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and

DEDUCTIONS FROM
GROSS ESTATE

Section 6 and 7 of Revenue Regulations 2-2003

in relation to Sec 86 (A) and 86 (B) of the Tax
Code allows deductions from the gross estate to
arrive at the taxable estate which is used as a
basis in determining the applicable estate tax.

DEDUCTIONS FROM GROSS ESTATE :

Prior to TRAIN Law
For Citizen and For Non-resident Alien
Resident Decedents Decedents

Ordinary deductions Ordinary deductions

1. ELIT 1. Proportionate Deductions

• Funeral expenses for ELIT computed as
• Judicial expenses follows:
• Claims against the
Gross Estate Phils
estate X ELIT
• Claims against an Gross Estate World World
insolvent person
• Taxes
• Losses

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DEDUCTIONS FROM GROSS ESTATE:

Prior to TRAIN Law
For Citizen and For Non-resident Alien
Resident Decedents Decedents

Ordinary deductions Ordinary deductions

2. Transfer for public purpose 2. Transfer for public purpose
3. Vanishing deductions 3. Vanishing deductions

Special deductions Special deductions

1. Standard deductions
2. Family home Not allowed
3. Medical expenses
4. R.A. 4917

DEDUCTIONS FROM GROSS ESTATE :

Under the TRAIN Law
For Citizen and For Non-resident Alien
Resident Decedents Decedents

Ordinary deductions Ordinary deductions

1. LIT 1. Proportionate Deductions

• Losses for LIT computed as
follows:
• Indebtedness/claims
against the estate Gross Estate Phils
• Taxes X LIT
Gross Estate World World
• Claims against
insolvent persons

DEDUCTIONS FROM GROSS ESTATE :

Under the TRAIN Law
For Citizen and For Non-resident Alien
Resident Decedents Decedents

Ordinary deductions Ordinary deductions

2. Transfer for public purpose 2. Transfer for public purpose
3. Vanishing deductions 3. Vanishing deductions

Special deductions Special deductions

1. Standard deductions • Standard

2. Family Home deduction of
P500,000
3. R.A. 4917
Share of surviving spouse Share of surviving spouse

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DEDUCTIONS FROM GROSS ESTATE

A. Ordinary Prior to TRAIN Law Under the TRAIN Law
deductions
• Funeral expenses • NA
1. LIT • Judicial expenses • NA
• Claims against the • Indebtedness and
estate claims against the
estate
• Claims against an • Claims against an
insolvent person insolvent persons
• Taxes • Taxes
• Losses • Losses
2. Transfer for • Transfer for • Transfer for
public use public use public use
3. Vanishing • Vanishing • Vanishing
deductions deductions deductions

DEDUCTIONS FROM GROSS ESTATE

B. Special Prior to TRAIN Law Under the TRAIN Law
deductions
• Standard • Standard
deductions deductions

• Family home • Family Home

• Medical
expenses • NA

• R.A. 4917 • R.A. 4917

C. Share of • Share of • Share of
surviving surviving Surviving
spouse spouse spouse

ORDINARY DEDUCTIONS FROM

GROSS ESTATE: PRIOR TO TRAIN LAW

A. Funeral expenses
Paid or unpaid up to the time of interment, the
amount deductible shall be whichever is the lowest
among the following:
a). The actual funeral expenses
b). The amount equal to 5% of the gross estate
c). Amount not to exceed P200,000.

Note: Medical expenses as of the last illness will not form

part of funeral expenses but should be claimed as medical
expenses.

NOTE: No longer allowed under TRAIN Law

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C
A
S
E How much is the deductible amount of funeral
expenses under each of the following
A independent cases ?
N Actual Gross estate
A Case 1 P180,000 P4,000,000
L Case 2 140,000 2,900,000
Y Case 3 207,000 4,250,000
S
I
S

C
A
S
FRANKENSTEIN died. The amount of his funeral
E
expenses is covered by a memorial plan up to
P120,000. Other actual funeral expenses
A
amounted to P75,000. The amount of his
N
tangible properties upon death was P3,700,000.
A
L
Y
S 1. How much is the gross estate ?
I 2. What is the amount of the funeral expenses ?
S

ORDINARY DEDUCTIONS FROM

GROSS ESTATE: PRIOR TO TRAIN LAW
B. Judicial expenses
Includes those actually and necessarily incurred
during the settlement of the estate but not beyond
six months, or the extension thereof for the filing
of the estate tax return. Expenses are:
• Testamentary or intestate court proceedings
• Inventory taking of assets comprising the
gross estate
• Payment of debts of the estate
• Expenses for the distribution of the estate
among the heirs
• Expenses under “extrajudicial proceedings”.

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ORDINARY DEDUCTIONS FROM

GROSS ESTATE: PRIOR TO TRAIN LAW

 Other Judicial expenses

• Attorney’s fees
• Accountant’s fees
• Executor/Administrator’s fees
• Appraiser’s fees
• Cost of preserving the estate
• Brokerage fees

ORDINARY DEDUCTIONS
FROM GROSS ESTATE

C. Claims against the Estate

This represents personal obligation of the
deceased existing at the time of his death except
unpaid funeral expenses and unpaid medical
expenses and may arise out of the following
sources:
• Contract
• Tort
• Operation of law

ORDINARY DEDUCTIONS
FROM GROSS ESTATE
Requisites for deductibility

• Must have been contracted in good faith and for

an adequate and full consideration in money or
money’s worth.
• The debt instrument must be duly notarized
except for loans granted by financial institutions
where notarization is not part of their business
practice
• It must not have been condoned by the creditor
• The action to collect from the decedent
must not have been prescribed.

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ORDINARY DEDUCTIONS
FROM GROSS ESTATE

D. Unpaid Mortgages on the properties

Mortgages upon the property left by the decedent.
The requisites for deductibility are the following:

• The motgage indebtedness was contracted in

good faith and for an adequate and full
consideration in money or money’s worth
• The fair market value of the property mortgaged
without deducting the mortgage indebtedness
has been included in the gross estate

ORDINARY DEDUCTIONS
FROM GROSS ESTATE

E. Claims against Insolvent persons

Receivable of the decedent which are uncollectible
due to insolvency of the debtor, Its requirements
for deductibility are as follows:
• The value of the decedent’s interest therein
must be included in the gross estate
• The debtor’s insolvency / incapacity is proven
and not merely alleged
• If the insolvent could only pay partial amount,
the full amount owed shall be included in the
gross estate, and the amount uncollectible shall
be allowed as a deduction

C
A
S
E Amount of claim against the debtor P 50,000
Total assets of the debtor 500,000
A Total liabilities of the debtor 800,000
N
A
L 1. How much should be included in the gross
Y estate of the decedent ?
S
I 2. What is the amount of deductible claim against
S the insolvent person ?

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ORDINARY DEDUCTIONS
FROM GROSS ESTATE

F. Unpaid Income and Property taxes

Unpaid taxes which have accrued prior to the
death of the decedent, thus the following are not
allowed as deductions:
• Income tax on income received after death
• Property taxes accrued after death
• Estate tax

BATMAN died on July 5, 2018 leaving the following

C data on deductions:
A Unpaid 2017 real estate taxes P 40,000
S Unpaid 2018 real estate taxes 40,000
E Income tax on income from Jan 1
July 4, 2018 35,000
A Losses from fire that occurred on
N July 3, 2018 (60% compensated
A by insurance) 800,000
L Casualty loss on Sept, 2018 450,000
Y Building destroyed by earthquake,
S on February 2019 1,300,000
I
S
What is the amount deductible from gross estate ?
4

ORDINARY DEDUCTIONS
FROM GROSS ESTATE
G. Losses
The amount deductible is the value of the property
lost. Its requisites for deductibility are:
• The loss must arise during the settlement of the
estate but not beyond the deadline for the
payment of the estate tax
• It must arise from fires, storms, shipwreck, or
other casualties, or from robbery, theft or
embezzlement
• Such losses have not been claimed as deduction
for income tax purposes
• Not compensated by insurance or otherwise.

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The following expenses and obligations were left by

C ROBIN HOOD upon his death:
A
S Notes payable, not notarized P 30,000
E Loans payable, PNB 300,000
Accounts receivable, debtor not insolvent 40,000
A Accounts receivable, debtor is insolvent 60,000
N Death benefits from employer 200,000
A Mortgage paid 50,000
L Income taxes on income of
Y decedent’s estate 7,500
S
I What is the total amount deductible
S from gross estate ?
5

ORDINARY DEDUCTIONS
FROM GROSS ESTATE

NOTE: If the decedent is a non-resident

alien, prorate the above deductions/
expense as follows:

Philippine Gross Estate

X ELIT
Total Gross Estate

TSONG SY TSANG, a non-resident alien died leaving

C
the following assets:
A
Domestic shares P 1,000,000
S
Foreign shares 3,000,000
E
Tangible personal property, Phils 6,000,000
Expenses (deductible) 1,200,000
A
N
The country where she is a citizen and resident does
A
not impose transfer tax on transmission of intangibles
L
of Filipinos.
Y
S
I
S What is the amount of net estate subject to tax
in the Philippines ?
6

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TA PUE, a non-resident alien, single, died leaving the

C following properties and deductions:
A Shares domestic corporation P 500,000
S Shares, foreign corporation 500,000
E Tangible personal property 1,500,000
Deductible expenses 500,000
A
N
A
L 1. What is the amount of gross estate ?
Y 2. Assuming there is no reciprocity, what is the
S amount of net taxable estate?
I 3. What is the amount of the estate tax payable ?
S a) Prior to TRAIN Law
b) Under the TRAIN Law
7

ORDINARY DEDUCTIONS
FROM GROSS ESTATE

Transfers for Public Purpose

 This are the amount of bequests, legacies,

devisees or transfers to or for the use of the
Government of the Philippines, or any political
subdivision thereof, for exclusively public
purposes.

 Before transfers are allowed as a deduction

from the gross estate, same amount shall be
included first in the computation of the gross
estate.

ORDINARY DEDUCTIONS
FROM GROSS ESTATE

Vanishing deductions
 Is an amount allowed to reduce the taxable
estate of a decedent where the property received
by him from a prior decedent by GIFT or by
BEQUEST, DEVICE or INHERITANCE.

 The deduction is also referred to as a

deduction for “property previously taxed”.

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REQUISITES FOR
DEDUCTIBILITY
DEATH

• The present decedent died within 5 years

from the date of death of the prior decedent or
date of gift

IDENTITY of
PROPERTY

• The property with respect to which deduction is

sought can be identified as the one received from
the prior decedent, or from the donor, or as the
property acquired in exchange for the original
property so received

REQUISITES FOR
DEDUCTIBILITY
LOCATION
• The property on which vanishing deduction is
being claimed must be located in the
Philippines

INCLUSION OF THE
PROPERTY

• The property must have formed part of the

gross estate situated in the Philippines of the
prior decedent or have been included in the
total amount of the gifts of the donor made
within 5 years prior to the present decedent’s
death.

REQUISITES FOR
DEDUCTIBILITY

PREVIOUS TAXATION
of the PROPERTY

• The estate tax on the prior succession, or the

donor’s tax on the gift must have been finally
determined and paid by the prior decedent or
by the donor as the case may be.

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REQUISITES FOR
DEDUCTIBILITY

NO PREVIOUS VANISHING
DEDUCTION on the PROPERTY

• No such deduction on the property, or the

property given in exchange therefore, was
allowed in determining the value of the net
estate of the prior decedent.

VANISHING
DEDUCTION RATES

Period from Receipt to

Decedent’s Death Rate %

Within one year 100 %

Beyond 1 year to 2 years 80 %
Beyond 2 years to 3 years 60 %
Beyond 3 years to 4 years 40 %
Beyond 4 years to 5 years 20 %

VALLE WALA died on November 20, 2018. Some of the

C properties he left are the following:
A
S Mode of Date of Market Value
E Assets Acquisition Acquisition Acquired Time of Death
Land Donation 7-3-14 500,000 350,000
A Car Purchase 10-2-17 800,000 980,000
N
Other information:
A
1. The gross estate of the decedent amounts to P 3 million.
L 2. The land was mortgage for P50,000 when it was
Y acquired and VAL paid the same before he died.
S 3. The allowable deductions total P125,000, which includes
I medical expenses of P30,000. It excludes bequest to a
S charitable institution in the amount of P50,000.

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What is the amount of the vanishing deduction ?

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SPECIAL
DEDUCTIONS

A. Standard Deductions
 The law allows a standard deduction of
a) P5,000,000 for citizens & resident (P1
million prior to TRAIN Law
b) P500,000 for NRA

No qualification, condition nor requisite

whatsoever. This amount shall be allowed as
an additional deduction without need of
substantiation. The full amount shall be
allowed as deduction for the benefit of the
decedent.

SPECIAL
DEDUCTIONS

B. Family Home
 the dwelling house including the land on
which it is situated, where the husband and
wife, or a head of the family, and members of
their family reside, duly certified to by the
Barangay Captain of the locality.
 the amount of family home allowable as a
deduction would be whichever is lower of P 10
million or the fair market value at the time of
the decedent’s death (P1 million prior to
effectivity of TRAIN Law.

REQUISITES FOR
DEDUCTIBILITY – FAMILY HOME

1. The decedent was married or if single, was a

head of the family
2. Along with the decedent, any of the
beneficiaries must be dwelling in the family
home.
3. The family home as well as the land on which it
stands must be owned by the decedent and
should have been included in the computation
of the decedent’s gross estate.

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REQUISITES FOR
DEDUCTIBILITY – FAMILY HOME

4. 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 where the family home is
situated.

5. The total value of the family home must be

included as part of the gross estate of the
decedent.
6. Allowable deduction must be in an amount
equivalent to the current fair market value of
the family home as declared in the gross
estate.

SPECIAL
DEDUCTIONS
C. Medical expenses
 all medical expenses ( cost of medicine,
hospital bills, doctor’s fees, etc), paid or
unpaid, within one year before the death of the
decedent shall be allowed as a deduction
provided duly supported by receipts and does
not exceed P500,000.
Requisites for Deductibility
 incurred by the decedent within one (1)
year prior to his death
 substantiated by receipts
Note: Not included under TRAIN Law 2 starting 2019

SPECIAL
DEDUCTIONS

D. Amounts received by Heirs under RA 4917

 any amount received by the heir/s from the
decedent’s employer as a consequence of the
death of the decedent employee in accordance
with R.A. 4917, provided that the amount of
separation benefit is included as part of the
gross estate of the decedent.

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ALLOWABLE DEDUCTIONS FOR

NONRESIDENT ALIEN DECEDENT

 No deduction shall be allowed in the case of a

non-resident decedent not a citizen of the
Philippines, unless the executor, administrator, or
anyone of the heirs, as the case may be, includes
in the return required to be filed under Section 90
of the Code, the value of at the time of the
decedent’s death of that part of his gross
estate not situated in the Philippines.

The heirs of a resident citizen decedent with a total

C gross estate of P15 million provided the break down
A as follows:
S Receivable from JUAN – debtor 500,000
E Amount collectible from JUAN 400,000
Unpaid taxes on estate before death 150,000
A Unpaid taxes on nestate after death 50,000
N Unpaid mortgage on estate 200,000
A Funeral expenses (paid) 182,000
L Judicial expenses 100,000
Y Unpaid loans- debt instruments notarized 125,000
S Unpaid loans- instrument not notarized 75,000
I Unpaid loans- instrument not notarized but
S the institution do not require notarization 100,000
Casualty loss 65,000
9
How much is the total amount of allowable deduction
from gross estate ?

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NIHONGGO died on January 1, 2019 leaving among

C others the following charges and obligations:
A Real property tax for the year 2018 P 100,000
S Real property tax for the year 2019 100,000
E Notarized interest bearing
Promissory note 100,000
A Accrued interest on the promissory note
N at the time of death 20,000
A Interest to accrue on the promissory note
L from the date of death to date of
Y maturity 10,000
S Income tax due for 2018 200,000
I
S
How much were the deductions from
10
the gross estate (disregard standard deduction)?

The following data relates to the estate of ABAN

C
DONADO:
A
House & lot (family home) in QC,
S
(zonal value is P1,150,000) P 2,230,000
E
Personal properties 2,500,000
Benefits received from employer
A
as a consequence of his death 150,000
N
Unpaid mortgage on a riceland
A
with a value of P1 million 200,000
L
Claims against Dimalupig, insolvent 35,000
Y
S
How much is the value of the
I
gross estate of ABAN DONADO ?
S

11

ALANIS, a resident citizen, single but head of family, died January

3, 2018 leaving the following:
C Properties:
A Real properties (excluding family home
S of P1,100,000) . . . . . . . . . . . 3,200,000
E House & lot in Australia . . . . . . . . . 1,500,000
Other personal properties ........... 800,000
Deductions:
A Funeral expenses ...... 120,000
N Claims against insolvent persons ...... 100,000
A Claims against the estate, not notarized. 50,000
Unpaid mortgage on family home ...... 30,000
L
The personal properties do not include shares of stocks valued at
Y P50,000 which were purchased by the decedent from Astra Co.
S one month prior to his death.
I The house in Australia was inherited by ALANIS from his father
S who died 2 ¼ years ago. Said property was mortgage for
P200,000 which was paid by the decedent before his death.
12 1. What is the amount of decedent’s gross estate ?
2. What is the total allowable deductions (excluding
standard deduction) ?

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JUANCHO died in June 30, 2018 leaving a gross estate of P 15 M

including a land inherited from his uncle 3 ½ years before his
C death and a car donated to him 7 years before death as follows:
A Unpaid mortgage FMV upon receipt FMV upon death
S Land P 100,000 P 1,800,000 P 1,250,000
E Car 50,000 300,000 400,000
The decedent was able to pay ½ of the unpaid mortgage on the
land before his death.
A Other deductions claimed:
N Expenses, losses, indebtedness, taxes excluding
A unpaid mortgage above but including funeral
expenses and mmedical expenses of P300,000
L
and P 600,000, respectively 1,200,000
Y Standard deductions 1,500,000
S Transfer to Government included above 300,000
I Death benefits from employer – RA 4917 200,000
S Family home, included above 2,000,000

13 1. How much is the amount of vanishing deductions?

2. How much is the net taxable estate ?

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