BIR Ruling No. 395-12

June 13, 2012 BIR RULING NO. 395-12 Spouses Agripino Gestopa and Isabel Silario Gestopa, petitioner, vs. Court of Appeals and Mercedes Danlag y Pilapil, respondents, G.R. No. 111904 dated October 5, 2000; 000-00 Jonathan T. Tomagan 775-N Sevilla Street Binondo, Manila Gentlemen : This refers to your letter dated May 20, 2011 requesting for a legal opinion on the tax implications of the four (4) Deeds of Donation executed by the late Antonia T. Eway. The antecedent facts as represented are as follows: 1. The late Antonia T. Eway was able to acquire several properties, during her lifetime. Without any immediate heirs, she executed on November 19, 2005 four (4) Deeds of Donation. 2. The Deeds of Donation, to distribute her (Antonia T. Eway) real properties in favor of Paulina T. Teves, Jonathan T. Tomagan and Francisca T. Manglicmot, were denominated as Donations Mortis Causa. Except for the names of the DONEE and the real property to be donated, all the four (4) Donations Mortis Causa contain the same provisions, the pertinent portions of which are herein reproduced for easy reference: aHcDEC "That for and in consideration of the love and affection the DONOR has for the DONEE, the DONOR hereby TRANSFERS, GIVES and ASSIGNS unto the DONEE, her heirs and assigns, the properties described above, to take effect upon the DONOR'S demise , subject to the following conditions: (1) That the usufructuary rights over the above properties shall pertain to her during her lifetime; (2) That the DONEE shall not dispose of, or in any manner, encumber, the property herein donated during the lifetime of the said usufructuary. That the DONEE accepts this donation, and hereby expresses her gratefulness and thanks to the DONOR for her kindness and liberality. That further, the DONOR hereby reserves unto herself the right to possess and sell the hereinabove described realties, as the true owner thereof, before her death, without need of prior consent or approval by the DONEE. " (emphasis supplied) 3. Antonia T. Eway died on November 14, 2008. 4. In December 2008, you started collecting the required documents for the payment of Estate Tax but upon inquiry with the Revenue District Office (RDO) No. 54, Trece Martirez City, you were informed that the Deeds of Donations are subject to Donor's Tax. 5. Until the present day, because of the different interpretations between you and the RDO No. 54 on what taxes are applicable to the Deeds of Donation, tax returns have not been filed. Based on the foregoing representations, you are now requesting for a legal opinion on the applicable tax due from the Deeds of Donation executed by the late Antonia T. Eway. Further, you are requesting for a reduction in the penalty for the late filing and payment if the subject Deeds of Donation is subject to Estate Tax the cause of the delay is due to the contrary opinion of RDO 54. In reply, please be informed that crucial in resolving whether the donations was inter vivos or mortis causa is the determination of whether the donor intended to transfer the ownership over the properties upon the execution of the deed. In ascertaining the intention of the donor, all of the deed's provisions must be read together. 1 A review of the Deeds of Donation in its entirety reveals that Antonia T. Eway was the true owner of the subject real properties before her death. The donor reserve unto herself the right to possess and sell the realties, as the true owner thereof, before her death, without need of prior consent or approval by the donees. AECacS The transfer of the subject properties would only take effect upon the death of Antonia T. Eway, hence it is subject to Estate Tax. Although the Deeds of Donation are subject to Estate Tax, contrary to the opinion of RDO 54, we regret that we cannot reduce the penalty for the late filing and payment. It is well-settled that the government is not bound by the errors committed by its agents. Estoppel does not also lie against the government or any of its agencies arising from unauthorized or illegal acts of public officers. ( Republic of the Philippines vs. Heirs of Felix Caballero, G.R. No. L-27473, September 30, 1977) This is particularly true in the collection of legitimate taxes due where the collection has to be made whether or not there is error, complicity, or plain neglect on the part of the collecting agents. ( Caltex Philippines vs. COA, G.R. No. 92585, May 8, 1992) 2 This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Spouses Agripino Gestopa and Isabel Silario Gestopa, petitioner, vs. Court of Appeals and Mercedes Danlag y Pilapil, respondents, G.R. No. 111904 dated October 5, 2000. 2. Secretary of Finance vs. Oro Maura Shipping Lines, G.R. No. 156946, July 15, 2009.