DIZON in his capacity as Administrator of deceased Fernandez vs. COMMISSIONER OF INTERNAL REVENUE - Estate Tax Compromise Payments and Deductions

FACTS:

There were claims against the estate which the BIR contested stating that lower amounts were paid as compromise payments during the settlement of the estate and these amounts should be what will be considered as deductions in arriving at the net estate.

ISSUE:

Will the compromise amounts be the amounts considered as deductions to the gross estate?

HELD:

NO. The deductions allowable are the amounts determined at the time of death. Post-death developments are not material in determining the amount of deduction. Thus, the Court applied the “date-of-death valuation rule” which is the US rule on deductions and which is applicable also in the Philippines. The amount deductible is the debt which could have been enforced against the deceased in his lifetime.