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Thread: Donation from Mother to Children

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    Donation from Mother to Children

    Hi there,

    What are the Donations Tax implications for the following:

    A mother(of old age) sells her primary property for R 500,000.00(reg in her name) and moves to an retirement old age home. She now rents month to month in the old age home.
    The four sons each receive R125,000.00 cash each from the sale to avoid the property being included in the mothers estate. (As the time is near)

    There is no CGT as the sale of property is under the R2mil exclusion as it is her primary residence....this has been checked for any other CGT events relating to her primary property and there are non.

    What are the donations tax implications for each of the sons in their personal capacities. I know donations between spouses is tax free, but the spouse in deceased.

    Thanks

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    Site Caretaker Dave A's Avatar
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    Donations tax is payable in the hands of the donor, in this instance the mother.
    The first R100 000 per annum is tax free, thereafter donations tax is payable at 20%.

    Ultimately the most efficient way would seem to be if the mother donated R25 000 per annum to each of her sons.

    Bear in mind that estate duty is also 20%, but the first R3.5 million is duty free in the 2014 tax year.
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    Gold Member Mark Atkinson's Avatar
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    Quote Originally Posted by Dave A View Post
    Donations tax is payable in the hands of the donor, in this instance the mother.
    The first R100 000 per annum is tax free, thereafter donations tax is payable at 20%.

    Ultimately the most efficient way would seem to be if the mother donated R25 000 per annum to each of her sons.

    Bear in mind that estate duty is also 20%, but the first R3.5 million is duty free in the 2014 tax year.
    What Dave says is pretty much right. You essentially have a choice between donations tax and estate duty.

    The donation can be made in contemplation of death, in which case it's exempt from donations tax, but the benefit can only be derived from the children on the death of the mother. This is because the property will be taxed in her estate instead.

    If the donation is done before death, the mother will be taxed R80000 in the current year of assessment. (R400k x 20%)

    If she has a limited number of assets, it may be more tax efficient to make the donation effective on the death of the mother. It'll then be included in the estate, but as Dave says, there is a sizeable sum which is duty free.

    Important to note that the children are not taxed, only the mother.
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    Thanks,

    Her estate is not even worth R3.5mil so when she does pass on, the money would in any case be distributed equally to the sons tax free?

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    New Member montronic's Avatar
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    Hi

    I am trying to understand this. My parents have decided to sell there home for R700k. They will now be living with me. They have decided to give the money of the sale of the house to me.

    How will this affect tax ? For me and for my dad

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    oh I am unemployed, but my wife is employed

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    Diamond Member Blurock's Avatar
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    Quote Originally Posted by montronic View Post
    Hi

    I am trying to understand this. My parents have decided to sell there home for R700k. They will now be living with me. They have decided to give the money of the sale of the house to me.

    How will this affect tax ? For me and for my dad
    As Dave has stated, the first R100,000 p.a is tax free. Invest the money (with a proven investment company - not a bank or insurance company) and donate R100k p.a The parents may then still draw an annuity which will pay for their own living expenses. That way the money will not be squandered by the recipients and ensures the parents an extended stay.

    I have seen and heard of too many siituations where the parents retire and sell their house and furniture to move in with the kids. The money is quickly wasted and within no time the parents are out on the street again.
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    New Member montronic's Avatar
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    Hi Blurock

    So what you are saying..
    1) If my father gave me the 700k he would still be taxed on the the remaining 600k. Is this correct. ?
    2) If he keeps the 700k and donates me 100k per year each donation would be tax free. Is this correct ?

    Ok so after the sale goes thru, and I decided the money stays in my dads name, would he still be liable for tax on the 700k for the sale of the property then ?

    Could you please recommend a company and plan to use for a investment as you have recommended.

    thanks again for your advice

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by montronic View Post
    Ok so after the sale goes thru, and I decided the money stays in my dads name, would he still be liable for tax on the 700k for the sale of the property then ?
    Your dad is in for the tax effects of the proceeds of his property sale regardless of what he does with the money.
    The trouble with opportunity is it normally comes dressed up as work.

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    New Member montronic's Avatar
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    Thanks Dave

    How is this tax calculated ? Is it from the profit amount, Selling Price (700) minus Purchased Price (300) ?

    What would the tax implications be if my dad decides to buy a retirement house lets say for 350k, would he then only be taxed on the remaining 350k ?

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