Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We need to comment on the ‘appears to be an amount transferred to the surviving spouse” remark made by you first. Section 4(q) of the Estate Duty Act reads as follows:
The net value of any estate shall be determined by making the following deductions from the total value of all property included therein in accordance with section 3, that is to say … so much of the value of any property included in the estate which has not been allowed as a deduction under the foregoing provisions of this section, as accrues to the surviving spouse of the deceased: Provided that-
the deduction allowable under the provisions of this paragraph shall be reduced by so much of any amount as the surviving spouse is required in terms of the will of the deceased to dispose of to any other person or trust;
no deduction shall be allowed under the provisions of this paragraph in respect of any property which accrues to a trust established by the deceased for the benefit of the surviving spouse, if the trustee of such trust has a discretion to allocate such property or any income therefrom to any person other than the surving [sic] spouse.
The emphasis is on the words “property included” and “which accrues to the surviving spouse”. Judge Plewman (for the majority) in CSARS v Frith, said that the “primary meaning of the word accrue would thus seem to me to involve a nuance which contrasts it with a meaning such as 'has been received' or 'will be actually received'.” The entitlement of the surviving spouse arises from the last will and testament of the deceased (or first-dying spouse).
It doesn’t allow for “income to be deducted” as you say, under section 4(q). This is primarily because the income accrues after date of death, and is subject to tax in accordance with section 25(1) of the Income Tax Act. It can’t be deemed to be that of the surviving spouse (as it was for death’s before 1 March 2016). The purpose of section 25 was to change that position.
Remember, the income after date of death is not accounted for in the liquidation account – it is accounted for in the income and expenditure account. The net amount is then dealt with in the distribution account.