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Deductions From Gross Estate
Deductions From Gross Estate
MID-YEAR 2021
TAX 2 – BUSINESS AND TRANSFER TAXATION
DEDUCTIONS FROM THE GROSS ESTATE except unpaid funeral and unpaid medical
expenses.
ALLOWABLE DEDUCTIONS FOR RESIDENT OR CITIZEN b. The liability was contracted in good faith and
DECEDENT for adequate and full consideration in money
or money’s worth.
I. EXPENSES, LOSSES, INDEBTEDNESS AND c. The claim must be a debt or claim which is valid
TAXES in law and enforceable in court.
d. The indebtedness must not have been
A. FUNERAL EXPENSES (removed in TRAIN Law) condoned by the creditor or action to collect
from the decedent must not have been
The amount allowable as deduction shall be the lower
prescribed.
amount between:
e. It must be duly substantiated by documents. (If
a. The actual funeral expenses (whether paid or a loan was obtain within a three-year period
unpaid) incurred in connection with the before death of the debtor, the administrator
interment or burial of the deceased; and or executor of the estate must submit a
b. 5% of the gross estate; statement of disposition of the loan proceeds)
c. But in no case to exceed two hundred
thousand pesos (P200, 000). Any unpaid D. CLAIMS AGAINST INSOLVENT PERSON
portion in excess of P200, 000 threshold
These are claims of the decedent against a person
cannot be claimed as deduction under “claims
declared as insolvent under the Financial Rehabilitation
against the estate”.
and Insolvency Act (FRIA Law). The full amount must be
Expenses to be deductible must be evidenced by included in the gross estate and only the uncollectible
supporting documents. Expenses incurred after the portion is allowed to be deducted.
interment such as prayers, entertainment, or the like
are not deductible. Any portion of the funeral and E. UNPAID MORTGAGE
burial expenses borne or defrayed by relatives and
For unpaid mortgage to be deductible, the fair market
friends of the deceased are not deductible.
value of the property mortgaged must be included in
the gross estate in full. The unpaid mortgage
B. JUDICIAL EXPENSES (removed in TRAIN Law)
deductible shall be to the extent that it was contracted
Expenses incurred during the settlement of the estate bona fide and for an adequate and full consideration in
but not beyond the last day prescribed by law, or the money or money’s worth.
extension thereof, for the filing of estate tax return in
the testamentary or intestate proceedings include: F. UNPAID TAXES
a. Inventory taking of assets comprising the gross These are taxes which have accrued as of the death of
estate the decedent but which were unpaid as of the time of
b. Their administration death. This deduction will not include:
c. The payment of debts of the estate
a. Income tax upon income received after death;
d. Distribution of the estate among the heirs
b. Property taxes not accrued before his death; or
Expenses should be supported by a sworn statement of c. Estate tax due from the transmission of his
account issued and signed by the creditor. estate.