COMPUTATION OF VANISHING DEDUCTION APPLICABLE TO RESIDENT AND NONRESIDENT CITIZEN DECEDENT

Vanishing deduction is one of the ordinary deductions allowed as a deduction in the computation of net estate taxable of a resident and nonresident citizen decedent in the Philippines.

Vanishing deduction is computed with the following format:

Value to take (the lower the amount of the fair market value of properties                           xxxx
at the time of inheritance between at the time of death of the decedent)
Less: Mortgage paid assumed (1st deduction)                                                               (xxxx)
Initial Basis                                                                                                                  xxxx
Less: Proportionate deduction (2nd deduction)                                                             (xxxx)

Initial Basis       x   ELITe + Transfer for Public Use   = Proportionate deduction
Gross Estate

Final Basis                                                                                                                    xxxx                                                   
Multiply by Vanishing deduction rate (%)                                                                           xxxx
Vanishing deduction                                                                                                     xxxx

The vanishing deduction rates is based on the period from receipt to decedent's death as follows: (1) within 1 year-100%; (2) beyond 1 year to 2 years-80%; (3) beyond 2 years to 3 years-60%; (4) beyond 3 years to 4 years-40%; and (5) beyond 4 years to 5 years-20%.