Mr and Mrs. Smit were married out of community of property on 1 April 1991. They lived in the little town of Betties bay in the Western Cape. They had 3 children. Bob the eldest was born on the 12thof May 1992, Lisa was born on the 18thof March 1994 and Liam was born on the 24thof August 1998.

Mr and Mrs Smit owned a home in Betties Bay which they purchased in 1999 for an amount of R 950 000. Mr Smit also owned an apartment in Cape Town where he stayed when conducting business in this city.

Mr and Mrs. Smit had various business interests. They held 50% shares in Orange (Pty) Ltd which was a fresh fruit and vegetable store. The other 50% shares belonged to Mr. Burger. Mr and Mrs. Smit furthermore owned the business property in Betties Bay on which Orange (Pty) Ltd was situated. There were 3 other stores whom rented business space from them for an amount of R 10 000.00 per month, payable monthly in advance on or the 1stof each month. During September 2014 Mr and Mrs. Smit made an appointment with their broker to arrange and oversee their affairs. Mr Smit updated his life policies and his profile consisted of a life policy on his own life to the value of R 2.5million of which he paid the premiums and a life policy on his own life in favour of his wife Mrs. Smit to the value of R 2.5 million. She paid the premiums on this policy which amounted to R 1000.00 per month.

A further policy was taken out by Mr Burger on the life of Mr Smit in the amount of R 250 000.00 to enable him to acquire Mr Smit's 50% share in Orange (Pty) Ltd in the event of Mr Smit passing away. Mr Burger paid the monthly premiums which amounted to R 1 000.00 per month.

Bob, Lisa and Liam also took out a policy on the life of their mother to the value of R 3 million to be paid out to them in equal shares in the event of Mrs. Smit passing away. Bob, Lisa and Liam paid the monthly premium of R 3 000.00. All of the above policies came into force and first premiums deducted on the 1stof December 2014.

On 3 September 2020 Mr and Mrs Smit revised their joint will and bequeathed the house in Betties Bay to their children in equal parts and granted a lifelong usufruct in favour of their daughter, Lisa, subject to the condition that should she marry the usufruct would cease to exist. The apartment in Cape Town was bequeathed to their son, Liam.

On the 1stof December 2023, Mr and Mrs. Smit both passed away tragically in a motor vehicle accident. The will was read on 2 December 2023 and all the beneficiaries adiated.

Their son, Bob, was appointed as the executor of the estate. As part of his duties he paid Eagle Funeral Services an amount of R 50 000 for the funeral and paid Full Life hospital R 80 000. On 15 December 2023 he sold the home in Betties Bay for an amount of R 3 million, despite the fact that this home had been valued at R 2,5 million on 30 November 2023.

Answer all the following questions with reference to the facts of the question and the deceased estate of both parties:

1. Explain which assets will be regarded as property or deemed property for estate duty purposes (and distinguish between the two). Motivate you answer with reference to the Estate Duty Act and case law. (15)
2. Critically analyse and explain what deductions and / or abatements will be available for estate duty purposes between the spouses in this question. Do you think that it is equitable to grant such deductions and/or abatements to spouses? Explain with reference to the Davis Tax Committee Final Report on Estate Duty (2016) and the Constitution of the Republic of South Africa, 1996. (10)