Professional Documents
Culture Documents
ORDINARY DEDUCTIONS
1. Expense, Losses, Indebtedness, Taxes (ELIT)
A. Claims against the estate
Debt instrument is notarized
If the loan is contracted within 3 years prior to the date of death the executor or
administrator execute as one declaration how the proceeds of the loan was disposed
Loan is not collateralized
B. Claims against insolvent persons
Receivable is included In the gross estate
EXAMPLE
A/R is P1,000,000
1. How much is included in the gross estate? = P1,000,000
2. If the debtor is 75% insolvent, how much is the allowable deduction? = P750,000
(1,000,000 x 75%)
3. If the debtor can pay 25% of his debt, how much is the allowable deduction? =
P750,000 (1,000,000 x 75%)
4. Assets : Liabilities is 1:4 = P750,000 (75% = ¾ x P1,000,000)
5. A/R is not included = P0
C. Unpaid Mortgage
Loan is Collateralized
The asset used as a collateral for the loan should be included in the Gross Estate
D. Unpaid Taxes
Accrue prior to the date of death
E. Casualty Losses
Arising from earthquake (fortuitous event)
Asset is included in the gross estate
Not compensated by insurance or otherwise
Not claimed for income tax purposes
Loss must occur 1 year from the date of death and during the settlement of estate
EXAMPLE
FMV P1,000,000 Car insured P300,000
1. How much is included in the gross estate? = P1,000,000
2. Deductions from casualty loss = P700,000