Tax 7: Estate Duty

Question 1

Death results in the _____ of one taxpayer and the _____ of another [the _____].

Answer 1

termination
creation
deceased estate

Question 2

If a person dies, the _____ must be apportioned.

Answer 2

age-related rebates

Question 3

The deceased’s year of assessment is…

Answer 3

day AFTER death to 28 Feb 2015

Question 4

T/F: a deceased estate has interest exemptions and normal rebates.

Answer 4

False, not an individual

Question 5

If a deceased person does not have a will, the distributions are made according to the law of _____. A ____ is appointed.

Answer 5

intestate succession

executor

Question 6

Estate duty is taxed a flat rate of ____.

Answer 6

20%

Question 7

What is property ito estate duty?

Answer 7

right to property

[movable, immovable, tangible, intangible]

Question 8

Annuities are included in estate duty only if it accrues to ____.

Answer 8

another person on death of deceased (e.g. life policy)

Question 9

What is seen as property for RSA residents?

Answer 9

1. all prop in SA
2. all prop outside SA, except:
   - - acquired BEFORE becoming an RSA resident
   - - acquired by donation from a non res or deceased estate (i.e. inherited)

Question 10

What is seen as property for non-res’s?

Answer 10

only prop in SA

Question 11

What are examples of DEEMED property?

Answer 11

1. insurance policy (domestic) + annuities
2. payments from benefit funds (e.g. pension, RA)
3. donation mortis cause (excluded from donations tax!)
4. property controlled by deceased prior to death

Question 12

When is an insurance policy EXCLUDED from deemed property?

Answer 12

1. policy recoverable by spouse/child (ante-nup agreement)
2. policy taken out by partner/shareholder to assist surviving shareholders to buy deceased’s interest
3. policy not effected by deceased (e.g. never paid premiums – no amount recoverable)

Question 13

How is the amount of insurance policy included in deemed property calculated?

Answer 13

lump sum recoverable
LESS: premiums paid
PLUS: 6% interest on premiums

Question 14

The interest calculated for insurance policy inclusions is calculated from date of ____ to date of ____.

Answer 14

payment, death

Question 15

If the deceased was married IN COP, only ____ of premiums and interest can be deducted.

Answer 15

half

Question 16

Property deemed to be included in estate duty: “deceased was competent to _____ of property immediately _____ death and it was used for his own _____ or for the benefit of his ______.

Answer 16

dispose
prior
benefit
estate

Question 17

Valuation of estate property depends on the ____ of assets.

Answer 17

type

Question 18

In a bona fide purchase and sale contract, property is valued at the _____. Except for… (2)

Answer 18

selling price
unlisted shares (value provided in exam)
prop sold where value is reduced as result of condition

Question 19

John agreed during his lifetime to sell his house to Jane for R100 000 in the event of his death. The house is valued in the market at R850 000. What is the value of the property for Estate Duty purposes?

Answer 19

Always MV, R850 000

Question 20

How is the value of an annuity determined for estate duty?

Answer 20

1. Annual value = MV * 12%
2. PV at 12% over expected lifetime of BENEFICIARY [given]
3. Step 1 X Step 2

Question 21

A farmer passed away. His property will be valued at ____.

Answer 21

MV less 30%

Question 22

What are DEDUCTIONS from Estate Duty?

Answer 22

1. funeral costs
2. debts due within SA
3. Admin charges (e.g. costs of winding up estate, executor’s fees)
4. Improvements to property
5. Bequests to PBO’s

Question 23

How is the executor’s fee calculated?

Answer 23

1. fixed/stated in will
2. maximum of
   - – 3.99% on value of prop (VAT vendor)
   - – 3.50% on value of prop (not a VAT vendor)

Question 24

T/F: When improvements are made to property by the beneficiary during the deceased’s lifetime, the amount can be deducted from the estate duty of the deceased.

Answer 24

True

Question 25

Property that accrues to a surviving spouse can be _____ from estate duty.

Answer 25

deducted

Question 26

If the surviving spouse sells the property to another person, the deduction needs to be ______ by the selling price.

Answer 26

reduced

Question 27

No deduction is allowed if the property accrues to a __________ trust, as the surviving spouse has no _______ to the income of the trust.

Answer 27

discretionary

vested right

Question 28

What is the normal abatement for estate duty?

Answer 28

R3 500 000 (from the NET value of estate)

Question 29

After 1 January 2010 the abatement is _______ between spouses. What does this mean?

Answer 29

portable;
surviving spouse qualifies for double the abatement
LESS: portion of abatement utilised by predeceased spouse

Question 30

Write down the scheme/calculation for estate duty.

Answer 30

See notes