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Income Tax Act, 1962 (Act No. 58 of 1962)

Department of Finance

Practice Note No. 34

Transfer Duty: Sale of Immovable Property by the Executor of a Deceased Estate

 

 

Date: 28 October 1994

 

1) Although the acquisition of property by virtue of a bequest is exempt from the payment of Transfer Duty in terms of section 9(1)(e)(i) of the Transfer Duty Act, Act No. 40 of 1949, there are various transactions which do not fall within the ambit of the exemption by virtue of the phrase "property of the deceased" in the section. The limitation of the exemption to "property of the deceased" was introduced by section 1(1)(a) of the Taxation Laws Amendment Act, Act No. 69 of 1989, with effect from 21 June 1989.

 

2) Following on the 1989 amendment the use of the exemption to obtain relief in respect of the acquisition by heirs of the survivor's property, where there has been a massing of estates, was no longer possible

 

3) Where parties are married in community of property and in terms of their joint will their fixed property is bequeathed to their children, subject to a usufruct in favour of the surviving spouse, the acquisition by the surviving spouse of the usufruct over the deceased's one half-share of the property falls within the ambit of section 9(1)(e)(i) of the Act. The acquisition of the bare dominium over the deceased's half-share by the children also falls within the provisions of section 9(1)(e)(i) of the Act. However, the acquisition of the bare dominium over the survivor's half-share of the property is not regarded as "property of the deceased" and transfer duty will, therefore, be payable by the heirs.

 

4) Furthermore, where the heirs do not wish to take transfer of the property (bare dominium) from the estate and consent to the sale of the bare dominium by the executor, transfer duty is still payable by the heirs on the acquisition of the bare dominium over the surviving spouse's half-share of the property.

 

5) From the above it will be apparent why the submission of the last will and testament to the Receiver of Revenue, in cases where the executor disposes of fixed property, is necessary when payment of duty by the ultimate purchaser is tendered.

 

6) Where, for instance, property is disposed of by an executor and the "acquisition" by the heirs is exempt in terms of section 9(1)(e)(i) of the Act, it will not be necessary to submit declarations in respect of the transfer from the estate to the heirs. In other words, the direct transfer from the estate to the ultimate purchaser is acceptable. However, where the massing of an estate occurs and the provisions of section 9(1)(e)(i) do not apply, the necessary declarations and payments will have to be submitted.