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1. Vanishing deductions, standard deductions and family home are not deductible from the
distributable estate because they do not actually are not diminish the estate.
2. Medical expenses will diminish the estate of the decedent upon its payment.
Tax credit generally refers to an amount that is subtracted directly from one's total tax
liability, an allowance against the tax itself, or a deduction from what is owed.
It is distinguished from tax deduction in the sense that tax deduction is subtracted from
gross estate for tax purposes, or an z)mount that is allowed by law to reduce the gross estate
prior to the application of the tax rate to compute We amount of tax which is due.
A tax credit reduces the tax due, including -- whenever applicable — the estate tax that
is determined after applying the corresponding tax rate, to net taxable estate. A tax deduction
reduces the estate that is subject to tax in order to arrive at taxable estate (CIR vs. Central
Luzon Drug Corporation, 456 SCRA 414[2005])
However, the amount of tax credit shall be subject to each of the following limitations:
a. The amount of the credit in respect to the tax paid to any country shall not exceed the same
proportion of the tax against which such credit is taken, which the decedent's net estate
situated within such country taxable in Title lll of the Tax and Code bears to his entire net
estate (Sec 86[E,2,a], NIHC); and
b. The total amount of the credit shall not exceed the same proportion of the tax against which
such credit is taken, which the decedent's net estate situated outside the Philippines bears
to his entire net estate (Sec. 86[E,2,B], NIRC).
The limitations imposed on tax credits are expressed in the following formulas: