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Trusts and Estate Planning

Transactions, such as the sale of shares or fixed property between related parties are deemed for tax purposes to have been at market value, regardless of the documented transaction value.

It often happens that you will want to sell assets into your trust structure and you are a connected person in relation to the trust. So, how are the assets valued?

The value of listed shares are published daily, so that one is easy, but what about shares in a private company, or in an investment property?

All tax acts are silent on who may perform the valuation, so you can do it yourself. The only proviso is that SARS may challenge (or override) your valuation.

So, don’t be stupid. Choose the lowest value that you could justify if challenged.

Why the lowest? Four reasons –

  • Capital Gains Tax based on the increase from cost to market value.
  • Transfer Duty based on market value
  • Securities Transfer Tax based on market value (although this is usually trivial).
  • Your loan to the trust structure, because this will usually be a vendor financed sale. You want your loan to be as little as possible because of the s7C interest and the fact that the loan is an asset in your estate.


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