"A taxpayer passed away in November 2019. The deceased and his spouse jointly owned the fixed property. Over and above the fixed property, the deceased also held 33.3% shares in a company. The deceased's will indicates that their daughter inherits his share of the fixed property. To his spouse he leaves the following - 33.3% interest in Fernmill Forest (Pty) Ltd. This interest will be subject to the provisions of any shareholders agreement in respect of Fernmill to which the taxpayer is bound. This bequest is subject to a bequest price consisting of his Spouse's one-half share in The lnn, 5 Taillard Road, Arniston, to be transferred to their daughter. Please advise as to how the above should be treated, and what value in respect of shares held must be reflected on L&D Account? "
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
We accept that the fact that they owned the property jointly doesn’t imply that they are married in community of property. There are specific prescriptions provided for in the Eighth Schedule and the Estate Duty Act, which deals with the valuation of shares not quoted on an exchange (they are much the same). They make reference to provisions and an association agreement respectively. We agree that there is a disposal at market value of the property of the deceased, being the joint interest, 50%, in the fixed property. There is no disposal at market value of the one-third interest in the unlisted company. The disposal of the property by the surviving spouse, in meeting the bequest price requirement, will indeed result in a capital gain for the surviving spouse.