Question

Mr and Mrs X are married in community of property. On 1 March they sell a block of
flats which they own, for
market value of R4 million to their daughters, A and B, in equal shares. A is 14 years
old, and B is 19. Mr and Mrs X lend the R4 million purchase price, interest-free, to A
and B. A market related interest rate is 12% per annum. The gratuitous disposition is
therefore 12% of R4 million (the loan), i.e. R480 000 per annum. For the year of
assessment
the flats generate rental income of R480 000.