Required: How much is shares of stock shall be included in Mrs. A’s gross estate?
G. DEDUCTIONS FROM THE GROSS ESTATE:
1. Ordinary Deductions
Items of Deductions
a. Claims against the estate
Claims against insolvent persons
Unpaid mortgage
b. Transfer for public purpose
c. Property previously taxes (Vanishing
Deductions)
2. Special Deductions
Items of Deductions
a. Family home
b. Standard deduction
c. Amount received under R.A. 4917
3. Others
Item/s of Deductions
a. Share of Surviving Spouse
H. DEDUCTIONS AMPLIFIED
Deductions
Indebtedness (Claims against
the estate)
These are the obligations of
the decedent which is
enforceable against him while
he is still alive and can be
enforced against his estate
upon his death.
Claims against insolvent
persons
This shall be deductible but
the full amount of the claim
must first be included in the
gross estate. Only the
uncollectible portion shall be
allowed as deductions.
Unpaid mortgage
1. ESTATE TAX
Resident alien or citizen decedent Non-resident alien decedent
Deductible -100% Deductible – Proportion
Phil. GE x (C +C+ U)
World GE
Deductible Deductible
Deductible Deductible
Resident alien or citizen decedent Non-resident alien decedent
Deductible (P10,000,000) Not Deductible
Deductible (P5,000,000) Deductible (P500,000)
Deductible Not Deductible
Resident alien or citizen decedent Non-resident alien decedent
Deductible Deductible
Requisites for deductibility Amount and items deductible Deducted
from
a. The liability represents a personal Debts or demands of pecuniary nature which Common
obligation of the deceased existing at the could have been enforced against the deceased property if
time of his death in his lifetime and could have been reduced to connected to
b. The liability was contracted in good faith simple money terms common
and for adequate and full consideration
in money or money’s worth Exclusive
c. The claim must be a debt or claim which property if
is valid in law and enforceable in court connected to
d. The indebtedness must not have been exclusive
condoned by the creditor or the action to
collect from the decedent must not have
prescribed.
Claims against the estate or indebtedness in
respect of property may arise out of the
following sources:
1. Contract
2. Tort
3. Operation of law
e. If the claim was based on a debt
instrument, such instrument must be
NOTARIZED. (Except loans granted
by financial institutions where
notarization is not part of the business
practice of the financial institution
lender.)
f. If a loan was incurred within 3 years
before the decedent death, the
administrator, or executor is required to
render a statement showing the
disposition of the loan proceeds.
a. The value of the claims is included in the Claims that are not collectible Common
gross estate. property if
b. The debtors are incapable of paying their connected to
debts. common
Exclusive
property if
connected to
exclusive
a. The fair market value of the mortgaged Amount of unpaid mortgage Common
property undiminished by such property if
mortgage or indebtedness has been connected to
included as part of the gross estate common
b. The mortgage indebtedness was
contracted in good faith and for an Exclusive
adequate and full consideration property if
connected to
exclusive
Page 10 of 15
2. Transfer for Public Use
a. Amount deductible
b. Requisites for deduction
c. Deducted from
Amount of all bequesst, legacies, devises or transfer to or for the use of the Government of the Philippines, or any
political subdivision for exclusively public purpose.
1. The disposition must be
a. testamentary in character (in the last will and testament) or
b. by way of donation mortis causa (should take effect after death)
c. executed by the decedent before his death.
2. In favor of the Government of the Philippines or any of its political subdivisions.
3. Exclusive for public purpose.
4. The value of the property given is included in the gross estate.
Exclusive property

3. Property Previously Tax (Vanishing Deduction) - This is a deduction derived from a property that was previously subjected to transfer tax.
a. Requisites for deduction
1. Death The present decedent must have died within five (5) years from the receipt of the property from a
prior decedent or donor.
2. Identity of the Property The property involved must have been a property transferred by a prior decedent or donor to the
present decedent or the property acquired in exchange for the original property so received.
3. Inclusion of the Property The property must have formed part of the prior decedent’s gross estate situated in the
Philippines or been included in the total amount of the gifts of the donor made within 5
years prior to the present decedent’s death.
4. Previous taxation of the property The estate tax on the prior succession must have been finally determined and paid by the prior
decedent. The same applies to gifts, in that donors must have taken care of the donor’s tax.
5. No previous vanishing deduction on the The vanishing deduction on the property must not have been claimed by the previous estate
property involving the same property.

b. Rates of vanishing deduction – If the present decedent died within the following period after the date of prior decedent’s death or after the date
of donation:
More than But not more than The rate is
- 1 year 100%
1 year 2 years 80%
2 years 3 years 60%
3 years 4 years 40%
4 years 5 years 20%
5 years - 0%

c. Format of computation
Value to take*** Xxx
Less Mortgaged paid by the current decedent (xxx)
Initial basis Xxx
Less: Proportional Deductions Initial basis x Claims-estate-insolvent plus unpaid mortgage plus TPU) (xxx)
Gross estate
Final Basis Xxx
Multiply by Rate of Vanishing Deduction %
Vanishing Deduction Xxx

*** Value taken is the LOWER between the fair market value of the property in the gross estate of the prior decedent or the fair market value of the
gift and the fair market value of the same property in the gross estate of the present decedent.
Notes:
1. Under conjugal partnership of gains vanishing is a deduction from exclusive property.
2. Under absolute community of property, vanishing deduction may be deducted from exclusive property or community property.

Exercise:

a. Ms. Khris Gayna, single, died leaving a property she inherited 3 ½ years ago with a fair market value of P800,000. During her father’s death,
it had a value of P750,000, and an unpaid mortgage of P100,00. P50,000 of the unpaid mortgage was paid by the present decedent.
Her gross estate, other than her inherited property had a fair market value of P1,300,000. The total expenses, claims against estate,
claims against insolvent, unpaid mortgage and transfer for public purpose amounted to P300,000.

How much is the vanishing deduction?

I. SPECIAL DEDUCTIONS
1. Family Home - The family home refers to the dwelling house, including the land on which it is situated, where the husband and the wife, or an
unmarried person who is the head of the family and members of the family reside, as certified by the Barangay Captain of the locality.

Conditions for the allowance of family home deduction from the gross estate:
a. The family home must be the actual residential home of the decedent and his family at the time of his death, as certified by the Barangay Captain
of the locality the family home is situated

1. ESTATE TAX Page 11 of 15

b. The total value of the family home must be included as part of the gross estate of the decedent, and
c. Allowable deduction must be in an amount equivalent to the current fair market value of the family home as declared or included in the gross
estate, or to the extent of the decedent’s interest (whether conjugal/community or exclusive), whichever is lower, but not exceeding P10,000,000.
Deductible amount
Classification of family home Amount deductible
a. Exclusive property Full value included in the gross estate or P10,000,000 whichever is lower

b. Conjugal/community property One-half (1/2) of the value included in the gross estate or P10,000,000
c. Partly exclusive property, partly conjugal/community property whichever is lower
Exclusive part (full value included in the gross estate) xxx
Conjugal/Community part (1/2 x value included in the gross estate) xxx
Total xxx
Total or P10,000,000 whichever is lower

Exercises: Determine the allowable family home deduction.

FMV at the Time of Death of the Decedent Deductible Amount
1. Exclusive family home P 800,000
2. Exclusive family home P 1,200,000
3. Common family home P 1,200,000
4. Common family home P 3,600,000
5. Exclusive family home (Decedent is single) P 800,000
6. Exclusive lot P 400,000
Common house P 28,000,000

2. Standard Deduction-
Amount deductible
• The amount deductible is P5,000,000 (citizen or a resident) P500,000 (nonresident) without any required substantiation

3. Amount Received by Heirs Under R.A. No. 4917

Amount deductible and Requisites
• Any amount received by the heirs from the decedent’s employer as a consequence of the death of the decedent employee in accordance
with Republic Act No. 4917 is allowed as deduction provided that the amount of the separation benefit is included as part of the gross
estate of the decedent
Amount Received By Heirs Under R.A. No. 4917
1. RA No. 4917 is entitled “an act providing the retirement benefits of employees of private firms shall not be subject to attachment, levy,
execution, or any tax whatsoever”
2. The amount received by heirs from decedent’s employer as a consequence of the death of the decedent employee is included in the gross
estate of the decedent
3. The amount above is also allowed as deduction from gross estate

J. OTHER DEDUCTIONS
1. Share of the Surviving Spouse- applicable only to married decedents
Gross Conjugal / community properties Xxx
Less: Conjugal / community deductions (xxx)
Net conjugal/community properties (NCP) Xxx
Share of surviving spouse (1/2 x NCP) Xxx

K. DEDUCTIONS FROM THE EXCLUSIVE OR CONJUGAL/COMMUNAL RPOPERTY UNDER THE

FAMILY CODE
a. Support of spouses, their common children and legitimate children of either spouse Conj/Comm
b. All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the conjugal Conj/Comm
partnership of gain or community, or by both spouses, or by one spouse with the consent of the other.
c. Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have been Conj/Comm
benefited
d. All taxes, liens, charges and expenses, including major and minor repairs, upon the conjugal/community property Conj/Comm
e. All taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse used by the Conj/Comm
family
f. Expenses to enable either spouse to commence or complete a professional or vocational course, or other activity for self- Conj/Comm
employment
g. Ante nuptial debts of either spouse insofar as they have rebounded to the benefit of the family Conj/Comm
h. Value of what is donated or promised by both spouses in favor of their legitimate children for the exclusive purpose of Conj/Comm
commencing or completing a professional or vocational course or other activity for self-improvement
i. Expenses of litigation between the spouses unless the suit is found to be groundless Conj/Comm
j. Ante-nuptial debts of either spouse that did not redound to the benefit of the family Exclusive
k. Support of illegitimate children of either spouse Exclusive
l. Liabilities incurred by either spouse by reason of crime or quasi-delict Exclusive
m. Loss during the marriage in any game of chance, betting, Sweepstakes, or any other kind of gambling whether permitted or Exclusive
prohibited by law

L. NET DISTRIBUTABLE ESTATE

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