that a trust is created.

” To constitute a valid testamentary trust there must be

LORENZO vs. POSADAS JR. a concurrence of three circumstances:
G.R. No. L-43082 (1) Sufficient words to raise a trust;
June 18, 1937 (2) a definite subject;
(3) a certain or ascertain object; statutes in some jurisdictions expressly or in
FACTS: Thomas Hanley died, leaving a will and a considerable amount of real effect so providing.”
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. There is no doubt that the testator intended to create a trust. He ordered in his
The will was admitted to probate. will that certain of his properties be kept together undisposed during a fixed
The CFI considered it proper for the best interests of the estate to appoint a period, for a stated purpose. The probate court certainly exercised sound
trustee to administer the real properties which, under the will, were to pass to judgment in appointmening a trustee to carry into effect the provisions of the
nephew Matthew ten years after the two executors named in the will was will
appointed trustee. Moore acted as trustee until he resigned and the plaintiff
Lorenzo herein was appointed in his stead. As the existence of the trust was already proven, it results that the estate which
plaintiff represents has been delinquent in the payment of inheritance tax and,
therefore, liable for the payment of interest and surcharge provided by law in
During the incumbency of the plaintiff as trustee, the defendant Collector of such cases.
Internal Revenue (Posadas) assessed against the estate an inheritance tax, The delinquency in payment occurred on March 10, 1924, the date when Moore
together with the penalties for deliquency in payment. Lorenzo paid said became trustee. On that date trust estate vested in him. The interest due should
amount under protest, notifying Posadas at the same time that unless the be computed from that date.
amount was promptly refunded suit would be brought for its recovery. Posadas NOTES: Other issues:
overruled Lorenzo’s protest and refused to refund the said amount. Plaintiff
went to court. The CFI dismissed Lorenzo’s complaint and Posadas’ (a) When does the inheritance tax accrue and when must it be satisfied?
counterclaim. Both parties appealed to this court. The accrual of the inheritance tax is distinct from the obligation to pay the same.
ISSUE: Acording to article 657 of the Civil Code, “the rights to the succession of a
person are transmitted from the moment of his death.” “In other words”, said
(e) Has there been delinquency in the payment of the inheritance tax? Arellano, C. J., “. . . the heirs succeed immediately to all of the property of the
deceased ancestor. The property belongs to the heirs at the moment of the
HELD: The judgment of the lower court is accordingly modified, with costs death of the ancestor as completely as if the ancestor had executed and
against the plaintiff in both instances delivered to them a deed for the same before his death.”
YES
The defendant maintains that it was the duty of the executor to pay the Whatever may be the time when actual transmission of the inheritance takes
inheritance tax before the delivery of the decedent’s property to the trustee. place, succession takes place in any event at the moment of the decedent’s
Stated otherwise, the defendant contends that delivery to the trustee was death. The time when the heirs legally succeed to the inheritance may differ
delivery to the cestui que trust, the beneficiary in this case, within the meaning from the time when the heirs actually receive such inheritance. ” Thomas
of the first paragraph of subsection (b) of section 1544 of the Revised Hanley having died on May 27, 1922, the inheritance tax accrued as of the date.
Administrative Code. This contention is well taken and is sustained. A trustee is
but an instrument or agent for the cestui que trust 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
The appointment of Moore as trustee was made by the trial court in conformity payment on inheritance tax is clearly fixed by section 1544 of the Revised
with the wishes of the testator as expressed in his will. It is true that the word Administrative Code as amended by Act No. 3031, in relation to section 1543 of
“trust” is not mentioned or used in the will but the intention to create one is the same Code. The two sections follow:
clear. No particular or technical words are required to create a testamentary SEC. 1543. Exemption of certain acquisitions and transmissions. — The following
trust. The words “trust” and “trustee”, though apt for the purpose, are not shall not be taxed:
necessary. In fact, the use of these two words is not conclusive on the question (a) The merger of the usufruct in the owner of the naked title.
(b) The transmission or delivery of the inheritance or legacy by the fiduciary CIRV.CA G.R. 123206 March 22, 2000
heir or legatee to the trustees.
(c) The transmission from the first heir, legatee, or donee in favor of another Facts:·Pedro Pajonar was part of the Death March and became insane. Her sister
beneficiary, in accordance with the desire of the predecessor. xx
became the guardian of his person while his property was placed under PNB's
SEC. 1544. When tax to be paid. — The tax fixed in this article shall be paid:
(a) In the second and third cases of the next preceding section, before entrance guardianship. ·When Pedro died, PNB filed an accounting of decendent's
into possession of the property. property valued at P3,037,672.09 but did not file an estate tax return. ·Instead
(b) In other cases, within the six months subsequent to the death of the PNB advised Pedro Pajonar's heirs to execute an extrajudicial settlement and to
predecessor; but if judicial testamentary or intestate proceedings shall be pay the taxes on his estate. Pursuant to the BIR's assessment, the estate taxes
instituted prior to the expiration of said period, the payment shall be made by were paid. ·His sister, Josefina, became the administrator of Pedro's estate. A
the executor or administrator before delivering to each beneficiary his share. second assessment for deficiency tax was given and paid. ·The administrator
The instant case does[not] fall under subsection (a), but under subsection (b), of
filed a protest praying that portions of the taxes be returned to the heirs. The
section 1544 above-quoted, as there is here no fiduciary heirs, first heirs,
legatee or donee. Under the subsection, the tax should have been paid before administrator went to the CTA and the latter ordered the refund of the taxes.
the delivery of the properties in question to Moore as trustee. ·Among the deductions allowed were the notarial fee for the extra judicial
(b) Should the inheritance tax be computed on the basis of the value of the settlement of estate and attorney's fees for guardianship.
estate at the time of the testator’s death, or on its value ten years later?
Issue: whether the notarial fee paid for the extrajudicial settlement and the
If death is the generating source from which the power of the estate to impose attorney's fees in the guardianship proceedings may be allowed as deductions
inheritance taxes takes its being and if, upon the death of the decedent,
from the gross estate of decedent in order to arrive at the value of the net estate.
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 Held:YES. Supreme Court held that those 2 deductions are allowable. The
subsequent increase or decrease in value deductions from the gross estate permitted under section 79 of the Tax Code
basically reproduced the deductions allowed under Commonwealth Act No. 466
(c) In determining the net value of the estate subject to tax, is it proper to (CA 466), otherwise known as the National Internal Revenue Code of 1939,and
deduct the compensation due to trustees?
which was the first codification of Philippine tax laws. Section 89 (a) (1) (B) of
A trustee, no doubt, is entitled to receive a fair compensation for his services. CA 466 also provided for the deduction of the "judicial expenses of the
But from this it does not follow that the compensation due him may lawfully be testamentary or intestate proceedings" for purposes of determining the value of
deducted in arriving at the net value of the estate subject to tax. There is no the net estate. Philippine tax laws were, in turn, based on the federal tax laws of
statute in the Philippines which requires trustees’ commissions to be deducted the United States. In accord with established rules of statutory construction, the
in determining the net value of the estate subject to inheritance tax decisions of American courts construing the federal tax code are entitled to
(d) What law governs the case at bar? Should the provisions of Act No. 3606 great weight in the interpretation of our own tax laws. Judicial expenses are
favorable to the tax-payer be given retroactive effect?
expenses of administration for purposes of arriving at the value of the net estate
A statute should be considered as prospective in its operation, whether it
enacts, amends, or repeals an inheritance tax, unless the language of the statute which includes all expenses essential to the collection of the assets, payment of
clearly demands or expresses that it shall have a retroactive effect, . . . .” debts, or the distribution of the property to the heirs. The notarial fee is clearly
a deductible expense since such settlement effect the distribution of Pedro's
Act No. 3606 itself contains no provisions indicating legislative intent to give it estate to his lawful heirs. Same goes for the attorney's fees. The accounting
retroactive effect. No such effect can be given the statute by this court. made by PNB and the advice given for the proper settlement of Pedro's estate
contributed to the collection of decedent's assets and subsequent settlement
thereof.
Dizon v CTA G.R. No. 140944 April 30, 2008

FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for
the probate of his will was filed with Branch 51 of the Regional Trial Court
(RTC) of Manila (probate court). The probate court then appointed retired
Supreme Court Justice Arsenio P. Dizon (Justice Dizon) and petitioner, Atty.
Rafael Arsenio P. Dizon (petitioner) as Special and Assistant Special
Administrator, respectively, of the Estate of Jose (Estate). Petitioner alleged that
several requests for extension of the period to file the required estate tax return
were granted by the BIR since the assets of the estate, as well as the claims
against it, had yet to be collated, determined and identified.

ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing the admission of
the pieces of evidence which were not formally offered by the BIR; and

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 were reduced or condoned through compromise agreements entered
into by the Estate with its creditors Or Whether or not the CA erred in affirming
the CTA in the latter's determination of the deficiency estate tax imposed
against the Estate.

RULING:
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 the administration of justice, the presentation of the BIR's evidence is
not a mere procedural technicality which may be disregarded considering that
it is the only means by which the CTA may ascertain and verify the truth of BIR's
claims against the Estate. The BIR's failure to formally offer these pieces of
evidence, despite CTA's directives, is fatal to its cause

2. Yes. The claims existing at the time of death are significant to, and should be
made the basis of, the determination of allowable deductions. Also, as held
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
subsequently settled for lesser amount did not preclude the estate from
deducting the entire amount of the claim for estate tax purposes. This is called
the date-of-death valuation rule.