Category: PART VI – Proceeds

Paragraph 41 (Eighth Schedule) – Tax payable by heir of a deceased estate

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41.    Tax payable by heir of a deceased estate

(1)       Where a person dies before 1 March 2016-

[Words preceding item (a) substituted by section 113 of Act 25 of 2015 effective on 1 March 2016]

(a)     the tax determined in terms of this Act, which relates to the taxable capital gain of a deceased person, exceeds 50 per cent of the net value of the estate determined for purposes of the Estate Duty Act, before taking into account the amount of that tax so determined; and

[Item (a) substituted by section 83 of Act 74 of 2002 and section 87 of Act 43 of 2014 effective on 20 January 2015]

(b)     the executor of the estate is required to dispose of any asset of the estate for purposes of paying the amount of that tax, any heir or legatee of the estate, who would have been entitled to that asset contemplated in item (b), had there been no liability for tax, may elect that that asset be distributed to that heir or legatee upon the condition that the amount of tax which exceeds 50 per cent of that net value be paid by him or her within a period of three years after the date that the executor obtained permission to distribute the assets of the estate, as contemplated in section 35(12) of the Administration of Estates Act, 1965 (Act No. 66 of 1965).

(2)     Any amount of tax payable by an heir as contemplated in subparagraph (1), becomes a debt due to the state and must be treated as an amount of tax chargeable in terms of this Act which is due by that person.

Paragraph 42 (Eighth Schedule) – Short-term disposals and acquisitions of identical financial instruments

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42.    Short-term disposals and acquisitions of identical financial instruments

(1)     Where a capital loss is determined in respect of the disposal by a person of a financial instrument, other than a disposal contemplated in section 29B, and within a period beginning 45 days before the date of disposal and ending 45 days after that date, that person or a connected person in relation to that person, subject to subparagraph (3), acquires or has entered into a contract to acquire a financial instrument of the same kind and of the same or equivalent quality-

(a)     the person who disposed of the financial instrument must be treated as having disposed thereof for proceeds equal to the base cost thereof; and

(b)     the person who acquired the financial instrument of the same kind and of the same or equivalent quality must be treated as having acquired that financial instrument at a cost equal to the total of –

(i)      any amount allowable in terms of paragraph 20; and

(ii)     the amount of any capital loss which would have arisen in the hands of the person who disposed of the asset, were it not for the operation of item (a).

which cost must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

[Item (b) substituted by section 90(1)(a) of Act 60 of 2001 and amended by section 74 of Act 35 of 2007, by section 55 of Act 3 of 2008 and by section 50 of Act 23 of 2020]

(2)     For the purposes of subparagraph (1), there must not be taken into account in determining the period of 91 days any days in which the person disposing of the financial instrument-

(a)     has an option to sell, is under a contractual obligation to sell or has made (and not closed) a short sale of a financial instrument of the same kind and of the same or equivalent quality;

(b)     is the grantor of an option to buy a financial instrument of the same kind and of the same or equivalent quality; or

(c)     has otherwise diminished risk of loss in respect of that financial instrument by holding one or more contrary positions with respect to a financial instrument of the same kind and of the same or equivalent quality.

(3)     For the purposes of this paragraph, a connected person in relation to-

(a)     a natural person does not include a relative of that person other than a parent, child, stepchild, brother, sister, grandchild or grandparent of that person; or

(b)     a fund of an insurer contemplated in section 29A does not include another such fund of that insurer in respect of the disposal of an asset by such fund to another such fund.

(4)     This paragraph must not apply to any asset-

(a)     in respect of which the weighted average method of determining base cost of assets, as contemplated in paragraph 32(4), is used; and

(b)     if that asset is, in terms of section 29B, allocated to any policyholder fund of an insurer as defined in that section.