G.R. No. 34937; March 13, 1933
CONCEPCION VIDAL DE ROCES and her husband, MARCOS ROCES, and ELVIRA VIDAL DE RICHARDS, plaintiff-appellants, vs. JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellee.

FACTS

Esperanza Tuazon donated parcels of land to the plaintiffs via public documents in 1925. The plaintiffs took possession, received the fruits, and obtained titles. The donor died in 1926 without forced heirs, bequeathing P5,000 to each plaintiff in her will. The defendant Collector of Internal Revenue assessed inheritance tax on both the donations and the cash legacies, treating the donations as “advances on inheritance” under Section 1540 of the Administrative Code. The plaintiffs paid under protest and filed an action for recovery. The trial court sustained the defendant’s demurrer to the complaint and dismissed the action for failure to amend.

ISSUE

Whether Section 1540 of the Administrative Code, which requires adding the value of “all gifts” to the taxable estate for inheritance tax purposes, constitutionally applies to inter vivos donations made prior to the donor’s death.

RULING

Yes, but only to the extent that such inter vivos donations are made in contemplation or in consideration of death. The Court affirmed the dismissal of the complaint. It held that Section 1540 refers to inter vivos gifts that are considered advances on inheritance because they are made in contemplation of death. The tax imposed is not a direct property tax but an inheritance tax on the transmission of property in anticipation of death. The law does not violate the Jones Law requirement on titles, as the heading “Tax on Inheritance” sufficiently expresses the subject. The Legislature has the power to impose such a tax on transmissions mortis causa, including gifts made in contemplation of death. The complaint was insufficient as it failed to allege that the donations were not made in contemplation of death.

AI Generated by Armztrong.