Lorenzo v Posadas (Tax)

FACTS:

Lorenzo, in his capacity as trustee of the estate of Thomas Hanley, brought an action against the Collector of Internal Revenue Posadas for the refund of P2,052.74 inheritance taxes. The properties under the will were to pass to Matthew Hanley after 10 years.

ISSUES:
1. When does the inheritance tax accrue and when must it be satisfied?
2. Should the inheritance tax be computed on the basis of the value at the time of the testator's death or on its value ten years later?
3. In determining the net value of the estate subject to tax, is it proper to deduct the compensation due to trustees?
4. What law governs the case?
5. Has there been delinquency in the payment of the inheritance tax?

RULING:
1. Thomas Hanley having died on May 27, 1922, the inheritance tax accrued as of that date. But it must be paid before the delivery of the properties in question to PJM Moore as trustee on March 10, 1924.
2. It should be computed at the time of the decedent's death, regardless of any subsequent contingency value of any increase or decrease and notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary and the tax measured by the value of the property transmitted at that time regardless of its appreciation or depreciation.
3. No. The compensation of a trustee, earned not in the administration of the estate, but in the management thereof for the benefit of the legatees or devises, does not come properly within the class or reason for exempting administration expenses.
4. Act 3031 and not Act 3606 applies. Even if Act 3606 is more favorable to the taxpayer, revenue laws, generally, which impose taxes collected by means ordinarily resorted to for the collection of taxes are not classes as penal laws.
5. Yes. That taxes must be collected promptly is a policy deeply entrenched in our tax system. Thus, no court is allowed to grant injunction to restrain the collection of any internal revenue tax. The mere fact that the estate of the deceased was placed in trust did not remove it from the operation of our inheritance tax laws or exempt it from the payment of the inheritance tax.