Vanishing Deduction (VD) or Prop.

Previously Taxed
- Requisites:
1. Current decedent - died w/in 5 yrs. fr. receipt of the prop. fr. prior
decedent/donor
2. Prop. on w/c VD is being claimed - located w/in PH
3. Said prop. - formed part of the taxable estate of the prior decedent OR
the taxable gift of the donor
4. Estate tax/donor’s tax - finally determined + paid
5. Prop. - identified as the one received fr. the prior decedent or fr. the
donor OR something acquired in exchange therefore
6. NO VD - was allowable to the estate of the prior decedent
*There is NO need that there be 2 succeeding deaths for deduction to
apply since the deduction is also applicable if the prop. is received as a
donation.
- Computation:
Value to Take xx
Less: First Deduction (xx)
Initial Basis xx
Less: Second Deduction (xx)
Final Basis xx
Applicable Rate %
VD xx

*Value to Take: lower bet. FMV at the time of death of the decedent +
FMV at the time of transfer (either donation or succession)
*First Deduction: amount of indebtedness on the prop. paid for by the
current decedent

*Initial Basis: diff bet. value to take + first deduction

*Second Deduction: Initial Basis / Gross Estate x (LITE + TPU)

*Final Basis: diff. bet. initial basis + second deduction

*Applicable Rate: depends on the length of time fr. the first transfer to
the death of the decedent
a. 1 yr. - 100%
b. More than 1 yr. Up to 2 yrs. - 80%
c. More than 2 yrs. Up to 3 yrs - 60%
d. More than 3 yrs. Up to 4 yrs - 40%
e. More than 4 yrs. Up to 5 yrs - 20%