Ruling on Transfer of Estate in Contemplation of Death

September 2, 1987 BIR RULING NO. 261-87 87 000-00 261-87 Gentlemen : This refers to your letter dated June 26, 1987 requesting a ruling on the following: "1. Can the Estate Owner legally transfer his properties to his Heirs during his lifetime in order to avoid paying Estate Tax? "2. Within how many years after an Estate owner transfers his properties to his Heirs can the transfer be considered in contemplation of death? (Mortis Causa) "3. Is it true that this provision of "transfer in contemplation of death" has recently been repealed or abolished by the new Government being one of the supposedly "repressive" decrees of the old Marcos Regime?" In reply thereto, I have the honor to inform you as follows: 1. A person can legally transfer or donate his properties to his heirs during his lifetime. The transferor-donor shall, however, be subject to the payment of the donor's tax pursuant to Section 101 of the Tax Code, as amended. The gift tax was enacted mainly to prevent the loss of revenue due to the practice of wealthy individuals of donating inter vivos or otherwise gratuitously disposing of their properties, during their lifetime for the purpose of reducing their estate and thus, avoid the payment of the estate tax upon their death. A gift tax is imposed to prevent avoidance of estate tax. 2. The law does not specify the number of years prior to a decedent's death within which a transfer can be considered in contemplation of death; 3. The provision on presumption on "transfer in contemplation of death" has been repealed by P.D. No. 1705. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner