G.R. No. 30885, January 23, 1930
ALFONSO TUASON Y ANGELES and MARIANO TUASON Y ANGELES, plaintiffs-appellees, vs. JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellant.

FACTS

Esperanza Tuason y Chuajap made two separate donations inter vivos to the plaintiffs, Mariano Tuason y Angeles (on September 15, 1922) and Alfonso Tuason y Angeles (on April 30, 1923). She died on January 5, 1926, leaving a will that bequeathed legacies of P5,025 each to the plaintiffs. The judicial administratrix paid the inheritance tax on these testamentary bequests. However, the defendant Collector of Internal Revenue also collected from the plaintiffs the sums of P3,809.76 and P6,653.64, respectively, as inheritance tax on the earlier donations inter vivos. The plaintiffs paid under protest and subsequently filed an action to recover these amounts, arguing that the donations inter vivos were not subject to inheritance tax. The trial court ruled in favor of the plaintiffs, ordering the refund. The Collector appealed.

ISSUE

Whether donations inter vivos made to persons who later become legatees or devisees under the donor’s will are subject to inheritance tax under Section 1540 of the Administrative Code.

RULING

YES. The Supreme Court reversed the trial court’s decision and absolved the defendant Collector from the complaint.

The Court held that Section 1540 of the Administrative Code requires that after allowable deductions are made from the estate, the value of all gifts (interpreted as gifts inter vivos) made by the deceased to any person who, after the donor’s death, proves to be an heir, devisee, legatee, or donee mortis causa must be added to the net taxable amount. The law presumes that such gifts inter vivos were made in anticipation of inheritance to evade the inheritance tax. Since the plaintiffs were named legatees in Esperanza Tuason’s will, the donations inter vivos made to them were properly included in the computation of the inheritance tax.

The Court rejected the constitutional challenge based on lack of uniformity in taxation, noting that the issue was not raised by the parties and, in any case, the differentiation between donees who later become heirs/legatees and those who do not is a valid classification, not violative of the uniformity principle.

DISSENTING OPINION:
Justice Street, joined by Justices Johnson and Villa-Real, dissented. They argued that the imposition of the tax violated the constitutional requirement of uniform taxation. The dissent emphasized that the plaintiffs were not heirs by intestate succession; thus, the donations inter vivos to them could not be considered “in anticipation of inheritance.” Taxing these gifts merely because the donor later named them legatees in her will created an arbitrary and capricious distinction, as a donee who later receives a small legacy would be taxed on the entire earlier gift, while another donee who receives no legacy would not be taxed at all. The dissent distinguished this case from Zapanta v. Posadas, where the donees were compulsory heirs, making the gifts potentially in anticipation of inheritance.