TITLE III — ESTATE AND DONOR’S TAXES arising, existing, exercised or relinquished before or after the effectivity of this Code. (G) Transfers for Insufficient Consideration. — If any one of the transfers, trusts, interests, rights or powers enumerated and described in Subsections (B), (C) and (D) of this Section is made, created, exercised or relinquished for a consideration in money or money’s worth, but is not a bona fide sale for an adequate and full consideration in money or money’s worth, there shall be included in the gross estate only the excess of the fair market value, at the time of death, of the property otherwise to be included on account of such transaction, over the value of the consideration received therefor by the decedent. (H) Capital of the Surviving Spouse. — The capital of the surviving spouse of a decedent shall not, for the purpose of this Chapter, be deemed a part of his or her gross estate. SEC. 86.  Computation of Net Estate.39 — For the purpose of the tax imposed in this Chapter, the value of the net estate shall be determined: (A) Deductions Allowed to the Estate of a Citizen or a Resident.40 — In the case of a citizen or resident of the Philippines, by deducting from the value of the gross estate — (1) Standard Deduction. — An amount equivalent to Five million pesos (P5,000,000).41 (2) For claims against the estate: Provided, That at the time the indebtedness was incurred the debt instrument was duly notarized and, if the loan was contracted within three (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; (3) For claims of the deceased against insolvent persons where the value of decedent’s interest therein is included in the value of the gross estate; and (4) For unpaid mortgages upon, or any indebtedness in respect to, property where the value of decedent’s interest therein, undiminished by such mortgage or indebtedness, is included in the 39 As amended by Section 23 of the TRAIN Law. Section 86(D) (Miscellaneous Provisions) was removed. 40 As amended by Section 23 of the TRAIN Law. Specific deductions for actual funeral expenses, judicial expenses of the testamentary of intestate proceedings and medical expenses were removed. 41 102 As amended by Section 23 of the TRAIN Law. Previous threshold was P1,000,000. Isla Lipana & Co., the Philippine member firm of the PwC network

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