Internal Revenue Tax Case of Mrs. Angelina Oasan Vda. de Fernandez and Estela Fernandez

November 03, 1959 BIR RULING NO. 619-59 The Regional Director B.I.R. Regional District No. 3 M a n i l a S i r : There is returned herewith the entire docket covering the internal revenue tax case of Mrs. Angelina Oasan Vda. de Fernandez and Estela Fernandez, involving the amounts of P63.34 and P53.68 as donor's and donee's gift taxes, respectively, for the year 1949. cdtech It appears from the records of this case that one Susana Fernandez died intestate on February 11, 1945 in Manila, leaving her mother, Mrs. Angelina Oasan Vda. de Fernandez, as her sole forced heir. By an affidavit of adjudication executed on June 28, 1949, the said heir adjudicated unto herself the only property left by the deceased consisting of one-half () of a parcel of land covered by TCT No. 2232 situated in the Municipality of Angadanan, Province of Isabela, and with a fair market value of P2,222.94. For a consideration of P1.00, Mrs. Angelina O. Fernandez conveyed to one of her daughters, Estela O. Fernandez, the aforementioned property, giving rise to the donation in question. This conveyance or donation was contained in the same affidavit of adjudication which was filed with this Office together with an Estate and Inheritance Tax Return on July 5, 1949. On the basis of the return filed, the estate of the late Susana Fernandez was provisionally assessed at P46.06 as inheritance tax inclusive of the penalties incident to delinquency. No estate tax was found due and collectible, it appearing that the estate had only a fair market value of P2,820.00 per the estate and inheritance tax return filed or P2,220.94 as per the result of the investigations conducted by the examiners of the Bureau of Internal Revenue. Accordingly, the aforementioned assessment was paid under Inheritance Tax Receipt No. 18508 and Estate Tax Receipt No. 1004 both issued on August 15, 1949. However, with regard to the donation, the records do not show any return filed by the donor nor the donee. Since July 5, 1949, the Bureau of Internal Revenue did not issue any assessment except those which were issued on November 19, 1958 in the amounts of P63.34 and P53.68 as donor's and donee's gift taxes, respectively. In the disposition of this case, the following issues are submitted for our resolution: 1. Whether or not the affidavit of adjudication filed in this case may be considered a return, for gift tax purposes. 2. Whether the Government's right to assess and collect taxes in this case has not yet prescribed. We agree with you in your contention that the said affidavit of adjudication has sufficiently served the purpose for which a return is so intended, namely, that of serving as basis for the determination of the correct amount of gift taxes that might be due. In fact, the Office assigned to said document a gift tax index number, Gift A-775-49, and referred the same for examination on July 12, 1949. We proceed to resolve the second issue on the theory that the affidavit of adjudication which was filed with this Office on July 5, 1949 maybe considered as a return. Pursuant to sections 331 and 332 of the Tax Code, the Commissioner of Internal Revenue can assess the donation in this case, for gift taxes if any, within five years from the date the affidavit of adjudication was filed or only until July 5, 1954 and to effect the collection of whatever taxes are found due also within five years from the date of such assessment. Obviously, the requirements of sections 331 and 332 of the Tax Code must be followed punctiliously for a valid assessment and collection of taxes. The only assessment for gift taxes against the donor and donee was issued on November 19, 1958 or more than 5 years from the filing of the affidavit of adjudication, making the said assessment illegal and void. A void and illegal assessment is no assessment at all. Consequently, due to the considerable length of time that has already elapsed, the Government's right to assess and collect gift taxes in this case has already prescribed. In view of the foregoing considerations, this Office is of the opinion that the assessments made against Mrs. Angelina O. Fernandez and Estela Fernandez, in the amounts of P63.34 and P53.68 as donor's and donee's gift taxes, respectively, should be cancelled and this case closed. aisadc Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue