FAR EASTERN UNIVERSITY

INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE

Department of Accountancy

DISCLAIMER: Kindly note that no part of this Module may be reproduced in any form or any means without
the permission (e.g., written or oral) from the Instructor.

MODULE NO. 03
ESTATE TAXATION – DEDUCTIONS

SUMMARY OF ORDINARY DEDUCTIONS (Mnemonics: C2LUT TPP PPT)

ORDINARY DEDUCTIONS RC, NRC, and RA NRA
Claims against the Estate Actual Amount Pro-rated Actual Amount
Pro-rated Uncollectible
Uncollectible Amount
Claims against Insolvent Person Amount
(Insolvency)
(Insolvency)
Losses Actual Amount Pro-rated Actual Amount
Unpaid Mortgage Actual Amount Pro-rated Actual Amount
Taxes Actual Amount Pro-rated Actual Amount
Transfer for Public Purpose Actual Amount Pro-rated Actual Amount
Property Previously Taxed (Vanishing Deduction) Amount per Computation Amount per Computation
NOTE: For the estate of a non-resident alien, the allowable CLUT deduction shall be prorated based on the size of the gross estate in the Philippines
relative to his entire worldwide gross estate.

SUMMARY OF SPECIAL DEDUCTIONS (Mnemonics: SAF)

ORDINARY DEDUCTIONS RC, NRC, and RA NRA
Standard Deduction P10,000,000 – Max 
Amount Received under RA 4917 P5,000,000 P500,000
Family Home Actual Amount 

SUMMARY OF OTHER DEDUCTIONS

ORDINARY DEDUCTIONS RC, NRC, and RA NRA
Share in Conjugal or Community Properties  

ALLOWABLE DEDUCTIONS FROM ESTATE – ORDINARY DEDUCTIONS

Deductions and/or losses already deducted from gross income can no longer be deducted from gross
estate. Deductions should not be compensated for by any insurance or extrajudicial settlement. Otherwise,
they are not valid deductions.
ALLOWABLE DEDUCTIONS

ORDINARY DEDUCTIONS SPECIAL DEDUCTIONS OTHERS

Claims against the Estate

Claims against Insolvent Person
Losses
Standard Deduction
Unpaid Mortgage
Taxes Share in Conjugal or Community
Amount Received under RA 4917
Properties
Transfer for Public Purpose
Family Home
Property Previously Taxed (Vanishing
Deduction)

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

CLAIMS AGAINST THE ESTATE [SEC. 86 (A)(2)]

• “Claims” generally mean debts or demands of a pecuniary nature which could have been enforced
against the deceased in his lifetime and could have been reduced to simple money judgments.
Claims against the estate or indebtedness in respect of property may arise out of contract, tort, or
operation of law. [Sec. 6(2), RR 12-2018]

• This consist of the bona fide unpaid personal obligations of the decedent of a pecuniary nature.
These can arise from contract, tort, or by operation of law. These must be incurred in good faith
by the decedent during his lifetime and can be enforced against the estate by his creditors. It must
not have been forgiven by the creditor, or the action to collect must not have prescribed.

• These include personal obligations of the decedent at the time of his death except unpaid
obligations incurred incidental to his death such as funeral or medical expenses.

• Requisites for Deductibility [Sec. 6 (2.1) and (2.2), RR 12-2018].

o The liability represents a personal obligation of the deceased existing at the time of his
death;
o The liability was contracted in good faith and for adequate and full consideration in money
or money’s worth;
o The claim must be a debt or claim which is valid in law and enforceable in court;
o The indebtedness must not have been condoned by the creditor or the action to collect
from the decedent must not have prescribed; and
o They must be reasonably certain in amount, and substantiated

• Substantiation Requirements [Sec. 6 (2.2), RR 12-2018].

o In case of simple loan (including advances):

✓ The debt instrument must be duly notarized at the time the indebtedness was
incurred, except for loans granted by financial institutions where notarization is not part
of the business practice/policy.
✓ Duly notarized Certification from the creditor as to the unpaid balance of the debt,
including interest as of the time of death.
✓ Proof of financial capacity of the creditor to lend the amount at the time the loan
was granted, as well as its latest audited balance sheet showing the unpaid balance
of the decedent-debtor.
✓ A statement under oath executed by the administrator or executor of the estate
reflecting the disposition of the proceeds of the loan if it was contracted within 3
years prior to the death of the decedent.

o If the unpaid obligation arose from purchase of goods or services:

✓ Documents evidencing the purchase of goods or service (e.g., sales

invoice/delivery receipt or contract for services), and statement of account given by the
creditor
✓ Duly notarized certification from the creditor as to the unpaid balance of the debt,
including interest as of the time of death.
✓ Certified true copy of the latest audited balance sheet of the creditor with a
detailed schedule of its receivable showing the unpaid balance of the decedent-debtor.
A certified true copy of the updated latest subsidiary ledger/records of the debtor-
decedent, should likewise be submitted

NOTE: Where the settlement is made through the Court in a testate or intestate proceeding,
pertinent documents filed with the Court evidencing the claims against the estate, and the Court
TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS
Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

Order approving the said claims, if already issued, in addition to the documents mentioned in the
preceding paragraphs. [Sec. 6(2.2.3), RR 12-2018]

CLAIMS AGAINST INSOLVENT PERSONS [SEC. 86 (A)(3), NIRC]

• These are claims of the deceased against insolvent persons as defined under RA 10142 (The
Financial Rehabilitation and Insolvency Act of 2010) and other existing laws, where the value of
the decedent’s interest therein is included in the value of the gross estate. [Sec. 6(3), RR 12-2018]

• REQUISITES FOR DEDUCTIBILITY

o The full amount owed by the insolvent must first be included in the decedent’s gross estate;
and
o The incapacity of the debtor to pay his obligation should be proven, although a judicial
declaration of insolvency is not required. [Monserrat v. Collector of Internal Revenue, CTA
Case No. 11 (1955)]

NOTE: If the insolvent could only pay a partial amount, the full amount owed shall be included in
the gross estate, and the amount uncollectible shall be allowed as a deduction.

EXAMPLE:
E died with a claim against J. J has properties worth P250,000 and obligations of P350,000. It is included
in the obligations of J are P50,000 unpaid taxes owed to the Government of the Philippines and P90,000
payable to Ms. E. The deductible claim against insolvent debtors is PhP___________?

EXAMPLE:
Mr. SS died with a total receivable of P200,000 from Mr. S. The latter was adjudged bankrupt by the
court with only P800,000 total assets but with P2,000,000 in total liabilities.

CASE 1: The deductible claims against insolvent debtors is PhP___________?

CASE 2: The deductible claims against insolvent debtors assuming zero recovery is PhP___________?

LOSSES [SEC. 86(A)(4), NIRC]

• Casualty Losses incurred on account of mishaps, accidents, casualties, acts of God, robbery, theft,
embezzlement can be deducted.

• REQUISITES FOR DEDUCTIBILITY

o Incurred during the settlement of the estate
o Arising from fires, storms, shipwreck, or other casualties, or from robbery, theft, or
embezzlement
o Not compensated for by insurance or otherwise
o At the filing of the estate tax return, such losses have not been claimed as a deduction for
income tax purposes in an income tax return
o Incurred not later than the last day for the payment of the estate tax (i.e., 1 year from
decedent’s death). Therefore, all casualty losses after the prescribed period from the
payment of tax are not deductible.

NOTE: VALUE TO DEDUCT: The difference of the FMV before and after incurring the loss.
[AMPONGAN].

NOTE: Casualty loss can be allowed as deduction in one instance only, either for income tax or
estate tax purposes. [Sec. 6(A)(5)), Rev. Reg 2-2003]

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

EXAMPLE:
Y, a Filipino resident, died on November 5, 2018, and his estate incurred losses:

1st From fire on February 2, 2018 of improvement on his property, not compensated by
insurance, P500,000;
2nd From flood on February 25, 2019 of household furniture also not compensated by
insurance, P300,000.
3rd From sale on February 20, 2019 of a property included in the gross estate, P100,000.
4th From theft on April 5, 2019, P300,000, 70% compensated by insurance
5th From robbery on May 5, 2019, P150,000, claimed as deduction from gross income.

The deductible loss is PhP___________?

EXAMPLE:
Mr. Y died in a fatal car crash on November 2, 2019. The following losses of properties were identified
by his estate administrator:

Losses up to the point of death:

Value of car totally destroyed during the crash P 1,200,000
Pilferage loss on merchandise revealed by the physical
inventory count on October 31, 2019 80,000

Losses since the death of the decedent:

Fire loss on an insured building on December 25, 2019 P 2,000,000
Theft of personal valuables of Mr. Y on January 1, 2020 180,000
Value of cash robbed from Mr. Y's residence on February 14, 2020 620,000
Value of an uninsured car destroyed by a storm on March 1,2021 800,000
Unpaid loans receivable from a bankrupt customer 100,000

The deductible loss is PhP___________?

FOCUS NOTE:
• A loss incurred before or at the date of death is non-deductible.
o The value of the car destroyed on the crash is non-deductible because the car will no longer
be included in the gross estate of the decedent
o If the property is compensated for by insurance, the proceeds of insurance is included in
gross estate, but still no loss deduction is allowed because the same does not affect the
hereditary estate.
o The pilferage loss on inventory will not be deductible since the inventories were lost before
death and are not part of the gross estate.
• The fire loss on the building is not deductible because it is insured. The loss is not actual but
temporary which will be recovered by the estate.
• The loss on an uninsured car caused by a storm is non-deductible as it is beyond 1 year from
the date of death.
• The unpaid loan receivable from a bankrupt customer is a deductible loss but under a separate
category "Claim against Insolvent Person."

UNPAID MORTGAGES [SEC. 86(A)(4), NIRC]

• The unpaid mortgage or indebtedness is deductible from the gross estate provided that the
decedent’s interest in the property, gross of the mortgage, is included in the gross estate.

• If the loan is an accommodation loan where the loan proceeds went to another person, the value
of the unpaid loan must be included in the gross estate as a receivable.

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

• REQUISITES FOR DEDUCTIBILITY [SEC. 6(4.1), RR 12-2018]:

o The value of the decedent’s interest therein, undiminished by such mortgage or
indebtedness, is included in the value of the gross estates.
o The mortgages were contracted bona fide and for an adequate and full consideration in
money or money’s worth.

NOTE: In case the loan of the decedent is only an accommodation loan where the loan proceeds
went to another person, the value of the unpaid loan must be included as a receivable of the estate.
If there is a legal impediment to recognize the same as a receivable of the estate, said unpaid
obligation shall not be allowed as a deduction. In all instances, the mortgaged property, to the
extent of the decedent’s interest therein, should always form part of the gross taxable estate. [Sec.
6(4), RR 12-2018]

TAXES [SEC. 6(4.2), RR 12-2018]

• REQUISITES FOR DEDUCTIBILITY:

o Taxes which have accrued as of or before the death of the decedent, and
o Unpaid as of the time of his death, regardless of whether or not it was incurred in
connection with trade or business.

NOTE: Unpaid taxes that accrued before the decedent’s death but not including:
o Any income tax upon income received after the death of the decedent;
o Property taxes not accrued before his death; or
o Any estate tax.

TRANSFERS FOR PUBLIC PURPOSE [SEC. 86(A)(6)]

• 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.

NOTE:
o Transfers made to the government or any political subdivision for public purposes; or
o Transfers to social welfare, cultural, and charitable institutions, provided:
▪ No part of its net income inures to the benefit of any individual; and
▪ ≤ 30% of the bequest, devise, or legacy is used for administrative purposes.
o NO PURELY RELIGIOUS ORGANIZATION

• REQUISITES FOR DEDUCTIBILITY:

o The disposition is in a last will and testament
o To take effect after death
o In favor of the Government of the Republic of the Philippines, or any political subdivision
thereof
o Exclusively for public purposes
o The value of the property given is included in the gross estate.

EXAMPLE:
Mr. A devised in his will the following properties:
Commercial Land, to a Public School P 2,000,000
Land and Building, to a GOCC 3,000,000
Total P 5,000,000

The amount to be included in Gross Estate is PhP___________?

The amount to be included in Ordinary Deductions – Transfer for Public Purpose is PhP___________?

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

PROPERTY PREVIOUSLY TAXED (VANISHING DEDUCTION) [SEC. 86(A)(5)]

• This is an amount allowed to reduce the gross estate where the property was previously subjected
to transfer taxes, either donor’s tax or estate tax.

• REQUISITES FOR DEDUCTIBILITY:

o DEATH – The present decedent died within 5 YEARS from the date of death of the prior
decedent OR the date of gift.
o IDENTITY OF THE PROPERTY – The property can be identified as the one received from
prior decedent or donor.
o 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.
o PREVIOUS TAXATION OF 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.
o NO PREVIOUS VANISHING DEDUCTION ON THE PROPERTY – No such deduction on
the property was allowed in determining the value of the net estate of the prior decedent.
This is intended to preclude the application of vanishing deduction on the same property
more than once.

• There are instances where properties are transferred between persons in short periods of time
causing a series of transfer taxation;
o The death of the decedent is preceded by a donation inter-vivos; and

DONOR’S TAX ESTATE TAX

o The death of the decedent is preceded by a donation mortis causa.

ESTATE TAX ESTATE TAX ESTATE TAX ESTATE TAX

• STEPS ON COMPUTATING PROPERTY PREVIOUSLY TAXED (Mnemonics: LIAR):

o LOWER VALUE – Identify the property and its proper value (i.e., the value at the time
previously taxed or the value of the property in the present estate, whichever is lower)

o INITIAL BASIS – Deduct any mortgage or lien paid by the present decedent to arrive at
the initial basis.

o ACTUAL OR FINAL BASIS – From the initial basis, deduct the proportionate amount
based on the ratio of the initial basis over the gross estate for
o Claims against the Estate,
o Claims against Insolvent Persons,
o Unpaid mortgages, Taxes and Casualty Losses, and
o Transfers for Public Purpose [pars. 2, 3, 4 and 6 of Sec. 86(A) of the NIRC]

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

FORMULA FOR PROPORTIONATE DEDUCTIONS:

[Initial Basis ÷ Gross Estate of the Current Decedent] x [CLUT TPP]

o RATE – Multiply the actual basis by the applicable rate based on the length of time the
property has been acquired:

MORE THAN NOT MORE THAN RATE

- 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%

• FORMULA FOR PROPERTY PREVIOUSLY TAXED:

Value of the Property, whichever is LOWER xxx,xxx
Less: Mortgage Debt Paid, if any xxx,xxx
Initial Basis xxx,xxx
Less: Proportionate Deduction xxx,xxx
Actual or Final Basis xxx,xxx
Multiplied by: Property Previously Taxed Rate xxx,xxx
Property Previously Taxed (Vanishing Deduction) xxx,xxx

NOTE: Under conjugal partnership of gains vanishing is a deduction from exclusive property. Under
absolute community of property, vanishing deduction may be deducted from exclusive property or
community property. If more than one property qualifies for vanishing deduction, the properties
shall be grouped and totaled on a per-year basis.

EXAMPLE:
Decedent was a citizen of the Philippines who was single at the time of death. Compute the vanishing
deduction based on the following information that were made available:

Properties inherited two-and-a-half years before death:

Located outside the Philippines P3,000,000
Located in the Philippines
FMV, when inherited 6,500,000
FMV, time of death 7,000,000
Unpaid mortgage on the property when inherited 1,500,000
Unpaid mortgage on the property at the time of death 1,000,000
Property acquired through own labor 2,000,000
Losses, Indebtedness, Taxes, etc. (excluding the unpaid mortgage of P1,000,000) 800,000
Transfer for public use (included in property acquired through own labor) 970,000
Medical expenses 800,000

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

EXAMPLE:
Mr. H, a bachelor, died with the following properties and allowable deductions:

The vanishing deduction shall be determined as follows:

ALLOWABLE DEDUCTIONS FROM ESTATE – SPECIAL DEDUCTIONS

ALLOWABLE DEDUCTIONS

ORDINARY DEDUCTIONS SPECIAL DEDUCTIONS OTHERS

Claims against the Estate

Claims against Insolvent Person
Losses
Standard Deduction
Unpaid Mortgage Share in Conjugal or Community
Taxes Properties
Amount Received under RA 4917
Transfer for Public Purpose Credit for Foreign Estate Tax Paid
Family Home
Property Previously Taxed (Vanishing
Deduction)

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

FAMILY HOME [SEC. 86(A)(7), NIRC; SEC. 6(7), RR 12-2018]

• 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, as certified to by the Barangay
Captain of the locality.

• It is deemed constituted on the house and lot from the time it is occupied as the family residence
and considered as such for as long as any of its beneficiaries actually resides therein.

• Temporary absence from the constituted family home due to travel or studies or work abroad, etc.
does not interrupt actual occupancy. The family home is generally characterized by permanency,
that is, the place to which one still intends to return.

• It must be part of the ACP, CPG, or Exclusive Property of the decedent. It may also be constituted
by an unmarried head of a family on his or her own property.

NOTE: For purposes of availing this deduction, a person may constitute only one family home.
[Sec. 6(7.1), RR 12-2018 citing Arts. 152, 153, 156 and 161, Family Code]

• REQUISITES FOR DEDUCTIBILITY [SEC. 6(7.2), RR 12-2018]

o The decedent was married (or if single, was the head of the family).
o Along with the decedent, any of the beneficiaries must be dwelling in the family home.
o The family home as well as the land on which it stands must be owned by the decedent.
o 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 same is
situated.
o The total value of the family home must be included as part of the gross estate.
o Allowable deduction must be in an amount equivalent to whichever is lowest of:
▪ the current FMV of the family home as declared or included in the gross estate, or
▪ the extent of the decedent’s interest (whether conjugal/community or exclusive
property), or
▪ P10,000,000. [AMPONGAN, 2018 and TABAG, 2021]

• BENEFICIARIES OF A FAMILY HOME [SEC. 6(7), RR 12-2018]

o The husband and wife, or an unmarried person who is the head of a family; and
o Their parents, ascendants, descendants, 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.

NOTE: The amount deductible:

PROPERTY DESCRIPTION
EXCLUSIVE PROPERTY FULL VALUE INCLUDED IN THE GROSS
ESTATE
CONJUGAL OR COMMUNITY PROPERTY ½ OF THE VALUE INCLUDED IN THE
GROSS ESTATE
PARTLY EXCLUSIVE – FULL VALUE AND
EXCLUSIVE PROPERTY CONJUGAL/COMMUNITY – ½ VALUE
CONJUGAL OR COMMUNITY PROPERTY INCLUDED IN THE GROSS ESTATE
In all three cases, the maximum amount of family home deduction is PhP10,000,000.

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

EXAMPLE:
A decedent died leaving a family home with a fair value of P 17,000,000 at the date of his death.

The following shall be deductible for family home under each of the following independent cases:

NOTE: When the family home is an exclusive property of the surviving spouse, none of it is reflected in
gross estate. Hence, there should be no deduction for family home in accordance with the matching rule.

STANDARD DEDUCTION [SEC. 86(A)(1), NIRC]

• An amount equivalent to P5,000,000 shall be deducted from the gross estate without need of
substantiation.

• For NRAs, the Standard Deduction is P500,000 [Sec. 86 (B)(1)].

AMOUNTS RECEIVED BY HEIRS UNDER RA 4917 [SEC. 86(A)(8), NIRC]

• Any amount received by the heirs from the decedent’s employer as a consequence of the death of
the decedent-employee in accordance with RA 4917, provided that such amount is included in the
gross estate of the decedent.

• This includes retirement benefits given by private firms with a reasonable private benefit plan, if the
employee is not less than 50 years old and has been with the same employer for at least 10 years.
Such benefit may be availed of only once.

EXAMPLE:
Mr. H, a bachelor, died in a car accident. His heirs received a P1,500,000 termination pay from his
employer on account of Mr. H’s death.

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

The P1,500,000 termination pay shall be included in gross estate and shall likewise be presented as a
deduction against gross estate.

ALLOWABLE DEDUCTIONS FROM ESTATE – OTHERS

ALLOWABLE DEDUCTIONS

ORDINARY DEDUCTIONS SPECIAL DEDUCTIONS OTHERS

Claims against the Estate

Claims against Insolvent Person
Losses
Standard Deduction
Unpaid Mortgage
Taxes Share in Conjugal or Community
Amount Received under RA 4917
Properties
Transfer for Public Purpose
Family Home
Property Previously Taxed (Vanishing
Deduction)

NET SHARE OF SURVIVING SPOUSE IN CPG/ACP [SEC. 86(C), NIRC; SEC. 6(9), RR 12-2018]

• The amount deductible from the net estate of the decedent is the net share of the surviving spouse
in the conjugal property. The net share is equivalent to ½ of the conjugal property after deducting
the obligations chargeable to such property. The net share of the surviving spouse is neither an
ordinary nor a special deduction.

NOTE: Compare with the Capital of Surviving Spouse which is excluded from the gross estate.

• FORMULA:
Gross CPG/ACP Properties xxx,xxx
Less: CPG/ACP Deductions xxx,xxx
Net CPG/ACP Properties xxx,xxx
Share of the Surviving Spouse xxx,xxx

EXAMPLE:
A married decedent died with the following gross estate and allowable deductions:
Separate Properties of the decedent P 1,200,000
Common Properties 3,800,000
Gross Estate P 5,000,000

ACTUAL ESTATE EXPENSES AND DEDUCTIONS:

Funeral expenses P 500,000
Judicial or estate administration expenses 400,000
Claim against the estate - separate properties 400,000
Claim against the estate - common properties 600,000
Unpaid mortgage on separate properties 100,000
Unpaid mortgage on common properties 400,000
Loss of common properties 150,000
Transfer for public use 100,000
Vanishing deduction on common properties 200,000
Family home 1,000,000
Standard deductions 1,000,000

THE STATUTORY DEDUCTION FOR SURVIVING SPOUSE

The statutory deduction for the share of the surviving spouse shall be computed using estate tax rules
as follows:
TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS
Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

NOTE:
• Funeral and judicial expense are no longer deductible in computing taxable estate.
• As a rule, transfer for public use is presumed deductible against exclusive properties of the
decedent as married persons cannot dispose common properties without the consent of the
other spouse.
• Exceptionally, if transfer for public use or vanishing deductions pertain to common properties,
the applicable deduction is against common properties.

THE ACTUAL SHARE FOR SURVIVING SPOUSE

The actual share of the surviving spouse would be computed from the actual properties that remains of
the common properties as follows:

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA
 FAR EASTERN UNIVERSITY
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
Department of Accountancy

NOTE:
• The amount of statutory deduction in the estate tax return is very different with the actual share
of the surviving spouse.
• Though non-deductible in the estate tax return, funeral expense and judicial expense would be
deducted to the common property to extract the net properties of the spouses. Funeral and
judicial expenses are charges against the common fund of the spouses.
• Vanishing deduction is not considered as it is an incentive deduction and does not physically
diminish the properties of the estate.

-NOTHING FOLLOWS-

TRANSFER AND BUSINESS TAXATION | ESTATE TAXATION - DEDUCTIONS

Mr. Kireina Otoko M. Manas, CPA