TAX3703 ASSIGNMENT 2 SEMESTER 1 2022

TAX3703 Assignment 2

QUESTION 1




Calculation of the value of Bokang's usufruct for estate duty purposes
Fair market value of property at Bokang's death (6 000 000 - 6 000 000 x 30%) 4 200 000
Annual value of right at 12% 504 000
Lungile's age next birthday 46 years
Factor for male aged 46 years 7,81924
Value of Bokang's usufruct (504 000 x 7,81924) 3 940 896

Application of first proviso
Value of consideration paid by Lungile 1 000 000
6% interest on R1 000 000 593 848
1 593 848

Value of usufruct as calculated 3 940 896
Less: value of consideration plus interest (1 593 848)
2 347 049

Application of second proviso
Fair market value of property when Bokang acquired her right (4 000 000 x 70%)
2 800 000
Annual value at 12% 336 000
Bokang's age next birthday when she acquired her right 61 years
Factor for female aged 61 years 7,25457
Value of Bokang's right at its creation (336 000 x 7,25457) 2 437 536
Value of Lungile's bare dominium at creation (2 800 000 - 2 437 546) 362 464
Present fair market value of property 4 200 000
Less: baredominium at creation (362 464)
Maximum value of Bokang's usufruct (in terms of the second proviso) 3 837 536

Because R2 347 049 is less than R3 837 536, the lesser amount is used for Estate duty
purposes, thus R2 347 049