Unit 6 - Deceased person

Question 1

What happens if a person passes away with a will & testament?

Answer 1

Assets are distributed to specific heirs.

CGT & Estate Duty implications.

Question 2

What happens if a person passes away without a will & testament?

Answer 2

Assets distributed to heirs ito rules of interstate succession.

Question 3

What is an estate?

Answer 3

All property & deemed property that a person owns @ his date of death.

Question 4

What is estate duty?

Answer 4

Tax upon dutiable amount of the deceased estate (only natural persons)

Question 5

Which estates pay estate duty?

Answer 5

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

Question 6

What is the year of assessment in Step 1: Calc. deceased’s taxable income & tax liability?

Answer 6

From beginning of YoA (1/3/2020) - Date of death

Question 7

Who is the new TP that comes into existence when a person passes away?

Answer 7

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.

Question 8

What needs to be done when the estate is wound up?

Answer 8

Step 3: Calc. Estate Duty

Question 9

How long can it take to wind up an estate in practise?

Answer 9

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.

Question 10

Step 1: Calc. of deceased’s taxable income & tax liability.

Answer 10

• 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

Question 11

How is the income tax for the deceased person calculated?

Answer 11

1. Calc. tax according to framework for
   individuals.
2. Incl. income & deemed accruals prior
   to death
3. Apportion interest exemption s10(1)(i)
   
   • always according to 365 days
4. Deduct expenditure & allowances
5. CGT = general rule: all assets deemed
   disposal s9HA

Question 12

s9HA(1) - Deemed disposal of all assets.

@ what cost & Exclusions?

Answer 12

@ MV

Excl.:
- SA long-term policy (life policy) & CGT on
policy
- Interest of deceased in retirement
funds in R & Outside R.

Question 13

s9HA(2) - What is the deemed disposal to a resident surviving spouse?

Answer 13

Disposal (Proceeds) = Base cost

= No CGT

Surviving spouse’s Base cost = Base cost

Question 14

s9HA(3) - What is the deemed disposal to an heir (not spouse)?

Answer 14

Disposal (Proceeds) = MV on DOD.

Heirs Base cost = MV on DOD.

Question 15

Deceased person: CGT

What capital gains/losses are disregarded?

Answer 15

• PBO/Government par 62

Always mention it!!!

Question 16

Deceased person

What is the annual exclusion?

Answer 16

R300 000 - in year person dies.

Question 17

Deceased person

Primary residence?

Answer 17

Proceeds < R 2mil, disregard gain/loss

Proceeds > R 2mil, gain is reduced by
R 2mil exemption.

Question 18

Deceased person

Personal use assets?

Answer 18

Have no CGT consequences

Question 19

Deceased person

Personal use assets - Exclusions?

Answer 19

• 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

Question 20

Deceased persons

Personal use assets - Loss limitation?

Answer 20

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

Question 21

Deceased person

Tax rebates?

Answer 21

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

Question 22

Deceased person

Assessed losses?

Answer 22

May NOT be carried forward to new TP (deceased estate)

Question 23

What income is taxable in the hands of the deceased person?

Answer 23

Income received after death but due before death.