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October 4, 1996


78-00 000-00 103-96
Atty. Jerry F. Bantillan
(Counsel for the Heirs)
Bacolod City
This refers to your letter dated April 2, 1996 requesting for a ruling as to
whether or not road lots and open spaces titled in the name of the decedent, Remberto
T. Jocson as owner and developer of a subdivision, including development costs are
includible in his gross estate for purposes of the estate tax.

It is represented that the decedent, Remberto T. Jocson a resident of Bacolod

City died testate on April 19, 1994 leaving among others, certain real properties
composed of subdivision lots registered in his name and intended for sale to the
public, all located in Bacolod City, Negros Occidental; that the bulk of these
subdivision lots have already been sold by the decedent while he was still alive,
except for around 13 subdivision lots; that as mandated by law the owner developer
has to provide roads and open spaces and other forms of subdivision development;
that a subdivision plan providing and delineating roads and open spaces was duly
approved and certificates of title thereto were issued in the name of the decedent; that
subdivision developments were undertaken, such as construction of drainage,
sewerage, lighting, water and other basic requirements; and that the aforementioned
lots and open spaces including the development costs were included in the gross estate
of the decedent in the computation and assessment of the estate tax by the BIR
Revenue District Office No. 77, Revenue Region No. 12, Bacolod City.
In reply, please be informed that estate tax is a tax imposed on the privilege of
the deceased person to transmit his estate at death to his lawful heirs and beneficiaries,
and is based on the decedents entire net estate which means his gross estate less
allowable deductions and specific exemptions as determined in accordance with
Sections 78 and 79 of the Tax Code as amended by R.A.. No. 7499. The value of the
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Philippine Taxation Encyclopedia 2013

gross estate of the decedent shall be determined by including the value at the time of
death of all property real or personal, tangible or intangible (Section 78, Tax Code, as
amended by R.A.. No. 7499). Based on this definition, the following are excluded
from the gross estate, viz: (1) Funeral expenses: (2) Judicial expenses for testate or
interstate proceedings; (3) Claims against the estate (debts of the estate); (4) Unpaid
mortgages upon, or any indebtedness in respect to property where the value of the
decedents interest undiminished by such mortgage or indebtedness, is included in the
gross estate; (5) Claims of the estate against insolvent persons (bad debts); (6) Taxes
owed by decedent; (7) Losses incurred during the settlement of the estate; (8) Property
previously taxed (vanishing deduction); (9) transfer for public purposes; and (10) Net
share of the surviving in the conjugal estate. (underscoring supplied).
Roads and open spaces which are required by law to be reserved/set aside by
the subdivision owners for the common use of the buyers of the subdivision lots and
the public in general do not form part of the transmissible properties/interest of the
decedent; hence, the value thereof are excluded in determining the taxable properties
of the decedent subject to estate tax. Considering that roads and open spaces are for
public use they are, in fact, government properties which cannot be transmitted to the
heirs by way of succession. Moreover, as represented the value of such roads and
open spaces was already factored, or included in the selling price of the lots; hence, all
the present and future buyers are considered the common owners thereof.
Based on the foregoing, roads and open spaces in the subdivision area adverted
to in your query should be excluded from the taxable gross estate of the decedent for
estate tax purposes.
This ruling is being issued on the basis of the foregoing facts as represented.
However, if upon investigation it will be disclosed that the facts are different, and/or
any of the requirements imposed in this letter are not complied with then this ruling
shall be considered null and void.

Very truly yours,

Commissioner of Internal Revenue

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Philippine Taxation Encyclopedia 2013