Unit 6 - Deceased person Flashcards
What happens if a person passes away with a will & testament?
Assets are distributed to specific heirs.
CGT & Estate Duty implications.
What happens if a person passes away without a will & testament?
Assets distributed to heirs ito rules of interstate succession.
What is an estate?
All property & deemed property that a person owns @ his date of death.
What is estate duty?
Tax upon dutiable amount of the deceased estate (only natural persons)
Which estates pay estate duty?
Ordinarily resident in SA on date of death = Worldwide assets
Person is not ordinarily resident in SA on date of death = Only assets located in SA
What is the year of assessment in Step 1: Calc. deceased’s taxable income & tax liability?
From beginning of YoA (1/3/2020) - Date of death
Who is the new TP that comes into existence when a person passes away?
Deceased estate (Step 2: Calc. deceased estate’s taxable income & tax liability)
- Assets are transferred to deceased
estate under control of the executor, &
assets can possibly still earn income.
What needs to be done when the estate is wound up?
Step 3: Calc. Estate Duty
How long can it take to wind up an estate in practise?
I could take at least more than 1 year to wind up an estate.
In theory - It will all happen in 1 year just for exam purposes.
Step 1: Calc. of deceased’s taxable income & tax liability.
- All income amounts received/accrued
to person from the beginning of YoA up
until date of death (DOD). - There is a deemed disposal of all assets
on DOD to deceased estate
= CGT implications need to be taken
into account
How is the income tax for the deceased person calculated?
- Calc. tax according to framework for
individuals. - Incl. income & deemed accruals prior
to death - Apportion interest exemption s10(1)(i)
- always according to 365 days
- Deduct expenditure & allowances
- CGT = general rule: all assets deemed
disposal s9HA
s9HA(1) - Deemed disposal of all assets.
@ what cost & Exclusions?
@ MV
Excl.:
- SA long-term policy (life policy) & CGT on
policy
- Interest of deceased in retirement
funds in R & Outside R.
s9HA(2) - What is the deemed disposal to a resident surviving spouse?
Disposal (Proceeds) = Base cost
= No CGT
Surviving spouse’s Base cost = Base cost
s9HA(3) - What is the deemed disposal to an heir (not spouse)?
Disposal (Proceeds) = MV on DOD.
Heirs Base cost = MV on DOD.
Deceased person: CGT
What capital gains/losses are disregarded?
- PBO/Government par 62
Always mention it!!!
Deceased person
What is the annual exclusion?
R300 000 - in year person dies.
Deceased person
Primary residence?
Proceeds < R 2mil, disregard gain/loss
Proceeds > R 2mil, gain is reduced by
R 2mil exemption.
Deceased person
Personal use assets?
Have no CGT consequences
Deceased person
Personal use assets - Exclusions?
- Coins made mainly from gold/platinum
(Krugerrand) - Immovable property
- Aircraft - empty mass > 450kg
- Boat > 10m
- Financial instrument
- Any fiduciary/usufructuary/other like
interest - Any insurance contract incl reinsurance
but excl short-term policy - Long-term insurance contracts
- Right/interest in above
Deceased persons
Personal use assets - Loss limitation?
Capital loss must be disregarded on the disposal of the following (only used for private purposes):
- Aircraft - empty mass > 450kg
- Boat > 10m
- Fiduciary/usufructuary/other like
interest
- Any lease of immovable property
- Time-sharing interest (timeshare) with
fixed life, value of which decreases over
time
- Share in a share block company with
fixed life, value of which decreases over
time
- Right/interest in above
Deceased person
Tax rebates?
Still applicable for current YoA
- Primary = < 65 years @ end of YoA
(not DOD)
- Secondary = > 65 years @ end of YoA
- Tertiary = > 75 years @ end of YoA
Apportioned by days, 365 days
Deceased person
Assessed losses?
May NOT be carried forward to new TP (deceased estate)
What income is taxable in the hands of the deceased person?
Income received after death but due before death.
