi Vill. Makati, Metro Manila S i r : This refers to your letter dated January 4, 1995 stating that in April 1991, Mario J. Mendezona entered into a Trust Agreement with Far East Bank and Trust Co. at Manila involving an amount of P5,108,132.67 which under the Trust Agreement would be transferred and given to the heirs of Carmen F. Ozamiz upon her death; and that on July 12, 1994, Carmen F. Ozamiz died after a lingering illness. cdta Based on the foregoing representations, you are now requesting for a ruling on the following queries: "1. Is this money subject to Estate tax considering that from the document itself it shows that the money belonged to Mario J. Mendezona given in trust to the heirs of Carmen Ozamiz, with the death of Carmen Ozamiz as the condition for its transfer to the heirs? "2. If said money placed in trust is indeed subject to Estate Tax, who is liable for payment of said tax on the amount Mario J. Mendezona who, on the face of the document appears to have owned said money, or the Estate or Heirs of Carmen Ozamiz?" In reply, please be informed that your abovequoted queries are answered as follows: 1. Your first query is answered in the negative. Under Section 78 of the Tax Code, as amended, the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated. Accordingly, and -- Mario J. Mendezona is not the decedent and the money subject of the Trust Agreement between Mario J. Mendezona and Far East Bank and Trust Co. belongs to him with the condition that the said money will be transferred to the heirs of Carmen Ozamiz (the decedent) upon the death of the latter, the same is not part of the gross estate of the decedent; hence, not subject to the estate tax imposed under Section 77 of the Tax Code, as amended. However, Mario J. Mendezona is subject to the donor's tax imposed under Section 92(b) of the Tax Code, as amended, on the transfer of the money he placed in trust to the said heirs upon the death of Carmen Ozamiz. 2. Your second query is no longer relevant in view of the answer in your first query. casia Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue