Page 34 - Nexia SAB&T Property and Tax Guide 2025

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.
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