SEC. 86. Computation of Net Estate. Flashcards
Net Taxable Estate
Gross Estate
Less: Ordinary Deductions
Less: Special Deductions
Less: Shares of the Surviving Spouse
Ordinary Deductions
Claims Against the Estate
Claims of the Deceased Against Insolvent Persons
Unpaid Mortgages, Taxes, and Casualty Losses
Property Previously Taxed (Vanishing Deduction)
Transfers for Public Use
Claims Against the Estate – Requisites of Deductibility
RR 12-18
2.1. Requisites for Deductibility of Claims against the Estate. —
2.1.1. The liability represents a personal obligation of the deceased existing at the time of his death;
2.1.2. The liability was contracted in good faith and for
adequate and full consideration in money or money’s
worth;
2.1.3. The claim must be a debt or claim which is valid in law and enforceable in court;
2.1.4. The indebtedness must not have been condoned by the creditor or the action to collect from the decedent must not have prescribed.
Claims of the Deceased Against Insolvent Persons – Computation
Total Claim
Less: Recoverable Amount
Claims of the Deceased Against Insolvent Persons – Computation – Recoverable Amount – Computation
Total Claim
Less: Secured Portion
Multiply by: Recovery Ratio
Unpaid Mortgages – Computation
Original Amount
Less: Paid Before Death
Property Previously Taxed (Vanishing Deduction) – Procedural Computation
- Initial Value
- Initial Basis
- Final Basis
4 Vanishing Deduction
Property Previously Taxed (Vanishing Deduction) – Procedural Computation – Initial Value – Computation
Lower of
FV of the property at the date of the first transfer and
FV at the date of death
Property Previously Taxed (Vanishing Deduction) – Procedural Computation – Initial Basis – Computation
Initial Value
Less: Indebtedness assumed and paid before death
Property Previously Taxed (Vanishing Deduction) – Procedural Computation – Final Basis – Computation
Initial Basis
Less: (Initial Basis / Gross Estate) x (Losses, Indebtedness, taxes, and transfer for public purpose)
Property Previously Taxed (Vanishing Deduction) – Procedural Computation – Vanishing Deduction – Computation
Final Basis
Multiply by: (Vanishing percentage)
If the decedent died within
1 year from receipt of the property – 100%
2 years from receipt of the property – 80%
3 years from receipt of the property – 60%
4 years from receipt of the property – 40%
5 years from receipt of the property – 20%
More than five years – 0%
Special Deductions
Standard Deductions
Family Home
Others (i.e. Benefits Under RA 4917)
Family Home – Conditions for Deductibility
RR 12-18
7.2.1. 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 family home is situated;
7.2.2. The total value of the family home must be included as part of the gross estate of the decedent; and
7.2.3. Allowable deduction must be in an amount
equivalent to the current fair market value 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),
whichever is lower, but not exceeding P10,000,000.
Share of Surviving Spouse – Computation
Gross Estate
Less: Ordinary Deductions
Divide by: 2
Net Taxable Estate of a Non-Resident Alien
Gross Estate
Less: Ordinary Deductions
Less: Special Deduction (Standard Deduction only)
Less: Share of Surviving Spouse
Ordinary Deductions of a Non-Resident Alien
Claims Against the Estate – Proportion
Claims of the Deceased Against Insolvent Persons – Proportion
Unpaid Mortgages, Taxes, and Losses – Proportion
Property Previously Taxed (Vanishing Deduction) – within the Philippines at the date of death
Transfers for Public Purpose – to the Philippine government
Ordinary Deductions of a Non-Resident Alien – Computation
Philippine Gross Estate
Divide by: World Gross Estate
Multiply by: Losses, Indebtedness, and Taxes
Standard Deductions
Residents and/or Citizens – ₱5,000,000.00*
Non-Resident Alien – ₱500,000.00
*Allocated in Each Country Based on Gross Estate
Total Allowable Deductions for LIT Items for Non-Resident Aliens – Computation
- Global LIT
- Philippine Gross Estate Ratio
- Philippine LIT
- Allowable Percentage
- Deductible LIT
Total Allowable Deductions for LIT Items for Non-Resident Aliens – Computation – Allowable Percentage
Total Proportional Value Allowed
Divided by: Total Actual Philippine Value
Total Allowable Deductions for LIT Items for Non-Resident Aliens – Computation – Deductible LIT
Actual
Multiply by: Allowable %
Final Foreign Tax Credit – Computation
Lower of
[Limit 1] Total of the Tax Credit Allowable per Country and
[Limit 2] World Estate Tax Credit Limit
Final Foreign Tax Credit – Computation – Tax Credit Allowable per Country – Computation
[Limit 1] Lower of
Actual Foreign Estate Tax Paid and
Foregoing Limit for Each Country
Final Foreign Tax Credit – Computation – Tax Credit Allowable per Country – Computation – Foregoing Limit for Each Country – Computation
Foreign Net Taxable Estate
Divided by: World Net Taxable Estate
Multiply by: Philippine Estate Tax Due
Final Foreign Tax Credit – Computation – World Estate Tax Credit Limit – Computation
Total Foreign Net Taxable Estate
Divided by: World Net Taxable Estate
Multiply by: Philippine Estate Tax Due
