Question 2 Read the scenario below and answer the questions that follow: Jordan Family Trust Danny Jordan (61 years old) and his wife Glenys (51 years old) are married out of community of property. They are both South African residents and they have three children: Frank Jordan - aged 26 years, single and living in Spain. He has never been ordinarily resident in South Africa and has never visited South Africa for the past two years. Lyn Simmons - a South African resident aged 22 years, married and living with her husband in South Africa. Leona Jordan - a South African resident aged 16 years, single and living with her parents in South Africa. During 2018 Danny Jordan, as part of his estate planning, created a trust (Jordan Family Trust) to which he donated his investments in South African rent producing properties. The rent producing properties had a market value of R5 400 000. In addition, he lent R600 000 cash to the trust at an interest rate of 4% (official market rate is 9%). Lyn Simmons also donated R1 800 000 cash she had received as an inheritance from her late grandmother to the trust. The trust invested R2 400 000 (R1 800 000 + R600 000) in a local participating mortgage bond market (not a tax free investment). During the 2019 tax year the trust had the following receipts and accruals: Rentals from South African properties of R480 000. Local interest from the participating mortgage bond of R264 000. Under a condition contained in the trust deed, the trustees are required to award R72 000 a year (at the rate of R6 000 per month) to each of the children. These amounts were distributed out of the combined net receipts and accruals. In addition, in accordance with their discretionary powers, the trustees made the following lump sum distributions which were awarded on 28 February 2019: To Frank, R108 000 To Lyn Simmons, R36 000 To Leona, R60 000 To Glenys, R156 000. . The trustees prepared the following receipts and accruals and distribution for the trust: Total Rentals Local interest (R) (R) (R) Receipts and accruals 744 000 480 000 264 000 Less interest incurred (24 000) (24 000) Net receipts and accruals 720.000 480 000 240 000 Less Distributions Annuities: Frank 72 000 48 000 24 000 Lyn 72 000 48 000 24 000 Leona 72 000 48 000 24 000 Lump sums: Frank 108 000 72 000 36 000 Lyn 36 000 24 000 12 000 - Leona 60 000 40 000 20 000 Glenys 156 000 104 000 52 000 Total distributions 576 000 384 000 192 000 Net receipts and accruals Total distributed Retained by the trust 720 000 (576 000) 144 000 480 000 (384 000) 96 000 240 000 (192 000) 48 000 For the interest earned, distributed and retained by the trustees of the trust, the following summary was prepared for the trust: Total interest From Lyn's From Danny's earned Donation Donation (R) (R) (R) Receipts and accruals 264 000 198 000 66 000 Less interest incurred (24 000) (24 000) Net receipts and accruals 240 000 198 000 42 000 Less Distributions Annuities: Frank 24 000 19 800 4 200 Lyn 24 000 19 800 19 800 4 200 4 200 Leona 24 000 Lump sums: Frank 6 300 36 000 12 000 29 700 9 900 Lyn Leona 2 100 3 500 16 500 20 000 52 000 192 000 Glenys Total distributions 42 900 9 100 33 600 158_400 Net receipts and accruals Total distributions Retained by the trust 240 000 (192 000) 48 000 198 000 (158 400) 39 600 42 000 (33 600) 8 400 NB: The interest received by Frank is not subject to 15% withholding tax. Calculate the taxable income of each of the following taxpayers: 1.1. Danny Jordan. 1.2. Glenys Jordan 1.3. Frank Jordan 1.4. Lyn Simmons 1.5. Leona Jordan (15 marks) (2 marks) (5 marks) (8 marks) (5 marks) Appendix Module Name: Module Code: Taxation 3 COTX302 Rates of Tax for Individuals 2019 tax year (1 March 2018 - 28 February 2019) Taxable income (R) Rates of tax (R) 0-195 850 18% of taxable income 195 851 - 305 850 35 253 + 26% of taxable income above 195 850 305 851 - 423 300 63 853 +31% of taxable income above 305 850 423 301 - 555 600 100 263 + 36% of taxable income above 423 300 555 601 - 708 310 147 891 + 39% of taxable income above 555 600 708 311 - 1 500 000 207 448 + 41% of taxable income above 708 310 1 500 001 and above 532 041 +45% of taxable income above 1 500 000 Medical Tax Credit Rates Per month (R) Per month (R) 2019 2018 R310 R303 For the taxpayer who paid the medical scheme contributions For the first dependant For each additional dependant(s) R310 R303 R209 R204 2018/2019 Tax Rebates Tax Rebate Primary Secondary (Persons 65 and older) Tertiary (Persons 75 and older) R14 067 R 7 713 R2 574 Table A The expectation of life and the present value of R1 per annum for life capitalised at 12 per cent over the expectation of life of males and females of various ages Expectation of life Present value of R1 per annum for life Age Female Female Age Male Male 64,74 65,37 64,50 63,57 62,63 61,69 60.74 59,78 58,81 57,83 56,85 72,36 72.74 71.87 70,93 69,97 69,02 68,06 67,09 66,11 65,14 64,15 8,327 91 8.328 28 8,327 76 8,327 14 8.326 44 8.325 67 8,324 80 8,323 81 8.322 71 8,321 46 8,320 07 8,331 8.331 8.330 8,330 8.330 8.329 8,329 8,329 8,328 8,328 8,327 05 14 91 64 33 99 61 18 69 15 53 3 4 5 7 8 9 10 55,86 54,87 53,90 52.93 51,98 51,04 50,12 49,21 48,31 47.42 63,16 62,18 61,19 60,21 59,23 58,26 57,29 56,33 55,37 54,41 8,318 49 8,316 73 8,314 80 8,312 65 8,310 29 8,307 70 8,304 89 8,301 80 8,298 41 8,294 71 8,326 8,326 8,325 8,324 8,323 8,322 8,320 8,319 8,317 8,315 84 08 22 27 20 03 71 26 64 84 11 12 13 14 15 16 17 18 19 20 46,53 45,65 44,77 43,88 43,00 42,10 41,20 40,30 39,39 38,48 53,45 52,50 51,54 50,58 49,63 48,67 47,71 46,76 45,81 44,86 8,290 61 8,286 13 8,281 17 8,275 64 8,269 59 8,262 74 8,255 16 8,246 77 8,237 37 8,226 94 8,313 8,311 8,309 8,306 8,303 8,299 8.295 8,291 8,286 8,281 83 61 12 33 26 81 95 71 97 70 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 37,57 36.66 35,75 34.84 33,94 33,05 32,16 31,28 30,41 29,54 28,60 27,85 43.91 42.96 42,02 41,07 40,13 39,19 38.26 37,32 36,40 35,48 34,57 33,67 8.215 38 8,202 57 8,188 36 8.172 62 8,155 36 8,136 47 8.115 58 8,092 74 8,067 81 8,040 30 8,010 67 7,978 44 8.275 8,269 8,262 8,254 8,245 8.235 8,224 8,211 8,198 8,183 8.167 8,149 83 30 10 00 09 17 26 99 66 86 62 83 31 32 33 34 35 36 37 38 39 40 41 42 Expectation of life Present value of R1 per annum for life Age Age Male Female Male! Female 43 43 44 45 46 47 48 49 50 27,02 26,20 25,38 24,58 23,79 23,00 22,23 21,47 32,77 31,89 31.01 30.14 29.27 28,41 27.55 26,71 7,94344 7,90547 7,86380 7,81924 7,77109 7,71843 7.662 36 7,602 01 8.130 8,108 8,085 8,059 8,031 8.000 7.966 7.929 12 81 27 56 19 26 17 50 45 46 47 48 49 50 51 52 53 51 52 53 20,72 19,98 19,26 18,56 17,86 17,18 16,52 15,86 15,23 14,61 25.88 25.06 24,25 23.44 2.65 21,86 21.08 20,31 19,54 18,78 7,537 13 7,467 48 7,393 87 7,316 31 7,232 34 7.144 14 7,051 78 6,952 25 6,850 04 6,742 06 7,889 7,846 7.799 7,748 7,693 7,633 7.568 7,499 7.423 7.341 67 46 65 34 55 63 96 27 21 35 57 59 60 60 61 61 62 63 64 65 66 67 68 69 70 14.01 13,42 12,86 12,31 11.77 11,26 10,76 10.28 9,81 9,37 18.04 17,30 16,58 15,88 15,18 14,51 13.85 13,20 12,57 11,96 6,630 10 6,512 32 6,393 01 6,268 22 6,137 89 6,007 26 5,871 65 5,734 03 5,591 82 5,451 65 7.254 7.160 7,060 6.955 6.841 6,723 6,598 6,468 6,328 6.184 57 20 46 37 61 93 93 35 18 66 71 71 72 73 74 75 76 8,94 8,54 8,15 7,77 7,41 7,07 6,73 6,41 6,10 5,82 11,37 10.80 10.24 9,70 9,18 8,68 8,21 7,75 7,31 5,307 75 5,167 44 5,024 37 4,878 76 4,734 90 4,593 54 4,446 63 4,303 09 4,158 98 4,024 40 6,036 5,882 5,722 5,557 5,388 5,217 5,046 4,870 4,693 4,516 07 78 22 43 93 27 79 92 89 47 74 75 76 77 78 79 80 78 79 80 6.89 81 82 83 84 85 86 87 88 89 90 5,55 5,31 5,09 4,89 4,72 4,57 4,45 4,36 4,32 4,30 6,50 6,13 5,78 5,45 5,14 4,85 4,58 4,33 4,11 3,92 3,890 51 3,768 02 3,652 76 3,545 46 3,452 32 3,368 64 3,300 66 3,249 07 3,225 97 3,214 38 4,343 4,173 4,004 3,839 3,679 3.523 3,374 3,231 3,102 2.989 99 15 82 88 21 71 26 75 96 12 81 82 83 84 85 86 89 90 Table B Present value of R1 per annum capitalised at 12 per cent over fixed periods Years Amount Years Amount Years Amount Years Amount 1 2 3 4 6 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 R 0,892 9 1,6900 2,401 8 3,0374 3,604 8 4,111 4 4,563 8 4.967 6 5,328 2 5,650 2 5,937 7 6,194 4 6,423 6 6,628 2 6,810 9 6.974 0 7,119 6 7,249 7 7,365 8 7.469 4 7,562 0 7,644 6 7.718 4 7,784 3 7,843 1 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 R 7,8957 7.942 6 7,984 4 8,021 8 8,055 2 8,085 0 8,111 6 8,135 4 8,156 6 8,175 5 8,1924 8,207 5 8,221 0 8,233 0 8,243 8 8,253 4 8,261 9 8,269 6 8,276 4 8,282 5 8,288 0 8,292 8 8,297 2 8,3010 8,304 5 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 R 8,307 6 8,310 4 8,312 8 8,315 0 8,317 0 8,318 7 8,320 3 8,321 7 8,322 9 8,324 0 8,325 0 8,325 9 8,326 7 8,327 4 8,328 1 8,328 6 8,329 1 8,329 6 8,330 0 8,330 3 8,330 7 8,331 0 8,331 2 8,331 4 8,331 6 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 R 8,331 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 NNNNNN OOO OOO OO OOR WOOD 1 1 1 48 49 50 COTX302 CA3 Question 2 Read the scenario below and answer the questions that follow: Jordan Family Trust Danny Jordan (61 years old) and his wife Glenys (51 years old) are married out of community of property. They are both South African residents and they have three children: Frank Jordan - aged 26 years, single and living in Spain. He has never been ordinarily resident in South Africa and has never visited South Africa for the past two years. Lyn Simmons - a South African resident aged 22 years, married and living with her husband in South Africa. Leona Jordan - a South African resident aged 16 years, single and living with her parents in South Africa. During 2018 Danny Jordan, as part of his estate planning, created a trust (Jordan Family Trust) to which he donated his investments in South African rent producing properties. The rent producing properties had a market value of R5 400 000. In addition, he lent R600 000 cash to the trust at an interest rate of 4% (official market rate is 9%). Lyn Simmons also donated R1 800 000 cash she had received as an inheritance from her late grandmother to the trust. The trust invested R2 400 000 (R1 800 000 + R600 000) in a local participating mortgage bond market (not a tax free investment). During the 2019 tax year the trust had the following receipts and accruals: Rentals from South African properties of R480 000. Local interest from the participating mortgage bond of R264 000. Under a condition contained in the trust deed, the trustees are required to award R72 000 a year (at the rate of R6 000 per month) to each of the children. These amounts were distributed out of the combined net receipts and accruals. In addition, in accordance with their discretionary powers, the trustees made the following lump sum distributions which were awarded on 28 February 2019: To Frank, R108 000 To Lyn Simmons, R36 000 To Leona, R60 000 To Glenys, R156 000. . The trustees prepared the following receipts and accruals and distribution for the trust: Total Rentals Local interest (R) (R) (R) Receipts and accruals 744 000 480 000 264 000 Less interest incurred (24 000) (24 000) Net receipts and accruals 720.000 480 000 240 000 Less Distributions Annuities: Frank 72 000 48 000 24 000 Lyn 72 000 48 000 24 000 Leona 72 000 48 000 24 000 Lump sums: Frank 108 000 72 000 36 000 Lyn 36 000 24 000 12 000 - Leona 60 000 40 000 20 000 Glenys 156 000 104 000 52 000 Total distributions 576 000 384 000 192 000 Net receipts and accruals Total distributed Retained by the trust 720 000 (576 000) 144 000 480 000 (384 000) 96 000 240 000 (192 000) 48 000 For the interest earned, distributed and retained by the trustees of the trust, the following summary was prepared for the trust: Total interest From Lyn's From Danny's earned Donation Donation (R) (R) (R) Receipts and accruals 264 000 198 000 66 000 Less interest incurred (24 000) (24 000) Net receipts and accruals 240 000 198 000 42 000 Less Distributions Annuities: Frank 24 000 19 800 4 200 Lyn 24 000 19 800 19 800 4 200 4 200 Leona 24 000 Lump sums: Frank 6 300 36 000 12 000 29 700 9 900 Lyn Leona 2 100 3 500 16 500 20 000 52 000 192 000 Glenys Total distributions 42 900 9 100 33 600 158_400 Net receipts and accruals Total distributions Retained by the trust 240 000 (192 000) 48 000 198 000 (158 400) 39 600 42 000 (33 600) 8 400 NB: The interest received by Frank is not subject to 15% withholding tax. Calculate the taxable income of each of the following taxpayers: 1.1. Danny Jordan. 1.2. Glenys Jordan 1.3. Frank Jordan 1.4. Lyn Simmons 1.5. Leona Jordan (15 marks) (2 marks) (5 marks) (8 marks) (5 marks) Appendix Module Name: Module Code: Taxation 3 COTX302 Rates of Tax for Individuals 2019 tax year (1 March 2018 - 28 February 2019) Taxable income (R) Rates of tax (R) 0-195 850 18% of taxable income 195 851 - 305 850 35 253 + 26% of taxable income above 195 850 305 851 - 423 300 63 853 +31% of taxable income above 305 850 423 301 - 555 600 100 263 + 36% of taxable income above 423 300 555 601 - 708 310 147 891 + 39% of taxable income above 555 600 708 311 - 1 500 000 207 448 + 41% of taxable income above 708 310 1 500 001 and above 532 041 +45% of taxable income above 1 500 000 Medical Tax Credit Rates Per month (R) Per month (R) 2019 2018 R310 R303 For the taxpayer who paid the medical scheme contributions For the first dependant For each additional dependant(s) R310 R303 R209 R204 2018/2019 Tax Rebates Tax Rebate Primary Secondary (Persons 65 and older) Tertiary (Persons 75 and older) R14 067 R 7 713 R2 574 Table A The expectation of life and the present value of R1 per annum for life capitalised at 12 per cent over the expectation of life of males and females of various ages Expectation of life Present value of R1 per annum for life Age Female Female Age Male Male 64,74 65,37 64,50 63,57 62,63 61,69 60.74 59,78 58,81 57,83 56,85 72,36 72.74 71.87 70,93 69,97 69,02 68,06 67,09 66,11 65,14 64,15 8,327 91 8.328 28 8,327 76 8,327 14 8.326 44 8.325 67 8,324 80 8,323 81 8.322 71 8,321 46 8,320 07 8,331 8.331 8.330 8,330 8.330 8.329 8,329 8,329 8,328 8,328 8,327 05 14 91 64 33 99 61 18 69 15 53 3 4 5 7 8 9 10 55,86 54,87 53,90 52.93 51,98 51,04 50,12 49,21 48,31 47.42 63,16 62,18 61,19 60,21 59,23 58,26 57,29 56,33 55,37 54,41 8,318 49 8,316 73 8,314 80 8,312 65 8,310 29 8,307 70 8,304 89 8,301 80 8,298 41 8,294 71 8,326 8,326 8,325 8,324 8,323 8,322 8,320 8,319 8,317 8,315 84 08 22 27 20 03 71 26 64 84 11 12 13 14 15 16 17 18 19 20 46,53 45,65 44,77 43,88 43,00 42,10 41,20 40,30 39,39 38,48 53,45 52,50 51,54 50,58 49,63 48,67 47,71 46,76 45,81 44,86 8,290 61 8,286 13 8,281 17 8,275 64 8,269 59 8,262 74 8,255 16 8,246 77 8,237 37 8,226 94 8,313 8,311 8,309 8,306 8,303 8,299 8.295 8,291 8,286 8,281 83 61 12 33 26 81 95 71 97 70 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 37,57 36.66 35,75 34.84 33,94 33,05 32,16 31,28 30,41 29,54 28,60 27,85 43.91 42.96 42,02 41,07 40,13 39,19 38.26 37,32 36,40 35,48 34,57 33,67 8.215 38 8,202 57 8,188 36 8.172 62 8,155 36 8,136 47 8.115 58 8,092 74 8,067 81 8,040 30 8,010 67 7,978 44 8.275 8,269 8,262 8,254 8,245 8.235 8,224 8,211 8,198 8,183 8.167 8,149 83 30 10 00 09 17 26 99 66 86 62 83 31 32 33 34 35 36 37 38 39 40 41 42 Expectation of life Present value of R1 per annum for life Age Age Male Female Male! Female 43 43 44 45 46 47 48 49 50 27,02 26,20 25,38 24,58 23,79 23,00 22,23 21,47 32,77 31,89 31.01 30.14 29.27 28,41 27.55 26,71 7,94344 7,90547 7,86380 7,81924 7,77109 7,71843 7.662 36 7,602 01 8.130 8,108 8,085 8,059 8,031 8.000 7.966 7.929 12 81 27 56 19 26 17 50 45 46 47 48 49 50 51 52 53 51 52 53 20,72 19,98 19,26 18,56 17,86 17,18 16,52 15,86 15,23 14,61 25.88 25.06 24,25 23.44 2.65 21,86 21.08 20,31 19,54 18,78 7,537 13 7,467 48 7,393 87 7,316 31 7,232 34 7.144 14 7,051 78 6,952 25 6,850 04 6,742 06 7,889 7,846 7.799 7,748 7,693 7,633 7.568 7,499 7.423 7.341 67 46 65 34 55 63 96 27 21 35 57 59 60 60 61 61 62 63 64 65 66 67 68 69 70 14.01 13,42 12,86 12,31 11.77 11,26 10,76 10.28 9,81 9,37 18.04 17,30 16,58 15,88 15,18 14,51 13.85 13,20 12,57 11,96 6,630 10 6,512 32 6,393 01 6,268 22 6,137 89 6,007 26 5,871 65 5,734 03 5,591 82 5,451 65 7.254 7.160 7,060 6.955 6.841 6,723 6,598 6,468 6,328 6.184 57 20 46 37 61 93 93 35 18 66 71 71 72 73 74 75 76 8,94 8,54 8,15 7,77 7,41 7,07 6,73 6,41 6,10 5,82 11,37 10.80 10.24 9,70 9,18 8,68 8,21 7,75 7,31 5,307 75 5,167 44 5,024 37 4,878 76 4,734 90 4,593 54 4,446 63 4,303 09 4,158 98 4,024 40 6,036 5,882 5,722 5,557 5,388 5,217 5,046 4,870 4,693 4,516 07 78 22 43 93 27 79 92 89 47 74 75 76 77 78 79 80 78 79 80 6.89 81 82 83 84 85 86 87 88 89 90 5,55 5,31 5,09 4,89 4,72 4,57 4,45 4,36 4,32 4,30 6,50 6,13 5,78 5,45 5,14 4,85 4,58 4,33 4,11 3,92 3,890 51 3,768 02 3,652 76 3,545 46 3,452 32 3,368 64 3,300 66 3,249 07 3,225 97 3,214 38 4,343 4,173 4,004 3,839 3,679 3.523 3,374 3,231 3,102 2.989 99 15 82 88 21 71 26 75 96 12 81 82 83 84 85 86 89 90 Table B Present value of R1 per annum capitalised at 12 per cent over fixed periods Years Amount Years Amount Years Amount Years Amount 1 2 3 4 6 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 R 0,892 9 1,6900 2,401 8 3,0374 3,604 8 4,111 4 4,563 8 4.967 6 5,328 2 5,650 2 5,937 7 6,194 4 6,423 6 6,628 2 6,810 9 6.974 0 7,119 6 7,249 7 7,365 8 7.469 4 7,562 0 7,644 6 7.718 4 7,784 3 7,843 1 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 R 7,8957 7.942 6 7,984 4 8,021 8 8,055 2 8,085 0 8,111 6 8,135 4 8,156 6 8,175 5 8,1924 8,207 5 8,221 0 8,233 0 8,243 8 8,253 4 8,261 9 8,269 6 8,276 4 8,282 5 8,288 0 8,292 8 8,297 2 8,3010 8,304 5 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 R 8,307 6 8,310 4 8,312 8 8,315 0 8,317 0 8,318 7 8,320 3 8,321 7 8,322 9 8,324 0 8,325 0 8,325 9 8,326 7 8,327 4 8,328 1 8,328 6 8,329 1 8,329 6 8,330 0 8,330 3 8,330 7 8,331 0 8,331 2 8,331 4 8,331 6 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 R 8,331 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,332 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 8,333 NNNNNN OOO OOO OO OOR WOOD 1 1 1 48 49 50 COTX302 CA3