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Collector of Internal Revenue vs.

Fisher may be allowed as deductions from the gross estate of decedent in order to arrive at the
value of the net estate.
GR. No. L-11622 January 28, 1961
Held: Yes.

DOCTRINE: Reciprocity must be total. If any of the two states collects or imposes or does As to the deductibility of the amount spent for notarization of the deed of extra-
not exempt any transfer, death, legacy or succession tax of any character, the reciprocity judicial settlement of estate- Explained the SC, administration expenses, as an allowable
does not work. deduction from the gross estate of the decedent for purposes of arriving at the value of the
net estate, have been construed by the federal and state courts of the United States [which
the law on allowable deductions from gross estate was copied!] to include all expenses
FACTS: "essential to the collection of the assets, payment of debts or the distribution of the property
to the persons entitled to it."
Walter G. Stevenson was born in the Philippines of British parents, married in Manila to
In other words, the expenses must be essential to the proper settlement of the estate.
another British subject, Beatrice. He died in 1951 in California where he and his wife
Expenditures incurred for the individual benefit of the heirs, devisees or legatees are not
moved to.
deductible. This distinction has been carried over to our jurisdiction. Thus, in Lorenzo
v.Posadas the Court construed the phrase "judicial expenses of the testamentary or intestate
In his will, he instituted Beatrice as his sole heiress to certain real and personal properties, proceedings" as not including the compensation paid to a trustee of the decedent's estate
among which are 210,000 shares of stocks in Mindanao Mother Lode Mines (Mines). when it appeared that such trustee was appointed for the purpose of managing the
decedent's real estate for the benefit of the testamentary heir. In another case, the Court
Ian Murray Statt (Statt), the appointed ancillary administrator of his estate filed an estate disallowed the premiums paid on the bond filed by the administrator as an expense of
and inheritance tax return. He made a preliminary return to secure the waiver of the CIR administration since the giving of a bond is in the nature of a qualification for the office,
on the inheritance of the Mines shares of stock. and not necessary in the settlement of the estate. Neither may attorney's fees incident to
litigation incurred by the heirs in asserting their respective rights be claimed as a deduction
In 1952, Beatrice assigned all her rights and interests in the estate to the spouses Fisher. from the gross estate.

Statt filed an amended estate and inheritance tax return claiming ADDITIOANL In this case, it is clear that the extrajudicial settlement was for the purpose of payment of
EXEMPTIONS, one of which is the estate and inheritance tax on the Mines shares of stock taxes and the distribution of the estate to the heirs. The execution of the extrajudicial
pursuant to a reciprocity proviso in the NIRC, hence, warranting a refund from what he settlement necessitated the notarization of the same. It follows then that the notarial fee of
initially paid. The collector denied the claim. He then filed in the CFI of Manila for the said P60,753.00 was incurred primarily to settle the estate of the deceased Pedro Pajonar. Said
amount. amount should then be considered an administration expenses actually and necessarily
incurred in the collection of the assets of the estate, payment of debts and distribution of the
CFI ruled that (a) the share of Beatrice should be deducted from the net estate of Walter, remainder among those entitled thereto. Thus, the notarial fee of P60,753 incurred for the
(b) the intangible personal property belonging to the estate of Walter is exempt from Extrajudicial Settlement should be allowed as a deduction from the gross estate.
inheritance tax pursuant to the reciprocity proviso in NIRC.
Deductible expenses of administration of the estate may include executor's or
ISSUE/S: Whether or not the estate can avail itself of the reciprocity proviso in the NIRC administrator's fees, attorney's fees, court fees and charges, appraiser's fees, clerk hire, costs
of preserving and distributing the estate and storing or maintaining it, brokerage fees or
granting exemption from the payment of taxes for the Mines shares of stock.
commissions for selling or disposing of the estate, and the like. Deductible attorney's fees
are those incurred by the executor or administrator in the settlement of the estate or in
RULING: NO. Reciprocity must be total. If any of the two states collects or imposes or does
defending or prosecuting claims against or due the estate.
not exempt any transfer, death, legacy or succession tax of any character, the reciprocity
does not work. As to the deductibility of attorney's fees in the Special proceedings- As a rule attorney's
fees in order to be deductible from the gross estate must be essential to the collection of
In the Philippines, upon the death of any citizen or resident, or non-resident with assets, payment of debts or the distribution of the property to the persons entitled to it. The
properties, there are imposed upon his estate, both an estate and an inheritance tax. services for which the fees are charged must relate to the proper settlement of the estate. [34
Am. Jur. 2d 767.] In this case, the guardianship proceeding was necessary for the
But, under the laws of California, only inheritance tax is imposed. Also, although the distribution of the property of the late Pedro Pajonar to his rightful heirs. It is noteworthy to
Federal Internal Revenue Code imposes an estate tax, it does not grant exemption on the point that PNB was appointed the guardian over the assets of the deceased. Necessarily the
basis of reciprocity. Thus, a Filipino citizen shall always be at a disadvantage. This is not assets of the deceased formed part of his gross estate. Accordingly, all expenses incurred in
what the legislators intended. relation to the estate of the deceased will be deductible for estate tax purposes provided
these are necessary and ordinary expenses for administration of the settlement of the estate.
SPECIFICALLY: Hence the attorney's fees of 50, 000 is deductible from the gross estate of the decedent.

Section122 of the NIRC provides that No tax shall be collected under this Title in respect
of intangible personal property
Dizon v CTA (Taxation)
(a) if the decedent at the time of his death was a resident of a foreign country which at the
time of his death did not impose a transfer of tax or death tax of any character in respect Dizon v CTA G.R. No. 140944 April 30, 2008
of intangible personal property of citizens of the Philippines not residing in that foreign
country, or FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the
(b) if the laws of the foreign country of which the decedent was a resident at the time of probate of his will was filed with Branch 51 of the Regional Trial Court (RTC) of
his death allow a similar exemption from transfer taxes or death taxes of every character in Manila (probate court). The probate court then appointed retired Supreme Court
respect of intangible personal property owned by citizens of the Philippines not residing in Justice Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon
that foreign country." (petitioner) as Special and Assistant Special Administrator, respectively, of the
Estate of Jose (Estate). Petitioner alleged that several requests for extension of the
On the other hand, Section 13851 of the California Inheritance Tax Law provides that period to file the required estate tax return were granted by the BIR since the
intangible personal property is exempt from tax if the decedent at the time of his death assets of the estate, as well as the claims against it, had yet to be collated,
was a resident of a territory or another State of the United States or of a foreign state or determined and identified.
country which then imposed a legacy, succession, or death tax in respect to intangible
personal property of its own residents, but either:. ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing the admission of
Did not impose a legacy, succession, or death tax of any character in respect to intangible the pieces of evidence which were not formally offered by the BIR; and
personal property of residents of this State, or
2. Whether the actual claims of the aforementioned creditors may be fully allowed
as deductions from the gross estate of Jose despite the fact that the said claims
Had in its laws a reciprocal provision under which intangible personal property of a non-
were reduced or condoned through compromise agreements entered into by the
resident was exempt from legacy, succession, or death taxes of every character if the
Estate with its creditors Or Whether or not the CA erred in affirming the CTA in the
Territory or other State of the United States or foreign state or country in which the latter's determination of the deficiency estate tax imposed against the Estate.
nonresident resided allowed a similar exemption in respect to intangible personal property
of residents of the Territory or State of the United States or foreign state or country of RULING:
residence of the decedent." 1. Yes. While the CTA is not governed strictly by technical rules of evidence, as
rules of procedure are not ends in themselves and are primarily intended as tools in
Cir v ca and pajonar the administration of justice, the presentation of the BIR's evidence is not a mere
Facts: Private respondent Josefina Pajonar was the guardian of the person of decedent procedural technicality which may be disregarded considering that it is the only
Pedro Pajonar. The property of the decedent was put by the RTC- Dumaguete, under the means by which the CTA may ascertain and verify the truth of BIR's claims against
guardianship of the Philippine National Bank via special proceeding, wherein 50, 000 was the Estate. The BIR's failure to formally offer these pieces of evidence, despite
spent therein for payment of attorney's fees. CTA's directives, is fatal to its cause

When the decedent died, instead of filing a estate tax return, PNB advised Josefina to extra-
judicially settle the estate of his brother. The decedent's estate was extra-judicially settled 2. Yes. The claims existing at the time of death are significant to, and should be
and the heirs paid an amount of 60, 753 for the notarization of the deed of extra-judicial made the basis of, the determination of allowable deductions. Also, as held
settlement of estate. in Propstra v. U.S., where a lien claimed against the estate was certain and
enforceable on the date of the decedent's death, the fact that the claimant
The private paid the estate tax, however, they were subsequently assessed of deficiency subsequently settled for lesser amount did not preclude the estate from deducting
taxes because the amount paid in the special proceeding [50, 000] and the notarization fee the entire amount of the claim for estate tax purposes. This is called the date-of-
[60, 753] cannot be claimed as a deduction to the decedent's estate. Private respondent paid death valuation rule.
the said taxes under protest. While the case is under review by the BIR, she filed a claim for
refund in the CTA which was granted.
Issue: whether or not the notarial fee paid for the extrajudicial settlement in the amount of
P60,753 and the attorney's fees in the guardianship proceedings in the amount of P50,000