G.R. No. L-22734 September 15, 1967
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.

FACTS

Atanasio Pineda died on May 23, 1945. Estate proceedings were had, and the estate was divided among his heirs, including his son, respondent Manuel B. Pineda, who received a share of about P2,500.00. The proceedings terminated on June 8, 1948. The Bureau of Internal Revenue later found that income tax returns for the estate for the years 1945, 1946, 1947, and 1948 were not filed. The Collector’s representative filed the returns based on data from the estate proceedings and issued an assessment for deficiency income tax for 1945, 1946, and 1947, plus surcharges, interest, and other taxes. Manuel B. Pineda contested the assessment. The Court of Tax Appeals initially ruled that the right to assess and collect had prescribed, but on appeal, this Court held that the right had not prescribed for 1945 and 1946 but had prescribed for 1947. The case was remanded to the Tax Court, which held Manuel B. Pineda liable only for the payment corresponding to his share of the taxes due for 1945 and 1946 deficiency income tax and real estate dealer’s tax. The Commissioner appealed, seeking to hold Pineda liable for the full amount of the taxes due from the estate.

ISSUE

Whether respondent Manuel B. Pineda, as an heir, can be held liable for the full amount of the unpaid taxes due from the estate of Atanasio Pineda, or only up to the extent of and in proportion to the share he received from the inheritance.

RULING

The Supreme Court modified the decision of the Court of Tax Appeals. It held that the Government can require Manuel B. Pineda to pay the full amount of the taxes assessed, which is P760.28, covering deficiency income tax for 1945 and 1946 and real estate dealer’s fixed tax. The Court explained that Pineda is liable in two capacities: (1) As an heir, he is individually answerable for the part of the tax proportionate to his share, but this liability cannot exceed the amount of his share. (2) As a holder-transferee of property belonging to the estate, he is liable for the tax up to the amount of the property in his possession, by virtue of the tax lien under Section 315 of the Tax Code, which attaches to all property of the taxpayer. The Government has a lien on the P2,500.00 received by Pineda for the unpaid taxes of the estate. Therefore, the Government can subject the property in Pineda’s possession to satisfy the tax assessment. After payment, Pineda has a right of contribution from his co-heirs. The Government has two remedies: to collect proportionately from all heirs or, as in this case, to subject the property in the hands of an heir to payment of the tax due from the estate.