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Estates (ALLOWABLE DEDUCTIONS -Section 4 ((b) Debts due within the…
Estates
ALLOWABLE DEDUCTIONS -Section 4
(a) Deathbed and Funeral Expenses
pmts to doctors, nursing homes, chemists
all costs related to burial or cremation
(b) Debts due within the Republic
All claims against the estate, including unenforceable claims
debts must be due to someone who is ordinarily resident in the country
:red_flag:Not allowed i.r.o.
any debt which constitutes a claim
by a person to a property
donated by the deceased which is exempt from donations tax i.t.o S56(1)
(c) Administration Charges
all costs allowed in admin and liquidation of the estate
(d) Expenditure necessary to comply with the Act
e.g. legal costs incurred by executor in settling a dispute with SARS
(e) Certain foreign assets held by the deceased
Must have been acquired before the deceased became ordinarily resident
if acquired after becoming ordinarily resident
must be acquired through donation
inherited from a non-resident
(f) Debts due outside the Republic
Allowable only if and to extent to which they have been paid out of proceeds of assets which are "property"
The excess from proceeds from foreign assets which aren't property is deducted under this paragraph
(g) Usufruct or fiduciary interest
(h) Charitable and other bequests
Property which accrues to
PBO
Institution or body exempt in terms of S10(1)(cN)
State or municipality
(i) Improvements made to property by the beneficiary
where property included in the estate has been enhanced in value
due to improvements made by the beneficiary of such property
during the lifetime of the deceased
with the deceased consent
such increase in
value
may be deducted under this subsection
(j) Improvements made to property subject to right of use
deduct amount by which the
value
of any fiduciary, usufructuary or other like interest has been
enhanced
due to improvements made at the expense of the
person who benefits
on the death of the deceased
(lA) Claim by Surviving Spouse
where value of deceased estate is larger than spouses claim
Can be deducted from estate
(o) Books, pictures, statuary and other objects of art
(p) Value of property taken into account when determining the value of shares
(q) property left to the surviving spouse
VALUATION OF PROPERTY
1. Property Sold
-
section 5(1)(a)
Property disposed by way of
bona fide
purchase
Sale in the course of liquidation of the estate
✔Valued at the price realised by the sale :
:red_cross:Excluded
🚩 Usufructs and bare dominium
🚩unquoted Shares
2. Fiduciary and Usufructuary Interests
-
section 5(1)(b)
Steps
a) Determine
annual value
of the interest at 12% of market value.
b) capitalise the annual value over the life expectancy of the usufructaury
If the beneficiary is to hold the limited right for a period shorter than his life expectancy, value is capitalised over the lesser period
c)Capitalising............................................................................................................................
(i) Determine beneficiary's age on his next birthday (ANB)..........................................
(ii)
TABLE A
in schedule to the EDA to determine beneficiary's life expectancy
(iii)
TABLE A
to determine present value of R1 received by beneficiary based on ANB and LE
(iv) Multiply this present value by the annual value
:warning:Three Provisions
If beneficiary of limited right originally purchase the bare dominium, deducted from above value
cost of bare dominium
+
interest (6% p.a.) on cost from pmt date to date of death of deceased
If bare dominium gets full ownership of property, value of usufruct accruing to him cant be more than
*FV of property at deceased death less value of bare dominum when the bare dominium was first acquired
If the new usufruct cannot be ascertained, usufruct must then be valued over a period of 50 years
3. Annuities Charged Against Property
-
section 5(1)(c)
Exists where a person has to pay an annuity yo somebody out of proceeds of his property, eg out of rent received from property
On death on person receiving annuity, person owning the property will:
(a) have to pay the annuity to someone else
annuity valued over the expected life of next person who will receive the annuity
(b) cease paying the annuity
Annuity paid over life expectancy of
owner
of property
4. Annuities Not Charged Against Property
-
Section 5(1)(d)
Usually annuity purchased from insurance
on death of person receiving the annuity, annuity will either
(a) cease
Doesn't fall into property of the decease
(b) accrue to somebody else
Valued over the life expectancy of the person to whom it accrues
5. Annuities From Funds
-
section 5(1)(d)bis
Value of annuity as mentioned in S3(3)(a) and S3(a)bis
must be capitalised at 12% over life expectancy of the annuitant
:!: Provided that
if within 5 years of the death of the deceased, the annuity ceases because of
the death of the annuitant
the remarriage of the annuitant (a woman)
Then
the value of the annuity will be the lesser of
the aggregate of the amounts which accrued to the annuitant
the capitalised value
6. Donations Taking Effect on Death
-
Section 5(1)(e)
donations are deemed property valued in terms of s62
valued at FV on date of donation
Provision includes
donatio mortis causa
and donations only taking effect after death of donor
7. Bare Dominium
-
section 5(1)(f)
values bare dominium the same way as ITA
8. Unquoted Shares
-
section 5(1)(f)bis
valued at date of death
Valuer to disregard any provisions or restrictions in the MOI or founding statement which would affect the deceased's shares
9. Other Property
-
Section (5)(g)
Not valued in terms of the other sections
Valued at FV
10. Calculations Over the "Life"of Artificial Persons
-
Section 5(3)
expected life deemed to be 50 years