CGT Deceased Estate - must the proceeds equal the base cost in terms of assets?
23 January 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Deceased Estate- must the proceeds equal the base cost in terms of assets
bequeathed to surviving spouse?
Q: With regards to a deceased estate’s assets bequeathed to a spouse, in the
final date of death tax return, do I show the deemed disposal of the assets to
the spouse? Do I disclose the proceeds as equal to the base cost, giving rise
to a nil capital gain?
A: Under para 40(1) Eighth
Schedule to the Income Tax Act the assets of a deceased person are deemed to be
disposed of at market value at the date of death. Excluded from this deemed
disposal are assets transferred to the surviving spouse of a deceased person as
contemplated in para 67(2)(a) [para 40(1)(a)] Eighth Schedule. In this way the
deceased is relieved of any CGT liability in respect of the relevant assets.
Despite this non-disposal treatment under para 40(1)(a), para 67(2)(a) takes
precedence and deems the deceased person to have disposed of his or her assets
to his or her spouse for the purposes of para 67(1) when the spouse acquires ownership
of those assets through intestate succession, inheritance or as a result of a
This rule has the effect of making the roll-over provisions of para 67(1)
applicable to the assets acquired by the transferee spouse. It will accordingly
only be possible to finalise the CGT consequences for the deceased and his or
her spouse once the liquidation and distribution account has lain open for
inspection for the prescribed period and no objection has been lodged against
it, for it is only at this point that the surviving spouse acquires ownership
of the assets. For example, if the assets of the deceased are bequeathed under
the last will and testament to the surviving spouse and assets are disposed of
by the executor before the liquidation and distribution account has become
final, the roll-over relief will not apply to those assets because the
surviving spouse will not have acquired ownership of them.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.