Deductions

Funeral Expenses – refers to expenses incurred in connection with the interment or burial of the deceased and paid for from the estate of the deceased. The expenses must be supported by receipts or invoices or other evidence to show that the expense was really incurred. They include

a. The mourning apparel of the surviving spouse and unmarried minor children of the deceased bought and used on the occasion of the burial
b. Expenses of the wake preceding the burial including food and drinks
c. Publication charges for death notices
d. Telecommunication expenses in informing relatives of the deceased
e. Cost of burial plot, tombstones, monument or mausoleum but not their upkeep.
f. Interment fees and charges
g. All other expenses incurred for the performance of the rites and ceremonies incident to interment. Expenses after the interment such as prayers, entertainment or the like are not deductible.

Amount Deductible- under the law, the amount deductible is equal to 5 percent of the gross estate or the amount of the actual funeral expenses whichever is lower but in no case to exceed P200,000 none withstanding that the funeral is in keeping with the social position of the deceased.

Judicial expenses of the probate proceedings-they include administration proceedings (collection of assets, payment of debts, distribution among persons entitled to the estate.

CLAIMS AGAINST THE DECEDENT’S ESTATE

For claims to be deductible, the following requisites must concur:

1. They were contracted in good faith and for an adequate and full consideration in money or money’s worth
2. They must be existing against the estate
3. They must be legally enforceable obligations of the decedent and ought to be enforced by the claimant
4. They must be reasonably certain in amount
5. At the time the indebtedness was incurred, the debt instrument was duly notarized and if the loan was contracted within 3 years before the death of the decedent, the administrator or executor shall submit a statement showing the disposition of the proceeds of the loan.

CLAIMS AGAINST INSOLVENT PERSONS

In order that claims of the deceased against insolvent persons (bad debts) may be deductible, provided
1. The amount of said claims has been initially included as part of his gross estate
2. The incapacity of the debtors to pay their obligations is proven and not merely alleged.

Since the debts are uncollectible, they are worthless and it is unfair and unreasonable for the heirs to pay taxes on them.