Q.
Gordon has just left overseas for his studies 2 months ago and now, he has to come back because his godmother had recently passed on. Her departure date was 10 Jun, 2021 after a long battle with cancer at 68 years old. She was never married and had no children. That was the reason Gordon was taken as a step-son from an orphanage when he was just a baby. In her Will, Gordon was given most of her belongings, including a semi-detached house which she stayed in until she died.
This semi-D house was acquired when she was at younger age some 35 years ago at RM350,000. She did massive renovation shortly after she took over the house. This renovation was a whooping RM150,000 because she believed in pampering herself as she did not have a family. Gordon was eventually adopted after she realised that the loneliness was unbearable. She had since loved Gordon like her own child.
Before sending Gordon off to his university overseas, she wanted to sell this semi-D for RM850,000 to a good neighbour Mr Goodrich to raise money. However, the deal was unsettled due to loan application which got stuck during Movement Control Order and many uncertainties. Similar semi-D in the surrounding area is already selling at RM900,000.
Now, Gordon wants to dispose of the semi-D because he needs the money to continue his studies. He agreed to sell to Mr Goodrich at RM800,000 and signed the Sale and Purchase Agreement on 10 July, 2022. He was rushing to get the money to continue his overseas studies.
Calculate the RPGT and Stamp Duty payable for both parties.
(25 marks)
A.
Gordon is step-child and legally he is treated as a legitimate child in accordance to Sch 2, Para 1 interpretation of the RPGT Act, 1976.
Hence, all transactions to Gordon is in accordance to the RPGT Act, 1976 subject to treatment or exemptions thereof.
Stamp Duty on transfer upon death - RM10 for Gordon. Stamp duty for Mr Goodrich and Godmother are calculated below.
Godmother:
Stamp duty (RM350,000, paid by Gordon’s godmother)
=1%(RM100,000)+2%(RM250,000)
=RM1000+RM5000= RM6000
Mr Goodrich:
Stamp duty: (RM800,000, payable by Mr Goodrich)
1%(RM100,000)+2%(RM400,000)+3%(RM300,000)
=RM1,000+RM8000+RM9000
=RM18,000
Acquisition price on transfer during death of Godmother to Gordon:
Value of the Semi-D upon transfer by death follows Sch 2, Para 19 - Acquisition price in particular cases, subpara-1 whereby Gordon acquired at MV.
Because MV was RM900,000 as mentioned in the question, subsequent sale to Mr Goodrich at RM800,000 was a loss, hence no RPGT gains.
RPGT upon death is calculated based on NO GAIN NO LOSS as per below case law:
In the case of Kerajaan Malaysia v Yong Siew Choon (2006), the Federal Court stated that for the purpose of the taxes, an ‘executor’ means the executor, administrator or other person administering the deceased person estate.
When the executor transfers a deceased person’s property to the beneficiaries, the disposal price is deemed to take place at the deceased person’s acquisition price, therefore no gain no loss transaction for Godmother.
On the other hand, the beneficiary (Gordon) is deemed to have acquired the property on the date of the transfer of ownership at the acquisition price equal to the market value of the property at that date (Sch2, Para 19) for Gordon. Date of acquisition for Gordon follows Sch 2, Para 15A (a) in the case of a gift of an asset on death, on the date of transfer of ownership of the asset to the recipient; which means after the death of his Godmother.
Ref:
Own account & https://www.rockwills.info/real-property-gains-tax-after-death/