31. Market value
(1) The market value of an asset on a specified date is in the case of –
(a) an asset which is a financial instrument listed on a recognised exchange and for which a price was quoted on that exchange, is the ruling price in respect of that financial instrument on that recognised exchange at close of business on the last business day before that date.
(b) an asset which is a long-term insurance policy, being a policy as defined in section 1 of the Long-term Insurance Act the greater of-
(i) the amount which would be payable to the policyholder upon the surrender of that policy on that day; or
(ii) the amount which according to the insurer is the fair market value of that policy should it run its remaining policy term as determined on that day;
(c) an asset which is not listed on a recognised exchange which constitutes a right of a holder of a participatory interest in –
(i) any portfolio of a collective investment scheme in securities, or any portfolio of a collective investment scheme in property, carried on in the Republic, the price at which a participatory interest can be sold to the management company of the scheme on that date; or
(ii) any arrangement or scheme contemplated in paragraph (e)(ii) of the definition of ‘company’, the price at which a participatory interest can be sold to the management company of the scheme on that date or where there is not a management company the price which could have been obtained upon a sale of the asset between a willing buyer and a willing seller dealing at arm’s length in an open market on that date;
(d) a fiduciary, usufructuary or other similar interest in any asset, an amount determined by capitalizing at 12 per cent the annual value of the right of enjoyment of the asset subject to that fiduciary, usufructuary or other like interest, as determined in terms of subparagraph (2), over the expectation of life of the person to whom that interest was granted, or if that right of enjoyment is to be held for a lesser period than the life of that person, over that lesser period;
(e) any asset which is subject to a fiduciary, usufructuary or other similar interest in favour of any person, the amount by which the market value of the full ownership of that asset exceeds the value of that fiduciary, usufructuary or other like interest determined in accordance with item (d);
(f) any asset which constitutes immovable property on which a bona fide farming undertaking is being carried on, subject to subparagraph (4), either-
(i) the value of that property determined as contemplated in paragraph (b) of the definition of “fair market value” in section 1 of the Estate Duty Act; or
[Subitem (i) substituted by section 86 of Act 43 of 2014 effective on 20 January 2015]
(ii) the price contemplated in item (g);
(g) any other asset, the price which could have been obtained upon a sale of the asset between a willing buyer and a willing seller dealing at arm’s length in an open market.
(2) For purposes of subparagraph (1)(d) –
(a) the annual value of the right of enjoyment of any asset which is subject to any fiduciary, usufructuary or other like interest, means an amount equal to 12 per cent of the market value of the full ownership of the asset: Provided that where the asset which is subject to that interest cannot reasonably be expected to produce an annual yield equal to 12 per cent on that value of the asset, the Commissioner must decide, on application by the taxpayer, such sum as reasonably represents the annual yield, and the sum so fixed must for the purposes of subparagraph (1)(d) be treated as being the annual value of the right of enjoyment of that asset; and
[Item (a) substituted by section 110 of Act 25 of 2015 effective on 8 January 2016]
(b) the expectation of life of a person to whom an interest was granted-
(i) in the case of a natural person, must be determined in accordance with the provisions applicable in determining the expectation of life of a person for estate duty purposes, as contemplated in the regulations issued in terms of section 29 of the Estate Duty Act, 1955; and
[Subitem (i) substituted by section 86 of Act 43 of 2014 effective on 20 January 2015]
(ii) in the case of a person other than a natural person, is a period of fifty years.
(3) The market value of any shares of a person in a company not listed on a recognised exchange must be determined at a value equal to the price which could have been obtained upon a sale of the share between a willing buyer and a willing seller dealing at arm’s length in an open market subject to the following-
(a) no regard shall be had to any provision-
(i) restricting the transferability of the shares therein, and it shall be assumed that those shares were freely transferable; or
(ii) whereby or whereunder the value of the shares is to be determined;
(b) if upon the winding-up of the company that person would have been entitled to share in the assets of the company to an extent that is not in proportion to that person’s holding of shares, the value of the shares held by that holder of shares must not be less than the amount to which that holder of shares would have been so entitled if the company had been in the course of winding-up and the said amount had been determined as at valuation date.
(4) The value contemplated in subparagraph (1)(f)(i) may only be used on the death of a person or when the immovable property is disposed of by way of donation or non-arm’s length transaction, if-
(a) that value was used for the purposes of paragraph 26 or 27; or
(b) the person acquired the immovable property by way of donation or inheritance or non-arm’s length transaction at that value.