Lecture Notes – Deductions from the Gross Estate

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Claims against the 1. Mr. A, during his lifetime, executed a promissory note that was not
Estate notarized. He died with the note still unpaid. Can there be a claim against his
estate arising out of the promissory note?
2. Mr. B, during his lifetime, executed a promissory note, payable 60 days from
the date of issue, and had it notarized. He died the day after he executed the
promissory note. The proceeds of the note were certified by the administrator
of the estate as used for family expenses. Can there be a claim against his
estate arising out of the promissory note?
3. Mr. C, during his lifetime, was sued for damages for an act committed by
him, and the court ordered him to pay damages. He died before he could
comply with the order of the court. Can there be a claim against his estate
arising out of the judgment debt?
4. Mr. D, during his lifetime, had cash of P100,000. He borrowed P100,000
from Mr. E, a friend, and executed a notarized promissory note for it. The
aggregate of P200,000 was maintained in a single bank account, from which
expenses were paid. One year after the note was executed, and the note still
being unpaid, Mr. D died. The administrator of the estate could not trace
payments from the proceeds of the note. Can there be a deduction from the
gross estate for the claim of Mr. E?

Claims against Insolvent 1. Mr. F died leaving an estate, in which receivables from debtors are included,
Persons as follows: P10,000 from a brother who died without any property whatsoever,
and P15,000 from a friend whose properties are not sufficient to pay preferred
creditors. How much will be the deduction from the GE?
2. Mr. G died leaving an estate, in which there is a receivable of P60,000 from
a debtor who has not enough properties to pay all his obligations. The debtor's
properties were worth P100,000 and his obligations amounted to P300,000.
Only 1/3 of the obligations can be satisfied from the properties. How much will
be the deduction from the GE?

Unpaid mortgage or Miss H died leaving real property with a fair market value of P1,000,000, but
indebtedness on subject to a mortgage in favor of Miss I in the amount of P600,000. While the
property equity of Miss H is P400,000, the gross estate will include the fair market value
of P1,000,000. How much will be the deduction from the GE?

Losses Cost of Property P400,000

FMV of property at time of casualty loss 300,000
Insurance recovery 200,000

How much will be the deduction from the GE arising from casualty loss?

Transfer for Public Use 1. In his last will and testament, Mr. L left a piece of land with a FMV of P10M
to the City of Tabaco, Albay, for the city government to build on it a new City
Hall. How much will be the deduction from the GE?
2. During his lifetime, Mr. M made a donation mortis causa of a piece of land
with a FMV of P3M to Brgy. Don Manuel, Quezon City, on which to construct
the barangay hall. How much will be the deduction from the GE?
Lecture Notes – Deductions from the Gross Estate

Family Home 1. Mr. C, single, a head of family, a citizen and resident of the Philippines, died
in 2019 leaving as gross estate a family home with a FMV of P18M, together
with other properties with a FMV of P10.5M. Deductions sought to be claimed
were claims against insolvent of P1.1M and family home. How much will be the
net taxable estate?
In case the decedent used as family home a part of a structure co-owned by
him with others. What will be the value of the deduction for Family Home?
If a family home is mortgaged, can there be a deduction for mortgage payable
and for family home, the aggregate of which exceeds the value of the family
home?

2. Mr. D died, a citizen and resident of the Philippines. Included in his GE was
a family home consisting of land and a structure on it that he acquired thru a
bank loan of P8M. At the time of his death in 2019, the property had a FMV of
P12M, and an unpaid bank loan of P6M. How much is the total of the
deductions related to the property to be claimed?

Deductions from the GE Mr. E, a citizen and resident of F country, single, died leaving a gross estate of
of a Non-resident, Not P5.2M in the Philippines and P2.4M in his F country. Claims against estate in
citizen of the Philippines the Philippines amounted to P1M, while in F country amounted to P500,000.

The deductions from the Phil Gross Estate will be?

Vanishing Deductions 1. Mr.A died leaving a piece of land to Mr. B. Two years later, Mr. B died with
the same piece of land.

2. Mr. C died leaving a piece of land to Mr. D. Mr. D exchanged the piece of
land for a car during his lifetime. Mr. D still had the car at the time of his death,
which was 2 and 1/2 years after the death of Mr. C.

3. Mr. F inherited real property from Mr. E. The ff. happened thereafter:
a) Three years after the inheritance, he died, and the property was inherited by
Miss G.
b) Four years after Miss G inherited the property, she died, and the property
was inherited by Mr. H.
c) Two years after inheriting the property, Mr. H died, and the property was
inherited by Miss I.
d) Six years after inheriting the property, Miss I died.

4. Mr. J died leaving 2 pieces of land to Miss K, one located in the Phil and
another in Malaysia. Two years after, Mr. K died still owning the 2 pieces of
land.

5. Mr. L inherited a car and a motorcycle from Mr. M, a citizen of the

Philippines. The properties were in the US at the time of inheritance. The
Philippine estate tax was paid on the properties. Mr. L brought the car to the
Philippines, but the motorcycle remained in the US. Three years after inheriting
the property, Mr. L died in the Philippines. At the time of his death, the car was
in the Phil. while the motorcycle was still in the US.

Can there be a vanishing deduction?

Lecture Notes – Deductions from the Gross Estate

6. Mr. M, single, inherited a piece of land from his father with a FMV of P6M
when inherited. 2 and 1/2 years later, Mr. N died still with the same piece of
land, at this time with a FMV of P7M. The gross estate, on which the land was
part, was P20M.

Selected ordinary deductions amounted to P7M and transfer for public use
was P50,000.

How much is the vanishing deduction?

7. Mr. P died, with the following data on Gross Estate:

Property inherited from father 2&1/2 years before FMV P4M

FMV when inherited 5M

Property received as gift within same year Mr. P died 2.8M

FMV when received 4M

Cash and other properties in Estate 8.2M

Total P15M

Charges against the estate:

Losses P5.5M
Taxes 500,000
Total P6M

How much is the vanishing deduction on the inheritance? on the gift?

Decedent was Married 1. Mr. Ramon Basco, a citizen and resident of the Philippines, married, under
the property relationship of absolute community of property during the
marriage, died with properties and obligations that follow:

Real properties inherited from father (10yrs ago) before marriage P20M
Real property received as gift from mother (7yrs ago) during marriage 5M
Cash - income from property received as gift 950k
Real property owned by Mrs. Basco before the marriage 3M
Family home 15M
Obligations incurred during marriage 1.5M

What is the net taxable estate, if:

(a) If family home was community property.
(b) If family home was exclusive property.

2. Property inherited 3&1/2 yrs ago, before marriage P2M

Property acquired with own money 1M
Other property 2M
Special items of ordinary deductions 1M

What will be the net taxable estate, if:

(a) Their property regime is under the absolute community of property
(b) Their property regime is under the conjugal partnership of gains.