Page 19 - Nexia SAB&T Property and Tax Guide 2024

SALE OF THE PROPERTY BY EXECUTOR TO A THIRD-PARTY PURCHASER
◆ The Executor can cause the immovable property in the estate to be marketed and sold, before the Liquidation
and Distribution Account has lain for inspection, where:
❖ The Executor deems it beneficial to do so (for liquidity in the estate).
❖ The deceased has specifically instructed that the property be sold in his Last Will and Testament.
❖ The heirs or the beneficiary/s wish the property to be sold, or have entered into a redistribution agreement
to this effect, and the heirs have consented to the sale and there is a clause in the agreement of sale
stating that the sale is subject to the approval of the Master of the High Court.
◆ The Executor would sign the sale agreement in his capacity as such and in due course would sign the transfer
documents, also in such capacity.
◆ The Conveyancer will need to obtain a Section 42(2) endorsement from the Master on the original Power of
Attorney to pass transfer, to confirm the Master’s approval.
◆ The costs of the transfer, including transfer duty, would be payable by the Purchaser.
◆ The deceased estate would carry the costs of obtaining rates and levy clearance certificates valid until after
registration, and of cancelling any bonds registered over the property.
◆ Where the Executor sells the immovable property during the administration of the estate to a third-party
purchaser, the value of such property may increase or decrease between the date of death and the date of
sale, which may have capital gains tax implications for the estate.
◆ These CGT implications are discussed in more detail below.
CAPITAL GAINS TAX, DEATH AND IMMOVABLE PROPERTY
THE DECEASED PERSON
◆ At death, the deceased person is deemed to have disposed of all his assets, including immovable property, to
his estate, at an amount received or accrued equal to the market value at the time of death. Capital gains tax
is activated through this deemed disposal.
◆ The R300,000 annual exclusion granted in the year of death of the individual will apply to these disposals
made to the deceased estate.
◆ The exclusion for primary residence may apply (R2 million).
◆ The CGT inclusion rate of 40% applies to the deceased person, and this amount will attract tax at the
deceased’s marginal rate of income tax.
◆ An exclusion to this provision is provided in Section 9HA(2) read with Section 25(4) of the Income Tax Act
(58 of 1962), which provides that where assets (including immovable property) are disposed of to a surviving
spouse (by means of either intestate or testate succession, or by way of a redistribution agreement between
the heirs or legatees), the liability for capital gains tax for the deceased person is postponed until the death
of the surviving spouse or until such time as the surviving spouse disposes of it him or herself. This is known
as “roll over relief” and is similar to the exemption in Section 4q of the Estate Duty Act, where the estate duty
liability in respect of assets inherited by a surviving spouse is postponed.
SALE OF IMMOVABLE PROPERTY BY THE EXECUTOR AND CGT
◆ Where the Executor sells the immovable property during the administration of the estate to a third-party
purchaser, the value of such property may increase or decrease between the date of death of the deceased
and the date of sale of the property, which may have a capital gains tax implication for the estate.
◆ The proceeds would equal the selling price of the property, less the base cost equal to the market value of the
property at date of death, which will result in either a capital gain or loss.
◆ Capital gains tax is levied in a deceased estate at the same rate as for individuals.
◆ The deceased estate will be entitled to the same exemptions and exclusions as would have been available
to the deceased before his death (the annual exclusion of R40 000), however it will not be entitled to any
assessed capital loss that might have remained in the estate of the deceased, or to the R300 000 annual
exclusion, nor to the primary residence exclusion of R2 million. Deceased estates are not provisional
taxpayers.
TRANSFER OF IMMOVABLE PROPERTY TO THE HEIRS/LEGATEES AND CGT
◆ In this case, the calculation for CGT will reflect the proceeds as equal to the market value of the property at
date of death of the deceased, less the base cost equal to the market value of the property at date of death,
resulting in a tax-neutral transfer of assets from the deceased estate to heirs or legatees.

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