1. BALAQUI v.

DONGSO

Facts: This is an appeal taken by the plaintiffs, Emiliana Balaqui and others, from the judgment of the Court of
First Instance dismissing their complaint that the gift to Dongso is void.The appellants dwelling on the words of
the fourth paragraph of the deed of gift just quoted, "does not pass title during my lifetime; but when I die, she
shall be the true owner of the two aforementioned parcels," contend that the gift in question is a
donation mortis causa, and, the requisites and conditions indispensable for a will, according to article 620 of the
Civil Code, being lacking is null and void.

However, Dongso contended that it is not a donation mortis causa , but donation inter vivos. Taking the deed
above quoted as a whole, it is observed, in the first place, that Hipolita Balaqui, wishing to reward Placida Dongso
for the latter's services since said Placida's childhood, who lived with her and was treated by her as a daughter,
she donated to her two parcels of land with their improvements; in the second place, it is noted that in the same
deed Hipolita Balaqui guaranteed to Placida Dongso and her heirs and successors, the right to said property thus
conferred. From the moment Hipolita Balaqui guaranteed the right granted by her to Placida Dongso to the two
parcels of land by virtue of the deed of gift, she surrendered such right; otherwise there would be no need to
guarantee said right. Therefore, when Hipolita Balaqui used the words upon which the appellants base their
contention that the gift in question is a donation mortis causa, the donor meant nothing else than that she
reserved of herself the possession and usufruct of said two parcels of land until her death, at which time the
donee would be able to dispose of them freely.Furthermore, there is nothing in the deed of gift to show that
said gifts was made by Hipolita Balaqui in favor of Placida Dongso in consideration of her own death.

Issue: WON the donation is a donation mortis causa.

Ruling: NO. As the donor guaranteed the right which she conferred on the donee by virtue of the deed of gift, wherein, in
recompense of the latter's good services to the former, she donates to her the two parcels of land with their
improvements, said gifts is inter vivos and irrevocable, and not mortis causa, notwithstanding the fact that the donor
stated in said deed that she did not transfer the ownership of the two parcels of land donated, save upon her death, for
such a statement can mean nothing else than that she only reserved to herself the possession and usufruct of said
property, and because the donor could not very well guarantee the aforesaid right after her death.

A donation mortis causa is made in consideration of death, without the donor’s intention to lose the thing conveyed or
its free disposal in case of survival, while a donation inter vivos is made without such consideration but out of donor’s
generosity.
2. Puig v. Peñaflorida, 16 SCRA 136
Facts:

Carmen Ubalde Vda. de Parcon died in the City of Iloilo, without forced heirs, leaving certain properties in the City
and province of Iloilo. She left a will and was survived by nephews and nieces, children of her predeceased brother,
Catalino Ubalde, and sister, Luisa Ubalde, married to Ariston Magbanua. Besides her will, the deceased had executed
two notarial deeds of donation. One, entitled DONACION MORTIS CAUSA, was executed on November 24, 1948, in
favor of her niece, Estela Magbanua. The deceased executed another deed of donation, also entitled "ESCRITURA DE
DONACION MORTIS CAUSA" in favor of the same donee, Estela Magbanua Peñaflorida, conveying to her three parcels
of land.

Defendants-appellants Estela Magbanua Peñaflorida, et al., insist that the reservation by the donor of the right to
dispose of the property during her lifetime in the deed of December 28, 1949 indicates that title had passed to the
donee in her lifetime, otherwise, it is argued, the reservation would be superfluous

Issue: Whether the donation is mortis causa.

Ruling:

Yes. A transfer mortis causa, being testamentary in nature, should be embodied in a last will and testament.
It is not a contract; it is a legacy. If not embodied in a valid will, the donation is void.

3. Bonsato vs CA

Facts: The case was initiated in the Court of First Instance of Pangasinan, by respondents Josefa Utea and other
heirs of Domingo Bonsato and his wife Andrea Nacario, both deceased. Their complaint (for annulment and
damages) charged that on the first day of December, 1949, Domingo Bonsato, then already a widower, had
been induced and deceived into signing two notarial deeds of donations in favor of his brother Juan Bonsato
and of his nephew Felipe Bonsato, respectively, transferring to them several parcels of land situated in the
municipalities of Mabini and Burgos, Province of Pangasinan, both donations having been duly accepted in the
same act and documents. Plaintiffs likewise charged that the donations were mortis causa and void for lack of
the requisite formalities. The defendants, Juan Bonsato and Felipe Bonsato, answered averring that the
donations made in their favor were voluntarily executed in consideration of past services rendered by them to
the late Domingo Bonsato; that the same were executed freely without the use of force and violence,
misrepresentation or intimidation; and prayed for the dismissal of the case.

After trial, the CFI rendered its decision finding that the deeds of donation were executed by the donor while
the latter was of sound mind, without pressure or intimidation; that the deeds were of donation inter
vivos without any condition making their validity or efficacy dependent upon the death of the donor; but as the
properties donated were presumptively conjugal, having been acquired during the coverture of Domingo
Bonsato and his wife Andrea Nacario, the donations were only valid as to an undivided one-half share in the
three parcels of land described therein. Thereupon the plaintiffs duly appealed to the Court of Appeals, assigning
as primary error the holding of the court below that the donations are inter vivos; appellants contending that
they were mortis causa donations, and invalid because they had not been executed with the formalities
required for testamentary disposition.

Issue: WON the donation is a donation inter vivos.

Ruling: Yes. None of the characteristics of mortis causa is discernible in the deeds of donation, executed by the
late Domingo Bonsato. The donor only reserved for himself, during his lifetime, the owner’s share of the fruits
or produce, a reservation that would be unnecessary if the ownership of the donated property remained with
the donor. Most significant is the absence of stipulation that the donor could revoke the donations; on the
contrary, the deeds expressly declare them to be “irrevocable”, a quality absolutely incompatible with the idea
of conveyances mortis causa where revocability is of the essence of the act, to the extent that a testator can
not lawfully waive or restrict his right of revocation.

Donations, being in the form of a will, are never accepted by the donees during the donor’s lifetime.
Acceptance is a requirement for donations inter vivos. Where the donation took effect immediately upon the
donee’s acceptance thereof and it was subject to a resolutory condition that the donation would be revoked
if the done did not fulfill certain conditions, the donation is inter vivos.

4. GREGG VS COMMISSIONER (US CASE)

FACTS:
This is an appeal by Barbara C. Gregg from a decree dismissing her petition seeking an abatement of a succession
tax, assessed by the respondent and paid by her, with respect to the death benefit, accumulated interest and
dividends received by her as the beneficiary under a retirement annuity contract which her husband, Donald
Gregg, had obtained from The Equitable Life Assurance Society of the United States (Society). This contract was
issued when Gregg was 52 years old. The society agreed to pay him a fixed annuity for life when he reached
sixty-five years of age or, in case he died before he reached that age, to pay a death benefit to his wife as the
beneficiary. Gregg died in the eighth contract year after having paid the society $19,200 in premiums. The
amount of the death benefit depended upon the amount paid in by Gregg.

The appellant contends that her right to receive the death benefit was so similar to the right of a beneficiary
under a life insurance policy to receive the proceeds that the receipt of the death benefit should come within
the principle of the two decisions last cited.

ISSUE: W/N the receipt by the beneficiary under this retirement annuity contract of the death benefit,
accumulated dividends and interest is subject to the succession tax.
RULING: YES
BOOK: Estate tax is laid neither on the property nor on the transferor or the transferee. It is as excise tax or
privilege tax and its object is to tax the shifting of economic benefits and the enjoyment of property from the
dead to the living.

A succession tax is imposed upon property passing by deed, grant or gift, except in cases of a bona fide purchase
for full consideration, made and intended to take effect in possession or enjoyment at or after the death of the
grantor or donor. The object of the statute is to tax the shifting of the economic benefits and enjoyment of
property from the dead to the living.

Our present inquiry is to determine whether the appellant derived any economic benefit from the annuity
contract which resulted from her husband’s death. He was building up a fund for the primary purpose of
acquiring monthly payments during the rest of his life after he had become sixty-five years of age. He was making
an investment for his own personal benefit. It was made in the expectation of living and not in contemplation
of death. It is true that the contract contained a provision for the payment of a death benefit, but that provision
was inserted in order that the annuitant should not lose all his investment if death came to him before annuity
payments became due from the society. An annuity is not an indemnity against loss by death like a life policy.

5. Burnett vs. Guggenhein 288 US 280

Facts: On June 28, 1917, the respondent, a resident of New York, executed in New Jersey two deeds of trust,
one for the benefit of his son, and one for the benefit of his daughter. The trusts were to continue for ten years,
during which period part of the income was to be paid to the beneficiary and part accumulated. At the end of
the ten-year period, the principal and the accumulated income were to go to the beneficiary, if living; if not
living, then to his or her children; and, if no children survived, then to the settlor in the case of the son's trust,
and in the case of the daughter's trust to the trustees of the son's trust as an increment to the fund. The settlor
reserved to himself broad powers of control in respect of the trust property and its investment and
administration. In particular, there was an unrestricted power to modify, alter, or revoke the trusts except as to
income, received or accrued. The power of investment and administration was transferred by the settlor from
himself to others in May, 1921. The power to modify, alter, or revoke was eliminated from the deeds, and
thereby canceled and surrendered, in July, 1925

In the meanwhile Congress had passed the Revenue Act of 1924 which included among its provisions of tax upon
gifts. 'For the calendar year 1924 and each calendar year thereafter ... a tax ... is hereby imposed upon the
transfer by a resident by gift during such calendar year of any property wherever situated, whether made
directly or indirectly,' the tax to be assessed in accordance with a schedule of percentages upon the value of the
property.

Issue: whether deeds of trust made in 1917, with a reservation to the grantor of a power of revocation, became
taxable as gifts under the Revenue Act of 1924 when in 1925 there was a change of the deeds by the cancellation
of the power.

Ruling: Yes. The dominant purpose of the law is to reach such transfers which are really substitutes for
testamentary dispositions and thus prevent the evasion of the estate tax. In most of these transfers, the
property remains substatially that of the transferor during his lifetime notwithstanding the transfer as he still
retains either the beneficial ownership or naked title to the property. Hence the transfer is essentially similar in
resprect to a transmission by testacy or intestacy upon the death of the decedent. The transfer inter vivos must
be absolute and outright with no strings attached whatsoever by the donor. A transfer of property by trust or
donation is not consummate until put beyond recall. A decision of the Court of Claims, Means v. United States,
39 F.(2d) 748, 69 Ct.Cl. 539, upholds the contention of the government that within the meaning of the act of
Congress the termination by a settlor of the power to revoke a trust is a transfer of the property and as such
subject to taxation.

6. 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 (Posadas)
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.
ISSUE:
(e) Has there been delinquency in the payment of the inheritance tax?

HELD: The judgment of the lower court is accordingly modified, with costs against the plaintiff in both instances
YES
The defendant maintains that it was the duty of the executor to pay the inheritance tax before the delivery of
the decedent’s property to the trustee. Stated otherwise, the defendant contends that delivery to the trustee
was delivery to the cestui que trust, the beneficiary in this case, within the meaning of the first paragraph of
subsection (b) of section 1544 of the Revised Administrative Code. This contention is well taken and is sustained.
A trustee is but an instrument or agent for the cestui que trust.

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?

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.
7. Corre vs. Tan Corre 200 Phil 321 (Residence)
FACTS: Petitioner (husband) filed a case against Defendant (wife) for legal separation. Defendant (wife) filed a
motion to dismiss on the ground that her husband is not a resident of the place where he filed the complaint.
The husband is an American citizen, resident of 114 North Ist Street, Las Vegas, Nevada, United States of
America; and for the purpose of filing and maintaining this suit, temporarily resides at 576 Paltoc, Santa Mesa,
Manila; the wife is a Filipino and resident of the municipality of Catbalogan, province of Samar, Philippines.
Section 1, Rule 5, of the Rules of Court provides that Civil actions in Courts of First Instance may be commenced
and tried where the Defendant or any of the Defendants resides or may be found, or where the Plaintiff or any
of the Plaintiffs resides, at the election of the Plaintiff.” From this rule it may be inferred that Plaintiff can elect
to file the action in the court he may choose if both the Plaintiff and the Defendant have their residence in the
Philippines. Otherwise, the action can only be brought in the place where either one resides.
ISSUE: Whether or not the Petitioner (husband) is a resident of the Philippines?
HELD: No. It the present case, it clearly appears in the complaint that the Petitioner is a resident of Las Vegas,
Nevada, U. S. A. while the Defendant is a resident of the municipality of Catbalogan, province of Samar. Such
being the case, Petitioner has no choice other than to file the action in the court of first instance of the latter
province. The allegation that the Petitioner “for the purpose of filing and maintaining this suit, temporarily
resides at 576 Paltoc, Santa Mesa, Manila” cannot serve as basis for the purpose of determining the venue for
that is not the residence contemplated by the rule. If that were allowed, we would create a situation where a
person may have his residence in one province and, to suit his convenience, or to harass the Defendant, may
bring the action in the court of any other province. That cannot be the intendment of the rule.
Indeed, residence as used in said rule is synonymous with domicile. This is defined as “the permanent home,
the place to which, whenever absent for business or pleasure, one intends to return, and depends on facts
and circumstances, in the sense that they disclose intent” (67 C.J., 123-124).

8. CROOKS v HASSELSON

FACTS: Benjamin H. Harrelson, a resident of Missouri, died testate in 1920, leaving within the state property
and assets which included real property valued at over $269,000. The CIR, upon review of the federal estate tax
return of the executors made under the Revenue Act of 1918, included the real property as a part of the gross
estate for the purpose of computing the tax. The executors paid $37,762.20, the amount attributable to the
value of the real property, and subsequently claimed a refund thereof on the ground that the value of the
decedent's real property having its situs in Missouri was not, under the law of that state and the terms of the
federal statute, properly subject to an estate tax, and the amount was therefore illegally assessed and
collected.

The estate having been closed and distributed and the executors discharged, plaintiffs (respondents
here), as sole beneficiaries and distributees, brought this action in a federal district court against the defendant
(petitioner here) to recover the amount so paid and claimed, together with interest. Defendant demurrered to
the complaint on the ground that the facts stated were not sufficient to constitute a cause of action. The district
court overruled the demurrer, and, defendant having declined to plead further, rendered judgment against him
for the sum claimed, with interest and costs.

ISSUE: W/N the CIR was right in including the real property as a part of the gross estate for the purpose of
computing the tax?
RULING: YES. (book) All properties and interests in properties of the decedent at the time of his death shall be
included in his gross estate. Where the decedent had, before his death, relinquished his interest in property,
he could not be deemed to have transmitted any interest in such property at his death.

A correct determination of the question presented requires consideration of the provisions of section 402 of
the Revenue Act of 1918, c. 18, 40 Stat. 1057, 1097, 1098, the relevant portion of which follows:

'Sec. 402. That the value of the gross estate of the decedent shall be determined by including the value
at the time of his death of all property, real or personal, tangible or intangible, wherever situated-
'(a) To the extent of the interest therein of the decedent at the time of his death which after his death
is subject to the payment of the charges against his estate and the expenses of its administration and
is subject to distribution as part of his estate.'

9. NATIVIDAD NAZARENO AND MAXIMO NAZARENO V. COURT OF APPEALS

Facts: During their marriage, Maximino Nazareno, Sr. and Aurea Poblete acquired properties in Quezon City.
After their death, Romeo, one of their children, filed an intestate case in the CFI of Cavite. He was thereafter
appointed as the administrator. In the course of the intestate proceedings, Romeo discovered that his parents
executed several deeds of sale in January 1970 conveying a number of real properties to his sister, Natividad.
One of the properties involved six lots in Quezon City. By virtue of the said deed, transfer certificates of title
were issued to Natividad. Among the lots covered was Lot 3-B which was occupied by Romeo and his wife, and
by his brother, Maximino, Jr. Natividad sold Lot 3-B to Maximino, Jr. When he found out of the sale, Romeo and
his wife locked Maximino, Jr. of of the house. As such, Maximino, Jr. filed an action for recovery of possession
and damages. The trial court ruled in favor of Maximino, Jr. which the Court of Appeals affirmed. Romeo in turn
filed for the annulment of sale against Natividad and Maximino, Jr on the ground of lack of consideration.
Natividad and Maximino, Jr. then filed a third-party complaint seeking the annulment of the transfer to Romeo
and cancellation of his title. During the trial, Romeo presented evidence to show that Maximino and Aurea never
intended to sell the six lots to Natividad and Natividad was only to hold the said lots in trust for her siblings.

Issue: Whether or not the subject properties of the Deeds of Sale are part of the estate of the deceased.

Ruling: Yes, the children never acquired ownership because the sale was void for lack of consideration. The sale
to a Natividad, one of the children, is deemed in trust for the other children of the deceased. The properties
should be collated as part of the estate. (Book): The estate of a deceased person is a juridical entity that has a
personality of its own. Judgment in a case binds only the parties therein and not thr estate of a deceased person
which might have been presented, at one time by one of the parties. To be sure, that case was for recovery of
possession based on ownership of Lot 3-B. The parties in that case were Maximino, Jr., as plaintiff, and the
spouses Romeo and Eliza, as defendants. On the other hand, the parties in the present case for annulment of
sale are the estate of Maximino, Sr., as plaintiff, and Natividad and Maximino, Jr., as defendants. Romeo and
Eliza were named third-party defendants after a third-party complaint was filed by Natividad and Maximino, Jr.
As already stated, however, this third-party complaint concerned Lot 3, and not Lot 3-B.
10. VILLOCINO VS. DOYON
Facts: This case was filed by the appellees to recover from the appellants the possession and ownership of two
parcels of land, which were conjugal properties of the appellee Marciana Villocino and Bartolome Rodriguez,
now deceased.
Without the knowledge of his wife, Rodriguez sold the Lot to the appellant Pedro Doyon. Rodriguez
made the sales even as his wife and son, Protasio Rodriguez, were seeking the Leyte Court of First Instance a
change of administration of the conjugal partnership.

Issue: Whether there is a ground to appoint the wife as the administrator of the conjugal properties.
Ruling: Yes. The administration of the conjugal partnership was transferred to appellee Villocino precisely
because the court found that the late Bartolome Rodriguez, who was living with a concubine, had fraudulently
disposed of their conjugal properties (among which were the lots in question) without the knowledge and
consent of his wife.
The court therefore hold that the sale of Lots to appellant Doyon are invalid to the extent that the rights
of appellee Villocino to one half are affected. The sales to appellants shall be deemed subject to the outcome
of the liquidation of the conjugal partnership and that, in the meantime, this condition should be noted in the
certificate of title.
11. CONFESOR v PELAYO

FACTS: Deogracias Umadhay, et al., respondents herein, filed an action for partition in the Court of First Instance
of Iloilo praying that a parcel of la known as Lot No. 3570 of the Cadastral Survey of Sta. Barbara, Iloilo, be
partitioned between them and the heirs of Juan Hingco, petitioners herein, in the proportion one-half each.

Petitioners interposed the defense that they were absolute and exclusive owners of the entire land and,
consequently, objected to the requested partition. After trial the court rejected petitioners' claim of exclusive
ownership and, accordingly, ordered that the land be divided in two equal parts, one part to belong to
respondents and the other part to petitioners.

Petitioners took the case to the Court of Appeals which in due time affirmed in toto the ruling of the trial court.
This decision having become final, the trial court, upon petition of respondents, issued a writ of execution
ordering respondents to be placed in possession of the portion of land adjudicated to them in the partition. To
this order petitioner interposed a vigorous objection contending that since in the dispositive part of the decision
of both the trial court as well as of the Court of Appeals nothing is provided that respondents were to be placed
in possession of the lot adjudicated to them the court could not amend the same by adding thereto a new
matter as was done by the trial court. Moreover, petitioners have a house of strong materials built, on the lot
adjudicated to respondents as well as other improvements in the form of crops of which they cannot be
deprived without the corresponding indemnity.

ISSUE: What is partition? What is the purpose of partition?

RULING: Partition is the separation, division, and assignment of a thing held in common among those to whom
it may belong. The thing itself may be divided, or its value. The idea of partition involves not only the setting
apart and division of a thing owned in common, but also the assignment or allotment of the respective shares
of parts of the heirs, so that they may enjoy and possess the same separately and exclusively. It is the purpose
of partition to put an end to the common tenancy of land or co-ownership. It seeks a severance of the
individual interest of each joint owners vesting in each a sole estate in specific property and giving to each
one the right to enjoy his estate without supervision or interference from the others. (book)

12. Cabuyao vs Caagbay

Facts:

Cabuyao alleged that he is the "lone compulsory heir" of the spouses Prudencio Cabuyao and
Dominga Caagbay, who died leaving the eleven (11) parcels of land, and that, although plaintiff had adjudicated
said properties to himself pursuant to section 1 of Rule 74 of the Rules of Court, the corresponding transfer
certificates of title could not be issued in his name because the original owner's duplicate certificates
were being ithheld by the defendants, who had also taken possession of said parcels of land, and
would continue unlawfully using the same and committing acts of dispossession thereof, unless enjoined by
the court.

Plaintiff filed, on June 12, 1952, an amended complaint, which the defendants sought to dismiss
upon the ground that "plaintiff has no legal capacity to sue," there being no allegation that
"plaintiff had been judicially declared lone compulsory heir" of the deceased spouses Prudencio Cabuyao
and Dominga Caagbay. It is not denied, that the lands in dispute belongs originally to the spouses
Prudencio Cabuyao and Dominga Caagbay, who were legally married; that plaintiff Damaso Cabuyao is
their "lone" legitimate child; and that the defendants are nephews and nieces of Dominga Caagbay,
except of Defendant Domingo Caagbay, who is her brother. TC dismissed the case as no action can be
maintained until a judicial declaration of heirship has been legally secured. MR denied.

Issue: W/n a judicial declaration of heirship should be first secured

Ruling:

No. Where there are two or more heirs, the whole estate of the decedent is, before its partition,
owned in common by such heirs, subject to the payment of debts of the deceased (Art 1078 NCC). From the
moment of death of the decedent, the heir, if there is only one, becomes the sole owner of the estate (Art
777 NCC). There is no need for judicial declaration of heirship. An affidavit of extrajudicial declaration suffices
to settle the entire estate of the decedent if the following conditions are present, namely, (a) that the decedent
left no debts; and (b) that the heirs and legatees are all of age, or the minors are represented by their judicial
guardian.

13. Collector v Fisher

FACTS: Walter Stevenson was born in the Philippines of British parents, married in Manila to Beatrice who was
also British. He died in 1951 in California where he and his wife moved to.

In his will, he instituted Beatrice as his sole heir to certain properties, among which are shares of stock in
Mindanao Mother Lode Mines.

Ian Murra Statt, the appointed ancillary administrator of his estate, filed an estate and inheritance tax return.
He made a preliminary return to secure the waiver of the CIR on the inheritance of the Mines shares of stock.

In 1952, Beatrice assigned all her rights and interests in the estate to the spouses Fisher.

Statt filed an amended estate and inheritance tax return claiming additional exemptions, one of which is the
estate and inheritance tax on the mines shares of stock pursuant to a reciprocity proviso in the NIRC. Hence,
warranting a refund from what he initially paid. The collector denied the claim. He then filed in the CFI of Manila
for the amount.

The CFI ruled that the ½ share of Beatrice should be deducted from the net estate of Walter and the intangible
personal property belonging to the estate of Walter is exempt from inheritance tax pursuant to the reciprocity
proviso under the NIRC.

ISSUE: Whether or not the estate can avail itself of the reciprocity proviso under the NIRC granting the
exemption from the payment of estate and inheritance taxes.

RULING: No. Reciprocity must be total. If any of the two states collects or imposes or does not exempt any
transfer, death, legacy, or succession tax of any character, the reciprocity does not work.

There is no "total" reciprocity between the Philippines and the state of California in that while the former
exempts payment of both estate and inheritance taxes on intangible personal properties, the latter only
exempts the payment of inheritance tax..

In the book: As a general rule, the situs of an intangible personal property is at the domicile or residence of
the owner. This is known as the principle of mobilia sequuntur personam. The principle, however, is not
controlling when it is inconsistent with express provisions of the statute or when jutice does not demand that
it should be, as when the property has in fact a situs elsewhere.
14. Burnet vs Brooks
Facts:
Respondent contested the determination of the CIR in including in the gross estate of decedent certain
intangible property. The decedent in this case was a subject of Great Britain and a resident of Cuba. The property
in question consisted of securities, bonds of foreign corporations and government, bonds of domestic
corporations and of a domestic municipality, balance of a cash deposit and stock in a foreign corporation. Some
of the securities, consisting of a stock certificate and bonds, were in the possession of decedent’s son in New
York City who collected the income and placed it to the credit of decedent in a New York bank.
None of the securities was pledged or held for any indebtedness. Finding these facts, the Board of Tax
Appeals decided that the property should be included in the decedent’s gross estate for the purpose of the
Federal estate tax
Issue: W/N the intangible property of the decedent should be included in his gross estate
Ruling:
No. Bonds, mortgages and certificates of stock are taxable at the place where they are physically
located.
As to tangibles and intangibles alike, it made the test one of situs, and we think it is clear that the
reference is to property which, according to accepted principles, could be deemed to have a situs in this country
for the purpose of the exertion of the federal power of taxation. Again, so far as the intention of the Congress
is concerned, we think that the principles thus impliedly invoked by the statute were the principles theretofore
declared and then held.
15. Collector vs Norton

Facts:

Respondents claim exemption from the inheritance tax on the transmission of intangible personal
properties of the deceased Lionel D. Hargis, an American citizen, in the Philippines. They rely on the reciprocity
provision contained in section 122 of the Tax Code, which according to them, finds its complement in section
13851 of the Revenue and Taxation Code of California, of which the deceased was a citizen and resident. Section
122 (b) relied upon by the respondents requires that "the laws of the foreign country * * * allow a similar
exemption."

Issue:

Whether or not respondents are exempt from inheritance tax

Held:

Yes.

Contrary to the petitioner's theory, "foreign country" as thus used may refer either to the Federal
Government or to the individual States of the Union like California; for each State of the United States is supreme
and independent, and has its own government with full powers of taxation and appropriation of the revenue
derived therefrom. Section 13851 clearly employs words allowing a similar exemption from transfers taxes or
death taxes in respect to intangible personal property of residents of the "territory or State of the United States
or foreign state or country." By express phraseology, it accurately contemplates, aside from territory or other
state of the United States, foreign state or country. Petitioner's contention, therefore, that the exemption in
said section was intended only for states or territories of the United States is untenable. Reciprocity exists also
with any "foreign state or country."

Moreover, as pointed out by the respondents, at the time of adoption of tbe National Internal Revenue
Code in 1939, the Philippines was a dependency of the United States and there were many nom-resident
Filipinos owning intangible personal properties in several states of the United States, and on the other hand
there were numerous American non-residents who owned similar properties here. The reciprocity involved was
undoubtedly conceived for their benefit.
A decedent’s intangible personal property may be subject to transfer taxes both in his place of domicile or
residence and in the place where such property has a situs or is located. In order to prevent multiplicity of
taxation, the Tax Code provides that the tax imposed by this Title shall be credited with the amounts of any
estate tax imposed by the authority of a foreign country, subject to limitation. No tax shall be imposed in respect
of intangible personal property of a citizen and resident of a foreign country (a) when the foreign country does
not imposed transfer tax of any character in respect of intangible personal property of citizens of the Philippines
not residing in that foreign country, or (b) when the foreign country imposes transfer taxes but grants similar
exemption from transfer taxes in respect of intangible personal property owned by citizens of the Philippines
not residing in that foreign country. The term “foreign country” may refer to the Federal Government or the
individual states of the United States. (BOOK)

16. Collector vs Antonio Campos Rueda – Reciprocal Exemption as to Intangible Personal Property

FACTS: Antonio Campos Rueda is the administrator of the estate of the deceased Maria Cerdeira. Cerdeira is a
Spanish national, by reason of her marriage to a Spanish citizen and was a resident of Tangier, Morocco up to
her death. At the time of her demise she left, among others, intangible personal properties in the Philippines.
The CIR then issued an assessment for state and inheritance taxes of P369,383.96. Rueda filed an amended
return stating that intangible personal properties worth P396,308.90 should be exempted from taxes. The CIR
denied the request on the ground that the law of Tangier is not reciprocal to Section 122 (now Section 104) of
the National Internal Revenue Code.

The case was elevated to the CTA which sided with Rueda. The CTA stated that the foreign country mentioned
in Section 122 "refers to a government of that foreign power which, although not an international person in
the sense of international law, does not impose transfer or death upon intangible person properties of our
citizens not residing therein, or whose law allows a similar exemption from such taxes. It is, therefore, not
necessary that Tangier should have been recognized by our Government order to entitle the petitioner to the
exemption benefits of the proviso of Section 122 of our Tax. Code."

ISSUE: Whether the exemption is valid.

RULING: YES.

The controlling legal provision as noted is a proviso in Section 122 of the National Internal Revenue Code. It
reads thus: "That no tax shall be collected under this Title in respect of intangible personal property (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 tax or death tax of any character in respect of intangible person property of the Philippines
not residing in that foreign country, or (b) if the laws of the foreign country of which the decedent was a
resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every
character in respect of intangible personal property owned by citizens of the Philippines not residing in that
foreign country."

It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line with
Pound's formulation that it be a politically organized sovereign community independent of outside control
bound by penalties of nationhood, legally supreme within its territory, acting through a government
functioning under a regime of law. A foreign country is thus a sovereign person with the people composing it
viewed as an organized corporate society under a government with the legal competence to exact obedience
to its commands.

Even on the assumption then that Tangier is bereft of international personality, the CIR has not successfully
made out a case. The Court did commit itself to the doctrine that even a tiny principality, like Liechtenstein,
hardly an international personality in the sense, did fall under this exempt category.

Book: Reciprocity in exemption does not require the foreign country to possess international personality in the
traditional sense. Thus, Tangier, Morocco was held to be “foreign countries: within the meaning of Section
108 of the Tax Code.
17. THE CIR vs DOMINGO DE LARA G.R. Nos. L-9456 and L-9481 January 6, 1958
FACTS:
Hugo H. Miller, an American citizen, was born in Santa Cruz, California, U.S.A., in 1883. In 1905, he came
to the Philippines. He worked for a book publisher and was stationed in the Philippines. In or about the year
1922, Miller lived at the Manila Hotel. His wife remained at their home in Ben-Lomond, Santa Cruz, California,
but she used to come to the Philippines for brief visits with Miller, staying three or four months. Miller also used
to visit his wife in California. He never lived in any residential house in the Philippines. After the death of his wife
in 1931, he transferred from the Manila Hotel to the Army and Navy Club, where he was staying at the outbreak
of the Pacific War. On January 17, 1941, Miller executed his last will and testament in Santa Cruz, California, in
which he declared that he was "of Santa Cruz, California". During the war, he was taken prisoner by the Japanese
forces in Leyte, and in January, 1944, he was transferred to Catbalogan, Samar, where he was reported to have
been executed by said forces on March 11, 1944, and since then, nothing has been heard from him. At the time
of his death in 1944, Miller owned several real properties in the Philippines and in the United States, along with
shares of stock in the PH and in the USA, and he was a resident of County of Sta Cruz, State of California, USA.

ISSUE: WON the administrator of the estate of Miller is entitled to tax exemption from intangible property found
in the Philippines?

HELD:
Yes. This exemption is allowed on all gross estate of non-residents of the United States, who are not
citizens thereof, irrespective of whether there is a corresponding or similar exemption from transfer or death
taxes of non-residents of the Philippines, who are citizens of the United States; and thirdly, because this
exemption is allowed on all gross estates of non-residents irrespective of whether it involves tangible or
intangible, real or personal property; so that for these reasons petitioner cannot claim a reciprocity. Reciprocity
in exemption does not require the foreign country to possess international personality in the traditional
sense. Thus, a state in the American Union is held to be a foreign country within the meaning of Section 108
of the Tax Code.

18. UNITED STATES vs WELLS ET. AL.

283 US 103; April 13, 1931

FACTS: John W. Wells, a resident of Menominee, Michigan, died on August 17, 1921. The Commissioner of
Internal Revenue assessed additional estate taxes, upon the ground that certain transfers by the decedent
within two years prior to his death, were made in contemplation of death and should be included in the taxable
estate under the provisions of section 402(c) of the Revenue Act of 1918. The amount of the additional tax was
paid by the executors under protest and claim for refund was filed. The claim having been rejected, the
executors brought this suit in the Court of Claims to recover the amount paid.

The decedent died at the age of seventy-three years; his wife and five children, three sons and two daughters,
survived him. When a young man he became interested in the business of acquiring and selling timber lands
and of manufacturing lumber. He continued in that business to the time of his death. In 1918, decedent
advanced to three of his children, Ralph W. Wells, Mrs. Edna Walsh, and Mrs. Florence Law, shares of stock in
the Dunbar & Wausaukee Railway Company for which he charged each of them, in the equalization hereafter
mentioned, the sum of $25,460. The decedent indorsed each of these statements with the words, 'Account with
_____,' 'This account is canceled and ledger balanced to date as a gift to _____' (the name of the son or
daughter being inserted), or with other words to the same effect. The transfers, which the Commissioner
deemed to be subject to the additional estate tax.

ISSUE: Whether or not a gift inter vivos was made "in contemplation of death" within the meaning of the
Revenue Act of 1918.

RULING: NO. A gift is made "in contemplation of death" when the motive inducing it is of the sort that leads to
testamentary disposition, BUT not when the motive is merely to attain an object desirable to the donor in his
life, as where the immediate and moving cause of transfers was the carrying out of a policy, long followed by
the decedent in dealing with his children, of making liberal girts to them during his lifetime. "The plaintiffs have
not only overcome the presumption created by the statute that the transfers were made in contemplation of
death, but have definitely established the fact that the immediate and moving cause of the transfers was the
carrying out of a policy long followed by decedent in dealing with his children of making liberal gifts to them
during his lifetime. He had consistently followed that policy for nearly thirty years, and the three transfers in
question were a continuation and final consummation of such policy. In the last transfer, such amounts were
given to his children as would even them up one with another in the gifts and advancements made to them.

19. Basket vs. Hassel

Facts:
This is a bill in equity, filed by Hassell, administrator of Chaney, a citizen of Tennessee, to which, besides Basket,
a citizen of Kentucky,
The single question in the case was, whether a certain fund, represented by a certificate of deposit, issued by
the bank to Chaney in his lifetime, belonged to Basket, who claimed it as a gift from Chaney, and had possession
of the certificate, or to Hassell, as Chaney's administrator. Basket asserted his title not only by answer, but by a
cross-bill. The final decree ordered that the certificate of deposit be surrendered to Hassell, and that the bank
pay to him, as its holder, the amount due thereon.
It is claimed on behalf of the Basket that the delivery of the certificate under the circumstances mentioned in
the statement of the case constitutes a valid donatio mortis causa, which entitles him to the fund.
Issue: Whether or not the certificate of deposits are donation mortis causa despite not being testamentary
(or made by last will) in character
Ruling:
Yes. That a delivery of a certificate of deposit, such as that described in the record in this case, might constitute
a valid donatio mortis causa, does not admit of doubt. It was so decided in Amis v. Witt, 33 Beav. 619; Moore v.
Moore, Law Rep. 18 Eq. 474; Hewitt v. Kaye, 6 id. 198; Westerlo v. De Witt, 36 N.Y. 340. A certificate of deposit
is a subsisting chose in action and represents the fund it describes, as in cases of notes, bonds, and other
securities, so that a delivery of it, as a gift, constitutes an equitable assignment of the money for which it calls.
This provision is not confined to disposition of property or property rights made by last will and testament or
to gifts mortis causa which are made in anticipation of impending death, are revocable and are defeated if
the donor surivives the apprehended peril.
20. Dison vs. Posadas, GR. No. 36770. November 4, 1932
Facts: Don Felix Dizon died on April 21, 1928. Before his death, he made a gift inter vivos in favor of the plaintiff
Luis W. Dizon of all his property according to a deed of a gift of which includes all the property of Don Felix
Dizon. The plaintiff did not receive the property of any kind of Don Felix upon the death of the latter. Don Luis
is the legitimate and only son of Don Felix. The defendant, collector of internal revenue assess an inheritance
tax of Php2,808.73 which Don Luis paid under protest and later filed an action to recover sum of money thus
paid. Plaintiff alleged that the inheritance tax is illegal because he received the property, which is the basis of
the tax from his father before his death by a deed of gift inter vivos which was duly accepted and registered
before the death of his father.
Issue: Whether or not the gift inter vivos is subject to inheritance tax.
Held: Yes. Section 1540 of the administrative code plainly does not tax gifts per se but only when those gifts
are made to those who shall prove to be the heirs, devisees, legatees or donees mortis causa of the donor.
In this case, the scanty facts before us may not warrant the inference that the conveyance, acknowledged by
the donor 5 days before his death and accepted by the donee one day before the donor’s death, was
fraudulently made for the purpose of evading the inheritance tax. But the facts, in our opinion, do not warrant
the inference that the transfer was an advancement upon the inheritance which the donee as the sole and
forced heir of the donor, would be entitled to receive upon the death of the donor. The tax to have been
properly assessed by the Collector of Internal Revenue.

BOOK: Circumstance taken into account include…… Length of time between the gift and the date of death.

22. Concepcion Vidal de Roces, et al.[appellants] v. Juan Posadas, Jr. (Collector of Internal Revenue-appellee)

FACTS: March 10 and 12, 1925, Esperanza Tuazon, by means of public documents, donated certain parcels of
land to plaintiffs, who accepted it in the same public documents—which were duly recorded in the registry of
deeds. By virtue of said donations, the plaintiffs took possession of the said lands, received the fruits thereof
and obtained the corresponding transfer certificates of title. Tuazon died on Jan. 5, 1926, leaving without any
forced heirs. In her will, she bequeathed P5k to each of the donees. After the estate had been distributed among
the instituted legatees and before delivery of their respective shares, respondent Collector ruled that the
appellants, as donees and legatees, should pay the inheritance tax (levied on donation and on the legacies
received by appellants). Appellants paid the taxes under protest. The Collector filed a demurrer to the complaint
on the ground that the facts alleged therein were not sufficient to constitute a cause of action, trial court
dismissed appellants’ complaint. The judgment appealed from was based on the provisions of section 1540
Administrative Code which reads as follows:

SEC. 1540. Additions of gifts and advances. — After the aforementioned deductions have been made, there shall
be added to the resulting amount the value of all gifts or advances made by the predecessor to any those who,
after his death, shall prove to be his heirs, devisees, legatees, or donees mortis causa.

The appellants contend that the above-mentioned legal provision does not include donations inter vivos.
Appellee contends that the words "all gifts" refer clearly to donations inter vivos. The rule laid down in the case
of Tuason and Tuason v. Posadas, stated that the expression "all gifts" refers to gifts inter vivos inasmuch as the
law considers them as advances on inheritance, in the sense that they are gifts inter vivos made in
contemplation or in consideration of death.

ISSUE: WON the donation inter vivos in question was made in contemplation of death.

HELD: Yes. Such transmissions were effected in the month of March, 1925, that the donor died in January, 1926,
and that the donees were instituted legatees in the donor's will which was admitted to probate. It is from these
allegations, especially the last, that the Court inferred a presumption juris tantum that said donations were
made mortis causa and, as such, are subject to the payment of inheritance tax.

Book Ruling: Concurrent making of a will or making a will within a short time after the transfer. (Circumstances
taken into account.)

23. Morgan v. Commissioner, 309 U.S. 78

FACTS: A decedent in Wisconsin exercised a power of appointment over property held in trusts created under
the law of that State. The trusts empowered the trustees to withhold from any beneficiary property which, in
their judgment, would be dissipated. or be improvidently handled.
The petitioner is the executor of Elizabeth Morgan who was the donee of two powers of appointment
over property held in two trusts created by their father by will or by deed. The property remaining in the
trustees’ hands for Elizabeth was given at her death, to the appointee/s named in her will. Under both trusts, if
in the judgment of the trustee, property going to any beneficiary would be dissipated for any reason, or
improvidently handled, the trustees were to withhold any part of such property; with directions for disposition,
in such event, of what was withheld. The decedent appointed in favor of her husband.
The Commissioner ruled that the value of the appointed property should be included in the gross estate
and determined a tax deficiency. Under the law of Wisconsin, the decedent could have appointed anyone to
receive the trust property.
ISSUE: Whether or not the powers are general within the intent of the revenue Act, notwithstanding they may
be classified, as special by the law of Wisconsin.
RULING: Yes. The power exercised was a "general power of appointment" within §302(f) of the Revenue Act of
1926, whatever its characterization -- whether "general" or "special" -- by the Wisconsin law. State law creates
legal interests and rights. The federal Revenue Acts designate what interests or rights, so created, shall be taxed.
The term "general power of appointment," as used in the federal Revenue Acts, applies where the donee may
appoint to any person he chooses, including his own estate or his creditors. This accords with common
acceptation and with administrative construction approved by Congressional reenactments of the provisions
construed. Assuming that the trustees could withhold the appointed property from an appointee, the power
must still be held general. The important consideration is the breadth of the control in the donee of the power,
whatever the nature or extent of the appointee's interest.

24. Graves v. Schmidlapp

Facts: Respondents' decedent died a resident of New York, where his will was probated and letters testamentary
were issued. Decedent's father had previously died a resident of Massachusetts, where his will had been
probated. To his son, the New York decedent, he gave a life estate in one share and a general power to dispose
of that share 'by will'. By his will decedent appointed his share of the trust fund to his widow, and the New York
tax authorities in computing the tax included in the decedent's gross estate the intangibles bequeathed to her
under the power. Article 10-C of the New York Tax Law, imposes an estate tax 'upon the transfer of the net
estate' of resident decedents. An order of the New York Surrogate's Court reduced the estate tax assessed
against the decedent's estate by excluding from his gross estate the share of the trust fund passing to the widow
by the exercise of the power, on the ground that the state was without constitutional authority to tax the
exercise by a resident donee of a power of appointment created by a non-resident donor.

Issue: W/N the share of the trust fund passing to the widow by the exercise of the power to dispose is taxable.

Ruling: Yes. Since it is the exercise of the power to dispose of the intangibles which is the taxable event, the
mere fact that the power was acquired as a donation from another is without significance. We can perceive no
ground for saying that its exercise by the donee is for that reason any the less the enjoyment of a property right,
or any the less subject to taxation at his domicile. The source of the power by gift no more takes its exercise by
the donee out of the taxing power than the like disposition of a chose in action or a share of stock, ownership
of which is acquired by gift.
B: The property passing under a general power of appointment comes from the donor and the donee
(decedent). The power to dispose of property at death by the exercise of a power of appointment is the
equivalent of ownership. It is a potential source of wealth to the appointee and the disposition of wealth
effected by its exercise or relinquishment at death is one form of the enjoyment of wealth

25. Del Val v Del Val

Facts:

Plaintiffs Francisco el at and defendant Andres are brother and sisters; that they are the only heirs at law
and next of kin of Gregorio Nacianceno del Val, who died in Manila on August 4, 1910, intestate. During the
lifetime of the deceased he took out insurance on his life for the sum of P40,000 and made it payable to the
defendant as sole beneficiary.

Plaintiffs contend that the amount of the insurance policy belonged to the estate of the deceased and
not to the defendant personally; that, therefore, they are entitled to a partition not only of the real and personal
property, but also of the P40,000 life insurance. Also, plaintiffs claim that the proceeds of the insurance policy
were a donation or gift made by the father during his lifetime to the defendant and that as per article 819 "gifts
made to children which are not betterments shall be considered as part of their legal portion.
Issue:

Whether or not the proceeds of the insurance belong to the estate of the deceased which does not
entitle the defendant thereof

Ruling:

No. taxation of the proceeds of the life insurance will depend on the designated beneficiary, the manner
of the designation of such beneficiary (revocable or irrevocable) and the period and the source of the fund used
in paying the premiums of the insurance contract such that:

From the book page 367-368

3. to determine the conjugal or separate character of proceeds, the following factors are considered;

a. policy taken before marriage – source of funds determine ownership of the proceeds of the life insurance.

B policy taken during marriage

1. Beneficiary is estate of the insured – proceeds are presumed conjugal hence one half share of the
surviving spouse is not taxable
2. Beneficiary is third person – proceeds are payable to the beneficiary even if premiums were paid
out of the conjugal partnership.

Where a life-insurance policy is made payable to one of the heirs of the person whose life is insured, the
proceeds of the policy on the death of the insured belong exclusively to the beneficiary and not to the estate of
the person whose life was insured; and such proceeds are his individual property and not the property of the
heirs of the person whose life was insured.

26. DE GUZMAN V. DE GUZMAN

FACTS: This case is about the propriety of allowing as administration expenses certain disbursements made by
the administrator of the testate estate of the late Felix J. de Guzman of Gapan, Nueva Ecija. The deceased
testator was survived by 8 children. Letters of administration were issued to his son, Doctor Victorino G. de
Guzman. One of the properties left by the decedent was a residential house located in the poblacion of which
8 children were given a 1/8 pro indiviso share in the project of partition. 3 heirs Crispina de Guzmans-Carillo
Honorata de Guzman-Mendiola and Arseniso de Guzman interposed objections to the administrator's
disbursements in the total sum of P13,610.48 comprising of the following:

Expense for the improvement and renovation of the decedent's residential house

Living expenses of Librada de Guzman while occupying the family home without paying rent

Other expenses: Lawyer's subsistence, Gratuity pay in lieu of medical fee, stenographic notes,
decedent's first death anniversary, representation expenses

Irrigation fee

Lower court: allowed the expenses

ISSUE: whether or not costs incurred for the death anniversary were allowable administration expenses of
the estate

RULING: No. the expense will not fall under any of the allowable deductions from gross estate. Whether viewed
in the context of either funeral expenses or medical expenses, the same will not qualify as a deduction. Funeral
expenses may include medical expenses of the last illness but not expenses incurred after burial nor expenses
incurred to commemorate the death anniversary. Those expenses are disallowed because they have no
connection with the care, management and settlement of the decedent's estate.

An executor or administrator is allowed the necessary expenses in the care, management, and settlement of
the estate. He is entitled to possess and manage the decedent's real and personal estate as long as it is necessary
for the payment of the debts and the expenses of administration. He is accountable for the whole decedent's
estate which has come into his possession, with all the interest, profit, and income thereof, and with the
proceeds of so much of such estate as is sold by him, at the price at which it was sold (Sec. 3, Rule 84; Secs. 1
and 7, Rule 85, Rules of Court).

28. Dela VIña v. Castillo, 65 Phil. 620

Facts:

The Collector of Internal Revenue contends that the income tax in question, being a lien created by law superior
to any other existing upon the property on which it is imposed, under the provisions of section 1588 of the
Revised Administrative Code, as amended, enjoys preference over the necessary expenses of administration.

Issue: Whether the income tax claimed by the CIR should be paid first before the administration expenses.

Ruling:
No. Unpaid taxes such as income and real estate taxes that accrued after the death of the decedent are not
deductible from gross estate as they are properly chargeable to the income of the estate.

29. Domingo vs Garlitos

Facts: In Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674, this Court declared as final and
executory the order for the payment by the estate of the estate and inheritance taxes, charges and penalties,
amounting to P40,058.55, issued by the Court of First Instance of Leyte in, special proceedings No. 14 entitled
"In the matter of the Intestate Estate of the Late Walter Scott Price." In order to enforce the claims against the
estate the fiscal presented a petition to the court below for the execution of the judgment. The petition was,
however, denied by the court which held that the execution is not justifiable as the Government is indebted to
the estate under administration in the amount of P262,200.

The Court orders that the payment of inheritance taxes in the sum of P40,058.55 due the Collector of Internal
Revenue as ordered paid by this Court on July 5, 1960 in accordance with the order of the Supreme Court
promulgated July 30, 1960 in G.R. No. L-14674, be deducted from the amount of P262,200.00 due and payable
to the Administratrix Simeona K. Price (Administratrix of the estate of her late husband Walter Scott Price), in
this estate, the balance to be paid by the Government to her without further delay. The Court has nothing
further to add to its order dated August 20, 1960 and it orders that the payment of the claim of the Collector of
Internal Revenue be deferred until the Government shall have paid its accounts to the administratrix herein
amounting to P262,200.00. It may not be amiss to repeat that it is only fair for the Government, as a debtor, to
its accounts to its citizens-creditors before it can insist in the prompt payment of the latter's account to it. Hence,
this petition for certiorari and mandamus against the Judge of the CFI of Leyte, Ron. Lorenzo C. Garlitos, seeking
to annul certain orders of the court and for an order in this Court directing the respondent court below to
execute the judgment in favor of the Government against the estate of Walter Scott Price for internal revenue
taxes.

Issue: WON the petition to set aside the above orders of the court below and for the execution of the claim of
the Government against the estate must be denied.

Ruling: Yes. Execution may issue only where the devisees, legatees or heirs have entered into possession of their
respective portions in the estate prior to settlement and payment of the debts and expenses of administration
and it is later ascertained that there are such debts and expenses to be paid, in which case "the court having
jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of their several
liabilities, and order how much and in what manner each person shall contribute, and may issue execution if
circumstances require" And this is not the instant case.

In testate or intestate proceedings to settle the estate of a deceased person, the properties of the estate are
under the jurisdiction of the court until they have been distributed among the heirs entitled thereto. During
the pendency of the proceedings all the estate is in custodia legis and the proper procedure is not to allow the
sheriff, in case of the court judgment, to seize the properties but to ask the court for an order to require the
administrator to pay the amount due from the estate and required to be paid. Also, Under the above
circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for services
rendered have already become overdue and demandable is well as fully liquidated. Compensation, therefore,
takes place by operation of law. It is clear, therefore, that the petitioner has no clear right to execute the
judgment for taxes against the estate of the deceased Walter Scott Price.
32. INTESTADO DE DON VALENTIN DESCALS VS. ADMINISTRATOR DE RENTAS INTERNAS
G.R. NO. L-7253 March 26, 1956

FACTS:
Valentin Descals, an American citizen, died on September 17, 1948, in the City of Manila where he was
a resident. He left as heirs his brothers Antonio and Ricardo and a sister Angeles. About t wo years before his
death he and his brother Ricardo jointly bought a piece of real estate property situated in the city of Barcelona,
Spain. Valentin became the owner of the entire property by buying his brother’s interest in it which was valued
at P46,000.00, acknowledged as a debt by means of a promissory note.

After the death of Valentin, proceedings were initiated in the City of Manila for the administration of his
estate. Ricardo filed before the probate court a claim for P46,000 with interest based on the promissory note
executed by his brother in 1946. Said claim was approved.
The Collector of Internal Revenue, however, assessed the estate for purposes of taxation without
deducting the claim filed by Ricardo despite its approval by the probate court a nd fixed and demanded the
payment of P701.53 by way of estate tax and P2,144.10 as inheritance tax, or a total of P2,845.63. The
administrator paid this amount under protest.

ISSUE:
Whether indebtedness in respect to property acquired outside the Philippines should be allowed as
deductions from the gross estate in the determination of the net estate.

HELD:
No. Real property situated outside the Philippines is not included in the value of the gross estate of a
deceased resident, hence, indebtedness incurred in respect to or by reason of said property, are not considered,
being regarded as impossible items.
“Inasmuch as real property situated outside of the United States does not form a part of the gross estate, no
deduction may be taken of any mortgage thereon or any indebtedness in respect thereof.” (Reg. Sec. 81.38.
(Vol. 2, Rabkin and Johnson, Federal Income, Gift and Estate Taxation, 1954 ed., Sec. 53.03(10), p. 5319).
“ cralaw now the deduction is allowed only in case the mortgaged property was included in the gross estate; “
“ among the deductions allowed were ‘unpaid mortgages’, an impossible item unless the whole value of the
mortgaged property is to be included in the gross estate under section 402(a), 40 Stat. 1097, as an
interest cralawn subject to the payment of charges against his estate.’ (City Bank Farmers’ Trust Co. vs.
Bowers, 68 Fed. (2d) 909, 913 [1934].)”

33. Manila Railroad Co. vs. Velasquez 32 Phil 286 (Valuation of Property)
FACTS: This action was instituted by the Manila Railroad Company for the purpose of expropriating twelve small
parcels of land for a railroad station site at Lucena, Province of Tayabas. The commissioners fixed the value of
the twelve parcels at P81,412.75, and awarded P600 to Simeon Perez as damages for the removal of an
uncompleted camarin. Upon hearing, the commissioners' report was approved and the plaintiff directed to pay
to the "Tayabas Land company" the total amount awarded, with interest and costs. The plaintiff company alleges
that that amount is grossly excessive, pointing out that the land has never been used except for rice culture.
The owner of condemned land is entitled to just compensation. That is all the law allows him. "Compensation"
means an equivalent for the value of the land (property) taken.
ISSUE: What should be the basis for the compensation?
HELD: Fair Market Value.
The supreme court of Missouri has also formulated an exceedingly clear statement of the matter in the Stock
Yards Case (120 Mo., 541):
The market value of the property means its actual value, independent of the location of plaintiff's road thereon,
that is, the fair value of the property as between one who wants to purchase and one who wants to sell it; not
what could be obtained for it in peculiar circumstances when greater than its fair price could be obtained; nor
its speculative value; nor the value obtained through the necessities of another. Nor, on the other hand, is it to
be limited to that price which the property would bring when forced off at auction under the hammer. The
question is, if the defendant wanted to sell its property, what could be obtained for it upon the market from
parties who wanted to buy and would give its full value.
These views are practically in accord with Lewis on Eminent Domain (2d ed.), section 478, where the rule is
stated as follows:
The market value of property is the price which it will bring when it is offered for sale by one who desire, but
is not obliged to sell it, and is bought by one who is under no necessity of having it. (Ruling sa book). In
estimating its value all the capabilities of the property, and all the uses to which it may be applied or for which
it is adapted are to be considered, and not merely the condition it is in at the time and the use to which it is
then applied by the owner. Nor can the damages be enhanced by his unwillingness to sell. On the other hand,
the damages cannot be measured by the value of the property to the party condemning it, nor by its need of
the particular and its surroundings, its improvements and capabilities, may be shown and considered in
estimating its value. (Approved in Seaboard Air Line vs. Chamblin, 18 Va., 42.)
For the foregoing, reasons, the judgment of the court below is modified by reducing the award for the parcel
containing 16,094 square meters to the sum of P6,500.
34. Worcester Country Trust Co. vs. Commissioner

Facts: James Smith died and his executors elected to value his gross estate. In his gross estate were 12,760
shares of no par value capitals tock of the Southwell Wool Combing Company, a Massachusetts corporation. In
order to keep the Company's stock in the founding families, the stockholders voted to amend the articles of
incorporation by inserting restrictions upon the sale and transfer of its shares. The Company's shares have never
been listed on any exchange and since the date of the amendment no shares have either been offered to the
Company for sale or have been sold. From a stipulation of facts filed at the hearing before the Board of Tax
Appeals it appears that the book value of the stock as of the close of the last month prior to the date selected
by the executors for the valuation of their decedent's estate, plus interest and less dividends, was $15.46 per
share. This was the figure used by the executors in their estate tax return, but the Commissioner's determination
of value, based, as he said, upon the Company's "income, balance sheets, and other relevant factors" was $35
per share and he assessed a deficiency accordingly. Accordingly, the Commissioner's figure is exactly ten times
the average net earnings of the Company over the 5-yr period from 1933 to 1937. The petitioners contend that
the Board erred in ruling as a matter of law that the Commissioner's determination of value must be sustained
because there was no adequate evidence to prove his valuation incorrect or another valuation correct.

Issue: Whether the petitioner’s contention is correct?

Ruling: NO. We cannot agree with the taxpayers that the amendment set the value of the shares at their book
value on the critical date. The amendment did not prohibit sales of the stock except at book value, nor did it
fix book value as a call price at which at the behest of the corporation the stock must be sold. It fixed a
limitation on the price obtainable by a shareholder for his shares only if he wished to sell and if the corporation
at that time wished to buy. The value to be used for this purpose is "the fair market value", at the critical date,
that is the "price at which the property would change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell."

Book: It is the price at which a property would change hands between a willing buyer and a willing seller with
neither being under any compulsion to buy or sell and both having reasonable knowledge of the facts and acting
for their own best interests

The problem is to determine the fair market value as of the applicable valuation date. There having been no
actual sales or bid and asked prices to evidence that value, the regulations direct that inquiry be made as to the
price at which the stock would have changed hands on the applicable date, not as a block but per unit, "between
a willing buyer and a willing seller, neither being under any compulsion to buy or to sell." And to arrive at this
figure the regulations require that consideration be given to the Company's net worth, earning power, dividend-
paying capacity, and all other relevant factors bearing upon the value of the stock. We shall first consider the
bearing of the amendment of July 25, 1935, on the question of the value of the stock; the taxpayers contend
that the effect of this amendment is to fix the market value of the stock at its book value. The Board, however,
took the position that it had no effect whatever on market value.