Page 53 - Bespoke EPG 2017 Digital

INCOME TAX AND DEATH

General

■■ If a person dies, that person is deemed to have disposed of all his assets at
market value.

■■ If the asset is a capital asset, then it will not form part of the gross income
of the deceased in his last income tax calculation, but it will be subject to
capital gains tax.

■■ However, if the asset is not a capital asset, for example trading stock of a
sole proprietor or livestock of a natural person conducting farming activities,
the market value of such trading stock or livestock will be included in the
gross income of the deceased in his last income tax return and therefore
subject to normal tax.

■■ The same principle would apply to depreciable assets held by a sole
proprietor and upon death such depreciable assets would also be deemed to
be sold at market value which could result in recoupment of previous wear-
and-tear claimed by the deceased being included in gross income of the
deceased in his last income tax return.

■■ This could result in a considerable income tax liability for the deceased.
■■ For assets bequeathed to the surviving spouse roll-over relief is available.

Income Tax and Estate Planning

■■ The estate planner need to evaluate the impact of income tax on his
estate plan

■■ If a sole proprietor or farmer has significant trading stock or livestock,
consideration should be given to transfer these business activities, including
the livestock to a company, with the sole proprietor or farmer in question
becoming the shareholder of the company.

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