Commissioner of Internal Revenue vs Lilia Gonzales (MFR)

G.R. No. L-19495 – Taxation Law – Estate Taxes – Liability of Administrator

In November 1966, the Supreme Court issued a decision declaring Lilia Gonzales to be liable for the entire tax deficiency due on an estate left by her father. Gonzales seeks reconsideration for her not to be adjudged as liable for the whole tax since she administers only 1/3 of the estate. And that the other 2/3 is now administered by his deceased brother’s widow, Florencia Yusay.

ISSUE: Whether or not Gonzales is only liable for 1/3.

HELD: No. In the first place, Florencia cannot be adjudged liable because she is not a party to this case. Gonzales appealed the tax assessments to the Court of Tax Appeals hoping for a favorable judgment. The adverse judgment shall be borne by her. Under the tax code, failure to pay the estate and inheritance taxes before distribution of the estate would subject the executor or administrator to criminal liability. The Supreme Court also clarified, it is immaterial that Gonzales administers only one-third of the estate and will receive as her share only said portion, for her right to the estate comes after taxes. As an administratrix, she is liable for the entire estate tax. As an heir, she is liable for the entire inheritance tax although her liability would not exceed the amount of her share in the estate. Besides, the tax payment shall come from the estate before actual distribution.

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