Howie Low, a member of the Just Right Pension Fund, failed to pay maintenance in respect of his two minor children to his divorced spouse, Stacey. He stated that he could not afford to do so due to the fact that his expenses exceeded his net income after the deduction of tax at his marginal tax rate of 31%. On 4 April 2020, Stacey obtained a maintenance order for R425,000, which she then sent to the Just Right Pension Fund with the request that this amount be deducted from Howie’s benefit. Stacey’s marginal tax rate is 18%. Choose the correct statement.
a.Stacey will receive R425,000 and neither her nor Howie will be taxed at the time that the payment is made. Stacey must however include this receipt as part of her gross income when she completes her tax submission for that tax year and will then be taxed on it at her marginal tax rate.
b.An amount of R578,426.56 will be deducted from Howie’s benefit in the Just Right Pension Fund.  R425,000 will be paid to Stacey and the balance to SARS.
c.An amount of R556,750 will be deducted from Howie’s benefit in the Just Right Pension Fund.  R425,000 will be paid to Stacey and the balance to SARS.
d.An amount of R353,000 will be deducted from Howie’s benefit in the Just Right Pension Fund.  R425,000 will be paid to Stacey and the balance to SARS.
e.None of the above.

Answer rating: 100% (QA)

Solution Correct answer is A aStacey will receive R425000 and ... View the full answer