As Mr and Mrs X are married in community of property, they are jointly responsible for any income generated from their assets, including the rental income from the block of flats. Therefore, the rental income of R480 000 will be split equally between Mr and Mrs X, A and B.
Each of them will be deemed to have received rental income of R120,000 for the year. As this income is generated from the asset sold to A and B, it will be considered as part of the gratuity, and will be included as part of the deemed interest of R480 000.
So, Mr and Mrs X will have to include R240 000 (R120 000 each) as part of the deemed interest received from A and B, resulting in a total deemed interest of R720 000 for the year. This amount is subject to donations tax of 20%, which means Mr and Mrs X will have to pay donations tax of R144 000 (20% of R720 000) for the year.
It is important for Mr and Mrs X to keep accurate records of the rental income and deemed interest received from A and B, as well as the donations tax paid, for tax purposes.
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.
1 answer
1 answer