TAX 2 Deductions From The Gross Estate 1PPT

Deductions from the
Gross Estate-1
The Revenue Regulations classify deductions from the
Gross Estate into:
A. Ordinary Deductions
1. Claims against the estate
2. Claims against insolvent persons;
3. Unpaid mortgages or indebtedness with
respect to property;
4. Taxes
5. Losses
6. Vanishing deduction;
7. Transfer for Public use;
8. Amounts receivable under RA 4917
B. Special Deductions:
1. Family Home
2. Standard Deduction
1. Claims against the Estate
 These are obligations of the decedent ,
enforceable if he were alive.
 Thus, an obligation that had prescribed
already during the lifetime of the decedent,
or that was unenforceable against him when
still alive (e.g. not in writing) will not be a
claim against his estate when he is dead.
If the claim is from a debt
instrument, the instrument must
be notarized. If the loan was
within three (3) years prior to
death, the executor or
administrator must certify on the
disposition of the loan.
Ex. Mr. A, during his lifetime,
executed a promissory note that
was not 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 within sixty
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.
Answers:
1. None
2. The obligation is a claim against
the estate.
2. Claims against Insolvent persons
A person is insolvent when his properties are
not sufficient to pay his obligations.
 Claims against insolvent persons are deductions
from the gross estate, subject to the condition

that the full amounts of the receivables are first
included in the gross estate.
 The deductions from the gross estate will be
uncollectible portion. It will be wrong to include

in the computation for the taxable estate the
realizable portion of the claims.
Ex. Mr. G died leaving an estate, in which
there is a receivable of P 60,000 from a
debtor who has not enough properties to pay
all his obligations. The debtor’s properties
worth P100,000 and his obligations
amounted to P300,000. With the case
presented, how much is the amount that can
be deducted from the gross estate as claims
against insolvent persons?
3. Unpaid Mortgage or indebtedness
on property
 When a person leaves property
encumbered by a mortgage or
indebtedness, his gross estate must
include the fair market value of the
property. The mortgage or
indebtedness is deduction from the
gross estate.
Ex. Miss Hannah died leaving real property
with a fair market value of P1,000,000, but
subject to a mortgage in favor of Miss Ina in
the amount in the amount of P600,000, While
the equity of Miss Hannah is P400,000. How
much will be include in the gross estate as the
value of the property and how much then, is
the deduction reflected as Unpaid mortgage or
indebtedness on the property?
Answer:
The gross estate will include the
fair value of P1,000,000, and the
mortgage of P600,000 will be
claimed as a deduction from the
gross estate.
If the Loan is merely as
accommodation loan, where the
proceeds of the loan went to another
person, the value of the unpaid loan
must be included in the Receivable of
the Estate.
4. LOSSES
Losses are deductible from the gross estate if:
1. Incurred during the settlement of the estate.
2. Arising from fire , shipwreck or other casualty, robbery,
theft or embezzlement.
3. Not compensated by insurance or otherwise,
4. At the time of filing the estate tax return, such loss
has not been claimed as a deduction from gross estate.
5. Incurred before the last day of payment of the estate
tax (within 1 year from the decedent’s death, or an
extension granted by the Bureau of Internal Revenue
not exceeding thirty (30) days for filing the estate tax
return,
Ex.
 Cost of the Property P 400,000
 Fair market value of property at the time of
casualty loss 300,000
 Insurance Recovery 200,000
How much can be claimed as Losses?

Solution:
Fair market value of the property at the
time of loss P 300,000
Less: Insurance recovery 200,000
Deductible Loss P 100,000
5. Transfer for Public Use
By “Transfer for Public Use” as
deduction from the gross estate is
meant disposition in a last will and
testament, or transfer to take effect
after death, in favor of the Government
of the Philippines, or any political
subdivisions thereof, for exclusively
public purposes.
What are the political subdivisions of
the National Government? They are:
a. Provinces;
b. Cities;
c. Municipalities; and
d. Barangays

The value of the property will
be included in the gross estate
and the same value will be a
deduction from the gross
estate
6. Family Home
It refers to the dwelling house where
the person and his family reside, and
the land on which it is situated. Within
the meaning of “family” are the spouse,
parents, ascendants, descendants,
brothers, sisters, who are living in the
family home and who depend upon the
head of family for support.
The deduction for family home is
“an amount equivalent to its fair
market value. The maximum is
ten million (P10,000,000) pesos.
Is certified to as such by the
Barangay Captain of the
locality where it is located.
7. Standard Deduction
An Estate is entitled to a Standard
Deduction of Five Million Pesos
( P5,000,000).
End….

TAX 2 Deductions From The Gross Estate 1PPT

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TAX 2 Deductions From The Gross Estate 1PPT

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Deductions from the

from the gross estate, subject to the condition

uncollectible portion. It will be wrong to include

How much can be claimed as Losses?

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