This article aims to provide general guidance on the tax implications associated with the deemed disposal of assets by the deceased and a deceased estate, as well as the transfer of assets between spouses. While it touches on the administration of deceased estates, a thorough exploration of this topic falls outside its scope.

Key Legislative Background

• Section 9HA, introduced by the Taxation Laws Amendment Act 25 of 2015, outlines that a deceased individual is deemed to have disposed of all their assets at market value on the date of death, excluding specific assets. • Section 25 addresses the tax treatment of a deceased’s estate and the values of assets received by surviving spouses, heirs, and legatees. This section also came into effect on 1 March 2016. • Section 9HB, enacted by the Taxation Laws Amendment Act 23 of 2018, standardizes the tax treatment of asset transfers between spouses, ensuring parity across all types of disposals.

Application of the Law -The Deceased

Year of Assessment of the Deceased

The taxable income of a deceased person must be calculated for the period from the start of the year of assessment until the date of death. According to section 66(13)(a)(i), a return for this period must be submitted. Consequently, tax is applicable from the beginning of the year of assessment until the date of death, with the term "year of assessment" defined in section 1(1). Rebates, as per section 6(4), are apportioned for periods shorter than 12 months, which typically applies to the deceased in the year of their passing.

Deemed Disposal of Assets by the Deceased

Under section 9HA(1), the deceased is considered to have disposed of their assets at market value on the date of death, barring the following exclusions:

• Assets transferred to a surviving spouse – provided the spouse is a resident .
• Long-term insurance policies – unless specified otherwise under paragraph 55 of the Eighth Schedule.
• Interests in pension and similar funds-subject to conditions outlined in paragraph 54 of the Eighth Schedule.

It needs to be understood that a legatee receives a specific legacy under a will, while an heir is entitled to the remaining estate after legacies and debts have been settled. The differentiation is significant for determining tax implications.

Definition of Assets and Market Value

For the purposes of section 9HA, "market value" is defined as the price that could be obtained upon sale between a willing buyer and seller in an open market, as detailed in paragraph 1 of the Eighth Schedule. The definition of "assets" is broad, encompassing property of all types, rights, or interests, with the intention behind the asset's acquisition being a crucial factor in distinguishing between capital and revenue account holdings.

Implications for Spouses

If the deceased’s spouse is a non-resident , the assets are still deemed disposed of to that spouse at market value, following the same rules for valuation. This stipulation maintains the integrity of tax treatments across different residency statuses. For assets characterized as revenue, such as trading stock and livestock, the market value must be included in the deceased's gross income on the date of death unless specifically bequeathed to a surviving spouse.