John Smith (66 years old) established the Smith Family Trust in South Africa in 2018 for the benefit of his three unmarried children, Ben, Susan and Danie. On 28 February 2021, Ben was 29 years old.

He lives and works in Port Elizabeth. Susan was 20 years old and a full‐time student at Varsity College. Danie was a 15‐year‐old scholar.

The assets of the trust were all donated by John. The trustees are independent third parties and the provisions of the trust deed include the following:

1). Each child will be paid R6 000 per month for their maintenance.

2). R30 000 a year will be paid to the Society for the Prevention of Cruelty to Animals (SPCA), a registered public benefit organization, and the trust will retain the relevant section 18A certificates to be issued in its name.

3). The balance of the receipts and accruals may be dealt with at the discretion of the trustees.

When Danie turns 25, the trust will be dissolved and the balance in the trust will be paid out in equal shares to the three children.

The receipts, accruals and payments for the current year of assessment were as follows: Receipts and accruals R Local dividends on shares from SA companies 100 000 Local interest 150 000 Rental income 50 000 300 000   

Payments Distributions to children in terms of point 1 above –

R72 000 per child and a lump sum of R18 000 each to Ben and Susan.

Summary of distributions Total R Dividends R Interest R Rent R

Ben – annuity 72 000 24 000 36 000 12 000

Susan – annuity 72 000 24 000 36 000 12 000

Danie – annuity 72 000 24 000 36 000 12 000

SPCA – annuity 30 000 10 000 15 000 5 000

Ben – lumpsum distribution 18 000 6 000 9 000 3 000

Susan – lumpsum distribution 18 000 6 000 9 000 3 000

Retained in the trust 18 000 6 000 9 000 3 000

300 000 100 000 150 000 50 000     

1). Calculate the taxable income of Ben, Danie and John for the tax period ending 28 February 2021. (21)

2). Calculate the normal tax payable by the trust for the tax period ending 28 February 2021 if it is assumed John Smith died on 28 February 2020.  

Answer rating: 100% (QA)

1 Ben Total taxable income R72 000 R24 000 R36 000 R12 000 R18 000 R192 000 Danie ... View the full answer