Lesson 3
Lesson 3
Lesson 3
ORDINARY DEDUCTIONS
1. Losses - pertaining to casualty losses
storms, shipwreck or other casualties, or from robbery theft or
embezzlement
amount deductible is the value of the property lost
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Lesson 3
Deductions from the Gross Estate
4. Sole Proprietorship (sworn certificate signed by the
owner of the business)
General Rule: One who should certify must not be a relative of the borrower
within the fourth civil degree
Exception: If the creditor is related to the debtor, a copy of the
promissory note or other evidence of the indebtedness must be filed with
RDO having jurisdiction over the borrower within 15 days from execution.
Unpaid Mortgage or Indebtedness on Property
o Deductions allowed when a decedent leaves property encumbered by
a mortgage or indebtedness contracted in good faith and for
adequate and full consideration
o Gross Estate must include the fair market value of the property
encumbered
o Amount allowed as a deduction would be the outstanding debt or
mortgage
3. Taxes - unpaid taxes that accrued prior to the death of the decedent
The following are not allowed as a deduction:
o income tax on income received after death
o property taxes accrued after death
o estate tax
SPECIAL DEDUCTIONS
1. Standard Deduction (Allowable amount under the TRAIN LAW)
Citizen or Resident - P5,000,000
Non-Resident Alien - P500,000
2. Family Home
the amount of family home allowable as a deduction would be whichever
is lower of P10,000,000 or the FMV of the Family Home at the time of
the decedent's death
Family home must be part of the properties of absolute community or of
the conjugal partnership. May also be constituted by an unmarried head
of a family on his or her own family
Unmarried Head of a Family
unmarried daughter or son which recognized natural or legally adopted
children living dependent upon him / her for chief support for
brothers / sisters that are below 21 years old, unmarried not gainfully
employed, regardless of age is incapable of self-support because of
mental or physical defect
Beneficiaries
husband, and wife or head of family
Parents, ascendants, descendants including legally adopted children,
brothers and sisters whether the relationship be legitimate or
illegitimate
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Lesson 3
Deductions from the Gross Estate
any amount received by heirs from the decedent's employer as a
consequence of the death of the decedent-employee in accordance with
RA No. 4917