BIR Ruling No. 173-84

November 6, 1984 BIR RULING NO. 173-84 101-114-80-173-84 Gentlemen : This refers to your letter dated March 28, 1984 requesting a ruling as to whether Land Bank Bonds in the principal amount of P238,000.00, with a total accumulated interest of P25,680.35 of the late Leonor Ilagan de Belen are subject to estate tax. In reply, please be informed that Section 166 of Republic Act No. 3844, as amended, otherwise known as the "Code of Agrarian Reforms of the Philippines", provides: "Sec. 166. Definition of terms . ... "(26) Tax Free in reference to the bonds and shares of stock issued by the Land Bank as payments for acquired private agricultural land shall mean all government taxes, except gift tax and inheritance tax." The inheritance tax was abolished, but the estate tax was retained by Presidential Decree No. 69, the effectivity of which was on January 1, 1973. On the other hand, the aforequoted provision was incorporated into the Code of Agrarian Reforms by Republic Act No. 6389, which became effective on September 10, 1971, a date prior to the date of the abolition of the inheritance tax. Thus, at the time of the adoption of the aforesaid definition, both the estate and the inheritance taxes were still in existence. The two were correlative taxes, they having been imposed on the right to transmit and to receive property by succession, respectively. Considering that at the time of the adoption of the aforequoted definition the existence of the inheritance tax in any particular case necessarily presupposes the corollary existence of the estate tax, it is our opinion that the reference to the "inheritance tax" in the aforequoted definition also includes correlative "estate tax".Such being the case, the principal amount and the interest of Land Bank bonds form part of the gross estate of the decedent for estate tax purposes. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner