5. Determination of value of property
[Heading substituted by section 12 of Act 60 of 2001]
(1) The value of any property for the purposes of the inclusion thereof in the estate of any person in terms of section 3 or the deduction thereof in terms of section 4 determined as at the date of death of that person, shall be-
(a) in the case of property, other than such property as is referred to in paragraph (f)bis or the proviso to paragraph (g), disposed of by a purchase and sale which in the opinion of the Commissioner is a bona fide purchase and sale in the course of the liquidation of the estate of the deceased, the price realized by such sale;
[Paragraph (a) amended by section 4 of Act 65 of 1960]
(b) in the case of any such fiduciary, usufructuary or other like interest in property as is referred to in paragraph (a) of section 3(2), an amount determined by capitalizing at twelve per cent the annual value of the right of enjoyment of the property in which the deceased held any such fiduciary, usufructuary or other like interest, to the extent to which the person who upon the cessation of the said interest of the deceased in consequence of the death of the deceased becomes entitled to any right of enjoyment of such property of whatever nature, over the expectation of life of such person, or if such right of enjoyment is to be held for a lesser period than the life of such person, over such lesser period: Provided that in any case in which it is proved to the satisfaction of the Commissioner that such person paid any consideration for the right of ownership in the property whereby he became entitled to the right of enjoyment of the property upon the death of the deceased, the value shall be so much of the value so arrived at as exceeds the amount of such consideration together with interest thereon calculated at six per cent per annum from the date of payment of such consideration to the date of death of the deceased: Provided further that where upon the cessation of the interest of the deceased in any property, there accrues to the holder of the bare dominium therein, the full ownership in that property, the value of the advantage or benefit so accruing by reason of the cessation of the interest held by the deceased, shall not exceed the difference between the fair market value of that property as at the date of such cessation and the value of the bare dominium as at the date when such bare dominium was first acquired under the disposition creating the said interest held by the deceased: Provided further that if upon the cessation of the interest held by the deceased it is not possible to ascertain until some future date the person or some or all of the persons who will become entitled to the right of enjoyment of the property, the value shall be determined by capitalizing at twelve per cent over a period of fifty years the annual value of the right of enjoyment of the property in which such interest was held, unless the Commissioner and the executor agree that, having regard to the circumstances of the case, it would be reasonable to adopt a lesser period than fifty years, in which event such lesser period, as agreed, may be adopted accordingly;
[Paragraph (b) amended by section 3 of Act 59 of 1957 and section 4 of Act 65 of 1960 and substituted by section 7 of Act 114 of 1977]
(c) in the case of any right to any annuity referred to in paragraph (a) of subsection (2) of section 3, an amount equal to the value of the annuity capitalized at twelve per cent-
(i) in the case where the said right accrues to some other person on the death of the deceased, over the expectation of life of the person to whom the said right accrues on the death of the deceased, or if it is to be held for a lesser period than the life of such person, over such lesser period;
(ii) in the case where the said right does not so accrue to some other person, over the expectation of life of the person who on the death of the deceased is the owner of the property upon which such annuity was charged;
[Paragraph (c) amended by section 7 of Act 114 of 1977]
(d) in the case of any right to any annuity referred to in paragraph (b) of subsection (2) of section 3, an amount equal to the value of the annuity capitalized at twelve per cent, over the expectation of life of the person to whom the right to such annuity accrues on the death of the deceased, or if it is to be held for a lesser period than the life of such person, over such lesser period;
[Paragraph (d) amended by section 7(1)(c) of Act 114 of 1977 and substituted by section 1(b) of Act 21 of 2021 and by section 2 of Act 16 of 2022]
(d)bis in the case of any annuity to which the provisions of section 3(3)(a) apply, an amount equal to the value of the annuity capitalized at twelve per cent over the expectation of life of the annuitant, or if the annuity is payable for a lesser period than the life of the annuitant, over such lesser period: Provided that if within five years after the death of the deceased the annuity ceases to be payable because of the death of the annuitant within that period or, where the annuitant is the widow of the deceased, because of her remarriage within that period, the value of the annuity shall be deemed to be an amount equal to the lesser of –
(i) the aggregate of the amounts which accrued to the annuitant in respect of the annuity and any amounts which accrued to him or his estate upon or as a result of the termination of the annuity; or
(ii) the said capitalized value of the annuity;
[Paragraph (d)bis inserted by section 4(1) of Act 81 of 1965, substituted by section 2(1) of Act 56 of 1966 and amended by section 7(1)(d) of Act 114 of 1977 and by section 2 of Act 20 of 2021]
(e) in the case of any property referred to in section 3(3)(b), an amount determined in the manner prescribed in section 62 of the Income Tax Act, 1962 (Act No. 58 of 1962);
[Paragraph (e) substituted by section 10 of Act 77 of 1964, section 12 of Act 87 of 1988 and section 9 of Act 97 of 1993]
(f) in the case of a right of ownership in any movable or immovable property which is subject to a usufructuary or other like interest in favour of any person, the amount by which the fair market value of the full ownership of such property exceeds the value of such interest, determined –
(i) in the case of a usufructuary interest, by capitalizing at twelve per cent, the annual value of the right of enjoyment of the property subject to such usufructuary interest over the expectation of life of the person entitled to such interest, or if such right of enjoyment is to be held for a lesser period than the life of such person, over such lesser period;
[Subparagraph (i) amended by section 7(1)(e) of Act 114 of 1977 and substituted by section 1(c) of Act 21 of 2021]
(ii) in the case of an annuity charged upon the property, by capitalizing at twelve per cent, the amount of the annuity over the expectation of life of the person entitled to such annuity, or if it is to be held for a lesser period than the life of such person, over such lesser period; or
[Subparagraph (ii) amended by section 7(1)(e) of Act 114 of 1977 and substituted by section 1(c) of Act 21 of 2021]
(iii) in the case of any other interest, by capitalizing at twelve per cent, such amount as the Commissioner may consider reasonable as representing the annual yield of such interest, over the expectation of life of the person entitled to such interest, or if such interest is to be held for a lesser period than the life of such person, over such lesser period;
[Paragraph (f) amended by section 1(b) of Act 19 of 2001. Subparagraph (iii) amended by section 7(1)(e) of Act 114 of 1977 and substituted by section 1(c) of Act 21 of 2021]
(f)bis in the case of shares in any company not quoted on any stock exchange, the value of such shares in the hands of the deceased at the date of his death, subject to the following provisions, namely –
(i) no regard shall be had to any provision in the memorandum and articles of association, founding statement, association agreement or rules of the company, as the case may be, restricting the transferability of the shares therein, but it shall be assumed that such shares were freely transferable;
[Subparagraph (i) substituted by section 9 of Act 97 of 1993]
(ii) no regard shall be had to any provision in the memorandum and articles of association, founding statement, association agreement or rules of the company, as the case may be, whereby or whereunder the value of the shares of the deceased or any other member is to be determined;
[Subparagraph (ii) substituted by section 9 of Act 97 of 1993]
(iii) if upon a winding-up of the company the deceased would have been entitled to share in the assets of the company to a greater extent pro rata to shareholding or membership than other shareholders or members, no lesser value shall be placed on the shares held by the deceased than the amount to which he would have been so entitled if the company had been in course of winding-up and the said amount had been determined as at the date of his death;
[Subparagraph (iii) substituted by section 9 of Act 97 of 1993]
(iv) no regard shall be had to any provision or arrangement resulting in any variation in the rights attaching to any shares through or on account of the death of the deceased;
[Subparagraph (iv) substituted by section 10 of Act 71 of 1961]
(v) there shall be taken into account any power of control exercisable by the deceased and the company whereunder he was entitled or empowered to vary or cancel any rights attaching to any class of shares therein, including by way of redemption of preference shares, if, by the exercise of such power he could have conferred upon himself any benefit or advantage in respect of the assets or profits of the company;
(vi) ……….
[Subparagraph (vi) deleted by section 10 of Act 71 of 1961]
[Paragraph (f)bis inserted by section 4 of Act 65 of 1960 and amended by section 10 of Act 71 of 1961 and section 1 of Act 19 of 2001]
(f)ter in the case of any property referred to in paragraph (d) of subsection (3) of section 3 which consists only of profits, an amount determined by capitalizing at twelve per cent, such amount as the Commissioner may consider reasonable as representing the annual value of such profits over the expectation of life of the deceased immediately prior to the date of his or her death, and in the case of any other property referred to in the said paragraph the amount remaining after deducting from the fair market value of that property as at the date of death of the deceased the expenses and liabilities which the deceased would have had to bear or assume if he or she had at that date exercised his or her power of disposition;
[Paragraph (f)ter inserted by section 4(c) of Act 65 of 1960, amended by section 7(1)(f) of Act 114 of 1977 and substituted by section 1(d) of Act 21 of 2021]
(g) in the case of any other property, the fair market value of such property as at the date of death of the deceased person: Provided that in any case in which, as a result of conditions imposed by any person whomsoever, the value of any property could or would be reduced for any reason or after the moment of death, the value of such property shall, unless the Commissioner otherwise directs, be determined as though those conditions had not been imposed.
[Paragraph (g) amended by section 4 of Act 65 of 1960 and section 1 of Act 19 of 2001]
[Subsection (1) amended by section 1 of Act 19 of 2001]
(1A) Where any company referred to in paragraph (f)bis of subsection (1) owns immovable property on which bona fide farming operations are being carried on in the Republic, the value of such immovable property shall, in so far as it is relevant for the purposes of determining in terms of that subsection the value of any shares in such company, be determined in the manner prescribed in the definition of “fair market value” in section 1.
[Subsection (1A) inserted by section 7 of Act 81 of 1985]
(2) For the purposes of paragraphs (b) and (f) of subsection (1) and for purposes of determining the value of any deduction contemplated in section 4, the annual value of the right of enjoyment of a property means an amount equal to twelve per cent upon the fair market value of the full ownership of the property which is subject to any fiduciary, usufructuary or other like interest: Provided that where the Commissioner is satisfied that the property which is subject to any such interest could not reasonably be expected to produce an annual yield equal to twelve per cent on such value of the property, the Commissioner may fix such sum as representing the annual yield as may be reasonable, and the sum so fixed shall be deemed to be the annual value of the right of enjoyment of such property: Provided further that where the property which is subject to any such interest consists of books, pictures, statuary or other objects of art, the annual value of the right of enjoyment thereof shall for the purposes of paragraph (b) of subsection (1) be deemed to be the average net receipts (if any) derived by the person entitled to such right of enjoyment of such property during the three years immediately preceding the date of death of the deceased.
[Subsection (2) amended by section 7(1)(g) of Act 114 of 1977, by section 2 of Act 136 of 1991, by section 1(e) of Act 19 of 2001, by section 12(1)(b) of Act 60 of 2001 and by section 1(e) of Act 21 of 2021]
(3) Where for the purposes of subsection (1) any calculation is required to be made over the expectation of life of any person, such calculation shall, in the case of a person who is not a natural person, be made over a period of fifty yearsection
(4) Whenever the value of any property included in the estate of a deceased is reduced as a result of the continuance after the death of that person of any right (other than a fiduciary, usufructuary or other like interest) to the use or occupation of property for no consideration or for a consideration which in the opinion of the Commissioner is not an adequate consideration, the value of such property shall for the purposes of subsection (1) be determined as though the said right had not been granted.
[Subsection (4) added by section 3 of Act 59 of 1957 and substituted by section 12 of Act 87 of 1988]
(5) For the purposes of subsection (1) (f)bis, the term “shares” includes any members’ interests or any class of shares, stock, debenture stock, debentures or right to purchase members’ interests or to subscribe for or purchase shares, stocks or debentures, and the term “company” includes any company or close corporation incorporated in the Republic or elsewhere.
[Subsection (5) inserted by section 4 of Act 65 of 1960, amended by section 10 of Act 71 of 1961 and substituted by section 9 of Act 97 of 1993]