CTA Case No. 301 (Decision)

1\l I lJI U i liP. l'liiLlJ'l l. t<: CO UHf Ul I: Al).P�Al...'i M&'fll.A � V t'GU � � . A. E t � SOl � X� � � � � � � � � � .., � ... � � . cI !0 nt ~olJ. ct r ap 1 r n - Intr &5 � a .in t an d an .~l t c , n- 1ft taxes i - elu l n te eats t. 0 r 1, 19~. t :u.s. y ~ � r 1 it ro th appear& that � 1950, p tl nton" � �rvl rn u~ un er sepa.rat in u lo to t c �� t. r tex- nc u � U$ roa in iSC ho ttiJ it . t n, lc � ia~ ... ho ts .. 8 0 te a d pou cs � t lot o!d o � e a cnila.r n a a c a at on n, ...of { � p . 6, c� sold to only \:0 {2) l.e t !1 d frostna , t a c n rat on of � (&:xn. .. 8 3

u E � 301 - 2- p. 27. . ). The p:r:op.erty n ques' t on ' lac t d at tho ~orner of ayon n ar� a .. la � tre s , ta. es H�l hts, ezon C .ty. v�oualy c .. ired fro~ th J. � ru son Znc., on arch 6, 1943 for ~ cons l rntion of (�xl � n, p. 64, rA r c.). !ho hou~~ � x ia t al sto.rles an of tron co .- atzucted ly 46, Jt a co t of � 1 47 for he u o nd lot re a sese; real & tat tax t n, respeetiv lv at and s. F ~n p. 32- , CTA rec. )'. Dur th yeer ! � th s es d valu ot t ere sed to 9 , 060.00 ( xi. 6, p. 64, C r c;. ) . t t of th s 1 s � est on t of t us ftn lot r n 9, (se also � � p. 6, T r c.) � ct S3 u n the r~port r co nd !on 01: � h!V a ( p. . ) , :r: s - n nt n to r i\.6, 1 54. aued nt not. c .and de anded fro aeh of pet o e:rs ( Xh&. l f to 2 , i e1 stv , pp. 21� 24, Oil rec., donor�� an on�� ' � t taxos as follo ' t�L_t>ono,� tft Tax Anton o n� ta veorro l � �� �� �� ���� � � ���� �� �������� Nu ri � ����� ���������� Jesu� T. erol and uirosin � d N see ���� � ����� ������ � � � ���� � 407. lac:! a � � ie Osias � � � � � � � � � � � � � � � � � � � 170. 84

�1 - 3- n tober 27, 19~4 , pet t1oners f led a lotter dated tober 2 , 1 54 (Exh. c. p. 28, CT rec.; Exh. 21. p. , 1R rtc.) e t ng for a r cons dorat on of respondent' ��� ents on t gro nd t the s le tn quest�o �� val~d, an �w�th suff c1en end ully ade ate cons�derat on." espondent, on J ly 5, 19~ denied th s r qu st nd m nta ned th ettt on r ar su ject to ft taxes nd r s ctton 111 of the Tex Co e on t ground th t ans ct na � estton er ot ade fo~ tull an adtqJ t cons der t on ( xh. 23, p. rec.}. Hence , th'a appeal !n t tut y t � t oners. he sal re �nvol d are ad tte ly v l~d. nee. t sole st on ere us ~a et r or ot t � propert�es ~n st~cn re tr n ferre for 1 han an a equate n full cons d ratton. fore proceed"ng to t scusa on of the G&U presented by the part i s � shall f~rst d pose of p - tit� ners� Ex- art to Corr ct Tr nscr pt of te ograp c f~ d o ce b r 5� l 57. The capt o t ot on ve of �ta ur a � owever, after a cons{ erat(on o nee y oth part �� at the hear n o nt for an th otion, f!n t � s e not t r�oue re y d nv the sa � roc ed�n to he prtnc p 1 est on h r ts , � ote ereun er oct on lll of t T applfe$ to t case t r.

1 -- e t� ners, tn iJne wlth t .e!x content on th t the propert �s re tran$fer ed fo% full and nd quat� cons rat on, pr s nt d d nc te.d11 to tb t the true ark than h arket values aa&i to r;y r ..,en n � o ~ rrobo.r t t test ony of cner Anton o � � erol, � onsu lo irin as pr s n ed to eon 1r that r offer d to r for sale. test!� fl.O t ~y and h u e th otal � 12. or for s.e an lot. Th!s v G the ount olci to the ch l~en of r t tran ct �on Ln est ons. ner 11ton�o .- . f ed th t � � 1r no � o of tho to hom th ,rop rt es re o�fe.re<l for s 1 , w ot th t she �a the only tness pr�s�nt d o ueh an ff alleg dly ll a e. � lso note tb off r 11 r as pe t oner �� � erol not pee fy or an- tion !th de n t�n ss the pr ce t wht~h he � w llin to s�ll. These facts do not how w 11 ngn s on t1 part of pe it!o e spouses to 6el1 th propert�es at 86 f?

1 - 5- ket. A& � f.tn! � or tpec!f!c , ye in cout� be a ason le bas s for the d ter tnatton of the arket val � o tn properties, reeso able fforts should have een � erted by et t one � o find a r � w 11 ~1ve th hfgbast pr c for &Uch pro� ill 9 ve ay Co. Aga!n, ... ing t here was a ef ntt o �r to ~�!1 y petitioner A .~. �- !th a epee e�ol to e pr ce, eve that the properties or price f at least 23, 120. , co that � the t , thf.a as the total �� es There t.tld be no basta to 5Usta1n the t c.ne.r , � � erol 1 � sell or of er to t e opertl sse sed lue. 1n ad tl o th t it ony f p tltionar A. � f p t tione s) te t f e ttt.t the hou � in quest , a in doprec nted ~tate at the time of h &ale. lt s thus c!a d hat the saessed value � 14, 0 . oo as tb n ~aaaive . the atteapt to ~ov� the1r potnt, et!t oners ~esented a copy of a letter date � are 1� 194 ddrested to I the City Asses or of uezon \.#tty purport ng to conte t the quest oned ssess~nt (axh. � p. 34, �ec �) � ver, there i no ev!d.ance t t th l�tter a& a led ..� 87 ft

� 301 - 6- or that t s rece d by th 1 tt r. Th n qu st on a .dl y of "ttron~... I! h. � p. 27, ).. d not t r" ls u�ld g ft r ld co 1 1 have d p.r e value to uc nt that itt tru& valu t ti of s le lo r than t � valu t her of d ... pett oul 1 f t f ct, i:n led , t c f � valu of 1 yr 1 a th rk t valuaa. ( � � oll ctor 11 TA o, i41, e olutio' of nece b r 29, 19 6 , 3 O. G. o. 1 , ay 1, 1 ~7, pp. 316 , 3211. t �- 0t t at 1946 a 0 r t es l.~ of 10, o. � ct c s, cur ty for a l no t t Peo 1 � a n In aep t the nerally e & st d valu ore th n he n d n for i ch pr rt s cur ty. XC cusse pr v ously, t t on rs � � ented no other ev d c to &u conte t I to. the et v lu of t o ~n stto � � ther � neG a o t e rk t v ue o lot larl a tu t d n' o pet t on rs� pro .rty. on t ot er nt d x E. P. vera, conducted t ve t gat on of th s case. vera to~t � f � on the ann r th d us d y h a .z- ,;\"

-- - �l of � cb f t pro rt1 s. expla ned th t the asseased al es of t proper .tes xe :'\C.r aa d y nt � op' ton and % 1 nco . ttow.ver, b ar iv d r t val at 1 on in p te .l. of the faet tb t no � n t e prop rt o � � ther did ~ lte n~t v of ak n ,. ll .a la f ce of t. ur u f teve:\u () concluct an cu f a d pro rtie � I ' f.ct, h t essor of t v .r c f� n :t ity pr � ~rt $ t� n , r oca � hu � t oul that �x i not ul or stan iv u "!!I 0t propertl � - ent d nee ,,. lot lac n n 0 r' rt t; pr f s tr {E � A, � f t th t 62 .. .) . t � sale too pli! th t n .... th t ..ale v l d t l $ � .h :r � propert � s ar no sale ha occurre at lon nt n a po& t�on to dept re~ a.:r f � our n f rnes& to re on ent , t r.1 y be st t d tbat th sal 0 t t on r ' ro crt� s n olv tl c :t r lot i ch ner lly co an a h~gh r pr ce than e non�

DEC �1 . t� � - 8- eorn�r 1o ' e� 19 aale. Apparently, ala t� juattfy hta atan4, reapon� nt ���nted e~l4enc� ~c . tend t eatabl1ah t � extat�nc� of a n��� ancl _c..- tal eat 11 nte near ~tftfon�~�� prope.-ttea. _ ���pt for t � bl c aarket operatri sfnc� 1946, situated at t � co:r.ner of Lao -Lean a yon atneta and about 260 tare froa the�� �� on e before the ate �f sale tbat the" o gbt ..._.1 a t � tnc.eea" !n t fau __.ket valu�� of \ t propertfea n tbe ne ~h.-4 of pet tf�n�r�' \ pnptrt ��� tM IIC'MHue aiopt by r� ponieD � .. cannot t � � the fell.. nt ~vat eat. Tbe re � ex- aa o tM � n rt�� ya ltng artet pr ce of ope~tt�� sttuated n tbit aetgna,.&- at a cena!n t � � . ett ~ dte M r�CI'!eat that t officer of the a ef nt Ml eve... wMH \ o ep � that, ataat.C �� fatr .ar~e\ value f x � ~� w the\& � Naaenable .Daate ..,.b 'bat tt. .... or leal � eta work. 90

DEClSI � C.T.A. CPSE � 1 -9- tnee taxpay ~� taken �� a whole contr bute to I t coffers of the gover nt , each ont regardless of t extent th r contr �' but on should b t1:eated justly and fairly. o our tnd. the anner or et hod used n th s cas n err v n _at the rket valuea of tb propart es here i nvolved ts unfa r and prejudicial to t � �taxp yers. or to allo an exa ner to ke up s own per onal jud nt w thout constder ng t all th cf u tances surround t n the prop rty and f x the values thereof on th 1 alono �s utterly unfa r and unjust. The duty to assess the value of pr er y !a undoubt dly en act requ r~ng a cons darable egree of d scr t'on �cb st b f trly �x�rc sed. ( �� �z. antl a 1 y Co. v. V las 32 Phfl. 14.) The deter n t on of values of real pro rtfes ts neceasar ly and adm ttedly ~ quest on of faet. To arri v at eerta n valuat on �� to ep nd upon v r1ous ctors such a t�me , pl ce, c d tfon and people ft T xat on. Vol. II. p. 1217. ctt!ng arch A. � e o t .Lat d � 26� 28) ~ n the narket \8lue _of a p �c� of property ts att Cned y the cons deratton of 11 thole fact h ch ate uch prop rty valuable ( enila !way Co. v. has �f , fl�d to cons der. j In this ease , ffn that ne�the~ of th partie has sho n y c petent an equ te ev dance th fall' �~ket val � alleged by eac f t e � ecause of such " 91

�1 - 10 - ef cfancy n the ev dence, � re of t e op!nfon that t ass gned arkot values are n t th true and fa r arket values of the proportf s n � t on. � nee. the eter nat on of th mar et valu of th proper- tfea st aceord ngly be mad n pursuanc of sectfo 113 f prov des s follo Un fo.rego fn rul and n vte of th a - sene of ev one to t contr ry, th ss d valu of the l t nd ou � t th of th sal n 19 h ch ts and 1 .ooo. � r p ct vcly. t cons der d thefr fa r rket valu � y pply ng sect.fon lll of the at onal Intern 1 av nu Cod c t d arl er nd 1 proc ss of subtract on, 11 arrfve t the exc s cf the ar et v lues of th pro- pert �� n quest on ov r and bov th l!fn pr e � t whteh t ey had en tr sf rred y p t t�on r spo to thetr ch 1 5 f gures ore deta�led as follo sa !:.2,l 1o e ar et v lue �������� t arket ell n pr ce ���� ��� 0 !ferer c ������ ���� 'e note a substant al dfsparfty value of the propert �� n est on a 11 n �� 92

�1 41! l l � ~ ces t reof. h s d ff�r nc a pr v de stron pr f that dona t a P sent �n t trensfers Ph�� of tM property ( ul . p. 11:12) �� cont pl t d y � ction 1 l o t T xC d " .t 1 t r fo follo that t ce f ..... v 1 th pro� 1: ov r t ll n t d t on f ct n lll f th to en~olop 11 tr n ct n rt 0 unbal c d� n th r d s 11 d exc;hanges eh t r r sact on a �n � s a s le r e, t f th r ae p r~t -� � t on , t d ff r nc 1 z� 1. t � llllf �� Vol. II, � 36) ."l j t .r al /' a ef c n ct t c �t :r le � t n c pre pa d t � far lo rt rt � n 1 4 { arry � on, :,) TA 7 � c t d n � rtena; Law of Fed. nc x t on� ol. 1, p � 251 1 , ......,.;,;a.,;;o. � 1112) . Th t, � of t p 0 old th t t reto st b l h corr spo ding n r' n � Y� Inc dent 11 , t t n d t. t t .-.o s r sed no s u a nl y for failure to f 1 return. s t t o r v n 93

c.r. . E � 1 - 12 - f ct fa 1 to f 1 A return co nr n the rans ers est:on tch ar &uDj ct to tho 'ft t xos a d pet ' t 0 s v'n f led to cont st t ho � s 1t .. � of t e sur\: 1 rg � li ve so old at $Ut'Ch r ay OS d f n cas � [ t ras c to t e c o!t ..s � n d or v~ 1 t T x Co e � Guf c t to st t t e y em of th p At no ~ r nt s r t..C ad s p n lty. c uld n t r jur of 1 pet t 0 to pay th 6 vOle � l l c :r, we � � Ca pt . 14. 1 5 ; tJ, . ty f.., o. m 10. 1 ... 5 ) _] In u � of th op n n nd so cl that t h t val e of tht! o ~roport n ov r 11 n f t h prop rt ~ const t t nd h t th resp_c �v 1 � .. 1 t! s 0 t o r f r onor ' ~ n d n o � ~ g �ft taxe a � �� � � � 5, 60, � Gur�c�h�a�rg��c��f �r�������� to f i r ur s ��� ' !f t X �� �������������������� � 01 9 Ll

E .. � l - 13 � s �� 5, 3Q �������on�������������� ����������������� r ould � as ~t Yt � rol 0py o re n .r 0 lt. th{ t� - t ve y, t n� te:re�t ould r � not 0 � rol, r t see ant\ yG 11 � for ' tax ~ ��� accord! ly c .c 11 � i' 95

l -1 - t co t.:s a nst t t n r~ nt n o E. �r 1 an u r n r-vor � , n.! ' br ry 28 , 19 � � I ; *"soc!at Jud e ' >:~ � dissent s in !ni n. ,, 9 6

PI I 1-'ltlLlPI-'lN~ COl.Jhl APPEALS li1AN1L& NTC�NIO � . ' \JER L, NUMERIANA TAV , J ESUS T. QUER L, z. s. EUFl ).5INA � E Nl ""U and I.ACI.D DE ;;) ! Petitioners, - v r us - C LLECt f I TE L EVEN Re pondent. I dissent. I can not agree to the opinion that the lot and hou o n ~u t on s1 uat d a the corn r of yon and ~aria lara treets , Sta . ~ sa Heights, u�zon. ity, had a fai~ arket value, for tax purposes, in 195 , equivalent to t as esse value. S ction 111 of he evenue ~o � rovi s that here p o rty i s tran ferre f or leas than an edequ t n full con id rati n 1n money or mon- ey's worth, the amount by which the value of the property exceeds the va lu of the c onaider�tion shall, for the purpose of the gift taxes, be e aed a gif , an hall be incl e in co uting the a ount of th 9 fts urlng the calendar year. ec- tion 113 provi that f a gi t 1s a e ln p o- perty, th fair . arke v u t e eof at � tim of t h gift a l l be c nsidered the amount of t1e gift. In cas of real roperty. the aas�s d v lue t hereof in th ye .r of t ~� 9 ft s shown in th tax roll� shall be eunsidered as the fair market ,. 9 7 it

DI TIHG PIN!\; - � CASE � 3 1 value, goleta tht ~ -2- a it showo. In this case, the spouses ntonio � ~uerol and umer1ana Tavora a 1 t ei~ children in Dec- e er, 195 the said house and lot f or le s than th 1r asses ed value. espondent, believing that the f air ma rket value of said prop�rty was twice the assessed value, eon,idered the difference be- tween the fair market value as determined y hia and the assess d value as a ft to t h children (purchasers of the property), and assess d the cor- respondi ng donor's and donee's gift taxes . n the other hand, petitioners ini1 t th th selling price of the property as shown in the deeds of sale re r nts the actual fair market value . oth par- 1 s, therefore, agree th~t the aasetsed value is not the fair market value. For convenience, the following is a state nt of the assessed value of the property and the values assigned to it by the parties' Hou Lot rot a � y coll eagues refused to believe petitioners and l a ree with thea. hey also refused to accept the determination of the fair market value ade by respondent ho considered the assessed value a& only ~ of the fair market value . The reason given is

DinS fl OPlNI~. � C.T . A. CA&E � 3V~ t et - �x x x � The revenue examiner who !nv stigattd this case failed to conouct an ocular 1nsp e ion of he properties nor uke inquiries as to the prevailing mar- ket ric of roperties s1tuat d 1n the neighborhood at a certain ttae. either dtd h~ request that he inspection b con- ducted by so�� other officer of the ur eau of Internal evenue where he former could not perform the same . on top of tha , the exa .iner roe d d to dopt s val e Which he deno inated as fair .arket value fixing the sa e arbitra ily without a re�sonable basis such that the sa e as ot o% less 9 ess wort.� l agr th t � inv~stigation d �� to t fair arket value of t e p o erty as haphazard, as is usually the ce e. ut I a sur that if pro er '- investigation h d en ade, it o ld ave produced surpr sin9 results in avor of tho position tak n y the Govern nt. ut is ia ne t r here nor there. The question is he ncr the fatr rket value of the prop rty 1 a t 1ned by pondent. ~ colleagues say that the fa1 rt t value s fi Ked by eapond- nt arbltr rlly 1i t hcut rea onabl~ is. l n this I a unable tc concur. ! qu te fro a decision ren- dere b �x x x � review of the ca aa decided by the Supreme Court on the det mination of fair rket val e of lands sat isfi ' us that, co aratively, the assessed value of real est t in the Fnilippine� is around one- half of its actual value.� (~stro v. Col- lector of Internal evenu , C.T . � o. 141, Dee. 29, 19~, citing cases d eided by the uprea Court.) The fa r rket valu as determined y respond- ent ls exactly 1n acccrdanc with the op ion of thia Court in the ease cited abovP, ieh is t ce the as� �� ed value. How can 1t b s id, therefore, that 99

DISCDJTlh Pl NI CN .... C. T� � CASE NO . 3 1 .. 4 - the fair mark. t v lue was fix by re o nt arbitr r- ily ithout r� son ble be&it? p rson who follows an _opin1on o a c our ean not b sai t hav com- mltted an ~rbltra~y ct . 1 b w en th assertio of petitioners and tb deteratin�t l on � y X' s 0 - ent, hieh ia su~port d by th� findings an ' pinions of the Supre�� Court an reeently e hoed by this Court, there i s very littl choice. I vo � to affirm the deci~ ion appeal d f r om . u. . i\"""l. ssoclate J udge 100