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LORENZO Vs POSADAS

Thomas Hanley died leaving real and personal properties to his nephew Matthew Hanley per his will. However, the properties would only be given 10 years after his death. The court appointed trustees to administer the properties. The Collector of Internal Revenue (CIR) assessed inheritance tax on the estate but the current trustee, Pablo Lorenzo, claimed it should have been assessed 10 years later and asked for a refund. The CIR denied the refund. The court ruled that: 1) the tax accrued at the time of death but was payable before delivery of properties to the trustee; 2) the tax is computed based on value at death regardless of future changes; and 3) there was delinquency in payment so surcharges applied.

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57 views2 pages

LORENZO Vs POSADAS

Thomas Hanley died leaving real and personal properties to his nephew Matthew Hanley per his will. However, the properties would only be given 10 years after his death. The court appointed trustees to administer the properties. The Collector of Internal Revenue (CIR) assessed inheritance tax on the estate but the current trustee, Pablo Lorenzo, claimed it should have been assessed 10 years later and asked for a refund. The CIR denied the refund. The court ruled that: 1) the tax accrued at the time of death but was payable before delivery of properties to the trustee; 2) the tax is computed based on value at death regardless of future changes; and 3) there was delinquency in payment so surcharges applied.

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© © All Rights Reserved
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PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased vs

JUAN POSADAS, JR., Collector of Internal Revenue


G.R. No. L-43082 June 18, 1937
64 PHIL REPORTS 353

FACTS:

Thomas Hanley died, leaving a will and 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 will bestowed Matthew Hanley, Thomas' nephew, the money and the real
estate. Also stipulated was that the property will only be given ten years after Thomas'
death.

The CFI appointed PJM Moore as trustee to administer the real properties. Moore acted
as trustee until he resigned and Pablo Lorenzo was appointed in his stead.

Juan Posadas, the CIR, assessed inheritance tax against the estate amounting to
P2,057.74. Lorenzo paid the tax after he was ordered by the CFI due to the CIR's
motion. Lorenzo claimed that the inheritance tax should have been assessed after 10
years and asked for a refund.

The CIR denied the protest and reassessed Lorenzo of P1,191.27 which represents
interest due on the tax and which was not included in the original assessment.
However, the CFI dismissed this counterclaim and also denied Lorenzo’s claim for
refund against the CIR, thus the case.

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 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?

4. What law governs the case? Should the provisions of Act No. 3606 favorable to
the tax-payer be given retroactive effect?

5. Has there been delinquency in the payment of the inheritance tax?

RULING:
1. Thomas Hanley having died on May 27, 1922, the inheritance tax accrued as of that
date. But it must be paid before the delivery of the properties in question to PJM Moore
as trustee on March 10, 1924.

2. It should be computed at the time of the decedent's death, regardless of any


subsequent contingency value of any increase or decrease and notwithstanding the
postponement of the actual possession or enjoyment of the estate by the beneficiary
and the tax measured by the value of the property transmitted at that time regardless of
its appreciation or depreciation.

3. No. The compensation of a trustee, earned not in the administration of the estate,
but in the management thereof for the benefit of the legatees or devises, does not come
properly within the class or reason for exempting administration expenses.

4. Act 3031 and not Act 3606 applies. Even if Act 3606 is more favorable to the
taxpayer, revenue laws, generally, which impose taxes collected by means ordinarily
resorted to for the collection of taxes are not classes as penal laws so it shouldn’t be
given a retroactive effect.

5. YES. The delinquency in payment occurred when Moore became trustee. The
interest due should be computed from that date and it is error of Lorenzo to compute it
one month later. A surcharge 25 per centum should be added to the tax and interest
due and unpaid within ten days after the date of notice. The CIR communicated with
Moore and a date was fixed. As the tax and interest due were not paid on that date, the
estate became liable for the payment of the surcharge. The mere fact that the estate of
the deceased was placed in trust did not remove it from the operation of our inheritance
tax laws or exempt it from the payment of the inheritance tax.

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