Tax Liability of the Executor or Administrator or the Heirs of an Estate

May 18, 1959 BIR RULING NO. 281-59 Mr. Juliano B. Palisoc Urbiztondo, Pangasinan S i r : This has reference to your letter dated January 7, 1959, wherein you requested this Office to issue a ruling on the following query: cdta "Shall I and my brother as vendees of a single parcel of land included in the estate of the late Enrico Velasquez pay the estate and inheritance taxes due on the whole estate? Or, shall I and my brother pay only the estate and inheritance taxes proportionately due on the parcel of land we have acquired and which we now seek to register in the office of the Register of Deeds?" The executor or administrator or the heirs as the case may be, shall be primarily liable for the payment of the estate and inheritance taxes assessed against the estate. In this connection, we quote hereunder the pertinent provision of section 95 of the Tax Code: "(c) Liability for payment . The estate tax imposed by section eighty-five shall be paid by the executor or administrator before delivery to any beneficiary his distributive share of the estate. For the purpose of this Chapter, the term "executor or "administrator" means the executor or administrator or the decedent, or, if there is no executor or administrator appointed, qualified, and acting within the Philippines, then any person in actual or constructive possession of any property of the decedent. "The inheritance tax imposed by section eighty-six shall in the absence of contrary disposition by the predecessor, be charged to the account of each beneficiary, in proportion to the value of the benefit received, and in accordance with the scale fixed for the class or group to which he pertains: Provided , That in cases where the heirs divide extrajudicially the property left to them by their predecessor or otherwise convey, sell, transfer, mortgage, or encumber the same without paying the estate or inheritance taxes within the period prescribed in the preceding subsections (a) and (b), they shall be solidarily liable for the payment of the said taxes to the extent of the estate they have received." According to the afore-quoted provision of law, purchasers of inherited property are not liable to said taxes. Section 315 of the Tax Code, however, provides that internal revenue taxes shall be paramount to all other claims, charges and encumbrances on the property inherited. The statutory lien for taxes is not divested by a transfer of the property and the State can enforce the tax lien within the reglementary period of five years against the property, whether in the possession of the delinquent owner or purchaser. Moreover, pursuant to section 104 of the Tax Code, register of deeds shall not register in the registry of property any document transferring any part of the estate, unless evidence of payment of estate and inheritance taxes that might have been assessed against the estate is presented to him. Whether or not the whole or only a part of the inheritance is transferred, the deed of transfer shall not be accepted for registration unless the total taxes due on the inheritance is shown to have been paid. Accordingly, you and your brother are not primarily liable for the payment of the estate and inheritance taxes due on the estate of the late Enrico Velasquez. However, if you are willing to pay the tax corresponding to that part of the estate sold to you in order that you may secure the registration thereof, this Office does not object thereto. You are, therefore, advised to see the Provincial Revenue Officer thereat and cause to be computed the tax due and payable on that part of the inheritance sold to you. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue