Estate Tay, Net Estate CHAPTER LEARNING OBJECTIVES At the end of the lesson, the student shall be able to: 1. discuss the nature of allowable deductions from gross estate; 2. identify allowable deductions from gross estate; 3. determine the deductions from gross estate of resident or citizen; 4. enumerate the items composing ordinary deductions; 5. apply the tax procedures in determining vanishing deduction; 6. determine properly the share of the surviving spouse; 7. describe the allocation of the net distributable estate; and 8. identify the basic tax procedures in computing tax credit.pyre j jn the computation of net taxable estate, the law allows igus items to be deducted from the gross taxable estate of the hae ent in order to determine the net estate which in turn will eke basis for the computation of the estate tax. After computing correctly the gross estate of the decedent, the next important step is to compute correctly the allowable deductions from the gross estate. The following basic procedures may be observed in handling deductions from the gross estate: 1. Deduct and classify the deductible item based on the specific property it pertains. If the property is classified as ‘exclusive, treat the deduction as exclusive. In the same manner, if the property to which the item relates is conjugal or community, classify the deduction as conjugal or community. a a ee ee 2. In case the deductible item cannot be clearly identified as what property classification applies, consider the item as conjugal or community. : The basic rule is that deductions from gross taxable estate are presumed to be conjugal deductions unless specifically identified as exclusive. CLASSIFICATION OF DEDUCTIONS Deductions from the gross taxable estate are classified as ‘Ollows: 1. 2, ordinary deductions; special deductions; or 3. share of the surviving spouse. 4 i deductions. These deductions refer to those “uctible items mentioned in Section 86(A)(1) of the NIRC, as ended, Ordinary deductions include the following items: Estate Tax: Deductions and Nei Estate | 339 _a. expenses, losses, indebtedness, and taxes; b. transfer for public purposes; and c. vanishing deductions. Special deductions. These are deductions spe cific mentioned by law that are deductible from the gross taxahy, estate of the decedent. Special deductions include the following a. family home; b. standard deduction; c. medical expenses; and d amounts received under Republic Act No. 4917, Share of the surviving spouse. This deductible item jg allowed if the decedent is married. The share of the surviving spouse is deducted from the conjugal or communal property, net of ordinary deductions properly chargeable therein. DEDUCTIONS FROM GROSS ESTATE OF RESIDENT OR CITIZEN DECEDENT The gross taxable estate of a resident or citizen decedent shall be reduced by the following: 1. Ordinary deductions which consist of: a. expenses, losses, indebtedness, and taxes which include the following: funeral expenses; judicial expenses; claims against the estate; claims against insolvent person; unpaid mortgages; unpaid taxes; and losses, b. transfer for public use; c. vanishing deduction; NOV Rene Simplified and Procedural Handbook on Transfer and Business Taxation