When ever you give armor/weapons/tools to a mob (like a zombie or skeleton) either via them naturally picking it up, or using a dispenser to equip it to them, they drop the items as mob loot. As in when you kill the mob with your items, they treat it like they naturally spawned with those items. What items they do drop are highly damaged, and there is a chance they won't drop 100% of the items they have equipped.
How to reproduce:
1. Summon a zombie in a confined area
2. Equip a full set of NEW armor onto it using a dispenser
3. Kill the zombie
4. Observe that not all armor will be dropped, and what armor is dropped, is highly damaged
5. Repeat until satisfied, or with a mob that can pick up tools/weapons
Expected result
The mobs should drop the armor/tools/weapons exactly as they picked them up, and they should drop 100% of them. The only difference might be some lost durability to armor, if they were attacked, causing the armor to take damage.
Video demo: https://youtu.be/-hXBfUPcMAg?t=254
Can confirm for 1.16, but i have a feeling that this may be a duplicate of another bug.