ESTATE TAX: DEDUCTIONS FROM GROSS ESTATE  A family home which is destroyed

cannot be deducted as “family

Deductions from Gross Estate
- Charges which naturally diminish the amount
of inheritance of the heirs.
- The law also allows certain deductions in the
nature of incentives from gross estate
Classification of Deductions
 Ordinary
- Items which diminish the amount of
inheritance
- Only exception is the deduction for
“Property previously taxed” which is tax
incentive but is classified as ordinary
deductions
 Special
- Items which do not reduce inheritance but
are incentive deductions against gross
estate
 Share of the surviving spouse
- Interest in net conjugal of the spouses
- Not owned by the decedent and will not
be transmitted as part of inheritance
General Principles
home” and “casualty loss”
 Losses claimed in income tax
return cannot be claimed again as
deduction in estate tax return
 Default presumption on ordinary deduction
- In case of married decedents, ordinary
deductions are presumed to be against
common properties unless proven to be
an exclusive properties of either spouse
Ordinary Deductions
 Losses, Indebtedness and Taxes
- Losses during settlement of estate
- May arise from casualty such as fires,
storms, shipwreck, robbery, theft or
embezzlement when losses are not
compensated by insurance
- Loss must be a sustained casualty loss
- It must occur during settlement of the
estate up to deadline of the estate tax
return
- The loss must not be concurrently
claimed in the income tax return

 The substantiation rule

-Items of deduction must be supported
with documentary evidence
 Matching principle
- Items of deduction must pertain to
properties that are part of gross estate
- Examples:
 Obligations of the exclusive
properties of the surviving spouse
cannot be claimed as deductions
 Losses of properties before death
of taxpayer are not deductible
 Separate obligations or losses of
surviving spouse are not
deductible.
 No double classification rule
- Items of deduction cannot be claimed
simultaneously under several deduction
categories
- Examples: