Deceased+Estates++-+2015

7/25/2019 Deceased+Estates++-+2015

1/19

Deceased estates

Reference:SilkeChapter 29; 28.11.2, 35.7.1

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TAXATION IV2015


2/19

Deceased Estates

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1The

deceasedperson in

the year of

death.

and

2The deceasedpersons estate

(separatetaxa!e entity".

and

3The heirs or!e#atees of

thedeceased

person.

numerous taxpayers


3/19

Deceased personPeriod from 1 arc! " date of deat! #taxpayer 1$

$nterest exe%ption (s 1&(1"(i"" not apportioned Reates apportioned (s '("" )edica! credit (s '*(3"" *dditiona! )edica! expenses credit(s'+"

Certain inco%e dee%ed to accre i%%ediate!y priorto death -%p s%s, 8*, 8+, 8C, 2*

C/T: 0ee%ed disposa! of assets (!i%ited exceptions"(par &" *nna! exc!sion R3&& &&& ri%ary residence exc!sion (par 5&" %a!! siness asset exc!sion (par 57"

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4/19

Deat! and %&T

0ee%ed disposa! y the deceased of assets ondate of death (para &(1""

roceeds )4 (date of persons death"

6xc!sions:

pose (para '7" -on#ter% insrance po!icy (para 55"

pension, proident and R* enets (para5"

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5/19

Deat! and %&T

0isposa! of assets to 6state or eir

deceased

0isposa! to heir < !e#atee dee%ed to ac=isition of those assetsat )4 at date of death of the deceased

0isposa! y 6state to eirs" (para&(2""

6state dee%ed to hae disposed of assets for proceeds e=a! toase cost

eir, !e#atee or trstee

0ee%ed ac=isitioncost ase cost to estate ()4"

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6/19

Deceased estatePeriod from DoD " ' #taxpayer 2$

*ssets ? !iai!ities of deceased @ re!atedinco%e ? expenses

25 $nterest exe%ption (s 1&(1"(h""

C/T on acta! disposa!s of assets

ri%ary residence exc!sion (par 5&"

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7/19

Estate income distri(uted to !eirs or)e*atees or to a trust + , 25#1$

$nco%e ? a%onts

receied y or accred to the exector; and

Ao!d hae een inco%e of the deceased

for the i%%ediate


8/19

Recop%ents s 8("(a"

$f an a!!oAance asset is disposed of ythe exector Recop%ent inc!ded in /$ of either the

deceased estate or the ascertained heir

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9/19

Examp)e

)r B died on 1 )ay 2&12 and !eft his Aho!eestate to his da#hter .

The on!y asset in the estate Aas a p!ant sed y)r B to operate a s%a!! %anfactrin# concern.

The p!ant Aas prchased y hi% 1& years a#o ata cost of R5&& &&&. $t has een f!!ydepreciated in ter%s of s12C. The a!e of thep!ant at the date of death is esti%ated to e

R'&& &&&.Source: SARS Interpretation Note no. 12 (adapted)

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10/19

A- T!e executor of t!e estate se))s t!e asset#proceeds )ess t!an t!e de(ts in t!e estate$

The exector had to se!! the p!ant in order to ensre that the dets (in excess ofR'&& &&&" of the estate are sett!ed. The p!ant Aas so!d for R'&& &&&.

0e to the fact that the asset Aas so!d y the exector in the process of Aindin#p of the estate the a%ont accred to the estate.

$f )r B had so!d the p!ant drin# his !ifeti%e, the depreciation a!!oAancespreios!y a!!oAed Ao!d hae een recoped and Ao!d hae for%ed part ofhis inco%e. $n this case the proceeds Ai!! e sed to pay oD the dets of theestate and Ai!!, therefore, not receie any enet fro% the estate.

The a%ont recoped (R5&& &&&" Ai!! for% part of the inco%e of the estate.(The recop%ent is !i%ited to the a%ont of a!!oAances c!ai%ed y )r B."

The exector Ai!! e o!i#ed to ensre that the estate is re#istered for inco%etax prposes and render a tax retrn dec!arin# the a%ont of the recop%ent astaxa!e inco%e in the year of assess%ent that the a%ont Aas recoered or

recoped. *ny assessed !oss incrred y the deceased p to date of his death isforfeited and cannot e set oD a#ainst the inco%e of the estate. The !oss doesnot constitte expenditre incrred y the estate in ter%s of s25(2".

Eo a%ont Ai!! e sFect to inco%e tax in the hands of as she Ai!! not otainany enet fro% the estate.

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11/19

.- T!e executor of t!e estate se))s t!e asset#ascertained !eir entit)ed to in!eritance$

The Ai!! stip!ates that the p!ant %st e so!d in the Aindin#p of the estate. (There Aere no dets in the estate."

The p!ant Aas so!d for R'&& &&& and pon na!isation of theestate the net proceeds (after dedction of nor%a! estatead%inistration costs" Aere distrited to .

The recop%ent Ao!d hae een inco%e in the hands ofthe deceased, there is an ascertained heir and it is for theheirs i%%ediate or ftre enet. The re=ire%ents ofs25(1" hae, therefore, een %et.

%st inc!de the a%ont of the recop%ent in her taxa!e

inco%e in the year of assess%ent drin# Ahich the a%ontaccred to the estate and not Ahen it is acta!!y paid to her.

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12/19

%- T!e executor of t!e deceased estate se))s t!easset ./T income not for immediatefuture (enet

$n ter%s of the Ai!! the exector is re=ired tose!! the p!ant.

oAeer, the Ai!! stip!ates that is entit!edto the inheritance, t not efore her%arria#e. $t cannot therefore e said that theinheritance Ai!! e deried for her enet (she%ay neer receie the inheritance ecaseshe %ay not %arry" and conse=ent!y the

recop%ent Ai!! e taxa!e in the hands ofthe estate and not in the hands of .

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13/19

D- T!e executor of t!e deceased estate distri(utest!e asset in specie to the heir or legatee

$n ter%s of the Ai!! is the on!y heir. he is prepared topay a!! the ad%inistration costs pertainin# to the Aindin#p of the estate. Gpon na!isation of the estate the assetis transferred to her. 0e to the fact that no a%ontaccres to the estate, s25 does not app!y.

Eo a%ont is therefore dee%ed to accre to either theestate or the heir.

The asset is disposed of y the deceased estate to theheir and nder para &(2" of the 6i#hth ched!e, thedeceased estate is treated as hain# disposed of the asset

for proceeds e=a! to the ase cost of the asset in thedeceased estate and the heir is treated as hain# ac=iredthe asset at that ase cost.

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14/19

, 25#2$

0edctions < a!!oAances in respect of s 25(1"inco%e < a%ont

fo!!oAs inco%e (Hto the extend a!!oAs prorata apportion%ent of expenditre"

*ssessed !oss of the deceased fa!!s otsidescope ofs 25(2"

Tradin# stocI

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15/19

Annuities

/ross inco%e para (a" inc!sion 11(a" dedction if paya!e ot of inco%e

Holley v CIR

Jhen assets are e=eathed y a testator oncondition that the heir or !e#atee pays anannity to so%e other person ot of theinco%e deried fro% these assets, the annityis taxa!e in the hands of the other person(recipient" in ter%s of para #a$*E0 Ai!!reduce t!e income that is sFect to tax inthe hands of the heir or !e#atee (Payer".

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16/19

Annuities

Lam!on v CIRJhen, in ter%s of a Ai!!, an annity is paya!e y a

!e#atee or heir y Aay of a e=est price for aninheritance and the Ai!! does not proide that the

annity is to e paya!e ot of the inco%e of theinheritance, the annity, a!tho#h taxa!e in thehands of the recipient in terms of para #a$ oft!e denition of 3*ross income4 in s 1, cannote dedcted fro% any inco%e deried fro% thatinheritance, since fro% the point of ieA of thepayer it is capita) expenditure.

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17/19

Deat! and %&T

Tax paya!e y heir of deceased (para 1" C/T of the deceased person K 5&L of net a!e

of estate (efore C/T"; and

6xector of estate is re=ired to dispose of the

asset to pay the a%ont of tax*ny eir

the asset, %ay e!ect to pay the a%ont of taxthat exceeds 5&L of that 3net a)ue4 and taIe

the asset Jithin three years after the date the exector otain

per%ission to distrite the assets

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18/19

)r + ac=ired a C!ifton cotta#e (not hispri%ary residence" on 1 Man & for R1 5&&

&&&. The cotta#e increased in a!e and )r+ otained a !oan of R' 5&& &&& a#ainst thecotta#e to ssidiNe his retire%ent inco%e.>n 1 e 2&13 )r + died and on his death

the cotta#e Aas Aorth R7 5&& &&& and hisda#hter is the on!y heir to his estate.

Ca!c!ate the re!eant taxes on death. *ss%e)r + has no other assets and !iai!ities atdate of death and that )r + pays tax at &L.

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%apita) *ains tax-


19/19

%apita) *ains tax-

roceeds )4 on death R7 5&& &&&

+ase cost (1 5&& &&&"

R' &&& &&&

-ess: anna! exc!sion (3&& &&&"

Capita! #ain R5 7&& &&&$nc!de in taxa!e inco%e O 33.3L 1 9&& &&&

Tax on C/ O &L R7& &&&

Estate duty-

4a!e of cotta#e at death R7 5&& &&&

-ess: -iai!ities (' 5&& &&&"

Eet a!e of estate efore C/T R1 &&& &&&

-ess: C/T de (7& &&&"

R2'& &&&

-ess: *ate%ent (3 5&& &&&"

0tia!e estate Rni!

The cotta#e is the on!y asset of the estate and needs to e so!d to pay theC/T.

*s the C/T exceeds 5&L of the net a!e of the estate efore C/T, (R7&19

Deceased+Estates++-+2015

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