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REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Quezon City Bureau of Internal Revenue Ruling 85;

97; 98 000-00 010-2003 Person to Contact: Chief, Law Division Tel. Nos. 926-55-36 / 927-09-63 September 08, 2003

Date: ___________________ ISHIWATA GATMAYTAN & ASSOCIATES No. 12, ADB Avenue, Ortigas Center 1550 Mandaluyong City, Metro Manila Attention: Atty. Ma. Cecilia Salazar-Santos Partner Gentlemen: This refers to your letter dated June 18, 2001 requesting on behalf of your client, Banco de Oro Universal Bank, for a confirmation of your opinion that a Survivorship Agreement executed by the joint depositors under a joint deposit account expressly stipulating that upon death of any one of the joint depositors, the entire remaining balance of the deposit shall belong to the surviving depositor/s and, in effect, may be forthwith withdrawn by the latter notwithstanding the provisions of Section 97 of the 1997 Tax Code. In reply, please be informed that the second paragraph of Section 97 of the 1997 Tax Code, which provides to wit:
If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the said deposit account, unless the Commissioner has certified that the taxes imposed thereon by this Title have been paid; Provided, however, That the administrator of the estate or any one (1) of the heirs of the decedent may, upon authorization by the Commissioner, withdraw an amount not exceeding Twenty thousand pesos (P20,000) without the said certification. For this purpose, all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors. (Emphasis supplied)

As can be readily gleaned from the Survivorship Agreement, the funds deposited in the joint deposit account are under co-ownership because the ownership or right over the same belong to different persons, the joint depositors. The share or portion belonging to the joint depositors in the joint deposit account shall be presumed equal and the benefits as well as the charges in the joint account shall be proportional to their respective shares. [Arts. 484 and 485, Civil Code] In the Survivorship Agreement, the joint depositors cannot withdraw any portion of the said deposit account without the consent of the other. However, upon death of any of

010-2003

September 08, 2003

them, the whole amount of the funds shall belong to the surviving co-depositor/s, and may forthwith be withdrawn by the latter. The said provision contained in the agreement is valid and binding between the joint depositors but it has an effect of a gift or donation morits causa made by the deceased co-depositor during his lifetime but effective upon death because the acquisition by the survivor of the share of the decedent in the joint account is considered to be acquired by bequest and hence subject to estate tax under Section 84 of the 1997 Tax Code. Considering that the joint account is co-owned by the depositors, there is a presumption that they owned it equally or in 50/50 shares, in which case, the transfer of the remaining balance of the whole deposit to the surviving co-depositor/s upon death of the other co-depositor pursuant to their Survivorship Agreement is a transfer made by the said depositor in contemplation of death, as provided under Section 85(B) of the 1997 Tax Code, viz:
(B) Transfer in Contemplation of Death To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after death, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from the property, or (2) the right, either alone or in conjunction with any person, to designate the person who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or moneys worth.

Thus, upon the death of the co-depositors, the 50% share of the deceased co-depositor in the deposit shall be included in computing the value of his gross estate. Hence, the funds in the joint deposit account cannot be withdrawn by the surviving co-depositor/s unless the Commissioner has certified that the taxes imposed thereon by Title III of the 1997 Tax Code have been paid; Provided, however, That the administrator of the estate or any one (1) of the heirs of the deceased co-depositor may, upon the authorization by the Commissioner, withdraw an amount not exceeding Twenty thousand pesos (P20,000.00) without the said certification. Very truly yours, (Original Signed) GUILLERMO L. PARAYNO, JR. Commissioner of Internal Revenue

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