Deductibility of the Net Share of the Surviving Spouse in the Conjugal Partnership Property

October 14, 1988 BIR RULING NO. 509-88 79 (e) 000-00 509-88 S i r : This refers to your letter dated July 14, 1988 stating as follows: "Silverio and Pedrita, Citizens of RP, husband and wife respectively, with five (5) legitimate children acquired real and personal properties during their marriage life. However, sometime in January 5, 1976, Pedrita died. The husband filed the Estate Tax Return for the estate left by his deceased wife which was at the time of death had a fair market value of the conjugal real property of P52,000.00, the valuation of which is in accordance with Presidential Decree No. 76 and personal property of P5,500.00. The funeral expenses incurred by them was P3,500.00. The Estate Tax Return showed that the heirs had limited their claim for funeral expenses to 5% of the gross estate. Since the properties are conjugal the share of Silverio, the husband was deducted to arrive at the net estate. The heirs paid the corresponding estate tax return. "In August 9, 1987, Silverio died leaving his share of the conjugal real property which had appreciated in value after the lapsed of exactly 11 years, 8 months and 4 days. But during the intervening period, the heirs failed to judicially partition the share of the previous decedent, Pedrita, of the conjugal real property. In other words, the estate remains intact up to the time of death of Silverio. The heirs of Silverio file his Estate Tax Return comprising the whole conjugal real property which had a total zonal valuation of P80,000.00 in accordance with RMO 3-87 dated June 3, 1987 and personal property valued at P6,500.00 and funeral expenses of P3,930.50." It is represented that the reviewer disallowed as deductions the 1/2 share of the heirs of the previous decedent whose estate tax had already been paid; that it is their contention that "the deduction thereof is not being supported by any provision of the Tax Code more specifically Title III Transfer Tax of Property, Chapter I"; and that you are of the opinion that the share of the heirs of the previous decedent is deductible since the same has already been taxed which is equivalent to 5/12 of the entire conjugal real property. In reply, please be informed that pursuant to Section 79(c) of the Tax Code, as amended, the net share of the surviving spouse in the conjugal partnership property as diminished by the obligations property chargeable to such property shall, for purposes of said Section, be deducted from the net estate of the decedent. Such being the case, and since in the instant case, the heirs of Pedrita had already paid the estate tax due on her estate when she died on January 5, 1976, it follows that even if the same remained intact up to the time of death of her husband, Silverio, on August 9, 1987, the same (share of Pedrita in the conjugal partnership property) should be deducted in the computation of the gross estate of Silverio. Accordingly, your opinion that the share of the heirs of the previous decedent (Pedrita) is deductible in the computation of the gross estate of her husband Silverio is hereby confirmed. aisadc Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner