Tax Liability of an Estate

January 13, 1958 BIR RULING NO. 116-58 Mr. Panfilo B. Villanueva Rm. 7 & 8, PhilAm Life Bldg. Lacson Street Bacolod City S i r : In reply to the queries propounded in your letter dated February 11, 1958, I have the honor to inform you as follows: LLpr 1. An income tax return should be filed by the estate on or before March 3, 1958, covering its income received during the year 1957, in accordance with Section 61, in relation to Section 45, both of the Tax Code. The said return should be filed in the name of the estate by the administrator or executor thereof. 2. The disposition or distribution of the estate's income rests entirely upon the sound discretion of the probate courts, and, ordinarily, this Office will not interpose any objection to such distribution as approved by the court. 3. The administrator or executor of the estate must file a return of the income of the estate notwithstanding the fact that the said income has been distributed to the heirs. The estate is entitled to a yearly exemption of P1,800.00 from its net income (Section 58, Tax Code). In computing the net income of the estate under administration, it shall be allowed the same deductions to which an individual is entitled. There shall also be allowed a additional deduction, the amount of the income of the estate for its taxable year, which is properly paid or credited during such year to any heir or beneficiary. The income paid or credited to the heirs or beneficiaries which was claimed as additional deduction by the estate shall be included in computing the net income of the receiving heir or beneficiary (Section 57(b), Tax Code). In the case of the estate referred to in your letter under reply, if the executor or administrator did not actually pay or credit the heirs during 1957 with the income of the estate, in accordance with an Order of the Court, the estate is not entitled to the additional deduction aforementioned. If the income of the estate will be paid or credited to the heir during 1958, the amount thereof can only be claimed as additional deduction of the estate when its 1958 income tax return is filed. cdll 4. The heirs who were paid or credited during the taxable year with income of the estate under settlement should include the amount received by or credited to them in their respective income tax returns be not less than P1,000.00 he received as his share from the income of the estate under administration is exempted from filing as income tax return. 5. The heir whose gross income from all sources for the taxable year is less than P1,800.00 is not required by law to file an income for the taxable year is the sum of P1,000.00 he received as his share from the income of the estate under administration is exempted from filing an income tax return. 6. Section 56, (3) of the National Internal Revenue Code provides that "income received by estates of deceased persons during the period of administration or settlement of the estate" shall be subject to income tax. The treatment of the amount of income of the estate distributed to the heirs is governed by Section 57 of the said Code. llcd Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue