Question 4 (47 marks)

You are employed in the estates department of a local accounting firm which has been appointed as the executor of the joint estate of the late Coco Chenel and her husband, Charles. The following is an extract of an e-mail you received from Charles in which he provided you with details of the couples estate: My wifes name was Coco Candy Chenel and her South African ID number was 6308090024071. She died on 20 October 2020. We were married in community of property and my South African ID number is 5407150412082. We only have one child, a daughter named Cindy who is 26 years old, unmarried and a full-time medical student.

The following information relates to our assets, liabilities etc. (no assets are excluded from our joint estate, unless stipulated otherwise):

Stand 2199, with private residence, Signal Hill, Durban, registration section S/G, KwazuluNatal, 920 square metres in extent, in terms of transfer deed number T1245/1993. We used the residence as our primary residence. An appraiser valued the property and placed a market value of R9 000 000 thereon at the date of Coco's death. This property was left to Coco by her late father, Brian Bosheilo, who died on 12 September 2018 (estate number 16841/2018), when the market value of the property was R6 800 000. She inherited the property on the condition that she must leave it to our daughter, Cindy. Coco did not pay or bear any portion of the estate duty payable in her father's estate.

An apartment in Croatia, valued at R8 000 000 (using the applicable exchange rate and correctly translated to South African Rand) on the date of Cocos death. Coco bought the apartment during a holiday for R3 000 000 in 2011. We would go there for annual holidays and did not rent it out. Coco has always been a resident of South Africa. The title deeds of the apartment where changed to reflect only my name on 1 January 2021, when the apartment was valued at R7 600 000 (using the applicable exchange rate and correctly translated to South African Rand).

Coco owed R355 000 on a local bank overdraft at the date of her death. I owed R200 000 on a local bank overdraft at the date of Cocos death. I also had a fixed deposit at another local bank amounting to R700 000 (including interest) at the date of Coco's death.

A 13-metre boat purchased on 1 September 2014 for a total cost of R530 000. The market value of the boat at the date of Coco's death was R480 000. The boat was only used for recreational purposes. The boat was stored at a storage facility near the beach. Storage cost amounted to R560 per month since the boat was purchased.

Coco did not sell any assets from 1 March 2020 to the date of her death.

Coco and I made a valid joint will which contained the following bequests:

To the surviving spouse: the apartment in Croatia, as well as R300 000 cash;

To Cindy: the balance of the estate.

Other information relating to the 2021 year of assessment:

Coco was a manager at Smell nice (Pty) Ltd (Smell nice), a perfume manufacturing company. Coco's IRP5 for the period of her employment from 1 March 2020 to the date of her death indicated the following total earnings:

SALARY	R252 000
Bonus (paid on 31 August 2020)	R33 000
Travel allowance received	R64 000
Employee's tax deducted	R78 000

Smell nice paid a monthly travel allowance to Coco from 1 March 2020 until 30 September 2020. Coco regularly travelled to functions where perfumes were being launched or marketed. Coco can accurately prove that she drove a total of 34 567 km during the months she received the allowance, of which 14 345 km was specifically for business purposes. Coco has driven a MBW vehicle that is owned by Smell nice from 1 March 2020 until 30 September 2020. It was purchased by Smell nice on 30 January 2020 at a retail market value of R300 000 (VAT included). Even though the purchase price did not include a maintenance plan, Smell nice did not carry any of maintenance costs nor any of the fuel relating to the vehicle, other than paying Coco an allowance.

Coco kept accurate records of the actual costs incurred by her in full during the 2021 year of assessment:

Fuel costs R17 100

Maintenance costs R 5 400

I received interest on the fixed deposit amounting to R40 000 during the 2021 year of assessment. This interest was earned evenly throughout the year of assessment. Coco was the recipient of an annuity of R17 000 per annum, paid to her from the profits of a Waterfront coffee shop left to her brother, Moses (who was born on 19 February 1975), by their late father. These payments ceased upon her death.

Coco (up to her date of death), Cindy and I belong to a medical scheme where I was the main member. I paid the contributions of R179 856 for the full year (1 March 2020 to 28 February 2021). Coco paid qualifying medical expenses of R55 000 before she died, the medical scheme did not refund her for these expenses. I paid death bed expenses of R16 900 of which the medical scheme refunded me R5 000 and I claimed the balance from the estate.

Cocos contributions towards a retirement annuity fund for her 2021 year of assessment amounted to R24 000 on date of death. On her death she was entitled to a lump sum of R430 000. Coco had never received any lump sums previously and this was the first and only lump sum she ever received. There was no balance of contributions not deducted on 29 February 2020. I realize that your firm will do a competent job of administering our joint estate, but I wonder if you can answer the following tax-related questions for me:

a) Can you please advise me how much capital gains tax will arise in Cocos final income tax assessment for the 2021 year of assessment? 10 MARKS

b) Can you please calculate Coco's final income tax liability due to SARS for the 2021 year of assessment? 20 MARKS

c) Can you also please calculate the net value of our joint estate for estate duty purposes? 17 MARKS

During the administration of the estate by your firm, the following transactions/events occurred:

o The boat was sold for R490 000.

o The following expenses were incurred in winding up the estate:

Transfer and valuation cost	R4 900
Funeral costs (considered to be fair and reasonable by the Commissioner)	R13 180
MASTER'S FEES	R7 000
Executor's remuneration	R375 811