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October 4, 1996

BIR RULING NO. 103-96

78-00 000-00 103-96

Atty. Jerry F. Bantillan

(Counsel for the Heirs)

Bacolod City

S i r :

This refers to your letter dated April 2, 1996 requesting for a ruling as to

whether or not road lots and open spaces titled in the name of the decedent, Remberto

T. Jocson as owner and developer of a subdivision, including development costs are

includible in his gross estate for purposes of the estate tax. cdasia

It is represented that the decedent, Remberto T. Jocson a resident of Bacolod

City died testate on April 19, 1994 leaving among others, certain real properties

composed of subdivision lots registered in his name and intended for sale to the

public, all located in Bacolod City, Negros Occidental; that the bulk of these

subdivision lots have already been sold by the decedent while he was still alive,

except for around 13 subdivision lots; that as mandated by law the owner developer

has to provide roads and open spaces and other forms of subdivision development;

that a subdivision plan providing and delineating roads and open spaces was duly

approved and certificates of title thereto were issued in the name of the decedent; that

subdivision developments were undertaken, such as construction of drainage,

sewerage, lighting, water and other basic requirements; and that the aforementioned

lots and open spaces including the development costs were included in the gross estate

of the decedent in the computation and assessment of the estate tax by the BIR

Revenue District Office No. 77, Revenue Region No. 12, Bacolod City.

In reply, please be informed that estate tax is a tax imposed on the privilege of

the deceased person to transmit his estate at death to his lawful heirs and beneficiaries,

and is based on the decedents entire net estate which means his gross estate less

allowable deductions and specific exemptions as determined in accordance with

Sections 78 and 79 of the Tax Code as amended by R.A.. No. 7499. The value of the

Copyright 2014 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia 2013 2

gross estate of the decedent shall be determined by including the value at the time of

death of all property real or personal, tangible or intangible (Section 78, Tax Code, as

amended by R.A.. No. 7499). Based on this definition, the following are excluded

from the gross estate, viz: (1) Funeral expenses: (2) Judicial expenses for testate or

interstate proceedings; (3) Claims against the estate (debts of the estate); (4) Unpaid

mortgages upon, or any indebtedness in respect to property where the value of the

decedent’s interest undiminished by such mortgage or indebtedness, is included in the

gross estate; (5) Claims of the estate against insolvent persons (bad debts); (6) Taxes

owed by decedent; (7) Losses incurred during the settlement of the estate; (8) Property

previously taxed (vanishing deduction); (9) transfer for public purposes; and (10) Net

share of the surviving in the conjugal estate. (underscoring supplied).

Roads and open spaces which are required by law to be reserved/set aside by

the subdivision owners for the common use of the buyers of the subdivision lots and

the public in general do not form part of the transmissible properties/interest of the

decedent; hence, the value thereof are excluded in determining the taxable properties

of the decedent subject to estate tax. Considering that roads and open spaces are for

public use they are, in fact, government properties which cannot be transmitted to the

heirs by way of succession. Moreover, as represented the value of such roads and

open spaces was already factored, or included in the selling price of the lots; hence, all

the present and future buyers are considered the common owners thereof.

Based on the foregoing, roads and open spaces in the subdivision area adverted

to in your query should be excluded from the taxable gross estate of the decedent for

estate tax purposes.

This ruling is being issued on the basis of the foregoing facts as represented.

However, if upon investigation it will be disclosed that the facts are different, and/or

any of the requirements imposed in this letter are not complied with then this ruling

shall be considered null and void. cdll

Very truly yours,

LIWAYWAY VINZONS-CHATO

Commissioner of Internal Revenue