Dison v Posadas

Facts:

Don Felix Dison, before his death, made a gift inter vivos in favor of plaintiff Luis Dison. Luis was the legitimate and only child of Felix. The Collector of Internal Revenue, Juan Posadas Jr. taxed him. Luis filed for the recovery of an inheritance tax in the sum of P2,808.73 paid under protest. He alleged in his complaint that the tax is illegal because he received the property from his father before his death by a deed of gift inter vivos which was duly accepted and registered before the death of his father. He contends that he received and held the property by a consummated gift and that Act No. 2601 being the inheritance tax statute, does not tax gifts.

Issue:

Whether or not Dison should pay inheritance tax.

Held:

Yes. Dison should pay tax. Section 1540 of the Administrative Code is applicable. It states that:

‘Addition of Gifts and Advances- After the aforementioned deductions have been made, there shall be added to the resulting amount the value of all gifts/advances made by the predecessor to any of those, who, after his death, shall prove to be his heirs, devisees, legatees or donees mortis causa.’

That Dison occupies the status of heir to his deceased father cannot be questioned. The conveyance is deemed to be an advancement upon the inheritance which the donee, as the sole and forced heir of the donor, would be entitled to receive upon the death of the donor. The tax has been properly assessed by the CIR.

As regards Act 2601, it is not applicable since the Act does not make any reference to a tax on gifts.