Question 5 [18] Sello Chokoe created a trust called Sello Chokoe Family Trust on 1 March...

 

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Question 5 [18] Sello Chokoe created a trust called Sello Chokoe Family Trust on 1 March 2016 in favour of her three grandchildren, Sipho, Mpho and Precious (aged 21, 22 and 24 years, respectively, on that date). Their father is Piet Chokoe, Sello's 51-year-old son. Sipho, Mpho and Precious each have a vested right to one-third of the retained income of the trust. Sello donated a farm with a market value of R2 000 000 to the trust. The annual rent income derived from the farm was R160 000. The trust will wound up two years after Sello's death. The farm will be sold, and its proceeds will be distributed equally among the beneficiaries who are alive at that stage. Piet Chokoe sold a flat at its market value of R900 000 to the trust on 1 May 2016. The selling price was left owing as a loan account bearing market-related interest at 8% per year, repayable on the dissolution of the trust. The trustees have discretion regarding the amounts to be distributed to the beneficiaries, provided that each beneficiary receives the same amount. The following information relates to the 2021 year of assessment: 1 March 31 August 2020 1 September - 28 February 2021 R77 000 R77 000 R8 900 Net rentals-farm (after deduction of allowable expenditure) Net rentals-flat (after deduction of interest and repairs) Net income-2021 year of assessment R12 600 R85 900 R89 600 An amount of R25 000 was distributed to each of the beneficiaries on 31 August 2020, consisting of R22 410 from farm rentals and R2 590 from the flat rentals. A further R30 000 was distributed to each beneficiary on 28 February 2021, pro rata from the income that accrued to the trust. Required: 5.1. Calculate the taxable income for the 2021 year of assessment for the Sello Chokoe Family Trust (13) 5.2. Discuss how your answer in 5.1 would differ if Mr Piet Chokoe did not charge any interest on the loan granted to the Sello Chokoe Family Trust. 5.3. Calculate the tax payable for the 2021 year of assessment for Sello Chokoe Family Trust. Question 5 [18] Sello Chokoe created a trust called Sello Chokoe Family Trust on 1 March 2016 in favour of her three grandchildren, Sipho, Mpho and Precious (aged 21, 22 and 24 years, respectively, on that date). Their father is Piet Chokoe, Sello's 51-year-old son. Sipho, Mpho and Precious each have a vested right to one-third of the retained income of the trust. Sello donated a farm with a market value of R2 000 000 to the trust. The annual rent income derived from the farm was R160 000. The trust will wound up two years after Sello's death. The farm will be sold, and its proceeds will be distributed equally among the beneficiaries who are alive at that stage. Piet Chokoe sold a flat at its market value of R900 000 to the trust on 1 May 2016. The selling price was left owing as a loan account bearing market-related interest at 8% per year, repayable on the dissolution of the trust. The trustees have discretion regarding the amounts to be distributed to the beneficiaries, provided that each beneficiary receives the same amount. The following information relates to the 2021 year of assessment: 1 March 31 August 2020 1 September - 28 February 2021 R77 000 R77 000 R8 900 Net rentals-farm (after deduction of allowable expenditure) Net rentals-flat (after deduction of interest and repairs) Net income-2021 year of assessment R12 600 R85 900 R89 600 An amount of R25 000 was distributed to each of the beneficiaries on 31 August 2020, consisting of R22 410 from farm rentals and R2 590 from the flat rentals. A further R30 000 was distributed to each beneficiary on 28 February 2021, pro rata from the income that accrued to the trust. Required: 5.1. Calculate the taxable income for the 2021 year of assessment for the Sello Chokoe Family Trust (13) 5.2. Discuss how your answer in 5.1 would differ if Mr Piet Chokoe did not charge any interest on the loan granted to the Sello Chokoe Family Trust. 5.3. Calculate the tax payable for the 2021 year of assessment for Sello Chokoe Family Trust.

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51 The taxable income for the 2021 year of assessment for the Sello Chokoe Family Trust would be R89 ... View the full answer