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Resident Citizen, Non-Resident Citizen, and Resident Alien Decedents
Resident Citizen, Non-Resident Citizen, and Resident Alien Decedents
Resident Citizen, Non-Resident Citizen, and Resident Alien Decedents
ALLOWABLE DEDUCTIONS
The following are the allowable deductions of a resident citizen, a non-resident citizen
or a resident alien decedent shall include the following:
1) Standard Deductions - an amount equivalent to Five Million pesos (P 5, 000,
000)
Provided, however that at the time the indebtedness was incurred the debt
instrument was duly notarized and, if the loan was contracted within three (3)
years before the death of the decedent, the administrator or executor shall
submit a statement showing the disposition of the proceeds of the loan.
For claims of the deceased against insolvent persons to be deductible, the full amount
of the claim must be included in the gross estate. The incapacity of the debtors to
pay their debts due to insolvency must be proven. The amount of receivable which is
uncollectible may be allowed as a deduction from the gross estate.
Example. Mr. Dizon’s estate has a claim of P 600,000 against Mr. Magno, a
debtor declared insolvent. Mr. Magno’s assets are worth P3M while his
liabilities P9M.
The full amount of the claim of P600, 000 must be included in the gross
estate. The proportionate amount of P 200, 000 (P600, 000 x P3M/P9M) is
still collectible. The amount deductible from the gross estate is P400, 000
(P600, 000 - P200, 000).
Step-by-step computation:
1. Value taken of PPT xxx
Less: Mortgage debt (or other lien paid, if any) xxx (1st deduction)
Initial basis xxx
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2. Initial basis x Claims against the estate, etc. = (2nd deduction)
Value of gross and transfers for public
estate of present purposes
decedent
3. Initial basis xxx
Less: 2nd deduction xxx
Final basis xxx
Multiply by percentage of deduction x%
Vanishing deduction xxx
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Example:
On September 10, 2017, Mr. Rayco died leaving his house and lot and Van to his only
son, Junior who is still a bachelor. The estate tax corresponding to the transmission of
these property were paid. Following are the relevant data:
FMV at the time of death Unpaid mortgage at the time of death
Property Rayco’s Junior’s Rayco’s Junior’s
House & lot P 8, 000, 000 P 9, 800, 000
P 600, 000 P 200, 000
Van 1, 900, 000 800, 000
On July 6, 2020, Junior died. His gross estate including the house & lot and van were
declared at P 15M while deductions (for claims against the estate, claims against
insolvent persons, unpaid mortgage, and transfers for public purpose) amounted to
P 2.5 M.
7) Family Home. The amount deductible from the gross estate as family
home shall be the current fair market value of the decedent’s family home at
the time of death. However, if the said current fair market value exceeds ten
million pesos (P10, 000, 000), the excess shall be subject to estate tax.
(TAXABLE) ALLOWABLE DEDUCTION IS ONLY 10M
Family home is 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, as certified to by the Barangay Captain of the locality. The
family home is deemed constituted on the house and lot from the time it is
actually occupied as a family residence and is considered as such for as long
as any of its beneficiaries actually resides therein (Arts. 152 and 153, Family
Code).
Beneficiaries of a Family Home
1. The husband and wife, or the head of a family; and
2. Their parents, ascendants, descendants including legally adopted
children, brothers and sisters, whether the relationship be legitimate or
illegitimate, who are living in the family home and who depend upon the head
of the family for legal support.
8) Amount Received by Heirs Under R.A. 4917. Any amount received by the
heirs from the decedent’s employer as a consequence of the death of the
decedent-employee in accordance with the Republic Act 4917 shall be
deductible. Such amount must be included in the gross estate of the
decedent.(SSS OR GSIS) (PENSION/ BENEFITS ACCEPTED BY
HEIRS)
10) Tax Credit for Estate Taxes Paid to a Foreign Country (BINAYARAN SA
IBANG BANSA)
a) In General - The estate tax shall be credited with the amounts of
any estate tax imposed by the authority of a foreign country subject to the
following limitations:
i. The amount of the credit in respect to the tax paid to any country
shall not exceed the same proportion of the tax against which such
credit is taken, which the decedent’s net estate situated within such
country taxable for estate tax bears to his entire net estate.
ii. The total amount of the credit shall not exceed the same
proportionof the tax against which such credit is taken, which the
decedent’s net estate situated outside the Philippines taxable for
estate tax bears to his entire net estate.
The estate of a non-resident alien decedent consists of property in the Philippines and
in other country or countries. For estate tax purposes, only his property in the
Philippines shall be considered in the gross estate computation. The estate is entitled
to the following deductions:
1. Standard Deduction. An amount equivalent to Five Hundred Thousand
Pesos
(P 500, 000).
2. Claims against the estate, Claims against insolvent persons, and Unpaid
mortgage subject to limitation as follows:
4. Transfers for Public Use. There shall be allowed as deduction from gross
estate the amount of all bequests, legacies, devises or transfers to or for the use of the
Government of the Republic of the Philippines, or any political subdivision thereof,
for exclusive public purposes.