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Taxation II Case Digest 1. Alejandro vs. Geraldez Facts: Spouses Gavino Diaz and Severa Mendoza executed a Deed of Donation in favor of their children, Olimpia, Angel and Andrea Diaz. In the deed of donation, the Sps. Donated 8 lots, with reservations on certain lots, to their children and daughters-in-law and with conditions that they are not allowed to alienate the same to 3rd persons while the couple are still alive and that they shall continue to administer the same until their death. The donees manifested their acceptance in the same deed of donation. When Gavino died, Severa executed a deed of donation in favor of Angel and Andrea, giving the siblings each a portion of Lot 2377-A. When Severa died, Andrea sued Angel to have the lots 2377-A and 2502 partitioned. Teodorico Alejandro, the surviving spouse of Olimpia, moved to intervene claiming 1/3 portion of Lot 2502. The CFI ruled that the donation was a donation mortis causa because the ownership of the properties donated did not pass to the donees during the donors lifetime but was transmitted to the donees only upon the death of the donor. It, however, sustained the partition of Lot 2502 since it was an extrajudicial partition. Both parties appealed to the SC, Andrea contending that it is a donation inter vivos while Alejandro contending it to be mortis causa.

The reservation clause which provides that the donees cannot sell the lots to 3rd persons while the couple is still alive implies that the ownership already passed. Although there was a stipulation where the couple reserved to them the administration, ownership and rights over the properties mentioned, this should not be construed as to mean that ownership will pass only after their death. This refers to the beneficial ownership and not the naked title and what the donors reserved to themselves by means of that clause was the management of the donated lots and the fruits thereof. 2. Heirs of Juan and Felipe Bonsato vs. CA Facts: The case was filed by respondents Utea and other heirs of Domingo Bonsato and his wife Andrea Nacario, both deceased. Their complaint (for annulment and damages) charged that Domingo, then already a widower, had been induced and deceived into signing two notarial deeds of donations in favor of his brother Juan Bonsato and of his nephew Felipe Bonsato, respectively, transferring to them several parcels of land, both donations having been duly accepted in the same act and documents; and that the donations were mortis causa and void for lack of the requisite formalities. CFI rendered its decision finding that the deeds of donation were executed by the donor while the latter was of sound mind, without pressure or intimidation; that the deeds were of donation inter vivos without any condition making their validity or efficacy dependent upon the death of the donor; but as the properties donated were presumptively conjugal, having been acquired during the coverture of Domingo Bonsato and his wife Andrea Nacario, the donations were only valid as to an undivided one-half share in the three parcels of land described therein. Upon appeal with the Court of Appeals, the majority rendered judgment holding the aforesaid donations to be null and void, because they were donations mortis causa and were executed without the testamentary formalities prescribed by law, and ordered the defendants-appellees Bonsato to surrender the possession of the properties in litigation to the plaintiffs-appellants. Issue Whether or not the deeds of donation are donations mortis causa or intervivos?

Issue: Whether or not the donation is a donation inter vivos or mortis causa Held: Donation inter vivos The donation is a donation inter vivos because it took effect during the lifetime of the donors as provided in Art. 729. It was stipulated in the deed that out of love and affection by the donors to the donees, the latter are donating wholeheartedly and unconditionally free from any kind of lien and debt. Likewise, it was accepted by the donees which are a requirement for donations inter vivos. Donations mortis causa are never accepted during the donors lifetime.

Held: The donation is inter vivos. Despite the widespread use of the term "donations mortis causa," it is wellestablished at present that the Civil Code of 1889, in its Art. 620, broke away from the Roman Law tradition, and followed the French doctrine that no one may both donate and retain by merging the erstwhile donations mortis causa with the testamentary dispositions, thus suppressing said donations as an independent legal concept. To be donations mortis causa, the documents should reveal any or all of the following characteristics: (1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive. (2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed. (3) That the transfer should be void if the transferor should survive the transferee. None of these characteristics is discernible in the deeds of donation. The donor only reserved for himself, during his lifetime, the owner's share of the fruits or produce, a reservation that would be unnecessary if the ownership of the donated property remained with the donor. Most significant is the absence of stipulation that the donor could revoke the donations; on the contrary, the deeds expressly declare them to be "irrevocable", a quality absolutely incompatible with the idea of conveyances mortis causa where revocability is of the essence of the act, to the extent that a testator can not lawfully waive or restrict his right of revocation. 3. Collector of Internal Revenue vs. Rueda

National Internal Revenue Code. Rueda requested for the reconsideration of the decision denying the claim for tax exemption. However, respondent denied this request on the grounds that there was no reciprocity with Tangier, which was moreover a mere principality, not a foreign country.. Court of Tax Appeals ruled that the expression 'foreign country,' used in the last proviso of Section 122 of the National Internal Revenue Code, refers to a government of that foreign power which, although not an international person in the sense of international law, does not impose transfer or death taxes upon intangible personal properties of our citizens not residing therein, or whose law allows a similar exemption from such taxes. It is, therefore, not necessary that Tangier should have been recognized by our Government in order to entitle the petitioner to the exemption benefits of the last proviso of Section 122 of our Tax Code. Issue: Whether or not the requisites of state hood, or at least so much thereof as may be necessary for the acquisition of an international personality, must be satisfied for a foreign country" to fall within the exemption of Section122 of the National Internal Revenue Code? Held: Supreme Court affirmed Court of tax Appeals Ruling. - If a foreign country is to be identified with a state, it is required in line with Pound's formulation that it be a politically organized sovereign community independent of outside control bound by ties of nationhood, legally supreme within its territory, acting through a government functioning under a regime of law. It is thus a sovereign person with the people composing it viewed as an organized corporate society under a government with the legal competence to exact obedience to its commands.

4. Cuevas vs. Cuevas Facts: 5. Reyes vs. Mosqueda

Facts: Collector of Internal Revenue held Antonio Campos Rueda, as administrator of the estate of the late Estrella Soriano Vda. De Cerdeira, liable for the stun of P161,874.95 as deficiency estate and inheritance taxes for the transfer of intangible personal properties in the Philippines, the deceased, a Spanish national having been a resident of Tangier, Morocco from 1931 up to the time of her death in 1955. Ruedas request for exemption was denied on the ground that the law of Tangier is not reciprocal to Section 122 of the

Facts: Dr. Emilio Pascual died intestate and was survived by his sister Ursula Pascual and the children of his late sisters, herein petitioners Ruperto Reyes et. al. The heirs of Dr. Pascual filed Special Proceedings No. 73-30-M in the CFI for the administration of Pascuals estate. Ursula then filed a motion to exclude some properties included alleging that these were donated to her in a

donation mortis causa in 1966. This was granted by the CFI without prejudice to its final determination in a separate action. An appeal was made to the SC. The SC then issued a TRO enjoining the CFI from enforcing the order. Among the properties donated to Ursula is lot 24 which was also donated in 1969 in a deed of donation inter vivos in favor of Ofelia Parungao who was then a minor at the time of the donation. When she reached the age of majority, she had the donation registered but found out that the certificate of title was missing so she filed a petition for reconstitution of title which was granted and she registered the donation and was issued a new TCT in her name. Ursula then sold the lot in favor of the Reyes. Benjamin Reyes filed a complaint for declaration of nullity of Ofelias TCT which prompted Ofelia to file a petition for recovery of possession against Benjamin Reyes. The CFI issued a joint decision for the 2 cases ruling that Ofelias TCT was null and void. The IAC affirmed thus an appeal to the SC. Issues: (1) Whether or not the probate has jurisdiction to exclude properties donated to Ursula (2) Whether or not the donation executed in favor of Ursula was a donation inter vivos Ruling: (1) YES. It was stressed in the order of the probate court that it was without prejudice to the final determination in a separate action. It is well-settled that although a probate court cannot adjudicate or determine title to properties, it can determine whether or not the properties should be included in the inventory to be administered. Such determination is not conclusive and is subject to the final decision in a separate action. (2) YES. Although the donation was entitled donations mortis causa it has been held that dispositions in a deed of donation do not depend on the title or term used in the deed of donation. It is the body of the document which should be considered in ascertaining the intention of the donor. For a donation to be a donation mortis causa, the following characteristics should be present: 1. It conveys no title before the death of the transferor or the transferor retains ownership over the property 2. Before his death, the transfer should be revocable by the transferor at will

3. The transfer is void should the transferor survive the transferee The following are not present in the case. The transfer of ownership was immediate and independent of the death of the donor. The provision stating that the donor has reserved sufficient properties for himself to maintain him for life confirms the intention of the donor to give naked ownership immediately after execution of the deed of donation.