This document is a ruling from the Bureau of Internal Revenue (BIR) in response to a request for clarification on whether the family home of Maximo Landrito could be deducted from his gross estate for estate tax purposes. The BIR ruling states that the family home cannot be deducted because Mr. Landrito and his family were not actually residing in the home at the time of his death, as required by law. The home had previously been foreclosed on but later reconveyed to Mr. Landrito, however he was renting an apartment and died there, not in the family home. Tax exemptions must be strictly construed under the law.
This document is a ruling from the Bureau of Internal Revenue (BIR) in response to a request for clarification on whether the family home of Maximo Landrito could be deducted from his gross estate for estate tax purposes. The BIR ruling states that the family home cannot be deducted because Mr. Landrito and his family were not actually residing in the home at the time of his death, as required by law. The home had previously been foreclosed on but later reconveyed to Mr. Landrito, however he was renting an apartment and died there, not in the family home. Tax exemptions must be strictly construed under the law.
This document is a ruling from the Bureau of Internal Revenue (BIR) in response to a request for clarification on whether the family home of Maximo Landrito could be deducted from his gross estate for estate tax purposes. The BIR ruling states that the family home cannot be deducted because Mr. Landrito and his family were not actually residing in the home at the time of his death, as required by law. The home had previously been foreclosed on but later reconveyed to Mr. Landrito, however he was renting an apartment and died there, not in the family home. Tax exemptions must be strictly construed under the law.
Sec. 86 (A) (4) NIRC; RR 02-03; CIR vs. Isabela Cultural Corp., G.R. No. 172231 Cynthia L. Tiotuyco #14 S. Moldero, B.F. Homes Capitol Site, Quezon City Ma'am : This refers to your letter dated February 4, 2011 requesting for a clarificatory ruling on whether the family home of your father, the deceased Maximo B. Landrito, may be deducted from his gross estate for purposes of estate tax. It can be gathered from the documents submitted that Maximo Landrito and his wife, Paz Landrito, ("Spouses Landrito") obtained a loan from Zoilo and Primitiva Espiritu ("Spouses Espiritu") in the amount of P350,000.00; that to secure the loan, the Spouses Landrito executed a real estate mortgage over their real property located in Alabang, Muntinlupa covered by Transfer Certificate of Title (TCT) No. S48498, in favor of Spouses Espiritu; that said property was being used by Spouses Landrito as their residence. Furthermore, the Spouses Landrito were unable to settle the loan when the same became due and demandable. As a consequence, the mortgaged property was foreclosed on October 31, 1990 and sold to Spouses Espiritu as the sole bidder. The title of the property was subsequently transferred in the name of Spouses Espiritu under TCT No. 179802 of the Registry of Deeds for Makati. Meanwhile, Spouses Landrito were ejected from their property and rented an apartment as their residence. On October 9, 1992, the Spouses Landrito, represented by their son, Zoilo Landrito, filed an action for annulment or reconveyance of title of the subject property against Spouses Espiritu. The Supreme Court, in its decision promulgated on April 3, 2007, declared invalid the foreclosure proceedings and ordered the Spouses Espiritu to reconvey the property to the Spouses Landrito. Pending the execution of the Court's decision, Maximo Landrito died on December 20, 2007 in his rented apartment in Sampaloc, Manila. The sole issue is whether or not the family home constituted on the lot that was foreclosed but subsequently reconveyed to Spouses Landrito may be deducted from the gross estate of Maximo Landrito. In reply, please be informed that Section 6 (D) (b) of the Revenue Regulations No. 02-2003, which implements Section 86 (A) (4) of the Tax Code of 1997, provides, to wit: "Conditions for the allowance of FAMILY HOME as deduction from the gross estate 1. The family home must be the actual residential home of the decedent and his family at the time of his death, as certified by the Barangay Captain of the locality where the family home is situated; 2. The total value of the family home must be included as part of the gross estate of the decedent; and
3. Allowable deduction must be in an amount equivalent to the current fair market
value of the family home as declared or included in the gross estate, or the extent of the decedent's interest (whether conjugal/community or exclusive property), whichever is lower, but not exceeding P1,000,000." Based from the above-quoted provision, it is clear that the family home, in order to be allowed as a deduction from the gross estate, must be the actual residential home of the decedent and his family at the time of his death. In this case, Mr. Landrito and his family were not actually residing at their family home at the time of his death. Hence, the said family home may not be allowed as a deduction from the gross estate for purposes of estate tax. It is a governing principle in taxation that tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. One who claims an exemption must be able to justify the same by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications. And since a deduction for income tax purposes partakes of the nature of a tax exemption, then it must also be strictly construed. (CIR vs. Isabela Cultural Corporation, G.R. No. 172231 dated February 12, 2007) Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue