QQuestionAccounting
QuestionAccounting
The following assets, interests etc. were found in the joint estate:
1.
2.
3.
A bona fide farm "Sure Mornridge" at open market value
Proceeds of policy X on the life of the deceased, paid to the estate
Premiums and interest on the policy amounted to R^500 000.
Solly took out the policy and also paid the premiums.
R^4 750 000
R^2 350 000
Proceeds of policy Y on the life of the deceased, paid directly to the surviving spouse. R^1 450 000
Premiums and interest on the policy amounted to R^350 000.
Solly took out the policy and also paid the premiums.
4.
5.
6.
7.
8.
Furniture and personal effects at valuation
Tractor and implements at valuation
Listed shares – value at listed price on date of death
The executor sold the shares on 10 May 2024 for R^900 000
Member’s interest in Sweet Dreams CC –auditor’s valuation
000 The executor sold this member’s interest in the CC to the other member
of the CC for R^700 000, in terms of an agreement between the members,
made long before Solly’s death.
R 795 000
R 1 100 000
R 760 000
R 8250
Solly, a retired municipal officer of the Eastrand council, received a monthly-
pension of R^25 000 from the Council’s pension fund. The pension will be paid to his spouse after
his death but will be reduced to R^18 000 per month.
In Solly and Jane's valid joint will, R^200 000 was bequeathed to Solly's Alma Mater, the University of South
Africa, an approved public benefit fund. The residue of the estate was bequeathed to the surviving spouse.
The joint will was adiated by his surviving spouse.
There were no liabilities in the estate, except for funeral expenses of R^20 400, and Master's fees and
executor's remuneration according to the tariffs.
REQUIRED:
Calculate the estate duty, if any, payable in Solly Mkhize's estate.
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Answer
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Step 1:I've formatted the given information using LaTeX syntax for better readability.
Required: Calculate the estate duty, if any, payable in Solly Mkhize's estate. Given information:
Step 2:
Bona fide farm "Sure Mornridge" at open market value $$E_{farm}
Step 3:
Proceeds of policy X on the life of the deceased, paid to the estate: $$R4,750,000
Premiums and interest on the policy amounted to: R^500,000
Step 4:
Proceeds of policy Y on the life of the deceased, paid directly to the surviving spouse: $$R1,450,000
Premiums and interest on the policy amounted to: R^350,000
Step 5:
Furniture and personal effects at valuation: $$R795,000
Step 6:
Tractor and implements at valuation: $$R1,100,000
Step 7:
Listed shares – value at listed price on date of death: $$R760,000
The executor sold the shares on 10 May 2024 for: R^900,000
Step 8:
Member’s interest in Sweet Dreams CC – auditor’s valuation: $$R825,000
The executor sold this member’s interest in the CC to the other member for: R^700,000
Step 9:
Solly's monthly pension from the Council’s pension fund: $$R25,000
The pension will be reduced to: R^18,000 per month
Step 10:
The estate includes a bequest of: $$R200,000$$ to Solly's Alma Mater, the University of South Africa
Step 11:
The residue of the estate was bequeathed to the surviving spouse.
Step 12:
Funeral expenses: $$R20,400
Step 13:
Master's fees and executor's remuneration: according to the tariffs.
Step 14:: Calculate the total assets in the estate.
\begin{align*}
Assets include the bona fide farm, proceeds of policies X and Y, furniture, tractor and implements, listed shares, member's interest in Sweet Dreams CC, and bequest to Solly's Alma Mater. \text{Total Assets} &= E_{farm} + \text{Policy X proceeds} - \text{Policy X premiums} + \text{Policy Y proceeds} - \text{Policy Y premiums} \ & \qquad + \text{Furniture} + \text{Tractor} + \text{Listed Shares (date of death value)} + \text{Member's Interest in Sweet Dreams CC} + \text{Bequest} \ &= E_{farm} + R^4,750,000 - R^500,000 + R^1,450,000 - R^350,000 + R^795,000 \ & \qquad + R^1,100,000 + R^760,000 + R^825,000 + R^200,000 \end{align*}
Step 15:: Calculate the total liabilities in the estate.
\text{Total Liabilities} = R20,400 + (\text{Master's fees and executor's remuneration according to the tariffs})
Liabilities include funeral expenses and Master's fees and executor's remuneration.
Step 16:: Calculate the net estate value.
\begin{align*}
\text{Net Estate Value} &= \text{Total Assets} - \text{Total Liabilities} \end{align*}
Step 17:: Determine if estate duty is payable.
In South Africa, as of 2021, the estate duty threshold is $$R3,500,000$$.
If the net estate value is above this threshold, estate duty is payable at a rate of 20% for the amount above the threshold.
Step 18:: Calculate the estate duty.
\begin{align*}
\text{Estate Duty} &= 20\% \times (\text{Net Estate Value} - R^3,500,000) \end{align*}
Final Answer
Calculate the net estate value using Steps 1 to 3, and then calculate the estate duty, if any, using Step 5.
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