RULING: Pertinent is Section 34, Rule 132 of the Revised Rules on

Evidence which reads:

DEDUCTIONS SEC. 34. Offer of evidence. -- The court shall consider no evidence which
has not been formally offered. The purpose for which the evidence is
offered must be specified.
Sec. 86. Computation of Net Estate. — For the purpose of the tax imposed
in this Chapter, the value of the net estate shall be determined: Corollarily, the mere fact that a particular document is identified and
marked as an exhibit does not mean that it has already been offered as
(A) Deductions Allowed to the Estate of a Citizen or a Resident - In the case part of the evidence of a party.
of a citizen or resident of the Philippines, by deducting from the value of
the gross estate— In Interpacific Transit, Inc. v. Aviles [186 SCRA 385], we had the occasion
to make a distinction between identification of documentary evidence
and its formal offer as an exhibit. We said that the first is done in the
(1) Standard Deduction
course of the trial and is accompanied by the marking of the evidence as
An amount equivalent to Five million pesos (₱5,000,000)
an exhibit while the second is done only when the party rests its case and
not before.
(2) For claims against the estate:
- Provided, That at the time the indebtedness was incurred the debt
However, in People v. Napat-a, we relaxed the foregoing rule and allowed
instrument was duly notarized and,
evidence not formally offered to be admitted and considered by the trial
- if the loan was contracted within three (3) years before the death
court provided the following requirements are present, viz.:
of the decedent, the administrator or executor shall submit a
1) the same must have been duly identified by testimony duly
statement showing the disposition of the proceeds of the loan.
recorded and,
2) the same must have been incorporated in the records of the case.
Dizon v. CTA & CIR
In this case, we find that these requirements have not been satisfied.
Facts: Petitioner Atty. Dizon is the administrator of the estate of Jose
The assailed pieces of evidence were presented and marked during the
Fernandez.
trial particularly when Alberto took the witness stand. Alberto identified
these pieces of evidence in his direct testimony. He was also subjected to
BIR issued an Estate Tax Assessment Notice demanding the payment of
cross-examination and re-cross examination by petitioner. But Alberto's
P66,973,985.40 as deficiency estate tax.
account and the exchanges between Alberto and petitioner did not
sufficiently describe the contents of the said pieces of evidence presented
In the hearings conducted, petitioner did not present testimonial
by the BIR.
evidence but merely documentary evidence. BIR presented one witness
in the person of Alberto Enriquez, who was one of the revenue examiners
In fact, petitioner sought that the lead examiner, one Ma. Anabella A.
who conducted the investigation on the estate tax.
Abuloc, be summoned to testify, inasmuch as Alberto was incompetent to
answer questions relative to the working papers. The lead examiner
ISSUE 1: Whether or not the CTA and the CA gravely erred in allowing the
never testified.
admission of the pieces of evidence which were not formally offered by
the BIR. – NO.
We find that the trial court had reasonable ground to consider that
petitioners had waived their right to make a formal offer of
documentary or object evidence. Despite several extensions of time to
make their formal offer, petitioners failed to comply with their
commitment and allowed almost five months to lapse before finally
submitting it. Petitioners' failure to comply with the rule on admissibility
of evidence is anathema to the efficient, effective, and expeditious
dispensation of justice.
ISSUE 2: Whether or not the CA erred in affirming the CTA in the latter's
determination of the deficiency estate tax imposed against the Estate. –
YES
RULING: It is admitted that the claims of the Estate's aforementioned
creditors have been condoned.
The case of United States, as held in Propstra v. U.S confirm the general
principle that post-death developments are not material in determining
the amount of the deduction.
We express our agreement with the date-of-death valuation rule, made
pursuant to the ruling of the U.S. Supreme Court in Ithaca Trust Co. v.
United States.
1) There is no law, nor do we discern any legislative intent in our tax laws,
which disregards the date-of-death valuation principle and particularly
provides that post-death developments must be considered in
determining the net value of the estate. It bears emphasis that tax
burdens are not to be imposed, nor presumed to be imposed, beyond
what the statute expressly and clearly imports, tax statutes being
construed strictissimi juris against the government.
2) Second, Such construction finds relevance and consistency in our Rules
on Special Proceedings wherein the term "claims" required to be
presented against a decedent's estate is generally construed to mean
debts or demands of a pecuniary nature which could have been enforced
against the deceased in his lifetime, or liability contracted by the
deceased before his death.
Therefore, the claims existing at the time of death are significant to, and
should be made the basis of, the determination of allowable deductions.
(3) For claims of the deceased against insolvent persons where the value of
decedent’s interest therein is included in the value of the gross estate.
(4) Unpaid mortgages, taxes, casualty losses –
Unpaid mortgages
- For unpaid mortgages upon, or any indebtedness in respect to,
property
- where the value of decedent’s interest therein, undiminished
by such mortgage or indebtedness, is included in the value of
the gross estate,
- but not including any
1) income tax upon income received after the death of
the decedent, or
2) property taxes not accrued before his death, or
3) any estate taxes.
Limitation; when founded upon a promise or agreement
- The deduction herein allowed in the case of claims against the
estate, unpaid mortgages or any indebtedness shall, when
founded upon a promise or agreement,
- be limited to the extent that they were contracted bona fide and
for an adequate and full consideration in money or money’s
worth.
Additional deduction due to fires, storms, shipwreck, etc.
- There shall also be deducted losses incurred during the
settlement of the estate arising from
- fires, storms, shipwreck, or other casualties, or from robbery,
theft or embezzlement
Conditions
1) when such losses are not compensated for by insurance or
otherwise, and
2) if at the time of the filing of the return such losses have not
been claimed as a deduction for the income tax purposes in an
income tax return, and
3) provided that such losses were incurred not later than the last
day for the payment of the estate tax as prescribed in
Subsection (A) of Section 91.
(5) Property Previously Taxed.
- An amount equal to the value specified below of any property forming
part of the gross estate situated in the Philippines of any person
o who died within five (5) years prior to the death of the decedent, or
o transferred to the decedent by gift within five (5) years prior to his
death,
- where such property can be identified as having been received by the
decedent
 from the donor by gift, or
 from such prior decedent by gift, bequest, devise or
inheritance, or
 which can be identified as having been acquired in exchange for
property so received:
o One hundred percent (100%) of the value, if the prior decedent died
within one (1) year prior to the death of the decedent, or if the
property was transferred to him by gift, within the same period
prior to his death;
o Eighty percent (80%) of the value, if the prior decedent died more
than one (1) year but not more than two (2) years prior to the
death of the decedent, or if the property was transferred to him by
gift within the same period prior to his death;
o Sixty percent (60%) of the value, if the prior decedent died more
than two (2) years but not more than three (3) years prior to the
death of the decedent, or if the property was transferred to him by
gift within the same period prior to his death;
o Forty percent (40%) of the value, if the prior decedent died more
than three (3) years but not more than four (4) years prior to the
death of the decedent, or if the property was transferred to him by
gift within the same period prior to his death; and
o Twenty percent (20%) of the value, if the prior decedent died more
than four (4) years but not more than five (5) years prior to the
death of the decedent, or if the property was transferred to him by
gift within the same period prior to his death.
Conditions
These deductions shall be allowed only where:
1) a donor’s tax, or estate tax imposed under this Title was finally
determined and paid by or on behalf of such donor, or the estate of
such prior decedent, as the case may be, and
2) only in the amount finally determined as the value of such
property in determining the value of the gift, or the gross estate of
such prior decedent, and
3) only to the extent that the value of such property is included in the
decedent’s gross estate, and
4) only if in determining the value of the estate of the prior decedent,
no deduction was allowable under paragraph (5) in respect of the
property or properties given in exchange therefor.
Where a deduction was allowed of any mortgage or other lien in
determining the donor’s tax, or the estate tax of the prior decedent, which
was paid in whole or in part prior to the decedent’s death, then the
deduction allowable under said Subsection shall be reduced by the amount
so paid.
Such deduction allowable shall be reduced by an amount which bears the
same ratio to the amounts allowed as deductions under paragraphs (2), (3),
(4), and (6) of this Subsection as the amount otherwise deductible under
said paragraph (5) bears to the value of the decedent’s estate. Where the
property referred to consists of two or more items, the aggregate value of
such items shall be used for the purpose of computing the deduction.
Note: I don’t get the no. 4 and last 2 paragraphs…
(6) Transfers for Public Use
- The amount of all bequests, legacies, devises or transfers to or for the use
of the Government of the Republic of the Philippines, or any political
subdivision thereof for exclusively public purposes.
(7) The Family Home
- An amount equivalent to the current fair market value of the decedent’s
family home:
- Provided, however, That if the said current fair market value exceeds Ten
million pesos (₱10,000,000), the excess shall be subject to estate tax.
(8) Amount Received by Heirs Under Republic Act No. 4917
- Any amount received by the heirs from the decedent’s employee as a
consequence of the death of the decedent-employee in accordance with
Republic Act No. 4917:
- Provided, That such amount is included in the gross estate of the
decedent.
(B) Deductions Allowed to Nonresident Estates
- In the case of a nonresident not a citizen of the Philippines,
- by deducting from the value of that part of his gross estate which at the
time of his death is situated in the Philippines:
(1) Standard Deduction
- An amount equivalent to Five hundred thousand pesos (₱500,000);
(2) That proportion of the deductions specified in paragraphs (2), (3), and
(4) of Subsection (A) of this Section which the value of such part bears to
the value of his entire gross estate wherever situated;
o Paragraph 2 - For claims against the estate
o Paragraph 3 - For claims of the deceased against insolvent persons
o Paragraph 4 – Unpaid Mortgages, taxes, casualty losses
(3) Property Previously Taxed - x x x
(4) Transfers for Public Use
- The amount of all bequests, legacies, devises or transfers to or for the use
of the Government of the Republic of the Philippines or any political
subdivision thereof, for exclusively public purposes.
(C) Share in the Conjugal Property
- The net share of the surviving spouse in the conjugal partnership property
as diminished by the obligations properly chargeable to such property shall,
for the purpose of this Section, be deducted from the net estate of the
decedent.
(D) Tax Credit for Estate Taxes Paid to a Foreign Country –
In General
- The tax imposed by this Title shall be credited with the amounts of any
estate tax imposed by the authority of a foreign country.
Limitations on Credit
Limitations
- The amount of the credit taken under this Section shall be subject to each
of the following limitations:
a) The amount of the credit in respect to the tax paid to any country
shall not exceed the same proportion of the tax against which such
credit is taken, which the decedent’s net estate situated within such
country taxable under this Title bears to his entire net estate; and
b) The total amount of the credit shall not exceed the same proportion
of the tax against which such credit is taken, which the decedent’s
net estate situated outside the Philippines taxable under this Title
bears to his entire net estate.
Section 87. Exemption of Certain Acquisitions and Transmissions. - The
following shall not be taxed:
a) The merger of usufruct in the owner of the naked title;
b) The transmission or delivery of the inheritance or legacy by the
fiduciary heir or legatee to the fideicommissary;
c) The transmission from the first heir, legatee or donee in favor of
another beneficiary, in accordance with the desire of the
predecessor; and
d) All bequests, devises, legacies or transfers to social welfare,
cultural and charitable institutions, no part of the net income of
which insures to the benefit of any individual: Provided, however,
That not more than thirty percent (30%) of the said bequests,
devises, legacies or transfers shall be used by such institutions for
administration purposes.
Section 88. Determination of the Value of the Estate. –
(A) Usufruct. - To determine the value of the right of usufruct, use or
habitation, as well as that of annuity, there shall be taken into account the
probable life of the beneficiary in accordance with the latest Basic
Standard Mortality Table, to be approved by the Secretary of Finance,
upon recommendation of the Insurance Commissioner.
(B) Properties. - The estate shall be appraised at its fair market value as of
the time of death. However, the appraised value of real property as of the
time of death shall be, whichever is higher of - (1) The fair market value as
determined by the Commissioner, or (2) The fair market value as shown in
the schedule of values fixed by the Provincial and City Assessors.