BIR Ruling [UN-136-94]

April 12, 1994 BIR RULING [UN-136-94] Atty. Jesus M. Gonzales Counsel for the Judicial Administrator of the Estate of the Late Jose P. Fernandez Room 205, Maritima Building 117 Dasmarias Street, Manila S i r : In reply to your letter dated December 12, 1991, please be informed that in letters dated July 23 and August 16, 1991, Atty. Rafael Dizon, the Judicial Administrator of the Estate of the late Jose P. Fernandez c/o Mr. Carlos P. Fernandez, Compaia Maritima Bldg. 205 Juan Luna St., Manila, was notified of the findings of this Office relative to the deficiency estate tax liability of the Estate of the late Jose P. Fernandez involving the amount of P66,973,985.40 for the year 1987, and that if he is not agreeable to the said findings, he can go over the records of the case and submit documentary evidence to support his objection against the proposed assessment. However, Atty. Rafael Dizon or his authorized representative did not appear to present his objection and/or submit documentary evidence to support his objection against the proposed assessment. Moreover, in your said letter of December 12, 1991 protesting the aforementioned assessment, you did not specifically state your objection to the said assessment. Your protest simply states that "considering the fact that the assessment was issued without giving us the chance to present our side and submit the necessary documentary evidence in support of the legal deductions from the gross estate, we request that the above assessment be recalled and that the same be referred back for reinvestigation and/or reverification" which is not true since the records of the case disclosed that you were notified on July 23, and August 21, 1991 of the findings of this Office. However, a query was posed by the then Chief, Banks, Financing & Insurance Division as to whether in the computation of the net estate of the decedent, the claims against the estate of Banque De L' Indochine Et De Suez and Equitable Banking Corporation in the respective amounts of US$4,828,905.90 (the peso equivalent of which is P100,909,646.59) and P19,756,428.31 is allowable only to the extent of the settlement amount of P20,000,000.00 and P4,000,000.00 respectively which was the amount paid by Fernandez Hermanos, Inc. to the said claimants and which amounts it will seek reimbursement from the estate. The allow allows the deduction from the gross estate to arrive at the taxable net estate, of claims against the estate. The "claims against the estate" which the law allows as deduction from the gross estate are existing claims against the estate (Secs. 79(a) (10 (C), Tax Code, as amended.) In the instant case, the claims against the estate of the decedent by Fernandez Hermanos, Inc. is only to the extent of P20,000,000.00 and P4,000,000.00. the settlement amount which it paid to Banque De L' Indochine Et De Suez and Equitable Banking Corporation because the said amounts are the existing claims against the estate. Thus, the stand taken by this Office that the allowable claims against the estate is to the extent of P20,000,000.00 and P4,000,000.00 respectively is correct. In view thereof, you are requested to urge the Judicial Administrator of the estate to pay to this Office thru the Chief, Law Division, Room No. 704, 7th Floor, BIR NOB, Diliman, Quezon City, the aforementioned deficiency estate tax liability of the Estate of the late Jose P. Fernandez in the amount of P66,973,985.40 representing deficiency estate tax for the year 1987 within thirty (30) days from receipt hereof otherwise this Office will enforce collection thereof through the summary remedies prescribed by law. This constitute the final decision of the Office in this case. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue