Compromise Settlement or Abatement of Estate Tax or Donor's Tax Under Section 295 of the National Internal Revenue Code as Amended

June 14, 1983 REVENUE MEMORANDUM ORDER NO. 20-83 SUBJECT : Compromise Settlement or Abatement of Estate Tax or Donor's Tax Under Section 295 of the National Internal Revenue Code as Amended TO : The Revenue Service Chiefs (Sector Operations Collection Office, Legal Service and National Assessment Office) All Revenue Regional Directors, The Chiefs (Receivable Accounts Division and Sector Audit Review Division) All BIR Task Forces Implementing the Current Operation Linis Pursuant to Section 295 of the Tax Code and All Others Concerned It had been observed that estate tax or donor's tax cases are sometimes being compromised/abated on the ground that the taxpayer concerned is financially incapable of paying the assessed tax. Section 295 (b) of the National Internal Revenue Code, as amended, permits compromise settlement only when the taxpayer is clearly financially incapable of paying the tax: cd i "The Commissioner may - (1) compromise the payment of any internal revenue tax when . . . (b) the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax . . ." (Sec. 295 (b), NIRC, as amended). The taxpayer's financial predicament envisaged by the law may not be reasonably considered present in transfer tax cases since for estate tax purposes, there shall always be properties (hereditary estate) that sufficiently meet the estate tax obligation. In the same manner, financial incapacity cannot be alleged by the donor since donation is purely an act of liberality. No binding obligation rests upon the donor to gratuitously dispose his property. In view of the foregoing, all are advised not to pursue compromise settlement of transfer tax cases, if the taxpayer's application in this connection is solely premised upon the taxpayer's financial condition. cd i Immediate and strict compliance herewith is enjoined. RUBEN B. ANCHETA Acting Commissioner