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Estate duty and tax on a property held within a company

Posted 9 May 2016 under Tax Questions



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Shelley says:
3 May 2016 at 13:20

What taxes are due on a property owned by an individual when the person dies?
What taxes are due on a property owned by a company when a shareholder dies?

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TaxTimTaxTim says:
4 May 2016 at 10:57

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TaxTimTaxTim says:
8 May 2016 at 15:28

Are there other shareholders and is there any shareholder agreement in place?


Shelley says:
8 May 2016 at 23:35

no there are no other shareholders in the company


TaxTimTaxTim says:
9 May 2016 at 11:25

If the property is owned by a person who dies, the property will fall into his/her estate. The primary rebate of R3,5m will be applied to the estate and any amount in excess of R3,5m will attract estate duty of 20%. If all the assets are left to a surviving spouse then estate duty is deferred until the death of the spouse. In addition, the property is deemed to be disposed of at the date of death, and thus will be subject to capital gains tax (CGT) on the difference between the market value and the base cost - if this is a primary residence then the first R2m will be excluded from the gain for the purposes of calculating capital gains tax.

If the property is owned by a shareholder who dies, the shares of the company will fall into the estate of the deceased. Like the first scenario, the shares will be deemed to be disposed of at the date of death and will be need to be valued in order to calculate the capital gains tax due. If the company owns the property and nothing else, then the value of the company is essentially that of the property. However, its valuation will be lower compared to that of a property held by an individual (assuming it is a primary residence) because on disposal of the property, the Company will not receive the R2m primary residence exemption which is received by individuals. In addition, if the property is disposed in the company then 80% of the gain is added to taxable income, while only 40% of the gain is added to the taxable income of the individual in the case of the property disposal.


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