A, a resident Filipino citizen, died in December 2018. A’s only assets consist of a house and lot in Alabang, where his heirs currently reside, as well as a house in Los Angeles, California, USA. In computing A’s taxable net estate, his heirs only deducted: 1. ₱10,000,000.00 constituting the value of their house in Alabang as their family home; and 2. ₱200,000.00 in funeral expenses because no other expenses could be substantiated.
(a) Are both deductions claimed by A’s heirs correct? Explain.(2%)
(b) May a standard deduction be claimed by A’s heirs? If so, how much and what proof needs to be presented for the same to be validly made?(2%)
(c) In determining the gross estate of A, should the heirs include A’s house in Los Angeles, California, USA? Explain.(2%)
Suggested answer only. Not an official answer and not legal advice.
**Answer:** Only the family home deduction is correct; funeral expenses are invalid. The heirs may claim a ₱5,000,000 standard deduction without proof. A's LA house is includable in his gross estate.
**Legal Basis:** Under Section 86(A) of the Tax Code, as amended, the family home up to ₱10,000,000 and a ₱5,000,000 standard deduction without proof are allowable, while funeral expenses were repealed. Section 85 includes a resident citizen's worldwide estate.
**Application:** Deducting ₱10,000,000 for the family home is valid, but deducting funeral expenses is improper. The heirs can claim the ₱5,000,000 standard deduction automatically. As a resident citizen, A's LA house is includable.
**Conclusion:** Thus, funeral expenses are non-deductible, a ₱5,000,000 standard deduction is allowed without proof, and the LA house is taxable.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
Which of the following expenses was repealed and is no longer deductible from the gross estate under the TRAIN Law?
The TRAIN Law deleted actual funeral expenses from the list of allowable deductions from the gross estate.
What is the maximum allowable family home deduction from the gross estate under the Tax Code, as amended by the TRAIN Law?
Under Section 86(A)(7) of the Tax Code, as amended by the TRAIN Law, the maximum family home deduction is ten million pesos.
How much is the allowable standard deduction for a resident citizen decedent, and what proof is required to claim it?
Section 86(A)(1) allows a standard deduction of five million pesos for resident citizens without requiring any proof or substantiation.
What properties are included in the gross estate of a deceased resident Filipino citizen?
Under Section 85 of the Tax Code, the gross estate of a citizen or resident decedent includes all properties wherever situated.
If a resident citizen decedent's family home is valued at fifteen million pesos, how much may be deducted from the gross estate?
The family home deduction is allowable up to an amount equivalent to the current fair market value or ten million pesos, whichever is lower.
Learn more about these topics
1. Estate Tax Deductions
Under the Tax Code, as amended by the TRAIN Law for decedents dying starting January 1, 2018, allowable deductions from the gross estate of a citizen or resident decedent include a standard deduction of five million pesos, which requires no proof or substantiation, and the family home deduction up to ten million pesos. Conversely, actual funeral expenses, judicial expenses, and medical expenses were completely repealed and deleted as allowable deductions. Consequently, heirs can no longer deduct funeral expenses regardless of the amount or substantiation presented in computing the net taxable estate.
2. Family Home Exemption
The family home is the dwelling house where a person and their family reside, including the land on which it stands. To be deductible from the gross estate, the family home must be certified by the barangay captain of the locality where it is situated. Under the TRAIN Law amendments, the maximum allowable deduction for the family home was increased from one million pesos to ten million pesos. If the actual value of the family home exceeds ten million pesos, only the ten-million-peso limit is deductible from the decedent's gross estate.
3. Worldwide Gross Estate
For estate tax purposes, the gross estate of a decedent who was a resident Filipino citizen encompasses all real and personal property, tangible and intangible, wherever situated. The principle of mobilization or territoriality does not restrict the taxing power over citizens and residents, whose global wealth is subjected to Philippine estate tax. Therefore, real properties located in foreign jurisdictions, such as a residential house located in the United States, must be fully disclosed and included in the gross estate computation of a deceased resident Filipino citizen.