Scribd
Upload
103 views2 pages

CIR Vs CA and PAJONAR

1) The CIR appealed a CTA ruling that allowed the estate of Pedro Pajonar to deduct notarial fees for an extrajudicial settlement and attorney's fees from guardianship proceedings when calculating estate taxes. 2) The Supreme Court ruled that expenses incurred during the extrajudicial settlement of an estate and attorney's fees related to terminating an inter vivos trust that was included in the estate can be deducted. 3) Deductible expenses must be actually and necessarily incurred in administering the estate, including collecting assets, paying debts, and distributing the remainder. The attorney's fees in question were essential to distributing Pedro Pajonar's property and therefore deductible.

Uploaded by

Bryan Jay Nuique
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
103 views2 pages

CIR Vs CA and PAJONAR

1) The CIR appealed a CTA ruling that allowed the estate of Pedro Pajonar to deduct notarial fees for an extrajudicial settlement and attorney's fees from guardianship proceedings when calculating estate taxes. 2) The Supreme Court ruled that expenses incurred during the extrajudicial settlement of an estate and attorney's fees related to terminating an inter vivos trust that was included in the estate can be deducted. 3) Deductible expenses must be actually and necessarily incurred in administering the estate, including collecting assets, paying debts, and distributing the remainder. The attorney's fees in question were essential to distributing Pedro Pajonar's property and therefore deductible.

Uploaded by

Bryan Jay Nuique
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

CIR v.

CA and PAJONAR
G.R. No. 123206; MARCH 22, 2016

Facts:

Pedro Pajonar, was a member of the Philippine Scout, Bataan Contingent, during the second
World War, was a part of the infamous Death March by reason of which he suffered shock and
became insane.

His sister Josefina Pajonar became the guardian over his person, while his property was
placed under the guardianship of PNB. He died on January 10, 1988. He was survived by his two
brothers Isidro and Gregorio, his sister Josefina, two nephews and a niece.

PNB filed an accounting of the decedent's property under guardianship valued at


P3,037,672.09. However, the PNB did not file an estate tax return, instead it advised Pedro Pajonar's
heirs to execute an extrajudicial settlement and to pay the taxes on his estate.

Pursuant to the assessment by the BIR, the estate of Pedro Pajonar paid taxes in the amount
of P2,557. Pursuant to a second assessment by the BIR for deficiency estate tax, the estate of Pedro
Pajonar paid estate tax in the amount of P1,527,790.98. Josefina, in her capacity as administratrix
and heir of Pedro Pajonar's estate, filed a protest with the BIR praying that the estate tax payment in
the amount of P1,527,790.98, or at least some portion of it, be returned to the heirs.

However, without waiting for her protest to be resolved by the BIR, Josefina filed a petition for
review with the Court of Tax Appeals praying for the refund of P1,527,790.98, or in the alternative,
P840,202.06, as erroneously paid estate tax.

CTA ordered the CIR to refund Josefina the amount of P252,585.59, representing erroneously
paid estate tax for the year 1988. Among the deductions from the gross estate allowed by the CTA
were the amounts of P60,753 representing the notarial fee for the Extrajudicial Settlement and the
amount of P50,000 as the attorney's fees in Special Proceedings for guardianship

CIR filed a motion for reconsideration of the CTA's decision asserting, among others, that the
notarial fee for the Extrajudicial Settlement and the attorney's fees in the guardianship proceedings
are not deductible expenses.

CTA issued the assailed Resolution ordering the CIR to refund the estate of Pedro Pajonar,
the amount of P76,502.42 representing erroneously paid estate tax for the year 1988. Also, the CTA
upheld the validity of the deduction of the notarial fee for the Extrajudicial Settlement and the
attorney's fees in the guardianship proceedings. CIR filed with the Court of Appeals a petition for
review questioning the validity of the abovementioned deductions.

ISSUE: Whether the notarial fee paid for the extrajudicial settlement in the amount of P60,753 and
the attorney's fees in the guardianship proceedings in the amount of P50,000 may be allowed as
deductions from the gross estate.
RULING:

YES

This Court adopts the view under American jurisprudence that expenses incurred in the
extrajudicial settlement of the estate should be allowed as a deduction from the gross estate. In the
United States, [a]dministrative expenses, executor's commissions and attorney's fees are considered
allowable deductions from the Gross Estate. Administrative expenses are limited to such expenses as
are actually and necessarily incurred in the administration of a decedent's estate.

Necessary expenses of administration are such expenses as are entailed for the
preservation and productivity of the estate and for its management for purposes of liquidation,
payment of debts and distribution of the residue among the persons entitled thereto.

The Court considered the contention of respondent as unmeritorious that the attorney's fees of
P50,000.00 incurred in the guardianship proceeding should not be deducted from the Gross Estate,
Attorneys' and guardians' fees incurred in a trustee's accounting of a taxable inter vivos trust
attributable to the usual issues involved in such an accounting was held to be proper deductions
because these are expenses incurred in terminating an inter vivos trust that was includible in the
decedent's estate. 

Although the Tax Code specifies "judicial expenses of the testamentary or intestate
proceedings," there is no reason why expenses incurred in the administration and settlement of an
estate in extrajudicial proceedings should not be allowed. However, deduction is limited to such
administration expenses as are actually and necessarily incurred in the collection of the
assets of the estate, payment of the debts, and distribution of the remainder among those
entitled thereto. Such expenses may include executor's or administrator's fees, attorney's fees, court
fees and charges, brokerage fees or commissions for selling or disposing of the estate, and the like.
Deductible attorney's fees are those incurred by the executor or administrator in the settlement of the
estate or in defending or prosecuting claims against or due the estate. It is clear therefore that the
also attorney's fees incurred in the guardianship proceeding in Spec. Proc. No. 1254 were essential
to the distribution of the property to the persons entitled thereto. Hence, the attorney's fees incurred in
the guardianship proceedings in the amount of P50,000.00 should be allowed as a deduction from the
gross estate of the decedent, as it was necessary for the distribution of the property of the deceased
Pedro Pajonar.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy