TAX Implications of donation from grandfather

[julies]

Hi all

My question: I received money from my grandfather to buy a house. What would the tax implications be for me.

My grandfather sold his primary residence and gave me the money to keep, but now he has said that I can use the money to buy a house in my name as he now stays in a old age home.

Thanks

Jules

[CLIVE-TRIANGLE]

Hi Jules

There are no implications for you. Depending on the amount, there may be donations tax implications for your grandfather.

The maximum he can donate per year (other than to his wife) is R100,000. Thereafter it attracts 20% tax on the excess.

[julies]

Thanks Clive

The amount is 700K.

My grandfather sold his house for 700k and let them pay the money into my account ( I don't know why he did that)

So if I give the money back or if I buy the property in his name will he still have to pay the tax. Or is it possible to say the money is a loan and setup a loan agreement with him.

[CLIVE-TRIANGLE]

So if I give the money back or if I buy the property in his name will he still have to pay the tax.

No he wont.

Or is it possible to say the money is a loan and setup a loan agreement with him.

Yes you can do that, while at the same time he donates R100,000 per year to you.

It seems you have a great relationship with your grandfather; you are both very fortunate.

[julies]

Yes he is a great man

Thanks for your input Clive, One more question, how does one go about setting up a donation per year. Do you fill out forms at sars or do you do it on the tax return and then at the same time enter it on the loan agreement as well, so as to reduce the loan by 100k per year ?

[CLIVE-TRIANGLE]

Regarding the donation, annually he should complete the IT144 form.

Regarding the loan, a short acknowledgement of debt and an undertaking to repay at R100,000 per year should be ok. So, your repayment is off course offset against the donation.

[sterne.law@gmail.com]

Probably not going to be an issue here, but an important issue to remember if one i sthe lender and that is that such a loan would fall under national credit act which would require the lender to be registered.

Also to be taken into account, is inheritance and the will and estate issues.
The loan would fall into the estate, and the executor may call it in. A disastor if the willdoes not leave a person with enough cash to offset.

[Dave A]

Also to be taken into account, is inheritance and the will and estate issues.
The loan would fall into the estate, and the executor may call it in. A disastor if the willdoes not leave a person with enough cash to offset.

The debt could be bequeathed to the debtor.

[sterne.law@gmail.com]

Correct, but then you need to get the will changed.
I think the question demonstrates the importance of the will and estate issues, especially when families make arrangements internally.
Even, as it seems, in a non conflict scenario, all could come undone in the unfortunate event that the one party passes.
Possibly the simpler method is a promissory note.

[julies]

Just to clarify again.
1) My grandpa needs to fill in the IT144 form at sars (if the amount is over R100 000)
2) I need to fill in a form at sars to say I received the donation

Is the above correct

Is it possible for my grandpa to donate to grandmother, then grandmother also donates to me ? Thus I receive R200 000 max per year.

If I use a promissory note, what sort of detail need to be on the note to make it valid ?