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8/9/2019 Tax Digests for January 30
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8/9/2019 Tax Digests for January 30
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Liability to pay tax may arise at a certain time and the tax may be paid within another given time. The
mere failure to pay ones tax does not render one delinquent until and unless the entire period has
elapsed within which the taxpayer is authorized by law to make such payments without being subjected
to the payment of penalties for failure to pay his taxes within the prescribed period.
The mere fact that the estate of the deceased was placed in trust did not remove it from the operation
of our inheritance tax law or exempt it from the payment of the inheritance tax. The corresponding
inheritance tax should have been paid on or before March 10, 1924, to escape the penalties of the law.
This is so for the reason already stated that the delivery of the estate to the trustee was in esse delivery
of the same estate to the cestui que trust, the beneficiary in this case.
On the case of Lim Co Chui vs Posadas, the fact that riots prevented the plaintiffs from paying their
internal revenue tax on time does not authorize the CIR to extend time prescribed for the payment and
to accept them without the additional penalty. Modes adopted to enforce the taxes levied should be
interfered with as little as possible.
Barrera,J.
Collector vs Fisher
Facts:
Walter G. Stevenson was born in the Philippines on to British parents and married in Manila to Beatrice
Mauricia Stevenson, another British subject. He died on Feb. 22, 1951 in San Francisco, California where he and his
wife moved and established their permanent residence since May 10, 1945. He executed his will in San Francisco
which was duly probated in the Superior Court ofCalifornia. He instituted his wife as the sole heiress to all the
properties they acquired while residing in the Philippines. Ancillary administration proceedings were theninstituted in CFI Manila for the settlement of Stevensons estate in the Philippines. The CFI Manila probated
Stevensons will and Ian Murray Scott was appointed ancillary administrator. Scott then paid the necessary estate
and inheritance taxes.
Scott then filed two amended estate and inheritance tax returns, wherein he made claim for the following
deductions:
1) funeral expenses,
2) judicial expenses (administrators fee, attorneys fee, judicial and administration expenses),
3) real estate tax for 1951 on Baguio real properties,
4) claims by creditors against the estate,
5) 4% interest per annum on the tax allegedly overpaid for the period from Feb. 2 to 22, 1951,
6) deduction of P4000 from the gross estate of the decedent as provided for in Section 861(4) of the US Federal
Internal Revenue Code; and
8/9/2019 Tax Digests for January 30
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7) exemption from the imposition of estate and inheritance taxes on the 210,000 shares of stock in the Mindanao
other Lode Mines, Inc., in pursuance of reciprocity proviso of Section 122 of the NIRC.
The Court of Tax Appeals exempted the 210,000 shares of stock from taxation in accordance with the reciprocity
proviso. It also allowed the funeral and judicial expenses with regard to the administration of the estate, but
disallowed the P4000 exemption in the computation of the estate tax. Both parties appealed.
Issues:
y WON the estate can avail itself of the reciprocity proviso granting exemption from the payment of estate andinheritance taxes on the 210,000 shares of stock in the Mindanao Mother Lode - NO
y WON the estate is entitled to the deduction of P4000 allowed in Sec. 861 of the US IRC vis--vis Sec 122 of theNIRC - NO
y WON estate entitled to deduction of judicial and administration expenses, funeral expense, real estatetaxes, and the amount of indebtedness allegedly incurred by the decedent during his lifetime - YES
y WON estate entitled to the payment of interest on the amount it claims to have overpaid the government andto be refundable to it NO
The estate was made to pay tax on the expenses disallowed.
Rulings:
1. WRT to the reciprocity proviso, it is well-settled that foreign laws do not prove themselves in our jurisdictionand our courts are not authorized to take judicial notice of them. Like any other fact, they must be alleged and
proved. Reading Sec. 122 of the NIRC vis--vis Sec. 13851 of the California Inheritance Tax Law, the reciprocity
must be total, that is, the two states must both tax the same subject. In this case, the US does not tax
intangible personal property of its residents, but the Philippines does. If then a Californian is allowed to be
exempt from payment of income tax on his shares of stocks here in the Philippines, but a Filipino is not
exempt, the Filipino is still taxed on his shares of stocks in California, would result in a disadvantage for theFilipino.
2. The second issue has already been settled in Collector v. Lara, where the court ruled that only exemptions,not deductions, are subject to reciprocity claimed under Sec. 122 of theNIRC.
3. As to the third issue, the probate court allowed the named expenses to be deducted, and the tax court foundno basis for departing from the same. The SC sees no ground to reverse the finding of fact of the two courts,
that indeed, the expenses were actually incurred.
4. Respondents claim for interest on the amount allegedly overpaid, if any, actually results after arecomputation on the basis of this decision is hereby denied. In Collector v. St. Pauls Hospital, the Court held
that in the absence of statutory provision clearly or expressly directing or authorizing such payment, andnone has been cited by the respondents, the National Government cannot be required to pay interest.
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