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CGT on usufruct where no money changed hands

Monday, 17 March 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

The answer to this query is based on legislation as at 2014/03/17.

Q: We would value your assistance on the following matter.  We have researched, using the Comprehensive Capital Gains guide issued by SARS, but have been unable to determine whether our conclusions are correct.

Trust purchased immovable property February 2000. A usufruct was registered in favour of one of the beneficiaries of the Trust. The value of the usufruct was determined to be R373 012.32 and the Trust paid the transfer duty on this value. The Trust sold the property last month (Feb 2014) for R2 000 000.  The current value of the usufruct if R1 591 224.  The Trust has paid the transfer duty to cancel the usufruct.

What is the position of the usufructuary?  When he was granted the usufruct, no money changed hands.  He has now conceded to the cancellation of the usufruct and no money has changed hands.  Would we be correct in concluding that the disposal of the usufruct with no payment does not trigger a capital gains event in the hands of the usufructuary?


A: The problem here is that the usufruct still had value as it did not expire but rather abandoned by a connected person to the trust. My view is that par 38 of the 8th Schedule may well apply. The usufructuary should have received a base cost in terms of par 38 when she received the usufruct.



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