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Repurchase of life rights to immovable property: are they taxable?

Wednesday, 28 January 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: We have a client that went through a divorce in 1990. Part of the agreement was that the holiday home that was in the wife’s name, be kept in her name and the husband will receive 50 per cent life rights to the property. This property was valued at R500 000 at that time. The wife now would like to buy out these life rights from the husband and has agreed to pay him R1,5 million to buy out his 50 per cent. Is this amount that the husband will receive taxable or does it still fall under the divorce agreement?

A: It is our view that the repurchase of the life rights by the wife would not be in terms of the divorce agreement as the initial allocation and not the repurchase was part of the divorce settlement per the facts provided. The sale and cession of these rights would constitute a disposal in terms of para 11 of the Eighth Schedule and CGT would have to be calculated accordingly.

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.



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