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TAXF > Estate Duty > Flashcards

Estate Duty Flashcards

1
Q

What is Estate duty?

A

Tax payable on net asset value of taxpayer’s estate at the time of his/her death.

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2
Q

What is the purpose of Estate duty?

A

To transfer tax of wealth from one person to anoher in the event of death

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3
Q

What is property?

A

Any right in property = movable or immovable

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4
Q

Specific rules of valuation of property?
* Unlisted shares
* Condition imposed on property

A
  • Unlisted shares: Fair MV; ignore selling price
  • If a condition has been imposed on the property: Fair MV, ignore condition
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5
Q

What is valuation of property in liquidating the estate?

A

Selling price, even for farming property not reduced with 30%

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6
Q

What is valuation of property not sold?

A

Fair market value UNLESS Farming property THEN - 30%

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7
Q

What is the Valuation of limited interests: Annuity?

A

Passed on to a beneficiary
Ceased = no value

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8
Q

Annuity charged upon property

A

Use life expectancy of
* Beneficiary if passed on
* Owner if annuity ceases at death

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9
Q

Purchased annuities (not charged upon property)

A

Use life expectancy of:
* Beneficiary if passed on
* None if annuity ceases at death

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10
Q

No value is included for?

A

Annuities originating upon death from Pension/Retirement annuity funds

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11
Q

What is the Valuation of limited interests: Bare dominium?

A

The deceased was the owner of Bare Dominium at death
Full MV of property is not included in the estate

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12
Q

The formula for Bare dominium in Estate Duty

A

(Fair MV @ date of death - Value of the usufruct) / life expectancy of Usufuctuary/Shortest Period of Usufruct

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13
Q

What does Deemed property include?

A
  • Domestic life insurance policies
  • Property donated by deceased under donatio mortis causa
  • Claim against spouse
  • Any property to dispose of prior to death to his/her own benefit
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14
Q

Domestic life insurance policies: Value of property included in estate

If deaceased paid premiums

A

Proceeds of policy

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15
Q

Domestic life insurance policies: Value of property included in estate

If beneficiary paid premiums

A

Proceeds of policy - Premiums paid + Interest @ 6% per annum

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16
Q

Domestic life insurance policies: Value of property included in estate

If spouse married IN community of property paid premiums

A

Proceeds of policy - 50 % of Premiums paid + Interest @ 6% per annum

17
Q

Domestic life insurance policies: Value of property included in estate

A

Included in the estate of the person whose life was insured, irrespective of who the beneficiary is

18
Q

Domestic life insurance policies: Exlusions

A
  • Ante-nuptial or postnuptial contract
  • Beneficiary is co-shareholder & will enable him/her to purchase deceased shares
  • Policy taken out by third party & proceeds are paybale to such a person
19
Q

Married under the accrual system (claim against spouse)

A

IF married OUT of community of property (under accrual system)
AND one of the spouses passes away
THEN the growth/accrual of both estates calculated & spouse with smallest accrual has a claim against the estate of the other spouse for HALF of the difference between the estates

20
Q

Married under the accrual system (claim against spouse): Exclusions

A
  • Inheritances, legacies & donations received
  • Donations between spouses
  • Assets excluded in terms of ante-nuptial contract
21
Q

Deductions

A
  • Debts due by deceased to resident
  • Costs of administration & liquidation of estate
  • Expenses incurred in meeting requirements of the Estate Duty Act
  • Debts due to non-resident
  • Donation to PBO’s
  • Accrual claim by spouse married under the accrual system
  • Books pictures and statues lent to the estate for > 30 years
22
Q

Allowable deuctions from estate

Certain foreign assets

A
  • Purchased before becoming a resident
  • Donated or inherited from non-resident
  • Profits or proceeds from above
23
Q

Allowable deuctions from estate

Funeral- , tombstone and death bed expenses

A

Amount comissioner considers fair (including medical expenses incurred in deceased’s last ilness)

24
Q

Allowable deuctions from estate

Deduction of certain limited interests: Annuity charged against property

A

If the person who donated the the annuity to the deceased, was the owner of the property at the time of donation and is still the owner at the deceased death, a deduction will be allowed

25
Q

Allowable deuctions from estate

Improvements made by beneficiary if

A
  • Incurred by person who inherits the property
  • Incurred during the lifetime of deceased, with their consent
    THEN $ by which value of property increased (due to improvements) will be deducted from estate
26
Q

Allowable deuctions from estate

Limited interest & annuity charged against property created by pre-deceased spouse if

A
  • The property formed apart of the estate of pre-deceased spouse (Estate duty already paid on it)
  • No deduction was allowed against the estate of pre-deceased spouse (Estate duty was paid on full value )
27
Q

Allowable deuctions from estate

Deemed property taken into account in valuing unlisted shares

A

Value of unlisted shares - Value of deemed property
to AVOID being taxed twice

28
Q

Allowable deuctions from estate

Property bequathed to surviving spouse

sec 4(q)

A

Unless the spouse has to dispose of the property to another person in terms of deceased’s will

29
Q

Successive death rebate

A

Person bequests property to another person (dies within 10 years), estate duty is reduced by % established under succcessive death rebate
**BUT ONLY IF **
second-dying person had to pay the estate duty of first-dying person’s esate & property is included in both estates

30
Q

Married IN community of property: Included in deceased estate

A
  • 1/2 of Net joint estate
  • ADD Property owned by him excluded from joint estate
  • ADD Fiduciary/Usufuctiary interests excluded from joint estate
  • Right to annuities included in joint estate
  • Liabilities which arise after the death of deceased don’t form part of joint estate
31
Q

Calculation of estate duty payable

First provision

A

When bare doinium owner purchsed right to bare dominium from origial owner

32
Q

Calculation of estate duty payable

Second provision

A

When Bare Dominium holder becomes full owner after death of usufuctuary
AND Usufruct & Bare Dominium were created in the same transaction

TAXF (7 decks)

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