BIR Ruling No. 089-11

March 21, 2011 BIR RULING NO. 089-11 Gregorio Rafael P. Bueta Administrator-Estate of Eugenia S. Perey 240 Santolan Road corner Perey St., San Juan City Sir : This refers to your letter dated April 27, 2010 requesting for a ruling as to whether the general renunciation made by the sole heir of the decedent, which made the four grandchildren the heirs next in line as the direct heirs, created a taxable event for which donor's tax should be paid. The facts as represented are as follows: Eugenia Siasoco Perey died on September 11, 2009. She is survived by her only daughter, MaryAnn P. Bueta, and her grandchildren by the said daughter, Gregorio Rafael, Genevieve Eugenie, Marla Dianne and Pierre Eusebius. In the course of settling the estate of the decedent, the sole heir MaryAnn intimated that she does not want to own or handle the only remaining property of the decedent, a property in Cubao, Quezon City, thereby renouncing her share in the estate of the deceased. To finally settle the estate, MaryAnn and the four grandchildren executed an extrajudicial settlement of the estate whereby MaryAnn unconditionally renounced her share in the said estate, and the grandchildren, being the heirs next in line, effectively became the heirs who received the inheritance and who had the duty to settle the estate. In reply, please be informed as follows: Section 11 of Revenue Regulations No. 2-2003 provides in part: "Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community after the dissolution of the marriage in favor of the heirs of the deceased spouse or any other person/s is subject to donor's tax whereas general renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent is not subject to donor's tax, unless specifically and categorically done in favor of identified heir/s to the exclusion or disadvantage of the other co-heirs in the hereditary estate. " (Emphasis supplied) ETCcSa The reason for this rule is that under the Civil Code in the event the nearest relative/s repudiates the inheritance, those of the following degree shall inherit in their own right and cannot represent the person/s repudiating the inheritance. Article 969 of the Civil Code reads: Art. 969. If the inheritance should be repudiated by the nearest relative, should there be one only, or by all the nearest relatives called by law to succeed, should there be several, those of the following degree shall inherit in their own right and cannot represent the person or persons repudiating the inheritance. Applying the abovementioned provision to the case at bar, the Cubao property will be transferred from the estate of Eugenia S. Perey directly to the grandchildren, pro indiviso. It is incorrect to construe that MaryAnn acquired the property from the estate and subsequently donated the same to her children. There can be no donation as the property was never transferred to MaryAnn. Since there is no donation, no donor's tax may be assessed on the transaction. This ruling is being issued on the basis of the foregoing facts as presented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue