129 LORENZO vs. POSADAS JR.

G.R. No. L-43082 June 18, 1937

FACTS: Thomas Hanley died, leaving a will and a considerable amount of real and personal
properties. Proceedings for the probate of his will and the settlement and distribution of his
estate were begun in the CFI of Zamboanga. The will was admitted to probate.
The CFI considered it proper for the best interests of the estate to appoint a trustee to
administer the real properties which, under the will, were to pass to nephew Matthew ten
years after the two executors named in the will was appointed trustee. Moore acted as
trustee until he resigned and the plaintiff Lorenzo herein was appointed in his stead.
During the incumbency of the plaintiff as trustee, the defendant Collector of Internal
Revenue assessed against the estate an inheritance tax, together with the penalties for
deliquency in payment. Lorenzo paid said amount under protest, notifying Posadas at the
same time that unless the amount was promptly refunded suit would be brought for its
recovery. Posadas overruled Lorenzo’s protest and refused to refund the said amount.
Plaintiff went to court. The CFI dismissed Lorenzo’s complaint and Posadas’ counterclaim.
Both parties appealed to this court.
ISSUES:
1. When does the inheritance tax accrue and when must it be satisfied?
2. Should the inheritance tax be computed on the basis of the value of the estate at the
time of the testator’s death, or on its value ten years later?
3. In determining the net value of the estate subject to tax, is it proper to deduct the
compensation due to trustees?

HELD:
1. The accrual of the inheritance tax is distinct from the obligation to pay the same.
From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow
that the obligation to pay the tax arose as of the date. The time for the payment on
inheritance tax is clearly fixed by section 1544 of the Revised Administrative Code as
amended by Act No. 3031, in relation to section 1543 of the same Code.
2. If death is the generating source from which the power of the estate to impose
inheritance taxes takes its being and if, upon the death of the decedent, succession
takes place and the right of the estate to tax vests instantly, the tax should be
 measured by the value of the estate as it stood at the time of the decedent’s death,
regardless of any subsequent contingency value of any subsequent increase or
decrease in value
3. A trustee, no doubt, is entitled to receive a fair compensation for his services. But
from this it does not follow that the compensation due him may lawfully be deducted
in arriving at the net value of the estate subject to tax. There is no statute in the
Philippines which requires trustees’ commissions to be deducted in determining the
net value of the estate subject to inheritance tax