Investigation of the Tax Liabilities of a Decedent's Estate Pending Court Determination of Legal Heirs

June 13, 1985 BIR RULING NO. 093-85 105 000-00 093-85 S i r : This refers to your letter dated September 29, 1984 requesting a ruling as to whether this Office can proceed with the investigation of the income and estate tax liabilities of the estate of a decedent, while the decision of the Supreme Court as to who are the legal heirs of the estate is still pending. Our reply thereto is in the affirmative. The estate tax return shall be filed within nine (9) months after the decedent's death; but if judicial testamentary or intestate proceedings shall be instituted for the settlement of the decedent's estate prior to the expiration of the said period, the return shall be filed within twenty-one (21) months after the decedent's death. (Sec. 105, Tax Code). As soon as practicable, after the return is filed, the Commissioner of Internal Revenue shall examine it and determine the correct amount of the tax due thereon. (Sec. 108. Ibid ) Moreover, estate tax is a tax on the right to transmit property at death and is measured by the value of the property. It accrues as of the date of death of the decedent, notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary. (Lorenzo vs. Posadas, 64 Phil. 353) Estate tax is in the nature of administration expenses payable out of any available funds of the estate; and if there be none, by converting any property into money for such purpose. On the other hand, if the estate prior to its being distributed to the heirs/beneficiaries derives income, the administrator should likewise file an income tax return for the estate pursuant to Section 61 of the Tax Code and pay the income tax due thereon, computed in accordance with Section 56 of the same Code. Said income tax return shall likewise be subject to investigation by the Commissioner of Internal Revenue without the necessity of waiting for the court's decision regarding the lawful heirs of the decedents. aisadc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner